October 4, 2022

Why section 25 of IPC which defines ‘Fraudulently’ used the word ‘with intent to defraud’?

The word “fraudulently” is defined by s. 25 of the Penal Code. A person is said to do a thing fraudulently if he does that thing with intent to defraud but not otherwise. The last three words “but not otherwise” clearly indicate that the intent must be an “intent to defraud”.

It may be pointed out that in the Larceny Act of 1861 and in the Companies Act of 1862 in England the expression was “with intent to deceive or defraud”, while in the Forgery Acts the words “with intent to defraud” alone were used.

The reason was that documents were divided into two: public documents and private documents.

In the case of public documents, it was enough if the intention was merely to deceive but in the case of private documents such an intention was not considered sufficient but “an intent to defraud” was required.

The distinction between the two expressions was made by Lord Buckley (then Buckley J) in a winding up case as follows:

“. . . . To deceive is, I apprehend, to induce a man to believe that a thing is true which is false, and which the person practising the deceit knows or believes to be false. To defraud is to deprive by deceit: it is by deceit to induce a man to act to his injury. More tersely it may be put, that to deceive is by falsehood to induce a state of mind; to defraud is by deceit to induce a course of action.” (In re London and Globe Finance Corp. Ltd (1903) 1 ch. 728)

There had been much dispute as to what Lord Buckley meant by the words “deprived by deceit”. These are apparently the key words. The rest is mere paraphrasing. Whether these words meant the causing of an economic loss to some person by means of deceit or merely the inducing of a person to act against his own interests has been much debated.

The House of Lords in Welbam v. Director of Public Prosecutions[1] ruled that it is not necessary that there must be an intention to cause an economic loss. The decision of the House of Lords has been criticized by the editors of Kenny’s Criminal Law and Russel on Crimes.

In Criminal Law Review 1958 and 1960 other writers have not accepted the interpretation of Buckley J’s words by the House of Lords, though there is some support in Modern Law Review, May 1960 and the Cambridge Law Journal 1960.

But, it may be said that a mere acting to one’s discomfort or discomfiture would not suffice.

In Dr. S. Dutt vs State Of Uttar Pradesh[2], Justice Hidayatullah observed that,

“with intent to defraud” in the section indicate not a bare intent to deceive but an intent to cause a person to act or omit to act, as a result of deception played upon him, to his disadvantage. This is the most extensive meaning that may be given to the expression “with intent to defraud” in our Penal Code and the words “but not otherwise” clearly show that the words ‘intent to defraud” are not synonymous with the words “intent to deceive” and require some action resulting in some disadvantage which but for the deception, the person deceived would have avoided.”

[1] [1961] A.C. 103

[2] 1966 AIR 523, 1966 SCR (1) 493