Rajasthan High Court: While considering a petition filed under Section 482, Criminal Procedure Code, 1973 (CrPC) seeking quashment of entire criminal proceedings in FIR under Sections 420, 406 and 120-B, Penal Code, 1860 (IPC) where the matter involved a contract dispute, a Single Judge Bench of Anil Kumar Upman, J., held that a mere failure to honour a promise or fulfil a contractual obligation, by itself, does not give rise to a presumption of such dishonest intention and in the absence of any material to indicate that the intention to deceive existed at the inception, the dispute remains civil in nature and does not attract criminal liability.
Accordingly, the Court allowed the said petition.
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Background
In the present case, a complaint was filed by Respondent 2 under Section 156(3) CrPC against the petitioner, and the co-accused pursuant to which the said FIR came to be registered. Upon completion of investigation, the police filed a charge-sheet. Since the petitioner did not join the investigation, the charge-sheet for him was filed under Section 299 CrPC.
The trial court took cognizance and framed charges against the co-accused, however, the proceedings against the petitioner were kept pending as he was declared an absconder.
The petitioner contended that there was a civil dispute, alleged non-supply of goods, between the parties arising out of monetary transactions which was given a criminal colour. He stated that the dispute arose from an agreement for local distributorship executed between the parties on certain terms and conditions and in 2018, the parties had entered into a compromise, pursuant to which the petitioner as well as the co-accused paid the entire disputed amount to the complainant.
Analysis
The Court stated that it is a settled law that a mere breach of contract, agreement, or promise, by itself, does not give rise to criminal liability under Sections 420 and 406 IPC and in order to constitute the offences of cheating or criminal breach of trust, it is imperative to establish the existence of fraudulent or dishonest intention at the very inception of the transaction.
Further, the Court emphasised another well-settled law that criminal proceedings cannot be resorted to for the purpose of resolving civil disputes or for recovery of money. The Court stated that “In the absence of any allegation or material indicating such initial dishonest intention, the continuation of criminal proceedings would amount to an abuse of the process of law.”
The Court stated that the distinguishing factor between the offence of cheating and any other civil dispute lies in the presence or absence of mens rea at the inception of the transaction. A mere failure to honour a promise or fulfil a contractual obligation, by itself, does not give rise to a presumption of such dishonest intention and in the absence of any material to indicate that the intention to deceive existed at the inception, the dispute remains civil in nature and does not attract criminal liability.
Further, the Court stressed that “a breach of contract constitutes an infringement of a private right, which is ordinarily remediable under civil law, such as by instituting proceedings for recovery of money. However, for such a dispute to attract criminal liability, there must be evidence indicating that the accused had no intention to fulfil the promise from the very inception of the agreement and, with such dishonest intention, persuaded the other party to believe the promise”.
Thus, where the breach is due to mere non-fulfilment of the contract without any fraud or deceitful intentions during the initial stages of signing the contract, the dispute remains civil in nature and does not warrant initiation of criminal proceedings.
The Court held that a bare perusal of the FIR as well as factual report does not disclose any material to indicate that the accused persons had any intention to deceive the complainant from the time of execution of the agreement for local distributorship that took place between the parties.
Further, taking into account that the complainant had alleged the accused persons cheating her and dishonestly obtaining Rs 2,96,000 from her, the Court stated that the factual report revealed that on 13 July 2018 her husband executed an affidavit declaring that the disputed amount of Rs 2,96,000 had been received by way of a demand draft. Thus, the material on record does not disclose the existence of any fraudulent or dishonest intention at the inception of the transaction.
The Court held that since the complainant had already received the disputed amount way back in 2018, any grievance that subsisted would be open to the complainant to raise a civil dispute before the competent forum.
Further, the Court stated that “where the foundational allegations do not disclose a cognizable offence, permitting criminal proceedings to continue would defeat the very purpose of instituting such a case and would result in injustice and harassment to the accused”.
Decision
Thus, the Court quashed the criminal proceedings pending before the trial court against the petitioner, as well as the co-accused as continuation of the criminal proceedings would amount to an abuse of the process of law.
The Court stated that even though the co-accused had not separately approached and sought any relief, it could not overlook that the allegations levelled in the FIR were identical against both the petitioner and the co-accused. Therefore, the Court held that the co-accused was equally entitled to the relief granted to the petitioner.
Accordingly, the Court allowed the petition at hand.
[Sanyukt Shekhari v. State of Rajasthan, 2026 SCC OnLine Raj 2694, decided on 7-4-2026]
Advocates who appeared in this case:
For the Petitioner: Shreyash Ramdev, Adv.
For the Respondent: Vikram Singh Rajpurohit, PP
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