Whether a Criminal Case of Breach of Trust or Cheating Can Be Made Out On A Non-payment of Salary Dispute

Introduction

“The distinction between, mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed[1].”

                                                                                 Hridaya Ranjan Prasad Verma v. State of Bihar

Salary disputes are a common issue in the modern workplace, with employees often facing issues such as delayed payments, incorrect calculations, and deductions without proper consent. The question arises as to whether a criminal case can be made out of a non- payment of salary dispute. In a country suffering with the daunt of the world’s largest backlog of cases, it is seen that the litigants often view criminal proceedings as a weapon to threaten and pressurize the opposite party to enter a favourable settlement. A dispute of civil nature solely based on a contractual relationship between the parties shall not be transformed into a criminal case for the purpose of obtaining outcome in their favour.

Salary dispute

[Image Sources : Shutterstock]

There are a plethora of instances where despite the cases involving civil liability, they are given criminal contours in order to ‘expedite the civil recovery mechanism’ or to exert pressure on the accused or out of hostility for the accused or to harass the accused[2].

The Honorable courts in India time and again deplored the initiation of false criminal proceedings in cases having the elements of a civil dispute. The courts have taken note of the growing inclination in business circles to convert purely civil disputes into criminal cases due to the common perception that “civil law remedies are time consuming and do not adequately protect the interests”[3] .

The courts have succinctly noted the prevalence of “forum shopping” being indulged by the litigants to get favourable decisions, whereby cases with predominantly civil nature are given the guise of a criminal offence, even after availing civil remedies[4].

This article will explore the question of whether a criminal case of breach of trust or cheating can be made out of a non-payment of salary dispute and the circumstances under which such a case may be initiated.

Whether non-payment of salary contribute to Criminal Breach of Trust?

Courts in various judgments have identified certain ingredients in order to constitute a criminal breach of trust.
1) A person must be entrusted with a property or entrusted with a dominion over
the property, and
2) The person entrusted :

  1. a) should dishonestly misappropriate or convert property to his own
    use, that
    b) such misappropriation, conversion, use or disposal should be in violation of:
  2. i) any direction of law prescribing the method in which the trust is
    discharged and
    ii) any legal contract which the person has made touching the discharge of trust[5]

An act of breach of trust involves a civil wrong, and the affected person may seek remedy through civil court. However, if there is evidence of a malicious intent, or mens rea, it can also result in criminal prosecution. Not every breach of trust constitutes a criminal offence of criminal breach of trust, it requires evidence of ‘manipulating act of fraudulent misappropriation’[6].

In V.K. Mittal and Ors. vs. The State of Jharkhand and Ors[7], which dealt with the non-payment of three months salaries, the complainant claimed that he was entitled to the salary, while the accused contended that the complainant was not eligible for the salary as he had been placed on forced leave, not terminated, and therefore was not entitled to the salary for the three months. The court going through the facts of the case found that the case “did not deal with entrustment of property” and thus found it to be a civil dispute and held that non- payment of salary by itself does not constitute an offence of cheating or criminal breach of trust.

Whether non-payment of salary contribute to Cheating?

The offence of cheating is dealt with in sections 415 to 420 of the Indian Penal Code, 1860. Simply put, cheating is an offence committed by a person who uses deceitful methods to gain an advantage or profit over another person. This involves making fraudulent representations with the intention to deceive. It’s not enough for the representation to simply be false; the accused must be aware that they are lying and doing so to deceive the victim.

The court in Parthkumar Ramniklal Kalavadiya & Ors v. State Of Gujarat put forward that the following ingredients should be present to constitute the offence of cheating:

(1) fraudulent or dishonest inducement of a person by deceiving him

(2) (a) the person so deceived should be induced to deliver any property to any persons; or to consent that any person shall retain any property or

(b) the person so deceived should be intentionally induced to do or omit to do anything which he would not do or omit if he were not so deceived.

 (3) in cases covered by 2(b) the act or omission should be one which causes or is likely to cause damage or harm to the person induced in bodily or reputation or property.[8]

The very first ingredient essential for constituting the offence of cheating is a deception of the complainant by the accused. In the absence of such a deception, the offence of cheating cannot be established. Once deception has taken place, the deceived persons should be induced to do or omit to do something. For cheating, criminal intention is necessary ‘at the time of entrustment’ itself, i.e, it is necessary to show that the person had fraudulent or dishonest intention at the time of making the promise. It cannot be presumed that a person had malicious intent right from the beginning, merely because he failed to fulfil the promise subsequently[9].

In a case decided by Gujarat High Court, which primarily dealt with non- payment of wages to the security guards at projects of GMDC, an application was filed to quash and set aside FIR for the offence punishable under Sections 406 and 420 of IPC. The Court while observing that it was nowhere alleged in the FIR that the accused/petitioner had ‘dishonest or fraudulent intention at the time the complainant parted with the money’, held that it would not amount to an offence under Section 420 IPC and may only amount to breach of contract. The court further opined that with regard to the civil nature of the factual dispute, allowing the respondent to pursue his complaint in criminal proceedings is nothing, but “abuse of process of law”[10].

Conclusion

Criminal proceedings should not be viewed as a ‘short cut’ of other legal remedies[11]. In general, it is necessary to show that the employer intentionally acted dishonestly or fraudulently in order to establish criminal liability in salary disputes involving employment contracts in India, and depends on the specific circumstances of each case. An analysis of the above mentioned case laws demonstrates that simple cases of salary withholding by an employer are typically viewed as civil cases, and may not result in criminal liabilities unless there is evidence of intent to deceive or fraudulent behaviour. To constitute a criminal offence of cheating, it is necessary to show that the person had fraudulent or dishonest intention to mislead a person to believe the unreal as existent and genuine and it is necessary to prove that the person had such dishonest intention to deceive from the time of making the promise itself, not subsequently at a later phase.

Author: Salmath KP is an Assessment Intern at Khurana & Khurana, Advocates and IP Attorney, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com.

 References/Citations

  1. Hridaya Ranjan Prasad Verma v. State of Bihar, AIR 2000 SC 2341 at Pp. 2345¬46 of para 16
  2. Mohammed Ibrahim & Ors. v. State of Bihar & Anr., (2009) 8 SCC 751
  3. Indian Oil Corporation v. NEPC India Ltd. & Others
  4. Ramesh Dahyalal Shah v. The State of Maharashtra, Joint Commissioner of Police & Ors., Criminal Application No. 613 of 2016
  5. see: S.W.P. Palanitkar v. State of Bihar, (2002)1 SCC 241) : (AIR 2001SC 2960). And Parthkumar Ramniklal Kalavadiya & Ors v. State Of Gujarat & Ors.
  6. Parthkumar Ramniklal Kalavadiya & Ors v. State Of Gujarat & Ors.
  7. K. Mittal and Ors. vs. The State of Jharkhand and Ors. (25.10.2009 – JHRHC) : MANU/JH/1009/2009
  8. Parthkumar Ramniklal Kalavadiya & Ors v. State Of Gujarat & Ors.
  9. Hridaya Ranjan Prasad Verma v. State of Bihar, AIR 2000 SC 2341 at Pp. 2345-46 of para 16) ; Vir Prakash Sharma v. Anil Kumar Agarwal and Anr. (2007) 7 SCC 373; R. Kalyani vs. Janak C. Mehta and Ors. (04.10.2008 – SC) MANU/SC/8183/2008
  10. Sameer Kumar vs. State of Gujarat and Ors. (27.08.2021 – GUJHC) : MANU/GJ/1284/2021
  11. Sagar Suri and Ors. vs. State of U.P. and Ors. ( 2000 ) 2 SCC 636

[1] Hridaya Ranjan Prasad Verma v. State of Bihar, AIR 2000 SC 2341 at Pp. 2345¬46 of para 16

[2] Mohammed Ibrahim & Ors. v. State of Bihar & Anr., (2009) 8 SCC 751

[3] Indian Oil Corporation v. NEPC India Ltd. & Others

[4] Ramesh Dahyalal Shah v. The State of Maharashtra, Joint Commissioner of Police & Ors., Criminal Application No. 613 of 2016

[5] see: S.W.P. Palanitkar v. State of Bihar, (2002)1 SCC 241) : (AIR 2001SC 2960). And Parthkumar Ramniklal Kalavadiya & Ors v. State Of Gujarat & Ors.

[6] Parthkumar Ramniklal Kalavadiya & Ors v. State Of Gujarat & Ors.

[7] V.K. Mittal and Ors. vs. The State of Jharkhand and Ors. (25.10.2009 – JHRHC) : MANU/JH/1009/2009

[8] Parthkumar Ramniklal Kalavadiya & Ors v. State Of Gujarat & Ors.

[9] Hridaya Ranjan Prasad Verma v. State of Bihar, AIR 2000 SC 2341 at Pp. 2345-46 of para 16) ; Vir Prakash Sharma v. Anil Kumar Agarwal and Anr. (2007) 7 SCC 373; R. Kalyani vs. Janak C. Mehta and Ors. (04.10.2008 – SC) MANU/SC/8183/2008

[10] Sameer Kumar vs. State of Gujarat and Ors. (27.08.2021 – GUJHC) : MANU/GJ/1284/2021

[11] G. Sagar Suri and Ors. vs. State of U.P. and Ors. ( 2000 ) 2 SCC 636

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