Supreme Court holds that offences under S.420/S.318 and S.406/S.316 cannot be simultaneously framed on the same facts, being legally “antithetical.”
The Supreme Court observed that the offence of criminal breach of trust and cheating cannot co‑exist on the basis of same allegations. The Court said that the offence of cheating (S.420 IPC / S.318 BNS) involves criminal intention from inception; however, for criminal breach of trust (S.406 IPC / S.316 BNS), there is lawful entrustment at the beginning, which is later misappropriated. So, both these offences cannot exist simultaneously on same facts, as they are “antithetical” to each other.
The Judgment & Its Facts
In a landmark decision delivered on 23 August 2024, a bench of the Supreme Court comprising Justices J. B. Pardiwala and Manoj Misra clarified that the offences of cheating and criminal breach of trust are distinct and mutually exclusive in the sense that they cannot be charged together when arising out of the same factual matrix. latestlaws.com+2Verdictum+2
The case arose from a complaint that the Delhi Race Club (1940) Ltd. and its officers had not paid sums due for horse grain and oats supplied over a period. The complaint invoked Sections 406 (criminal breach of trust), 420 (cheating), and 120B IPC. The Allahabad High Court refused to quash summons issued under all those heads. latestlaws.com+2Verdictum+2
However, the Supreme Court overturned that order. It held that once the complaint seeks to invoke misuse of entrustment, to simultaneously assert cheating would be conceptually inconsistent, because the two offences rest on different timings and modes of mens rea (dishonest intention). latestlaws.com+3Verdictum+3LawBeat+3
Why They Cannot Co‑Exist: The Legal Distinction
Cheating (S.420 IPC / S.318 BNS)
- In cheating, the dishonest or fraudulent intention must exist from the very inception of the transaction. Bar and Bench – Indian Legal news+3latestlaws.com+3LawBeat+3
- It involves a false or misleading representation by the accused, inducing another to part with property (or consent) under that deception. LawBeat+3Bar and Bench – Indian Legal news+3Verdictum+3
- The very inducement is tainted — the victim is led into the transaction by deceit. latestlaws.com+3Bar and Bench – Indian Legal news+3Verdictum+3
Criminal Breach of Trust (S.406 IPC / S.316 BNS)
- The property must initially have been lawfully entrusted to the accused (or they must have lawful possession/dominion). Hindustan Times+3Mondaq+3Verdictum+3
- The dishonest intention arises later — in the course of that relationship / entrustment — when the accused misappropriates or diverts the property. Mondaq+3Verdictum+3latestlaws.com+3
- Merely failing to pay or honor commitments does not ipso facto amount to criminal breach of trust unless a fiduciary element and misappropriation with dishonest intent are shown. Hindustan Times+3Mondaq+3Verdictum+3
Thus, the Court held, the two offences rest on antithetical premises: cheating presumes deceit from the start, whereas criminal breach of trust presumes initially fair dealing which is then abused.
As the Court put it, “if it is a case … of criminal breach of trust … then in the same breath it cannot be said that the accused has also committed cheating.” Verdictum+2latestlaws.com+2
Practical Import & Court’s Directives
On Summons / Cognizance
The Supreme Court emphasised that issuing summons is a serious step and must not be done mechanically — the magistrate must closely examine whether the complaint’s averments prima facie satisfy the ingredients of the specific offence. Hindustan Times+3Telegraph India+3Verdictum+3
The Court criticized the common practice in both magistrate courts and police stations of layering both cheating and criminal breach of trust charges without proper legal scrutiny. Hindustan Times+3LawBeat+3Verdictum+3
On Police & Judicial Training
The Court directed that its verdict be circulated to relevant departments (MoLJ, Home) and urged training of police and judicial officers to distinguish carefully between the two offences. Hindustan Times+2Verdictum+2
It deplored a systemic casual approach whereby FIRs are lodged under both offences on broad allegations of dishonesty, without applying mind to legal nuances. Hindustan Times+2Verdictum+2
On Application under New Penal Code (BNS)
Though the case was decided under the IPC regime, the judgment itself notes that the new Bharatiya Nyaya Sanhita (which replaces IPC provisions) carries forward the distinction: cheating is now under Section 318 BNS, and criminal breach of trust under Section 316 BNS. Verdictum+3Hindustan Times+3Verdictum+3
Hence, the principles will hold relevance even in prosecutions under the new penal regime.
Broader Legal Significance & Impact
- Checks on over‑charging / misuse of criminal law
Many civil / contractual disputes are wrongly transformed into criminal complaints litigated under cheating and breach of trust. The ruling is likely to curb overreach where dishonest intention from inception is not established. Hindustan Times+3The Indian Express+3Verdictum+3 - Defence leverage
Defence counsel can argue quashing of charges or summons where facts do not support both offences, citing this judgement as authority. - Judicial consistency & clarity
It sets a clearer doctrinal boundary that lower courts and police must adhere to, reducing inconsistent or indiscriminate framing of charges. - Transition to BNS era
As the legal system fully shifts to the Bharatiya Nyaya Sanhita, this interpretation ensures continuity in how offences of cheating and breach of trust are treated. - Litigation posture in contractual disputes
The decision reinforces that not every breach or non‑payment constitutes a crime — absent fraud from the outset or entrustment plus later misdeed, the dispute could remain purely civil.
An example of this principle was also recently applied in a Delhi sessions court which held that failure to deliver promised flats under a real estate scheme, without proof of fraud from inception, could not amount to cheating — though criminal breach of trust might be considered where diversion of funds was shown.
