In this article, Anubhav Pandey deals with Indian Penal Code on fraud and cheating.

Chaar sau bees! In India, this term can be heard in every lane and every corner. The term Chaar Sau Bees represents a legal jargon adapted in its simplest form. What is cheating as per the penal laws of India? What is Fraud as per penal laws of India? Are these bailable or non-bailable offence? What is the difference between fraud and cheating? A well-researched article which finally reveals the mystery between chaar sau bees and Section 420 of Indian Penal Code.

Cheating in India (section 415 of IPC)

Let us try to understand cheating with the help of an example. A sells B a bat. A, intentionally deceives B into believing that the bat belonged to Sachin Tendulkar and thereby induces him to buy it. A committed the crime of cheating.

Ingredients of the offence of cheating

• The accused must deceive another person
• The person so deceived should be induced to deliver any property to any person, or
• The person so deceived should be intentionally induced to do or at times, not to do an activity.

There are two classes of acts which the person deceived may be induced to do. Firstly he may be induced to deliver any property to anyone. Here having a fraudulent intention is a must.  Second is doing of an act which the person would not have done provided he was not cheated. E.g  Buying of the bat.

The essence of cheating is having a fraudulent or dishonest intention.

What is meant by deceiving

• Deceiving is the backbone of the offence. Deceiving means causing to believe what is false or misleading as to a matter of fact. But all deceptions does not amount to cheating.
• Deceptions only with fraudulent and dishonest intentions amounts to cheating.

If A sold the bat to B with the honest belief that the bat was of Sachin Tendulkar’s, this will not amount to cheating.

Cheating in a contract

• A mere breach of contract will not be a cheating. Understanding this through an illustration, A singer promised to perform in a certain concert and asked their organizer to arrange for an orchestra. The organizer made all the required arrangement as per the contract.
• The singer arrived at the concert place and everything was set to go. At the meantime, singer backed out from singing owing to his personal reasons. The organiser filed a case for cheating against the singer.

The law on this is, a mere breach of contract will not be cheating. For THE OFFENCE, prior dishonest intention is required.

There is a very thin line of difference between cheating and breach of contract. For any sort of cheating, there has to exist a deceiving content right from the beginning of the contract.

Explaining through another illustration, if in a contract, the party failed to pay for an EMI, this will not amount to cheating or fraud at the first instance. For this to be an offence a prior intention to deceive the seller must be present in the mind of the buyer.

Where a person, fraudulently or dishonestly induces a person to deliver any property

• As it is clear by now, mere dishonest intention or deceit will not be sufficient for cheating. Meeting of these two in order to induce the other person to deliver their property and making them do something which they would not have done otherwise, is cheating.

• Therefore, to constitute fraud at the time of delivery of the property by assuring the seller of the property that he will pay afterward but deceived him by leaving the town amounts to cheating.

When a person deceived the examination authority that he passed in a certain year and obtained his certificates, it was held be cheating.

Breach of promise and cheating

How many times, must a boy have heard this from his girlfriend, You’re a cheater! But does breaking up social promises amounts to cheating? By social promises, we mean social engagement. Like going for a movie or a dinner date. The answer is no. As said earlier, there must be a dishonest intention to deceive the other for some gain. A mere breaking of social promises won’t amount to cheating. So next time before canceling your dinner date do not fear for criminal punishment of cheating.

The person being cheated must suffer damage or harm in body, mind, reputation or property

The damage must be a consequential result of cheating and must not be too remote. The loss suffered because of cheating must not be vague.

Where a person is selling steel coated in gold and it can be reasonably figured out that, the article sold is not gold, will this amount to cheating? Does reasonableness from the side of the buyer is not required? The answer is, this too will amount to cheating. It could be, say, the person might be buying gold for the first time. There was a deceiving act done from the seller’s end to gain wrongfully and he succeeded too. This will amount to cheating.

The answer is, this too will amount to cheating. It could be, say, the person might be buying gold for the first time. There was a deceiving act done from the seller’s end to gain wrongfully and he succeeded too. This will amount to cheating.

Cheating is a criminal act or mere civil wrong

• The question is worth mooting. A civil wrong is a matter pertaining only between two parties. E.g breach of contract, non-repayment of a loan, etc. Civil wrongs are matters which do not harm the society in any way.
• Act which has the tendencies to harm the society at large is called a criminal wrong. Cheating is both a civil as well as criminal wrong in the same way as defamation is.
• When a criminal proceeding is set into motion several disabilities arises, for example, institutions might not accept your admission or difficulty in applying for a passport. Therefore, the court sees to it that cheating is not used as a tool to harass the offender.
• Court applies its brain and in every case of cheating. If the court thinks that the effect of cheating is more civil in nature it sets civil procedure is set into motion. Although, in few cases such as chit fund cases where large stake of people is involved, a cheating is often dealt criminally.

Puffing: exaggeration by salesmen

• How many time it is seen that salesmen to increase their sale try to outshine their product. Will it be considered as cheating if the product does not possess these qualities which the salesmen claim of? 
• Presentation of the glossy respect of the accused cannot in itself be said to be fraudulent or false representation provided it does not appear that there was no semblance of truthfulness in such representation
• Take an example of a typical Delhi chor bazaar say Sarojini Market. You go to buy a shoe. First the salesperson fixes the price at INR 1500. You start moving to next shop. The Shopkeeper calls you and fixes the price at INR 1200 with no further discount. You insist to buy the product at INR 700. Shopkeeper says the final price is INR 900. Then he remind you of the quality of the product and its reasonable price. Although,  the shopkeeper is inducing or deceiving you to buy the product which might be of worth INR 500 but still court will not consider this trivial matter judicially.

Misrepresentation as to caste

• Where person belonging to different caste falsely represent himself to be of some other caste to gain something from the deceived person comes under the ambit of cheating.

Where a prostitute convinced a person to establish a sexual relation with her by deceiving a man that she was free from any sort of sexual disease which in reality she was not. This was held to be cheating.

Cheating by personation

• Where a person deceives his identity for deceiving someone and gaining something out of that deception, this is called cheating by personation.
• A, introduces himself to be a well-known big banker and thus took a loan from B to invest into his property amounts to cheating by personation.
• Personating an imaginary person is also cheating. Where a person personates himself to be a physics graduate from Harvard and got him selected into Public service commission board. This was said to be cheating by personation.

False representation at examination

In a case where A sat in the examination in the name of B. Gave the examination also, it was held that this was a case of cheating by personation. In such cases it is the person who is giving the examination who gets into more trouble.

Punishment for cheating

Simple cases: Simple cases are to be punished for a jail term which may extend upto one year which may end with a fine too. Where a person deceived his girlfriend that he will marry her and entered into sexual relationship with her and after she became pregnant left her. This was considered to be covered under this punishment.

Mild cases: The section mostly applies to cases of cheating by guardian, trustee, solicitor, agents, manager of Hindu family etc. The punishment under this section is jail term which may extend for up to three year along with fine.

Punishment for cheating by impersonating: There must be an essence of cheating alongwith personating. The cheating is essential ingredient for the offence. Where a person cheats another by deceiving himself to be someone else, he is guilty under section 416 IPC and punished under section 419 IPC. Punishment under this section is a jail term which may extend to three year jail term along with fine.

Proper section for cheating

This is the real chaar sau bees. Where there is any destruction or alteration in the property because of cheating, this section comes into action. Punishment under this is imprisonment for upto seven year along with fine. Punishment under Section 420 is attracted in case where there is a gross injustice to parties.

Explaining fraud

• Fraud as a crime is nowhere defined in the Indian Penal Code but we all use this term in general in our day to day life. What is fraud? Is it synonymous to cheating? What are the differences between the two?
• A fraud is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another’s loss.

Whenever the term fraud or defraud appears in the context of criminal law, two things are automatically to be assumed. First is deceit or deceiving someone and second is, injury to someone because of such deceit.

Implications of fraud is found in these following sections of IPC nameley, 421,422,423 and 424.

• Fraudulent removal or concealment of property to prevent distribution among creditors
• Fraudulently preventing debt being available for creditors.
• Fraudulent execution of deed of transfer containing false statement of consideration.
• Fraudlent removal or concealment of property.

Let is understand fraud in this way.

Fraudulent removal or concealment of property to prevent distribution among creditors. (Section 421 IPC)

This section refers to fraud considered with insolvency. The offence under it consists in a dishonest disposition of property with the intent to cause wrongful loss to the creditor. It will cover benami transactions. Where a shopkeeper keeps goods in his shop bought from a credit taken from another and he does not repay the person from whom he took the loan. This offence will be covered under this section. Punishment under this section is imprisonment up to 2 years with fine. This is a bailable offence.

Fraudulently preventing debt being available for creditors. (Section 422 IPC)

Preventing defrauding of creditors by masking the property. Any proceeding to prevent the attachment and sale of debts due to the accused will fall under this. Therefore, whereby a person has the means of returning his loan but he is not availing such means is fraudulent preventing debt being available for creditors. This is a bailable offence.  Punishment is imprisonment for up to two year with or without fine.

Fraudulent execution of deed of transfer containing false statement of consideration. (Section 423)

This is a variety of fraudulent execution which deals with-

• False recital as to consideration and
• False recital as to the name of beneficiary

In legal terminology, “Whoever dishonestly or fraudulently signs,executes or becomes a party to any deed or instrument which purports to transfer or subject to any charge, any property, or any interest therein, and which contains any false statement relating to the consideration for such transfer or charge, or relating to the person or persons for whose use or benefit it is really intended to operate, shall be punished with imprisonment of either description for a term which may extend to two years, or with fine or with both”. Punishment is imprisonment upto 2 years with or without fine and it is a bailable offence.

Fraudulent removal or concealment of property. (Section 424)

For this section there must be a concealment or removal and that too dishonestly or fraudulently. This section provides for cases which do not comes under the ambit of the precious three fraudulent claims. The crucial question for determination under this section is, whether the alleged removal of property is dishonest or fraudulent and therefore, if persons claiming title to property under attachment in executions of a decree on another remove the same, the matter where sch property belonged to the accused or not has to be determined by criminal court before deciding upon conviction. Punishment for this section is imprisonment with or without fine and a bailable offence.

Suggested readings.

List of Bailable & Non-Bailable Offences Under Indian Penal Code

How to Register Cyber Crime Complaint with Cyber Cell of Police – Online Complaint Procedure

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