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Report No. 42

2.41. Section 2.-"movable property".-

Section 22 defines "movable property" as "intended to include corporeal property of every description except land and things attached to the earth or permanently fastened to anything which is attached to the earth." This expression is important where any offence, involving theft is to be considered, as theft1 can only be of movable property. The General Clauses Act2 defines movable property as "property of every description except immovable property", and then says3 "immovable property" includes "land, benefits to arise out of land and things attached to the earth or permanently fastened to anything attached to the earth."

In terms, this definition in the General Clauses Act is wider than the explanation in the Code, but, for practical purposes, it seems to us that the General Clauses Act definition is adequate for the Code, and does not unduly widen the concept of "theft", as it has been all along understood. For other offences involving "movable property" also, that definition seems sufficient, and since we think that when the General Clauses Act contains a good definition of a particular expression, another definition in the Code should not be attempted, we propose to delete the provision in section 22 of the Code.

1. Section 378.

2. Section 3(36), General Clauses Act, 1897.

3. Section 3(27), General Clauses Act, 1897.

2.42. Sections 23 and 2.-"wrongful gain", "wrongful loss" and "dishonestly".-

Section 23 explains the terms "wrongful gain" and "wrongful loss", and section 24 says that a person does a thing "dishonestly" if he does it with the intention of causing wrongful gain to one person or wrongful loss to another. There has been no difficulty in understanding or applying these definitions.

2.43. Section 2.-"fraudulently".-

The same cannot be said of the definition of "fraudulently" in the next section. Section 25 states that "a person is said to do a thing fraudulently if he does that thing with intent to defraud but not otherwise". As early as 1897 this definition came in for criticism by the Calcutta High Court. Maclean C.J., delivering the unanimous judgment of five Judges of that Court, observed1.-

"As a definition this provision is obviously imperfect, and perhaps introduces an element of doubt which did not previously exist; for it leaves it to be determined whether the word 'defraud' as used in section 25 implies the deprivation or intended deprivation of property as a part or result of the fraud. The word 'defraud' is of double meaning, in the sense that it either may or a may not imply deprivation, and as it is not defined in the Code, and is not, so far as we are aware, to be found in the Code, except in section 25, its meaning must be sought by a consideration of the context in which the word 'fraudulently' is found.

The word 'fraudulently' is used in sections 471 and 464 together with the word 'dishonestly' and presumably in a sense not covered by the latter word2. If, however, it be held that 'fraudulently' implies deprivation, either actual or intended, then apparently that word would perform no function which would not have been fully discharged by the word 'dishonestly', and its use would be mere surplus usage. So far as such considerations carry any weight, it obviously inclines in favour of the view that the word 'fraudulently' should not be confined to a transaction of which the deprivation of property forms a part."

1. Q.E. v. Abbas Ali, 1897 ILR 25 Cal 512 (FB).

2. The word "fraudulently" is used together with the word "dishonestly" in sections 209, 246, 247, 415, 421, 422, 423, 424, 464, 471 474, and 477. It is used by,itself or in variations like "with fraudulent intent" or "with intent to defraud" in sections 206, 208, 210, 262, 263, 264, 265, 266, 477A, 482, 487, 488 and 486. It is used together with the expression "or with intent that fraud may be committed" in sections 239, 240, 242, 243, 250, 251, 252, 253, 261 and 463.

2.44. Calcutta view.-

In another Calcutta case,1 it was held that the word "fraud" involves two conceptions, namely, deceit and injury to the person deceived, that is, an infringement of some legal right possessed by him, but not necessarily deprivation of property.

1. Surendra Nath Ghose v. Emp., ILR 38 Cal 75.

2.45. Allahabad view.-

In an equally old Allahabad case,2 where the character roll of a police head constable was tampered with, by substituting a page containing favourable remarks, in order to increase his chances of promotion, the question was whether forgery had been committed. Bannerjee J. held that "where there is an intention to deceive and by means of that deceit to obtain an advantage, there is fraud, and if a document is fabricated with such intent it is forgery". It was further held that an offence is committed under section 471 whenever a document known or believed by the accused to have been forged is used as genuine with the intention that some person should be deceived thereby, and by means of that deception either an advantage should accrue to the person so using the document or injury should befall some other person or persons.

1. Q.E. v. Muhammad Saeed Khan, 1898 ILR 21 All 113 (115, 116).

2.46. Bombay view.-

In a later Bombay case1, it was observed that, although there were conflicting rulings on the definition of "fraudulently", the consensus of opinion in the Bombay High Court was that there must be some advantage on the one side with a corresponding loss on the other.

1. Sanjeev v. Emp., AIR 1932 Born 545.

2.47. View taken in England.-

In England also, the precise legal meaning to be attached to the word "defraud", particularly in distinguishing between "intent to deceive" and "intent to defraud", has been a matter of controversy. Buckley J.'s dictum1 which became classic was.-

"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."

There has been much dispute in recent years as to what is meant by the words "deprive by deceit". The question 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 interest, has been strongly debated. In a recent case,2 the House of Lords decided that it is not necessary that there should be an intent to cause an economic loss.

After reviewing judicial pronouncements up to and including this decision of the House of Lords, a learned writer suggested3 that the intent to defraud which was necessary in English law to constitute forgery of private documents could be stated as "an intent by deceit the cause prejudice to any other either by causing damage to his person, property or reputation, or by affecting his rights whether by deprivation or concealment thereof, or by inducing him to act contrary to what would have been his duty had he not been deceived."

1. London and Glove Finance Corporation (in re:), 1903 All ER 891 (893).

2. Welham v. Director of Public Prosecutions, (1960) 1 All ER 805.

3. R.N. Gooderson, "Prejudice as a test of intent to defraud", 1960 Cambridge Law Journal 199, 213.

2.48. Exposition of the Supreme Court.-

The Supreme Court1 has, after considering relevant decisions on the subject, stated the legal position as follows.-

"The expression 'defraud' involves two elements, namely, deceit and injury to the person deceived. Injury is something other than economic loss, that is, deprivation of property, whether movable or immovable, or of money, and it will include any harm whatever caused to any person in body, mind, reputation or such others. In short, it is a non-economic or non-pecuniary loss. A benefit or advantage to the deceiver will almost always cause loss or detriment to the deceived. Even in those rare cases, where there is a benefit or advantage to the deceiver, but no corresponding loss to the deceived, the second condition is satisfied."

In a later case, however, the Supreme Court observed2.-

"The words '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 'intent to deceive', and require some action resulting in some disadvantage which, but for the deception, the person deceived would have avoided."

1. Dr. Vimla v. Delhi Administration, 1963 (Suppl ) 2 SCR 585.

2. Dr. S. Dutt v. State of Uttar Pradesh, (1966) 1 SCR 493 (502).

2.49. Essential elements of "intent to defraud".-

It would thus appear that the essential elements to constitute an intent to defraud are (i) an intent to deceive another, and (ii) an intent to cause, by that deception, injury to some person (ordinarily, but not necessarily, the person deceived). The injury intended need not necessarily be pecuniary or even economic, amounting to a deprivation of property, but may be any harm whatsoever to any person in body, mind or reputation. It goes without saying that the intention and object of the person accused of fraudulent conduct is to obtain a benefit or advantage to himself which he would not otherwise have got. Difficulty arises only in those cases where while this benefit or advantage to the deceiver is obvious, the injury or risk of injury to the person deceived, or indeed to any person, is not apparent.

2.50. Definition of "fraudulently" recommended.-

We consider it desirable to replace the very unsatisfactory definition of "fraudulently" if it can be called a definition at all, by one which will at least state the essential requirements as indicated by the Supreme Court and furnish a guideline in doubtful cases. In such a definition, it would obviously be not sufficient to relate the second element to the deceiver's intention to obtain an undue benefit or advantage to himself by means of the deceit. To constitute culpable fraud there should either be an intention to cause by the deception injury in the wide sense to someone or, at any rate, an intention to induce the person deceived to act to his disadvantage. We recommend the following definition.-

"A person is said to do a thing fraudulently if he does that thing with intent to deceive another and, by such deceit, either to cause injury to any person or to induce any person to act to his disadvantage."



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