Mere Breach Of Contract Does Not Constitute Criminal Breach Of Trust U/S 405 IPC Without 'Entrustment': Jharkhand High Court

The Jharkhand High Court has held that a mere breach of contract does not constitute an offence under Section 405 of the Indian Penal Code without the presence of 'entrustment'. The provision penalises criminal breach of trust.

Justice Sanjay Dwivedi observed, “Offence of criminal breach of trust has been defined under section 405 I.P.C. and same is punishable under section 406 I.P.C. In order to bring offence of criminal breach of trust, entrustment should be there.”

In the case at hand, the complainant had entered into an agreement with the company of the petitioner-accused. It was alleged that the petitioner failed to pay outstanding bills amounting to approximately Rs.28 lakhs. The complainant claimed that the accused, with dishonest intent, did not make the payment for the work completed as per the agreement.

The petitioner argued that recovery of the amount should be pursued through civil means, asserting that the complaint was false as the complainant had not completed the work, resulting in significant loss for the company.

The complainant contended that the case of cheating was evident, given the unpaid sum of Rs.28 lacs. However, the court noted that this dispute arose from a business transaction where the work was not completed and was later executed through a third party. The court highlighted that criminal action in such commercial disputes is not permissible.

Referencing the case of Satishchandra Ratanlal Shah v. State of Gujarat and Others (AIR 2019 SCC 1538), the court emphasized, “From the very beginning there is no intention of cheating and that is why the learned court has not taken cognizance under section 420 I.P.C. Admittedly, the transaction was with regard to business terms. Mere breach of contract does not constitute offence under section 405 I.P.C. without there being care of entrustment.”

Consequently, the court quashed the criminal proceedings before the learned sub-judicial magistrate and allowed the petition.

Case Title: Rohit Chaudhary V. The State of Jharkhand

LL Citation: 2024 LiveLaw (Jha) 131

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