Supreme Court: Mere breach of contract does not constitute cheating

The Apex Court on Wednesday held that a mere breach of contract does not constitute cheating and act as grounds for criminal prosecution unless from the very beginning mala fide intentions were present [Sarabjit Kaur v. State of Punjab and Another].

Facts of the Case

The Appellant had filed a petition and prayed before the High Court to quash the First Information Report (FIR) dated 16th October 2017 under Sections 420 (cheating),120(B) (criminal conspiracy), and 506 (criminal intimidation) of Indian Penal Code, 1860 (). However, the Court had dismissed the petition. So, the Appellant approached the Supreme Court.

The Learned Counsel representing Sarabjit Kaur (Appellant) submitted that the Appellant on 27th May 2013 had entered into an agreement with Malkit Kaur wife of Jangir Singh (Respondent No. 2) to purchase a plot that measured 1 kanal. On 18th November the Appellant entered into an Agreement to Sell, the execution date of the Sale deed was fixed as 26th June 2014 and further extended to 24th December 2014 the amount received to date to the Appellant for registration was Rs. 5,75,000/- (Rupees Five Lakhs Seventy-Five Thousand Only)

On 30th September a complaint was filed by Darshan Singh against property dealers Manmohan Singh and Ranjit Singh concerning the above Agreement to Sale. Darshan Singh has not recovered an amount of Rs. 29,39,500/- (Rupees Twenty-Nine Lakhs Thirty-Nine Thousand Five Hundred Only) from the abovementioned Property Dealers. The Complaint was investigated and concluded with the opinion that the dispute was of a civil nature and there was no police action required. Being dismayed by this Darshan Singh filed another complaint on 5th October 2016 and another one on 23rd January 2017 with the same allegations without disclosing the end result of his prior complaints.

The Learned Counsel stated that in the first complaint, there was no allegation against the Appellant and the Respondent No. 2 had filed for three complaints without disclosing the fate of the two prior complaints. The FIR presented before the court was registered on the complaint filed on 15th June 2017, nearly three years later the date of execution of the sale deed. Respondent No. 2 had not asked for a remedy by the Police nor did he avail remedy of specific performance of agreement of sale. Hence, the third FIR against the Appellant must be quashed.

The Learned Counsel for the State submitted that the chargesheet was filed and pleas for quashing the FIR are wrong.

Observation by the Court

The Court observed that there was nothing more submitted before the Court except for the details of the Sale Deed and Agreement to Sell and based on the filings there is evidence to show that Respondent No. 2 had initiated any civil proceedings for the execution of the sale deed. Also, there is no proof to show that Respondent no. 2 approached the appellant to get the sale deed registered.

The excerpts from the judgement read out as:

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 the allegation of failure to keep up promise will not be enough to initiate criminal proceedings. From the facts available on record, it is evident that respondent No.2 had improved his case ever since the first complaint was filed in which there were no allegations against the appellant rather it was only against the property dealers which was in subsequent complaints that the name of the appellant was mentioned.”

The Supreme Court set aside the order passed by the High Court and granted the prayer by the Appellant to quash the said FIR dated 16th October 2017.


Source: Bar and Bench


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