Not to make Breach of Contract a Criminal Offence

Breach of contract not to be made an offence of cheating

A breach of contract does not amount to a criminal offence of cheating, under Section 420 or 406 of the Indian Penal Code, 1860 (IPC), unless fraudulent or dishonest intention is shown right at the beginning of the transaction, says the Supreme Court (SC) in Jay Shri v State of Rajasthan.

Any effort to settle civil disputes and claims, which do not involve any criminal offence, by resorting to criminal prosecution should be deprecated and discouraged, says the SC.

Facts of this case

In this case, the allegation against the accused persons was that they entered into an agreement to sell with the complainant and received Rs 80 lakh. Thereafter, neither the registration took place nor the money was returned to the complainant. Therefore, an FIR was lodged against them under Sections 420 and 120-B (criminal conspiracy) of the IPC.

The accused then approached the High Court, praying for anticipatory bail contending that it was a case of breach of contract having the civil nature. However, the High Court dismissed their bail application. Thus, they preferred the present appeal for the grant of anticipatory bail. The SC granted them bail and made the comments as above.

The SC relied on Indian Oil Corpn v NEPC India Ltd. and Others, in arriving at the above said remarks.

To sum up

In short, converting civil disputes into criminal offences in order to put pressure on the person is to be deprecated and discouraged.