Source: Bombay High Court

Why in News?

In a recent ruling in the case of Rajiv Bansal & Ors v. State of Maharashtra and Ors, it was held that withholding of salary or emoluments does not constitute the offense of cheating.

• This decision came amidst a legal battle involving Air India Limited (AIL) and its employees over withheld incentives, where the court emphasized that withholding salary does not meet the criteria for cheating, as it lacks elements of deceit or inducement typically associated with the offense.

What was the Background of Rajiv Bansal & Ors v. State of Maharashtra and Ors?

• Rajiv Bansal and other petitioners, including current and former directors/managers of Air India Limited (AIL), were involved in a legal case and K. V. Jagannatharao, the respondent, joined AIL in 1987.
• In 2013, AIL issued notifications withholding 25% of Performance Linked Incentive due to financial difficulties, without issuing the statutory notice required under Section 9A of the Industrial Dispute Act, 1947 (ID Act).
• Writ petitions were filed against these notifications, leading to the Bombay High Court declaring them illegal.
  • The Bombay High Court ruled that the workmen were entitled to benefits received by them at the time of judgment, and if AIL wanted to change conditions, they must give notice by July 31, 2014.
• The Supreme Court challenged the Bombay High Court's decision, pending till date.
• AIL transferred arrears of salary to the workmen as per Supreme Court directions, but without paying any interest.
• The respondent filed a verification statement under Section 200 of the Code of Criminal Procedure, 1973 (CrPC), alleging offenses under Sections 415 of the Indian Penal Code, 1860 (IPC).
  • The Metropolitan Magistrate found a prima facie case against the petitioners for offenses under IPC sections 409 and 420.
• The petitioners challenged this order through a writ petition, arguing that the Magistrate erred by issuing process mechanically without recording the verification statement on oath.
• The petitioners contended that withholding salary and emoluments, without notice under Section 9A of the ID Act, does not constitute cheating or criminal breach of trust.
• The respondent argued that the verification statement was properly recorded by the Magistrate and that initiating criminal action alongside civil remedies is legitimate, given the alleged criminal intent behind withholding salaries without notice.

What were the Court’s Observations?

• The court noted that despite the Supreme Court's directive, the dispute primarily concerned the claim for interest on arrears paid by AIL, not the payment itself.
  • Even assuming AIL's deduction of salary/emoluments without notice under Section 9A of the ID Act was improper, it does not automatically constitute the offense of cheating.
  • Cheating necessitates deceit, fraudulent or dishonest inducement, leading to the delivery or retention of property.
• Withholding salary/emoluments does not fit the criteria for cheating, as the employer's action does not involve deceit or inducement. And cheating requires dishonest intention from the beginning, whereas AIL's deduction was within its authority as an employer.
• Similarly, the offense of criminal breach of trust is not established, as there was no entrustment of property by employees to the employer.
  • The employer did not breach any legal contract, which is essential for criminal breach of trust.
• The Magistrate erred procedurally by not recording the complainant's verification statement under oath, as mandated by Section 200 of the CrPC.

What is Offence of Cheating?

• About:
  • Cheating is considered as a criminal offence under the Indian Penal Code, 1860 (IPC).
  • It is done to gain profit or an advantage from another person by using some deceitful means.
  • Section 415 states that whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property, to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat".
  • All forms of cheating under IPC in Sections 417, 418 and 420 have been clubbed into a single provision i.e., Section 318 of the Bharatiya Nyaya Sanhita, 2023 (BNS).
• Section 415:

Section 415 IPC delineates the offense of cheating into two distinct segments, each with its own set of essentials:

• • First Segment:
    • Deception must be practiced;
    • There should be inducement;
    • Inducement should be either fraudulent or dishonest;
    • There must be delivery or consent for retention of any property — by the person deceived;
    • The delivery may be to any person.
  • Second Segment:
    • Deception must be practiced;
    • There should be inducement;
    • Inducement should be intentional;
    • Inducement should be directed towards making the person deceived to do something or omit to do something which he would not do or omit if he were not so deceived;
    • Such an act or omission should cause or be likely to cause damage or harm to that person in body, mind, reputation, or property.
  • Accordingly, under Section 415 of the IPC, cheating may occur through deception inducing any person fraudulently or dishonestly to take actions specified within the section, or by intentionally inducing a person to undertake or refrain from actions detailed within the section.

What are the Essentials of Cheating?

• Deception: In the context of the offense of cheating, deception occurs when one person causes another to believe false or misleading information, leading them into error.
  • Deception is a crucial element in both segments of the cheating offense outlined in the statute.
• Deception Preceding Inducement: For the offense of cheating to be established, deception must precede and induce the other person to either deliver or retain property or to commit an act or omission.
  • Any fraudulent representation of an existing fact that is not true constitutes deception and forms the basis of the offense of cheating.
  • The determination of what constitutes deception relies on the evidence presented in each case, considering the specific facts and circumstances.
• Willful Representation: Willful misrepresentation with the intent to defraud constitutes cheating. However, it must be established that at the time the misrepresentation was made, it was knowingly false to the accused.
• Dishonest Intention: To convict a person of cheating, it is essential to demonstrate that they harbored fraudulent or dishonest intentions at the time they made the promise or representation.
• Inducement: The person who has been cheated must have been intentionally induced to perform an act that they would not have otherwise done due to the deception perpetrated against them. Mere deceit or committing acts fraudulently or dishonestly is insufficient.
  • The fraudulent or dishonest act must have the effect of inducing the deceived person to deliver property or undertake an action (either in the form of an act or omission).

What Other Provision is Involved in the Case?

Section 34 of IPC:

• Section 34 deals with acts done by several persons in furtherance of common intention.
• When a criminal act is done by several persons in furtherance of the common intention of all, each of such persons is liable for that act in the same manner as if it were done by him alone.

Section 409 of IPC:

• Section 409 deals with criminal breach of trust by public servant or by banker, merchant or agent.
• Whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits criminal breach of trust in respect of that property, shall be punished with imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.
• Criminal breach of trust as provided under Sections 406 – 409 of IPC has been clubbed in one provision under Section 316 BNS.

Section 420 of IPC:

• Section 420 deals with certain aggravated forms or specified classes of cheating. It deals with cases of cheating, whereby, the deceived person is dishonestly induced;
  • To deliver any property to any person.
  • To make, alter or destroy;
    • The whole or any part of a valuable security.
    • Anything signed or sealed and capable of being converted into a valuable security.
• It is required to prove that the complainant has parted with the property due to dishonest inducement of the accused. The property so delivered must have some money value to the person cheated.
• The maximum punishment under this section is imprisonment for a term of 7 years and a fine.