Breach of Contract Not Cheating Without Initial Dishonest Intent; FIR for Recovery Dispute Quashed: Punjab & Haryana High Court
Case Name: Deepak Chopra & Anr. v. State of Punjab & Anr.
Date of Judgment: April 28, 2026
Citation: CRM-M-12146 of 2024
Bench: Hon’ble Mr. Justice Surya Partap Singh
Held: The Punjab & Haryana High Court held that mere non-payment of contractual dues does not constitute cheating unless fraudulent or dishonest intention exists at the inception of the transaction. Where substantial payments have been made and the dispute is limited to recovery of balance amount, the matter remains civil in nature. Criminal proceedings initiated in such circumstances amount to abuse of process and are liable to be quashed.
Summary: The petitioners approached the High Court seeking quashing of FIR registered under Sections 420 and 120-B IPC, arising out of a construction contract dispute. The complainant had alleged that despite completing construction of a showroom, a substantial amount remained unpaid, thereby accusing the petitioners of cheating.
The petitioners contended that the dispute was purely civil in nature, relating to non-payment of certain dues under a contract. It was highlighted that a significant portion of the payment had already been made and that even a civil suit for recovery filed by the complainant had been dismissed. Therefore, the essential ingredients of cheating were absent.
On the other hand, the complainant and State argued that the petitioners had acted with dishonest intention from the very beginning and deliberately withheld payments in a calculated manner.
The High Court examined the FIR and legal principles governing the offence of cheating. Relying upon settled law, including precedents of the Supreme Court, the Court reiterated that the core ingredient of cheating is dishonest intention at the time of entering into the contract. Mere breach of contract or subsequent failure to pay does not amount to cheating.
Upon analysing the facts, the Court found that payments had been made on multiple occasions, which negated the allegation of initial fraudulent intent. The dispute essentially revolved around non-payment of a balance amount, thereby falling squarely within the realm of civil law.
Decision: The Court allowed the petition and quashed FIR No. 174 dated 24.08.2018 registered under Sections 420 and 120-B IPC along with all consequential proceedings. It held that the allegations, even if taken at face value, did not disclose the commission of a criminal offence and that continuation of criminal proceedings would amount to misuse of the legal process.