In a landmark judgment, the Supreme court has expressed serious concerns over the casual approach adopted by lower courts in distinguishing between the offences of criminal breach of trust and cheating, highlighting the enduring confusion that persists even after 162 years since the Indian Penal Code (IPC) was introduced.

The Supreme Court strongly observed:-

“Before we close this matter, we would like to say something as regards the casual approach of the courts below in cases like the one at hand. The Indian Penal Code (IPC) was the official Criminal Code in the Republic of India inherited from the British India after independence. The IPC came into force in the sub-continent during the British rule in 1862. The IPC remained in force for almost a period of 162 years until it was repealed and replaced by the Bharatiya Nyaya Sanhita (“BNS”) in December 2023 which came into effect on 1 st July 2024. It is indeed very sad to note that even after these many years, the courts have not been able to understand the fine distinction between criminal breach of trust and cheating."

The court’s remarks came during the hearing of a case involving a long-standing dispute between the owner of Agarwal Udyog, a firm based in Khurja, and the Delhi Race Club 1940 Limited and the Delhi Horse Trainers Association. The complainant, Vipin Kumar Agarwal, alleged that the defendants had cheated his firm by failing to pay a sum of ₹9,11,434 for horse feed supplied over several years.

The court underscored the necessity for magistrates to meticulously examine complaints to determine whether the offences of cheating or criminal breach of trust are truly substantiated by the facts presented. It criticized the tendency of the police to register FIRs under both offences without proper application of mind, which often leads to confusion and misapplication of the law.

"The two offences are independent and distinct, and cannot coexist in the same set of facts," the court noted. It emphasized that the Bharatiya Nyaya Sanhita (BNS), which replaced the IPC in December 2023, maintains the same distinctions, and urged law enforcement officers to undergo proper legal training to better understand these differences.

In the case at hand, the complainant alleged that despite regular payments until 2017, the defendants, including the Delhi Race Club and the Delhi Horse Trainers Association, colluded to avoid paying the outstanding amount. The complaint led to an investigation and the eventual summoning of the defendants under Section 406 of the IPC, relating to criminal breach of trust.

However, the High Court dismissed the appeal to quash the summoning order, asserting that the evidence suggested a prima facie case of malafide intentions on the part of the defendants. The court concluded that there was no legal infirmity in the lower court's decision to proceed with the trial under Section 406, emphasizing the importance of distinguishing between cheating and criminal breach of trust to ensure justice is served.

The judgment has sparked discussions about the need for clearer judicial understanding and more rigorous legal training for both the judiciary and law enforcement agencies in handling such cases, as the country transitions from the IPC to the newly implemented BNS.

It also observed "When dealing with a private complaint, the law enjoins upon the magistrate a duty to meticulously examine the contents of the complaint so as to determine whether the offence of cheating or criminal breach of trust as the case may be is made out from the averments made in the complaint. The magistrate must carefully apply its mind to ascertain whether the allegations, as stated, genuinely constitute these specific offences. In contrast, when a case arises from a FIR, this responsibility is of the police – to thoroughly ascertain whether the allegations levelled by the informant indeed falls under the category of cheating or criminal breach of trust. Unfortunately, it has become a common practice for the police officers to routinely and mechanically proceed to register an FIR for both the offences i.e. criminal breach of trust and cheating on a mere allegation of some dishonesty or fraud, without any proper application of mind.

It is high time that the police officers across the country are imparted proper training in law so as to understand the fine distinction between the offence of cheating viz-a-viz criminal breach of trust. Both offences are independent and distinct. The two offences cannot coexist simultaneously in the same set of facts. They are antithetical to each other. The two provisions of the IPC (now BNS, 2023) are not twins that they cannot survive without each other.

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