Mere breach of a contract is not an offence
Breach of contract is not defined as a criminal offence under Indian law, and it is included in civil law rather than criminal law.
A bench of Supreme Court of India opined that a simple breach of contract is not a criminal offence and that it does not entail any party becoming involved in a criminal act and receiving punishment as a result.
“Cheating”, on the other hand, is a criminal offence, but there is a distinction between the two. Any individual who deceives another person or property, or destroys valuable security, will be imprisoned or fined under section 420 of the Indian penal code (IPC). This can be defined as cheating.
Contractual breaches, property damage, and carelessness resulting in harm or death are all covered by civil law. The parties concerned must compensate each other, although they are not subject to imprisonment.
Civil law complaints can only be brought in a tribunal or court, but criminal offences require the complainant to first register with the police station before the case can be filed in court.
In a case, a company managing director filed an appeal in the Calcutta High Court against the director of the company to quash the proceedings against them for defrauding and criminal offence.
After reviewing all of the circumstances, the court concluded that there was no evidence of cheating in the case found. The appellant did not make the promise with any malafide motives, as stated in the MOU signed between the parties in August 2009.
The parties mutually agreed that respondent no. 2 would invest 2.5 crores in the company and obtain stock in exchange for that investment. The corporation also had issued a share allotment of 2,50,000 shares for the same.
However, the company later failed to bring an IPO for some reason; respondent no. 2 filed a lawsuit against the appellant. This developed into a criminal case.
And after reviewing the evidence, the judge dismissed the criminal charges brought against the appellant under Sections 406, 420, and 120B of the Indian Penal Code.
Therefore, we can conclude a breach of contract without wrong purpose does not constitute a criminal offence, and the judgment must be rendered under civil law.