Cheating and Criminal Breach of Trust Cannot Co-Exist on the Same Allegations: Supreme Court

Introduction

In a landmark judgment delivered on 24 September 2025, the Supreme Court of India has clarified that the offences of cheating (Section 420 IPC / Section 318 BNS) and criminal breach of trust (Section 406 IPC / Section 316 BNS) cannot be alleged simultaneously on the basis of the same set of facts. The Court emphasized that both offences are “antithetical” in nature, and therefore cannot co-exist.

The judgment was delivered by a Bench comprising Justice B.V. Nagarathna and Justice R. Mahadevan in the case Arshad Neyaz Khan vs State of Jharkhand & Another (Criminal Appeal No. ___ of 2025; arising out of SLP (Crl.) No. 3606 of 2024).

Background of the Case

The dispute arose from an agreement for sale executed in 2013. The appellant, Arshad Neyaz Khan, agreed to sell certain immovable properties to the complainant, Md. Mustafa, for a total consideration of ₹43,00,000. An advance of ₹20,00,000 was paid, but the sale deed was never executed, nor was the money refunded.

After nearly eight years, in 2021, the complainant filed a case alleging offences under Sections 406 (criminal breach of trust), 420 (cheating), and 120B (criminal conspiracy) IPC. An FIR was also registered. While the High Court refused to quash the proceedings, the appellant approached the Supreme Court.

Supreme Court’s Observations

The Supreme Court undertook a detailed analysis of the provisions and judicial precedents.

1.      On Cheating (Section 420 IPC):

o   For cheating, a fraudulent or dishonest intention at the inception of the transaction is essential.

o   Mere failure to keep a promise later cannot amount to cheating.

o   In the present case, there was no material to suggest that the appellant had dishonest intention from the beginning.

2.      On Criminal Breach of Trust (Section 406 IPC):

o   This offence requires lawful entrustment of property and subsequent dishonest misappropriation.

o   The complainant failed to prove how the property was entrusted or misappropriated.

o   Every breach of contract cannot be converted into a criminal breach of trust unless dishonest intention is evident.

3.      Antithetical Nature of the Offences:

o   In Delhi Race Club (1940) Ltd. vs. State of UP (2024), the Court had earlier clarified the distinction.

o   Cheating involves deception at inception, whereas breach of trust involves lawful entrustment followed by dishonesty.

o   Both cannot exist together in the same factual scenario.

4.      Delay and Mala Fide Allegations:

o   The complaint was filed after eight years, raising doubts on its bona fides.

o   The Court cautioned against misuse of criminal proceedings for settling civil disputes.

By quashing the complaint and FIR, the Supreme Court reiterated the principle that criminal law should not be misused as a tool for harassment or to pressurize parties in civil disputes. This judgment provides much-needed clarity to distinguish between cheating and criminal breach of trust, strengthening the jurisprudence on criminal liability in contractual matters.

The decision is a guiding precedent for lawyers, law students, and judiciary aspirants, reaffirming the Court’s stand against conflating distinct offences in criminal law.

Key Takeaways

• Cheating requires proof of dishonest intention from the beginning of the transaction.
• Criminal Breach of Trust requires proof of entrustment and subsequent misappropriation.
• Both offences are mutually exclusive and cannot be alleged together on the same facts.

Delay in filing complaints and misuse of criminal law for civil disputes will not be entertained by courts.