Section 316 and 318 of BNS

Source: Supreme Court  

Why in News?

Recently, Justice BV Nagarathna and Justice R Mahadevan clarified that cheating [S.420 Indian Penal Code,1860 (IPC) /S.318 Bharatiya Nyaya Sanhita, 2023 (BNS)] and criminal breach of trust (S.405 IPC/S.316 BNS) cannot be alleged together on the same facts, as they are “antithetical.” The ruling came in a property sale dispute, where the Court set aside criminal proceedings for both offences filed simultaneously. 

• The Supreme Court held this in the matter of Arshad Neyaz Khan v. State of Jharkhand & Another (2025). 

What was the Background of Arshad Neyaz Khan v. State of Jharkhand & Another (2025)? 

• Arshad Neyaz Khan owned property situated at Khata No.186, MS Plot No.1322, Sub Plot No.1322/38-A and held power of attorney for an adjacent property at Sub-Plot No.1322/39-A-1. In January 2013, one Atik Alam approached complainant Md. Mustafa, informing him that Khan's property was available for sale. 
• Upon meeting Khan, the complainant was assured that all documents and titles to the property were in proper order. Khan also represented that the adjacent land was owned by six different individuals who had executed powers of attorney in his favour, authorizing him to sell that property as well. Based on these representations, both parties entered into an Agreement for Sale dated 16th February 2013 for a total consideration of Rs.43,00,000/-. 
• As per the agreement terms, the complainant paid an advance amount of Rs.20,00,000/- to Khan on the date of execution, with the balance amount to be paid during registration of the sale deed. However, after executing the agreement, Khan failed to convey title of the properties to the complainant and also did not return the advance money deposited with him. 
• After nearly eight years of non-performance, on 29th January 2021, the complainant filed a complaint in Complaint Case No.619 of 2021 against Khan. This complaint resulted in the registration of FIR No.18 of 2021 dated 8th February 2021 at Police Station Hindpiri, alleging offences under Sections 406 (Criminal Breach of Trust), 420 (Cheating), and 120B (Criminal Conspiracy) of the Indian Penal Code. 
• Apprehending arrest, Khan filed an Anticipatory Bail Petition which was granted by the Judicial Commissioner, Ranchi on 23rd December 2021. During proceedings, parties were referred to mediation where they reached a settlement agreement for Khan to pay Rs.24,00,000/- to the complainant in five instalments. Khan paid the first instalment of Rs.5,00,000/- but failed to comply with subsequent instalment conditions, leading to cancellation of his anticipatory bail on 15th June 2022.

What were the Court’s Observations? 

• The Supreme Court observed that criminal breach of trust and cheating cannot co-exist on the same allegations as they are "antithetical" to each other. Cheating requires criminal intention from inception, while criminal breach of trust involves lawful entrustment followed by misappropriation. 
• The Court observed that establishing cheating requires demonstrating fraudulent or dishonest intention at the time of making representations. Such culpable intention cannot be presumed and must be proven through cogent facts. Mere failure to keep a promise does not establish initial fraudulent intent. 
• The Court observed that not every breach of trust constitutes a penal offence unless there is evidence of fraudulent misappropriation. The complainant failed to establish how property was entrusted and subsequently misappropriated for personal use. 
• The Court observed that neither cheating nor criminal breach of trust was established in this case. There was a clear absence of dishonest intention during the agreement execution and no evidence of intentional deception from the beginning. 
• The Court observed that the eight-year delay in filing complaint raised suspicions about bona fides. Criminal law should not become a platform for vindictive proceedings or settling personal scores when no prima facie case exists.

What are Sections 316 and 318 of BNS ? 

• Section 316 - Criminal Breach of Trust 
  • Entrustment of Property: A person must be entrusted with property or dominion over property in any manner, creating a fiduciary relationship between the parties. 
  • Dishonest Misappropriation or Conversion: The entrusted person must dishonestly misappropriate or convert the property to his own use, departing from the terms of entrustment. 
  • Violation of Legal Direction or Contract: The accused must dishonestly use or dispose of the property in violation of any direction of law prescribing the mode of discharge of trust, or breach any legal contract (express or implied) regarding the trust discharge. 
  • Wilful Permission to Others: The section covers situations where the accused wilfully suffers any other person to commit the aforementioned acts, extending liability to passive facilitation. 
• Section 318 – Cheating  
  • Deception: The accused must deceive any person through false representations, concealment of material facts, or other fraudulent means. 
  • Fraudulent or Dishonest Inducement: The deception must fraudulently or dishonestly induce the deceived person to deliver property to any person or consent to property retention by another. 
  • Intentional Inducement for Action/Omission: The accused must intentionally induce the deceived person to do or omit doing something which they would not have done or omitted if not deceived. 
  • Causation of Damage or Harm: The act or omission caused by deception must result in or be likely to cause damage or harm to the deceived person in body, mind, reputation, or property. 

What is the Difference Between Section 316 (Criminal Breach of Trust) and Section 318 (Cheating)?