Every breach of contract not an an offence of cheating: Court
New Delhi: A Delhi sessions court, while hearing a revision petition against a magisterial court, observed that the magisterial court "did not independently apply its mind to the chargesheet and simply borrowed the opinion of the IO" and took cognisance of the chargesheet filed against a private limited company for the offences of cheating, criminal conspiracy and others.
The court of Additional Sessions Judge Vishal Singh on June 4 said that according to the offences committed by the company, cognisance for offences of criminal breach of trust and criminal conspiracy could be taken. According to the prosecution, a Delhi-based real estate company in 2011 took money from various buyers and promised possession of flats in three years but failed to do so. Following this, buyers filed a case in 2019.
A magisterial court on May 6, 2025, took cognisance of the offences under sections 420 (cheating), 409 (criminal breach of trust by public servant, or by banker, merchant or agent), and 120B (criminal conspiracy) against five accused, including two private companies. The accused filed a revision petition against this decision in the sessions court.
The ASJ observed that every breach of contract would not give rise to an offence of cheating but only when there was any deception played at the very inception.
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"If the intention to cheat developed later, the same cannot amount to cheating. For the purpose of constituting an offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making the promise or representation," the ASJ said.
Even in a case where allegations are made regarding failure on the part of the accused to keep his promise, in the absence of a culpable intention at the time of making the initial promise, no offence under Section 420 IPC could be said to have been made out, the court held.
The court said that in the present case, the delay was caused because of circumstances beyond the control of the accused, so the buyers could scarcely allege that they were cheated by the accused. "Things would have been different if the agreement between the parties pertained to an already developed residential colony with plots of specific size and serial numbers. Then there would be no contingency involved and the seller would be under strict obligation to sell the contracted plot to the buyer," the court said.
The judge then ruled that as per the chargesheet, the accused diverted the money received from buyers/complainants and meant for plotting purposes to other accounts, misappropriating the money to their personal benefit in contravention of contractual obligations. "The accused have not accounted for the money entrusted to them by buyers for plotting purposes. On the basis of the chargesheet, there is sufficient reason to proceed against the accused for the offence under Section 406 (criminal breach of trust) IPC read with Section 120B IPC," the court concluded.
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