White-collar crime: cheating, forgery and corporate fraud

Cheating under Section 318(1) of the BNS (formerly Section 415 of the IPC) means deceiving a person and thereby fraudulently or dishonestly inducing him to deliver property, or to act in a way he otherwise would not, to his harm. Dishonest concealment of facts is deception. Simple cheating carries up to three years under Section 318(2); cheating that induces delivery of property carries up to seven years and fine under Section 318(4) (formerly Section 420 of the IPC). Illustration (g) draws the line: a person who meant to deliver when he took the money, and later broke the contract, does not cheat and is liable only in a civil action.

Criminal breach of trust under Section 316(1) of the BNS (formerly Section 405 of the IPC) covers a person entrusted with property who dishonestly misappropriates it or deals with it against the law or the terms of the trust. Section 316(2) (formerly Section 406 of the IPC) raises the maximum from three to five years. An employer who deducts provident fund or ESI contributions and does not pay them over is deemed to have been entrusted with that money.

Forgery under Section 336(1) of the BNS (formerly Section 463 of the IPC) is making a false document or electronic record with intent to cause injury, support a claim, cause a person to part with property, or commit fraud; it carries up to two years. Forging a valuable security or will falls under Section 338 (formerly Section 467 of the IPC), and using a forged document as genuine under Section 340(2) (formerly Section 471 of the IPC). In Mariam Fasihuddin v. State by Adugodi Police Station ([2024] 1 S.C.R. 623) the Supreme Court said forgery needs two things: that the accused made the false instrument, and that he did so intending it to be used for cheating.

Section 344 of the BNS (formerly Section 477A of the IPC) punishes an employee who wilfully and with intent to defraud falsifies the employer's books or accounts, with up to seven years. The charge need only allege a general intent to defraud.

Section 447 of the Companies Act, 2013 defines fraud widely: any act, omission, concealment or abuse of position with intent to deceive, gain undue advantage, or injure the company, its shareholders, creditors or others, whether or not there is wrongful gain or loss. Where at least ten lakh rupees or one per cent of turnover (whichever is lower) is involved, the punishment is six months to ten years and a fine of one to three times the amount; if public interest is involved, the minimum is three years. Smaller frauds without public interest carry up to five years, or fine up to fifty lakh rupees, or both.

The Central Government may assign an investigation to the SFIO under Section 212, for example on a Registrar's report, a special resolution of the company, in the public interest, or at a government department's request. Under Section 212(6), a Section 447 offence is cognizable, and if the Public Prosecutor opposes bail the court must be satisfied there are reasonable grounds for believing the accused is not guilty and will not offend on bail. A person under sixteen, a woman, or a sick or infirm person may be released if the Special Court directs. Cognizance is taken only on a written complaint by the SFIO Director or an authorised officer.

In Serious Fraud Investigation Office v. Aditya Sarda ([2025] 5 S.C.R. 485) the Supreme Court called economic offences a class apart and held that an accused who evades warrants should not get anticipatory bail.

Delhi Race Club (1940) Ltd. v. State of Uttar Pradesh ((2024) 10 SCC 690) restates that a breach of contract is not cheating unless dishonest intention is shown from the beginning of the transaction, while breach of trust needs entrustment followed by dishonest misappropriation. The Court treated the two as mutually exclusive and quashed the case. G. Saminathan v. State (2026 INSC 772) held that both cannot be sustained on the same facts about the same property.

Where a complaint only questions a commercial transaction and a civil remedy is being pursued, the High Court should quash it (Dr Sonia Verma v. State of Haryana, [2024] 3 S.C.R. 673). In Shailesh Kumar Singh v. State of Uttar Pradesh (2025 INSC 869) the Court disapproved of a High Court ordering payment and mediation; it must decide whether an offence is disclosed. Quashing petitions lie under Section 528 of the BNSS (formerly Section 482 of the CrPC).

Section 141 of the Negotiable Instruments Act makes those in charge of a company liable for its offences; the BNS has no such rule for cheating or forgery. In Sunil Bharti Mittal v. Central Bureau of Investigation ((2015) 4 SCC 609) a three-judge bench held that there is no vicarious liability unless the statute provides for it. A director can be made an accused with the company only on sufficient evidence of his active role and criminal intent, or where the statute creates vicarious liability.

Sanjay Dutt v. State of Haryana ([2025] 1 S.C.R. 446) adds that the complainant must make specific allegations attributing a particular role to the director, that there is no presumption that every officer knows about the transaction, and that vague allegations against directors in their personal capacity are not enough.

In S.N. Vijayalakshmi v. State of Karnataka (2025 INSC 917) the Supreme Court said there is no bar to simultaneous civil and criminal proceedings, and that use of a civil remedy is not in itself a ground to quash an FIR. The allegations must still disclose an element of criminality; without it, continuing both cases is an abuse of process and the criminal case should be quashed. Kishan Singh v. Gurpal Singh ((2010) 8 SCC 775) adds that whether either case should be stayed depends on the facts.