Cheating and criminal breach of trust are among the most common charges in business, money and property disputes. Under the Bharatiya Nyaya Sanhita, 2023 (BNS), cheating is in Section 318 and criminal breach of trust is in Section 316. They replace Sections 420 and 406 of the old Indian Penal Code. This guide explains what the prosecution must prove and how an accused can defend.
What is cheating under BNS Section 318?
Cheating means deceiving a person and thereby fraudulently or dishonestly inducing him to deliver property or consent to a person retaining property, or intentionally inducing him to do or omit something that he would not otherwise do, and which causes or is likely to cause damage or harm in body, mind, reputation or property.
Punishment (in general terms):
- Simple cheating: imprisonment up to three years, or fine, or both.
- Cheating a person whom the offender knows he is bound to protect: up to five years, or fine, or both.
- Cheating and dishonestly inducing delivery of property or making or altering a valuable security: up to seven years and fine.
Ingredients of cheating
- A false representation or deception.
- The accused had a dishonest or fraudulent intention at the time of making the promise.
- The victim was induced to deliver property or to act.
- Loss or harm followed, or was likely.
The most important element is dishonest intention at the beginning. A later failure to keep a promise, without proof of that intention from the start, is a breach of contract and not cheating.
What is criminal breach of trust under Section 316?
A person commits criminal breach of trust when, being entrusted with property or with dominion over property, he dishonestly misappropriates or converts it to his own use, or dishonestly uses or disposes of it in violation of a direction of law or a legal contract.
Punishment (in general terms):
- General offence: imprisonment up to five years, or fine, or both.
- By a carrier, wharfinger or warehouse-keeper: up to seven years and fine.
- By a clerk or servant: up to seven years and fine.
- By a public servant, banker, merchant, agent, broker or attorney in the course of business: life imprisonment or up to ten years, and fine.
Ingredients of criminal breach of trust
- Entrustment of property to the accused.
- Dishonest misappropriation, conversion or disposal of that property.
- Intention to cause wrongful gain or loss.
Mere failure to pay a debt is not criminal breach of trust, because a debtor is not holding the money as a trustee.
Civil dispute or criminal case?
Courts have repeatedly warned against giving criminal colour to civil disputes. In Indian Oil Corporation v. NEPC India Ltd. (2006), the Supreme Court cautioned about the growing tendency to convert purely civil disputes into criminal cases. In Hridaya Ranjan Prasad Verma v. State of Bihar (2000), the Court explained that the distinction between breach of contract and cheating lies in the intention at the time of making the promise.
The Supreme Court has also observed, for example in Delhi Race Club (1940) Ltd. v. State of U.P. (2024), that cheating and criminal breach of trust involve different mental states and ordinarily do not co-exist in the same transaction. The question must be examined on the facts of each case.
Defences in cheating and criminal breach of trust
- No dishonest intention at the inception. The dispute is about performance of a contract.
- No entrustment. The money was a loan or advance, not held in trust.
- No false representation, or the complainant knew the true facts.
- No loss or delivery of property.
- Delay, motive and falsity in the complaint.
- Payments already made, or a settlement reached.
Remedies for an accused
- If arrest is feared, consider anticipatory bail under BNSS Section 482.
- Where the FIR shows only a civil dispute, a petition for quashing of FIR under BNSS Section 528 can be filed.
- Many of these offences are compoundable, some with the permission of the court, under the compounding table in the BNSS, so a settlement can end the case. Check the table for the exact section.
- Know how the case began by reading about FIR registration under BNSS Section 173.
Advice for complainants
- Keep documents showing the promise, the payment and the dishonest act.
- Give a clear chronology in the complaint.
- Consider a civil recovery suit at the same time if money is the real goal.
- Avoid exaggeration, since courts examine the complaint closely.
Frequently Asked Questions
Which BNS sections replace Section 420 and Section 406 of the IPC?
Cheating is dealt with in Section 318 of the BNS, and criminal breach of trust is in Section 316 of the BNS.
Is every failure to repay money a cheating case?
No. A breach of contract or failure to repay becomes cheating only if the prosecution proves that the accused had a dishonest intention from the very beginning.
What must be proved for criminal breach of trust?
The prosecution must show that property was entrusted to the accused, and that he dishonestly misappropriated, converted or disposed of it.
Can the same facts be both a civil suit and a criminal case?
They can be, but courts discourage criminal proceedings that are really civil disputes. Each case depends on whether the ingredients of the offence are made out.
Can cheating cases be settled?
Many are compoundable, some with court permission. The parties can compound the offence and end the case, or approach the High Court for quashing on a genuine settlement.
What is the punishment for criminal breach of trust by a banker or agent?
It is more serious. Under Section 316, it can extend to imprisonment for life or up to ten years, along with a fine.
What should I do if I receive a police notice in a cheating case?
Do not ignore it. Consult an advocate, collect your documents, appear on the date, and consider the protective remedies available before arrest becomes likely.
This article is general legal information and not a substitute for advice on your specific case. Consult an advocate before acting.