Mere Failure To Make Timely Payment Not Cheating Without Initial Fraudulent Intent: Gauhati High Court Reiterates
The Gauhati High Court has reiterated that mere non-payment arising out of contractual dealings, without prima facie material showing fraudulent or dishonest intention at the inception, cannot be treated as offences of cheating or criminal breach of trust.
The ruling was delivered by Justice Anjan Moni Kalita, who observed,
“…though there are instances of non-fulfillment of promises, the same cannot prima facie be termed as willful intention on the part of the accused-applicant for non-payment. It is seen that the disputes as alleged in the instant case are primarily of civil nature, wherein allegation of breach of several contracts by the accused-applicant is leveled. However, the same cannot be treated prima facie as Cheating or Criminal Breach of Trust on the basis of the materials available before this Court.”
“the dishonest intention and mens rea, prima facie, cannot be made out against the accused-applicant from the materials brought before this Court. To sustain a charge under Section 318 and Section 316 of BNS, 2023, there must be substantive evidence of fraudulent or dishonest intention at the very inception of the contract or transaction. Mere allegation of such intention will not hold legal force. Mere failure to discharge contractual obligation, i.e., failure in payment in time, by itself, will not constitute cheating. Court has to find reliable material to that effect. Similarly, a mere breach of a promise, agreement or contract does not, ipso facto, constitute the offence of criminal breach of trust contained in Section 316 of BNS without there being a clear case of entrustment in true sense,” the Court further opined.
The above observations were made in a bail application filed under Section 483 of the BNSS in connection with a case registered under Sections 316(5), 318(4), 351(3) and 3(5) of the BNS.
As per the factual matrix of the case, the allegation was that the accused, being proprietor-cum-director of a company engaged in a four-lane highway project, had induced the informant to supply sand and soil but failed to clear dues amounting to more than Rs. 4.36 crore, despite having received substantial payments. It was also alleged that threats were issued to the informant.
The accused contended that the dispute arose out of contractual transactions and had been given a criminal colour. It was argued that there was no material to show that there was any dishonest intention at the inception of the transaction and that the issue related to non-payment in the course of execution of the project.
The State and the informant opposed the plea, contending that the accused had acknowledged liability and still failed to make payments, and that similar complaints had been made by other vendors.
Upon examining the materials, the Court noted, “It is clear from the materials available before this Court that though the project concerned has been almost completed by execution of about 94%-95% of the work and some of the works are yet to be completed and during such point of time, a dispute arose about the non-payment of the dues including the dues to the Informant.”
“Though there was a promise to pay the dues to the Informant, it is seen that the accused-applicant did not pay the aforesaid dues to the Informant and the other vendors and thereby, might have compelled the vendors, including the Informant to file the FIRs against the accused-applicant,” the Court added.
The Court noted the fact that the accused-applicant had been behind the bars for more than 52 days and during his stay in the judicial custody, no interrogation has been made by the Investigating Authority in the process of investigation.
It said, “Whatever interrogation has been made, admittedly, that was made during his initial police custody. It is also seen that recording of statements of the complainants are not completed as yet and statements of only 3(three) complainants have been recorded till date.”
While considering the necessity of further custody, the Court observed, “This shows the lethargic investigation that is being conducted in the case. Therefore, taking into account the length of detention of the accused-applicant as well as the progress of investigation in the instant case and having, prima facie, come to a finding that the dispute in the instant case is primarily of civil nature having remedies other than instituting criminal cases against the accused-applicant,” the Court opined, that further custodial detention of the accused-applicant is not necessary.
The Court directed, “the accused-applicant shall be released on bail forthwith, on furnishing of a bail bond of Rs. 2,00,000/- (Rupees Two Lakhs only) with 2(two) sureties of like amount, one of which shall be a local government servant to the satisfaction of the Investigating Authority.”
Accordingly, the bail application was accordingly allowed.
Case Name: Mukesh Jalan v. State of Assam
Case Number: Bail Appln./90/2026