SC: Mere breach of contract cannot give rise to criminal prosecution for cheating

New Delhi: The Supreme Court has said a mere breach of contract cannot give rise to criminal prosecution for cheating and dishonest intention has to be shown right at the beginning of the transaction. A bench of Justices A S Oka and Rajesh Bindal said only the allegation of failure to keep a promise will not be sufficient for initiating criminal proceedings. "A breach of contract does not give rise to criminal prosecution for cheating unless the fraudulent or dishonest intention is shown right at the beginning of the transaction. Merely on the allegation of failure to keep up promise will not be enough to initiate criminal proceedings," the bench said.

The court made the observations while setting aside an order of the Punjab and Haryana high court which had refused to quash an FIR against a man under Sections 420 (cheating), 120 B (criminal conspiracy) and 506 (criminal intimidation) of the Indian Penal Code in a case of sale of land.

The top court was hearing a plea filed by Sarabjit Kaur challenging the high court order. Kaur had entered into an agreement to purchase a plot of land on May 27, 2013 with Malkit Kaur, wife of Surender Singh. She then entered into an agreement to sell the same land to the wife of Darshan Singh for which she received a sum of Rs 5 lakh and later another Rs 75,000.

After the agreement was not executed, Darshan Singh filed a complaint against property dealers Manmohan Singh and Ranjit Singh. In the complaint, Darshan Singh made reference to two other transactions entered into by him and sought recovery of Rs 29,39,500 from the property dealers. The complaint was investigated and in 2016, finally, it was held that the dispute being civil in nature no police action was required. Darshan Singh made another complaint with the same allegations without disclosing the fate of his earlier complaint and later, an FIR was filed against appellant Sarabjit Kaur, Manmohan Singh and Ranjit Singh.