"Mere breach of contract cannot give rise to criminal prosecution under section 420 unless fraudulent or dishonest intention is shown, right at the beginning of transaction when the offence is said to have been committed

Section 420 of Indian Penal Code, 1860, states that whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person or to make, alter or destroy the whole or any part of a valuable security, or anything which is singed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine. In Shruti Enterprises v. State of Bihar and ors, 2006 CrLJ 1961 , it was held that mere breach of contract cannot give rise to criminal prosecution under section 420 of the Indian Penal Code, 1860, unless fraudulent or dishonest intention is shown right at the beginning of transaction when the offence is said to have been committed. If it is established that the intention of the accused was dishonest at the time of entering into the agreement, then liability will be criminal and the accused will be guilty of offence of cheating. On the other hand, if all that is established is that a representation made by the accused has subsequently not been kept, criminal liability cannot be fastened on the accused and the only right which complainant acquires is to a decree of damages for breach of contract. In view of the above, it may be said that "Mere breach of contract cannot give rise to criminal prosecution under section 420 of Indian Penal Code, 1860 unless fraudulent or dishonest intention is shown, right at the beginning of transaction when the offence is said to have been committed".