Legal provisions regarding Cheating out of Fiduciary Relation under section 418 of Indian Penal Code, 1860.
Cheating out of Fiduciary Relation:
Section 418 applies to cases of cheating by guardians, trustees, solicitors, agents, the manager of a Hindu Family, directors or managers of a bank in fraud to the shareholders. It is the abuse of trust that is met with severe punishment.
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The prints requiring proofs are:
1) That the accused cheated some person;
2) That the accused was then under a legal obligation to protect the interest of the person;
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3) That the cheating related thereto;
4) That the accused knew that he was likely to cause wrongful loss thereby.
Section 418 punishes those in cheating cases who owe a special responsibility to protect the interest of those with whom they are transacting. Misuse of trust reposed is punished under Section 418.
Section 418 prescribes severe punishment for cheating by persons standing in fiduciary or financial capacity to the person cheated, as for-example, the nature of relationship between banker and customer, director of company and shareholder, advocate and client, a guardian and ward and so on.
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Liability under Section 418 arises when a person in such a fiduciary or responsible capacity makes a statement knowing it to be false at the time of making it, and making it with the dishonest intention of cheating another. Where a false balance sheet is shown with intent to secure or renew the deposits for the capacity, the culprits are taken care of under Section 418.
However, when there was no intention to cheat, the offence under Section 418 cannot be established. In S. Shankarmani v. Nibar Ranjan Parida [(1991) CrLJ 65], a bank intended to take a house on hire, because of which the landlord incurred a huge expense to furnish the house. However, for reasons beyond the control of the bank officials, the house could not be taken on rent. At no stage was there any intention to deceive the landlord. Hence it was held that the offence of cheating was not made out.
The offence under Section 418 is non-cognizable, but warrant should, ordinarily issue, in the first instance. It is bailable and compoundable with the permission of the court and is triable by any Magistrate.