Cheating and Fraud Under BNS Section 318: What Businesses Need to Know

Section 318 BNS: The New Law on Cheating

Section 318 of the Bharatiya Nyaya Sanhita (BNS), 2023 replaces Section 420 of the Indian Penal Code as the primary provision dealing with cheating and dishonestly inducing delivery of property. For businesses, this section is one of the most frequently encountered criminal provisions, arising in contexts ranging from fraud in commercial transactions to dishonest misrepresentation in contracts and investments.

Key Elements of Section 318 BNS

Section 318 BNS punishes cheating and dishonestly inducing delivery of property with imprisonment up to seven years and fine. The essential elements include: deception of any person either by making a false or misleading representation or by other action or omission, fraudulent or dishonest inducement to deliver any property or to consent to the retention of property, and intentional induction to do or omit to do anything which the person deceived would not do or omit if not deceived.

The BNS expands the scope of cheating to explicitly cover digital and technology-enabled fraud, addressing the growing incidence of online scams, phishing, identity theft, and cyber-enabled financial crimes.

Section 318 BNS vs Section 138 NI Act

In cheque bounce cases, complainants often face the choice between filing under Section 138 NI Act alone or combining it with Section 318 BNS. While Section 138 provides for specific procedural advantages (statutory presumption, interim compensation), Section 318 BNS carries a higher maximum punishment (seven years vs two years) and can be invoked where dishonest intent at the time of issuing the cheque is established.

Business Implications and Risk Mitigation

Businesses should understand that Section 318 BNS can be invoked against directors, officers, and employees who are involved in transactions that involve deception or dishonest inducement. Robust compliance frameworks, clear documentation practices, transparent communication with customers and counterparties, and prompt grievance redressal mechanisms are essential for mitigating the risk of criminal prosecution under this provision.

Where a business becomes a victim of cheating, prompt legal action combining Section 318 BNS with other applicable provisions (including Section 138 NI Act for cheque-related fraud) provides the strongest legal position for recovery and deterrence.