08 Jan 2121

Mere breach of contract cannot give rise to criminal prosecution for cheating, unless fraudulent/dishonest intention is shown at the beginning of the prosecution - Gauhati High Court

Case : Urmimala Baruah And 2 Ors. v. State of Assam And Anr. Crl. Pet/222/2019

Court : Gauhati High Court

Bench : Justice Mir Alfaz Ali

Decided on : 08 Jan 2121

Relevant Statutes-

Section 200 and 482 of the Code of Criminal Procedure, 1973

Section 12(B), 420, 506 and 34 of The Indian Penal Code, 1860

Brief Facts and Procedural History

1. The husband of petitioner No.1 and respondent entered into a verbal agreement of buying two flats on 2 and 3 floors of 'City Residence'. For both, the flats complainant paid almost 70% of the amount but the sale didn't proceed. On 21st September 2016 complainant sent a legal notice to accused No.3 for commencement of the sale.

2. petitioner No. 2, Rituraj Hazarika, who is the brother of petitioner No. 1, Urmila Baruah, started a guest house on the 2nd floor of the building and the complainant himself spent Rs. 1,94,476 on the construction of the kitchen. Petitioner no.2 also converted the nature of the rooms.

3. The complainant then filed a complaint against the Petitioners alleging commission of an offence under Section 120(B), Section 420, Section 506, Section34 Indian Penal Code, 1860. Aggrieved by the decision of the Judicial Magistrate the petitioners approached this High Court in order to quash the complaint and criminal proceedings.

The Issue(s) of the Case

1. Whether the offence of breach of contract or cheating comes under the ambit of Section 120(B), Section 420, Section 506, Section34 Indian Penal Code, 1860?

2. Whether the sole heir is liable for the criminal liability of her deceased husband?

The Observations of the Court

1. The Honourable Gauhati High Court relied upon the case of Pratibha Rani Vs. Suraj Kumar (1985) 2 SCC 370, in which the Supreme Court observed that be there may not be any doubt that only because civil law can be taken recourse to would not necessarily mean criminal proceedings should be barred.

2. In Devendra Vs. State of U.P. (2009) 7 SCC 495., the Apex Court held that a distinction must be made between civil wrong and criminal wrong. When a dispute between the parties constitute only a civil wrong and not criminal wrong, the court would not permit a person to be harassed, although, no case for taking cognizance has been made out.

3. Therefore in the instant case, there was neither any contract between the complainant and the present petitioners nor any money was delivered to them pursuant to any contract between them. The basic ingredient of the offence under Section 420 Indian Penal Code, 1860 is totally absent against the petitioners.

4. In Anil Mahajan Vs. Bhor Industries reported in (2005) 10 SCC 228, the Apex Court observed that a distinction has been made to be kept in mind between the mere breach of contract and offence of cheating.

5. The Honourable Gauhati High Court relied upon the case of Uma Shankar Gopalika Vs. State of Bihar and Anr. (2005) 10 SCC 336, the Supreme Court observed that “it is well settled 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. If the intention to cheat develops, later on, the same cannot amount to cheating.''

6. In the present case, the Honourable Gauhati High Court find no allegation in the complaint and thus not disclose any criminal offence against the petitioners. The Supreme Court in State of Haryana Vs. Bhajanlal, (1992) 1 Suppl. 1 SCC 335, has laid down certain guidelines in order to quash the criminal proceedings and this present case falls under some of those guidelines. The guidelines are as follows,

i., where the allegations made in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie, constitute any offence or make out a case against the accused;

ii. where the allegations in the First Information Report and other materials, if any, accompanying the F.I.R. do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code;

iii. where the uncontroverted allegations made in the FIR or 'complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused;

iv. where the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code;

v. where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused;

vi. where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party;

vii. where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.”

The Decision held by the Court

1. The Honourable Gauhati High Court is of the view that the complaint and the criminal proceeding in CR Case No. 145/2018 deserves to be quashed to secure the ends of justice. Accordingly, the complaint and the proceeding in CR Case No. 145/2018 is hereby quashed.

2. The petition is allowed.

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