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It Is Not Cheating To Breach A Contract; Giving Criminal Color To Civil Disputes Must Be Discouraged

Legal Correspondent-Aryan Sharma

October 26 2020 In a recent case of Mitesh Kumar J.Shah v State of Karnataka the Supreme Court observed that mere breach of contract cannot give rise to criminal prosecution for cheating. The bench consisted of Justice S.Abdul Nazer and Justice Krishna Murari.

The facts of the case is, The builder company was accused of selling four excess flats beyond its share as stipulated by the joint development agreement and the supplementary agreement entered into between the parties. The complaint contented that the builders has sold 13 flats instead of 9 flats. The High Court refused to quash the criminal charges. While Supreme Court focused on its interpretation and said “ Criminal Breach of trust under Section 405 of IPC, says misappropriation or conversion of another’s property for one’s use , with a dishonest intention, while the cheating under section 415 of the IPC also includes dishonest intention aimed at the another party to deliver their property. Here the most important thing lies is the “Dishonest intentions” as a condition for prima facie case” It was noted by the bench that the dispute between the parties could best be described as a breach of contract. The court also referred to a judgment of Hridaya Ranjan Verma Ors vs State of Bihar. It is the intent of the accused at the time of inducement which can be judged by his subsequent behavior, but the substance of this subsequent behavior is not the only factor to consider. They further stated as “Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning”

The court also expressed its disapproval towards the complaints as they observed that a civil dispute had been stretched to criminal proportions they explained this by saying Such an exercise is nothing but an abuse of the process of law which must be discouraged in its entirety.".


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