A CRIMINAL CASE FOR CHEATING CAN NOT BE BASED SOLELY ON A BREACH OF CONTRACT.
In Sarabjit Kaur v. State of Punjab [2023 SCC OnLine SC 210], the Appellant agreed to purchase a plot with Malkit Kaur on 27.05.2013. Eventually, the Appellant entered into an Agreement to Sell the same to the wife of Respondent No. 2 on 18.11.2013, wherein the Agreement, it was categorically mentioned that at present the vendor was not the owner of the property. The Appellant received Rs. 5,00,000/- (Rs. Five Lakhs Only) as earnest money and the date of registration of the sale deed was fixed as 25.06.2014. The date for execution of the sale deed was extended to 24.12.2014 on receipt of an additional sum of ₹75,000/-. Subsequently, Respondent No. 2 filed a complaint regarding the alleged Agreement to Sell against property dealers Manmohan Singh and Ranjit Singh alias Billa. In the complaint, reference was made to two other transactions entered into by Respondent No. 2 and the prayer was that an amount of ₹29,39,500/-be got recovered from the property dealers. Therefore, an investigation was conducted and the nature of the dispute was found to be civil so there was no need for any criminal proceedings. However, Respondent No. 2 again filed a complaint against the property dealers without disclosing the fate of the earlier complaint. The complaint was consigned to record. Respondent No. 2 for the third time filed another complaint against the property dealer and this time against the Appellant as well. Thereafter, an F.I.R. was registered under sections 420, 120(b), and 506 of the Indian Penal Code.
The Appellant filed a petition before Punjab and Haryana High Court seeking quashing of the F.I.R U/s 482 of the Code of Criminal Procedure, 1973. The High Court dismissed the petition. Aggrieved by the Order of the High Court, the Appellant filed an appeal in the Supreme Court. The Supreme Court after considering the facts of the case observed that “A breach of contract does not give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction. Merely on the allegation of failure to keep up promise will not be enough to initiate criminal proceedings.”
Furthermore, "The entire idea seems to be to convert a civil dispute into criminal and put pressure on the appellant for return of the amount allegedly paid. The criminal Courts are not meant to be used for settling scores or pressurise parties to settle civil disputes. Wherever the ingredients of criminal offenses are made out, criminal courts have to take cognizance. The complaint in question based on which F.I.R. was registered was filed nearly three years after the last date fixed for registration of the sale deed. Allowing the proceedings to continue would be an abuse of process of the Court." Therefore, the Supreme Court set aside the order of the High Court and allowed the appeal.