Criminal Law : Breach of Contract and The Criminal Liability under Indian Law

Criminal Law : Breach of Contract and The Criminal Liability under Indian Law

In case of Vesa Holdings (P) Ltd v. State of Kerala [2015] GCtR 4684 (SC), it was held that "every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the very inception." The case involved allegations under S.420 of IPC and complaint was quashed. S.420 of IPC dealt with cheating and thereby dishonestly inducing a person to deliver the property. 

If the intention to cheat has developed later on, the same cannot amount to cheating. In other words for the purpose of constituting an offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. Even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in the absence of a culpable intention at the time of making initial promise being absent, no offence under Section 420 of the Indian Penal Code can be said to have been made out.

It is true that a given set of facts may make out a civil wrong as also a criminal offence and only because a civil remedy may be available to the complainant that itself cannot be a ground to quash a criminal proceeding. The real test is whether the allegations in the complaint disclose the criminal offence of cheating or not.

Criminal proceedings should not be encouraged when it is found to be malafide or otherwise an abuse of the process of the court. Superior courts while exercising this power should also strive to serve the ends of justice.