Mere Breach of Contract Without Initial Dishonest Intention Does Not Attract Criminal Liability for Cheating.

The petitioner sought to quash criminal proceedings arising from FIR No. 139/2016 for offences under Sections 420, 406, and 120B of the IPC

The dispute stemmed from a local distributorship agreement where the complainant alleged non-supply of goods after payment of Rs. 2,96,000/-

While a charge-sheet was filed against the co-accused (Sunil Baweja), the petitioner was declared an absconder, and proceedings against him were kept pending under Section 299 Cr.P.C.

Factual reports later confirmed that the parties entered a compromise in 2018, and the complainant’s husband executed an affidavit acknowledging receipt of the full disputed amount via demand draft

1. Whether a mere breach of contract or failure to fulfill a promise constitutes the criminal offences of cheating and criminal breach of trust under the IPC.

2. Whether the High Court can extend the benefit of quashing proceedings to a non-petitioning co-accused whose case stands on the same footing.

The Court primarily applied Sections 406 (Criminal Breach of Trust) and 420 (Cheating) of the IPC. It relied on the principle that to constitute these offences, a fraudulent or dishonest intention (mens rea) must exist at the very inception of the transaction

The Court cited Arshad Neyaz Khan v. State of Jharkhand (2025 SCC Online SC 2058) to establish that mere non-performance of an agreement is not cheating

per Javed Shaukat Ali Qureshi v. State of Gujarat (2023 AIR SC 4444), the Court applied the doctrine of parity, asserting its duty to extend relief to similarly situated co-accused to prevent manifest injustice under Article 21 of the Constitution

The Court observed that the dispute was essentially civil and monetary, subsequently given a criminal color

It reasoned that for an act to qualify as cheating, there must be evidence that the accused never intended to fulfill the contract at the time of signing

Upon perusing the FIR and the factual report, the Court found no material indicating initial dishonest intent; rather, a subsequent dispute led to the non-supply of goods

Since the disputed amount was fully refunded in 2018 and acknowledged by the complainant, the Court determined that continuing the prosecution would be a "futile exercise" and an "abuse of the process of law"

The Court further reasoned that since the allegations against the petitioner and the co-accused (Sunil Baweja) were identical and interdependent, individual relief would be anomalous; thus, parity was required

The petition was allowed, and the criminal proceedings in Criminal Case No. 1417/2018 pending before the Metropolitan Magistrate No. 10, Jodhpur, were quashed. Notably, the Court extended this relief to the co-accused, Sunil Baweja, even though he was not a party to the present petition, to ensure the interests of justice