SC Reiterates Difference Between Cheating And Criminal Breach Of Trust

The Supreme Court of India recently reiterated that for the offence of cheating, dishonest intention must exist at the inception of the transaction, whereas, in case of criminal breach of trust there must exist a relationship between the parties whereby one party entrusts another with the property as per law, though dishonest intention came later.

Bench comprising Justice Sanjiv Khanna and Justice Dipankar Datta heard a criminal appeal pertaining to an FIR registered under Sections 406 and 506 of the Indian Penal Code, 1860.

After the chargesheet was filed by the Police under Section 173 of Criminal Procedure Code 1973, the accused persons approached the High Court and obtained stay on arrest. The High Court, however, had rejected their plea for quashing of the FIR.

The Apex Court said that there existed a clear distinction between a civil wrong in the form of breach of contract, non-payment of money or disregard to and violation of the contractual terms; and a criminal offence under Sections 420 and 406 of the IPC. It was observed by the Bench that numerous judgments of the Supreme Court in this regard were somehow overlooked and were not being applied and enforced.

The Apex Court said that the High Court should not hesitate in invoking and exercising its power under Section 482 CrPC and that no person should undergo harassment of litigation for a number of years, when no criminal offence was made out.

The Court noted that, "In this case entrustment is missing, in fact it is not even alleged. It is a case of sale of goods."

With these observations, the Court allowed the appeal and quashed the FIR against the appellants-accused.