Receiving stolen property and cheating

1. Stolen property: section 317(1)

Property is stolen property if its possession has been transferred by theft, extortion, robbery or cheating, or if it has been criminally misappropriated or is the subject of criminal breach of trust, whether the offence was committed in India or outside (old s.410 IPC). Cheating is a new addition to the list. Property ceases to be stolen once it comes back into the possession of a person legally entitled to it. So if the police recover stolen jewellery and then use it as bait, a person who buys it from the thief afterwards does not receive stolen property.

2. Dishonestly receiving or retaining: section 317(2)

Whoever dishonestly receives or retains any stolen property, knowing or having reason to believe it to be stolen, is punishable with up to three years, or fine, or both (old s.411). The prosecution must prove:

• that the property is stolen property within s.317(1);
• that the accused received it, or retained it, that is, kept it after learning it was stolen;
• that he did so dishonestly; and
• that he knew or had reason to believe it was stolen.

These elements were set out by the Supreme Court in Trimbak v. State of Madhya Pradesh (1953), AIR 1954 SC 39. “Reason to believe” (s.2(29)) is satisfied where the circumstances would lead a reasonable person to believe the goods were stolen: buying a new phone at a tenth of its price from a stranger at midnight is the classic case. Where stolen property is found with the accused soon after the theft, the court may presume under s.119(1), illustration (a), of the Bharatiya Sakshya Adhiniyam, 2023 (old s.114 of the Evidence Act) that he is either the thief or a receiver, unless he accounts for his possession.

3. Aggravated forms: section 317(3) to (5)

• receiving property known to be transferred by dacoity, or from a member of a gang of dacoits: life or rigorous imprisonment up to ten years (s.317(3), old s.412);
• habitually receiving or dealing in stolen property: life or up to ten years (s.317(4), old s.413);
• voluntarily assisting in concealing or disposing of stolen property: up to three years (s.317(5), old s.414).

A thief cannot be convicted of receiving the property he himself stole; the offence is aimed at the fence, not the thief. If the evidence shows he was the thief, he is convicted of theft.

4. Cheating: section 318(1)

Whoever, by deceiving any person:

• (first limb) 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
• (second limb) 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 (old s.415). The Explanation adds that dishonest concealment of facts is deception. The essentials are deception of a person; inducement, fraudulent or dishonest (first limb) or intentional (second limb); and delivery of property, or an act or omission causing or likely to cause harm.

Illustrations: falsely pretending to be in the Civil Service to obtain goods on credit (illustration (a)); passing off goods by a counterfeit maker's mark (b); a false sample (c); pledging fake diamonds (e); borrowing with no intention to repay (f); selling an estate already conveyed to another (i).

5. Punishment

• cheating, up to three years, or fine, or both (s.318(2), old s.417; the IPC maximum was one year);
• cheating a person whose interest the offender was bound by law or contract to protect, up to five years (s.318(3), old s.418);
• cheating and thereby dishonestly inducing delivery of property, or the making, alteration or destruction of a valuable security, up to seven years and fine (s.318(4), old s.420).

Section 318(4) is the provision behind most “420” cases: it applies only where the cheating results in delivery of property or a valuable security.

6. Cheating by personation: section 319

A person cheats by personation if he cheats by pretending to be some other person, by knowingly substituting one person for another, or by representing that he or another is someone other than he really is (old s.416). It does not matter whether the person personated is real or imaginary. Pretending to be a rich banker of the same name, or to be a person who has died, are the illustrations. Punishment: up to five years, or fine, or both (s.319(2), old s.419).

7. Cheating and breach of contract

Illustration (g) to s.318 contains the rule. A who obtains an advance by promising to deliver indigo he never meant to deliver cheats. But if A intended to deliver when he took the money, and afterwards breaks the contract, he does not cheat; he is liable only in a civil action for breach of contract.

The Supreme Court applied this in Hridaya Ranjan Prasad Verma v. State of Bihar, 2000 INSC 178, (2000) 4 SCC 168. The complaint arose out of a sale of land, and alleged that the complainant had been deceived in the transaction. The Court held that to hold a person guilty of cheating it must be shown that he had a fraudulent or dishonest intention at the time of making the promise. From a mere failure to keep a promise later, such an intention cannot be presumed. The distinction between breach of contract and cheating is fine but real, and depends on the intention at the inception of the transaction. The complaint was quashed.

The rule was restated in Vesa Holdings P. Ltd. v. State of Kerala, 2015 INSC 228, (2015) 8 SCC 293: every breach of contract does not give rise to cheating, and an intention developed later is not enough. In Delhi Race Club (1940) Ltd. v. State of Uttar Pradesh, 2024 INSC 626, the Court added that cheating and criminal breach of trust rest on opposite premises (deception at the start, against honest entrustment followed by dishonest use), and criticised the mechanical summoning of accused for both on the same facts. Courts are also wary of complainants who give a purely civil dispute the colour of a criminal case to put pressure on the other side.

8. Problem

A takes Rs. 2 lakh from B as advance for supplying 100 bags of rice within a month. A buys the rice, but the price rises and he sells it to C at a profit. He does not return B's money. B files a complaint for cheating.

Issue. Whether A cheated B, or only broke the contract.

Law. Cheating under s.318 requires deception and a dishonest or fraudulent intention at the time the property was obtained (illustration (g); Hridaya Ranjan Prasad Verma).

Application. A bought the rice, which shows he intended to perform when he took the advance. The decision to sell to C came later, when the price rose. There was no deception when the money was paid. Nor was the advance entrusted to A for a specific purpose: it was paid towards the price, so it became A's money, and there is no criminal breach of trust either.

Conclusion. A has not cheated. B's remedy is a civil suit for refund of the advance and damages. Had A never had the rice or any means of getting it, and made the promise to get the money, the inference of dishonest intention at the start would make it cheating under s.318(4).

How this is examined

Receiving stolen property is a 6-mark short note (January 2026): define stolen property under s.317(1), state the elements, mention reason to believe and the presumption, and list the aggravated forms. For cheating, the 10-mark form is “Define cheating. Distinguish cheating and breach of contract”: give both limbs of s.318(1), the Explanation, the punishment ladder, s.319, illustration (g) and Hridaya Ranjan Prasad Verma.