Mitali Palnitkar
Published on: March 23, 2022 at 17:16 IST
The Telangana High Court observed that a mere Breach of Contract cannot give rise to Criminal Prosecution for Cheating or Criminal Breach of Trust.
Justice G Radha Rani clarified that every Breach of Trust might not result in a Penal Offence of Criminal Breach of Trust unless there is an Evidence of a Mental Act of Fraudulent Misappropriation.
The Court was hearing a Plea filed under Section 482 of Criminal Procedure Code which sought to Quash a First Information Report (FIR) registered against the Petitioner under Sections 406, 409, 418 and 420 read with Section 34 of the Indian Penal Code.
The First Information Report was registered at the instance of the Managing Director of M/s Agastya Agro Limited. As per the First Information Report, the firm was engaged in manufacturing and distributing pesticides.
The Petitioner and his son were partners in the firm and dealers as well. Their job was to purchase the pesticides and sell them and pay back the amount.
It was Alleged that since 2011, the Petitioner did not Remit the amount and kept postponing the same so as to avoid payment. Thus, the First Information Report was Registered against the Petitioner.
The Petitioner approached the Court and argued that he had only defaulted the payment of the pesticides purchased from the company. However, there was no Dishonest or Fraudulent Intention on his part and hence, the Offences under Sections 418 and 420 of Indian Penal Code could not be attracted.
The Court referred to the Case of Hridaya Ranjan Prasad Verma Vs. State of Bihar (2000) wherein the Supreme Court held that mere Breach of Contract cannot give rise to Criminal Prosecution for Cheating.
It had further opined, “To hold a person Guilty of Cheating it is necessary to show that he had Fraudulent or Dishonest Intention at the time of making the promise.”
The High Court emphasized that the Intention to Deceit shall exist when the Inducement is made. It clarified that if representation was made but was not kept later, Criminal Liability cannot be foisted. The only remedy which the Complainant can acquire is the Remedy for Breach of Contract in the Civil Court.
Also Read: Regulation of Trusts and NGOs in India: An Overview