Breach Of A Contract Cannot Give Rise To A Criminal Case - SC

In a recent verdict, the Supreme Court stated that a breach of contract alone is not enough to warrant criminal prosecution for cheating unless there is evidence of fraudulent or dishonest intentions at the outset of the transaction. A division bench of Justices Abhay S Oka and Rajesh Bindal concluded that accusations of a failure to fulfill promises are not sufficient grounds for initiating criminal proceedings.

Background

An FIR was filed against the accused-appellant under Sections 420, 120B, and 506 of the Indian Penal Code. The complaint was made by the respondent, who alleged that the accused cheated him in an agreement to sell a property. It was the third complaint made by the respondent, who had previously only requested a refund for the amount paid in the agreement, without alleging any cheating.

The earlier complaints were directed at the property dealers and not against the accused. After an investigation, it was determined that no criminal offense had been committed in the first two complaints, and the complainant was advised to approach the civil court. However, in the third complaint, the complainant accused the accused-appellant of cheating and other offenses, leading to the registration of the FIR.

The appellant approached Punjab and Haryana High Court seeking the quashing of the FIR. However, the plea was dismissed, prompting the appellant to appeal to the Supreme Court.

Held

The apex court examined the sequence of complaints made by the complainant and found that they were simply trying to pressure the appellant to return the money. The complainant had not attempted to initiate any civil proceedings against the appellant to enforce the agreement to sell.

The Court noted that the allegations made in the complaint were civil in nature and that criminal courts should not be used to settle civil disputes or put pressure on parties to reach a settlement. Criminal proceedings should only be initiated when there is evidence of criminal offenses.

The complaint was filed nearly three years after the last date for registration of the sale deed, making it an abuse of process to continue the proceedings. The Court quashed the case.