Contractual Dispute of Civil Nature & Offence of Cheating; Distinction Between

Contractual Dispute : In M/s. Indian Oil Corporation Vs. M/s. NEPC India Ltd. & Ors. AIR 2006 SC 2780, the Apex Court has observed as under:

  • A growing tendency in business circles to convert purely civil disputes into criminal cases is obviously on account of a prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of lenders/creditors.
  • Such a tendency is seen in several family disputes also, leading to irretrievable break down of marriages/families.
  • There is also an impression that if a person could somehow be entangled in a criminal prosecution, there is a likelihood of imminent settlement.
  • Any effort to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure though criminal prosecution should be deprecated and discouraged.

In V.Y. Jose and Anr. Vs. State of Gujarat and Anr. (2009) 3 SCC 78, the Apex court has held that :-

  • There exists a distinction between pure contractual dispute of civil nature and an offence of cheating.
  • Although breach of contract per se would not come in the way of initiation of a criminal proceeding, there cannot be any doubt whatsoever that in absence of the averments made in the complaint petition wherefrom the ingredients of an offence can be found out, the court should not hesitate to exercise its jurisdiction under Section 482 of the Code of Criminal Procedure.
  • One of the ingredients of cheating as defined in Section 415 of the Indian Penal Code is existence of an intention of making initial promise or existence thereof from the very beginning of formation of contract.
  • Section 482 of the Code of Criminal Procedure, saves the inherent power of the court. It serves a salutary purpose viz. a person should not undergo harassment of litigation for a number of years although no case has been made out against him.
  • It is one thing to say that a case has been made out for trial and as such the criminal proceedings should not be quashed but it is another thing to say that a person should undergo a criminal trial despite the fact that no case has been made out at all.