Supreme Court clarifies the distinction between civil wrong and criminal offense: Rikhab Birani & Anr. vs. State of Uttar Pradesh & Anr. (2025) INSC 512 (April 16, 2025)

Introduction

Date of the Judgment: April 16, 2025

Citation: 2025 INSC 512

Judges: Sanjiv Khanna, CJI., Sanjay Kumar, J.

Is every breach of contract a criminal offense? The Supreme Court of India addressed this critical question in a recent judgment, emphasizing the distinction between civil wrongs and criminal offenses like cheating and breach of trust. This case, Rikhab Birani & Anr. vs. State of Uttar Pradesh & Anr., arose from a property sale dispute that escalated into a criminal complaint. The Supreme Court, comprising Chief Justice Sanjiv Khanna and Justice Sanjay Kumar, delivered the judgment.

Case Background

In June 2020, Rikhab Birani and Sadhna Birani (the appellants) entered into an oral agreement to sell a property, Roti Godown No. 28/27, Birhana Road, Kanpur, Uttar Pradesh, to Shilpi Gupta (respondent No. 2) for ₹1,35,00,000. Shilpi Gupta claimed to have paid ₹19,00,000 towards the sale between June and September 2020.

The appellants contended that Shilpi Gupta was required to pay 25% of the total sale amount as an advance by September 15, 2020, but failed to do so. A cheque for ₹10,00,000 provided by Shilpi Gupta bounced due to insufficient funds. The appellants cited WhatsApp messages and other communications where they requested Shilpi Gupta to pay the outstanding amount and complete the sale.

On September 3, 2021, the appellants sold the property for a lower price of ₹90,00,000, citing changed circumstances. They claimed to have suffered a loss of ₹45,00,000 due to Shilpi Gupta’s failure to honor the oral agreement and thus, were not liable to refund any amount.

Neither party initiated civil proceedings. Instead, Shilpi Gupta filed a complaint with the Metropolitan Magistrate, Kanpur Nagar, under Section 156(3) of the Code of Criminal Procedure, 1973, seeking the registration of a First Information Report (FIR). The Magistrate dismissed the application on April 26, 2022, stating that the matter was civil in nature and no criminal offense was made out.

Timeline:

Course of Proceedings

Following the dismissal of her application under Section 156(3) of the Cr.P.C. by the Metropolitan Magistrate on April 26, 2022, Shilpi Gupta filed another criminal complaint on June 14, 2022, before the same court. The Metropolitan Magistrate then requested a report from the Station House Officer of Police Station – Harbans Mohal under Section 202 of the Cr.P.C. After reviewing the report, the Magistrate dismissed the criminal complaint on July 14, 2023, reiterating that the matter was civil.

Despite these dismissals, Shilpi Gupta directly approached the Police Station – Harbans Mohal and registered FIR No. 78/2023 on July 22, 2023, under Sections 420, 406, 354, 504, and 506 of the Indian Penal Code, 1860. Apprehending arrest, the appellants filed for anticipatory bail, which was granted until the chargesheet was filed.

On September 12, 2023, the investigating officer filed a chargesheet. Subsequently, on January 17, 2024, the Metropolitan Magistrate took cognizance and summoned the appellants, despite the previous orders dismissing Shilpi Gupta’s criminal complaints based on the same allegations.

The appellants then filed a petition under Section 482 of the Cr.P.C. before the High Court, which was dismissed on May 9, 2024. The High Court stated that at that stage, only a prima facie case needed to be considered, based on the law established by the Supreme Court.

Legal Framework

This case involves the interpretation and application of several key sections of Indian law, primarily focusing on the distinction between civil wrongs and criminal offenses. The relevant legal provisions include:

• Section 156(3) of the Code of Criminal Procedure, 1973 (Cr.P.C.): This section allows a Magistrate to order the police to register and investigate a cognizable offense.
• Section 202 of the Cr.P.C.: This section allows the Magistrate to inquire into the case himself or direct an investigation to determine whether there is sufficient ground for proceeding.
• Section 420 of the Indian Penal Code, 1860 (IPC): This section deals with cheating and dishonestly inducing delivery of property. The essential ingredients include deception, dishonest inducement, and resulting damage or harm.
• Section 406 of the IPC: This section pertains to criminal breach of trust, which requires entrustment of property and dishonest misappropriation or conversion of that property.
• Sections 354, 504, and 506 of the IPC: These sections relate to assault or criminal force to outrage modesty, intentional insult with intent to provoke breach of the peace, and criminal intimidation, respectively.
• Section 482 of the Cr.P.C.: This section saves the inherent power of the High Court to make orders necessary to give effect to any order under this Code, or to prevent abuse of the process of any court or otherwise to secure the ends of justice.

The Supreme Court emphasized that a breach of contract should not automatically lead to criminal proceedings unless there is evidence of fraudulent or dishonest intention from the beginning of the transaction. The court reiterated that criminal procedure should not be used to pressure parties in civil disputes, as this undermines the rule of law.

Arguments

The arguments presented by both sides in this case revolved around whether the dispute was civil or criminal in nature. The appellants argued that the FIR and subsequent chargesheet were an abuse of the legal process, as the matter was purely a breach of contract with no evidence of dishonest intention from the outset.

The respondent, Shilpi Gupta, contended that the appellants had dishonest intentions from the beginning and had committed offenses under Sections 420, 406, 354, 504, and 506 of the IPC.

• Appellants’ Arguments:
  • ✓ The dispute arose from an oral agreement for the sale of property, and the failure to complete the transaction was a breach of contract, not a criminal offense.
  • ✓ There was no evidence of dishonest intention or fraudulent inducement at the time of entering into the agreement.
  • ✓ The Metropolitan Magistrate had previously dismissed Shilpi Gupta’s complaints, recognizing the civil nature of the dispute.
  • ✓ The chargesheet lacked the necessary particulars and details required under Section 173(2) of the Cr.P.C. to establish the alleged offenses.
• Respondent’s Arguments:
  • ✓ The appellants had dishonest intentions from the beginning, as evidenced by their failure to refund the advance payment after selling the property to someone else.
  • ✓ The appellants committed offenses under Sections 420, 406, 354, 504, and 506 of the IPC.

Submissions Table

Issues Framed by the Supreme Court

1. Whether the dispute between the parties was civil or criminal in nature.
2. Whether the High Court erred in dismissing the petition under Section 482 of the Cr.P.C.
3. Whether the FIR and subsequent chargesheet were an abuse of the legal process.

Treatment of the Issue by the Court: “The following table demonstrates as to how the Court decided the issues”

Authorities

The Supreme Court relied on several precedents to distinguish between civil wrongs and criminal offenses. These cases provide guidance on the ingredients necessary to establish offenses such as cheating and criminal breach of trust.

• Lalit Chaturvedi and Others v. State of Uttar Pradesh and Another, 2024 SCC Online SC 171 (Supreme Court of India): Quoted the decision in Mohammed Ibrahim and Others v. State of Bihar and Another, emphasizing the essential ingredients of cheating under Section 420 of the IPC.
• Mohammed Ibrahim and Others v. State of Bihar and Another, (2009) 8 SCC 751 (Supreme Court of India): Defined the essential ingredients of the offense of cheating, including deception, dishonest inducement, and resulting damage or harm.
• V.Y. Jose and Another v. State of Gujarat and Another, (2009) 3 SCC 78 (Supreme Court of India): Stated that a contractual dispute or breach of contract per se should not lead to the initiation of criminal proceedings and that the ingredient of ‘cheating’ requires a fraudulent or dishonest intention from the very beginning of the contract.
• Delhi Race Club (1940) Limited and Others v. State of Uttar Pradesh and Another, (2024) 10 SCC 690 (Supreme Court of India): Highlighted the distinction between criminal breach of trust and cheating, noting that they are antithetical and cannot coexist simultaneously.
• Kunti and Another v. State of Uttar Pradesh and Another, (2023) 6 SCC 109 (Supreme Court of India): Referred to Sarabjit Kaur v. State of Punjab and Another, observing that a breach of contract does not give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction.
• Sarabjit Kaur v. State of Punjab and Another, (2023) 5 SCC 360 (Supreme Court of India): Reiterated that a breach of contract does not give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown at the beginning of the transaction.
• G. Sagar Suri and Another v. State of U.P. and Others, (2000) 2 SCC 636 (Supreme Court of India): Emphasized the duty of the court to exercise caution in issuing process, particularly when the matter is essentially of a civil nature.
• Vijay Kumar Ghai and Others v. State of West Bengal and Others, (2022) 7 SCC 124 (Supreme Court of India): Discouraged the use of criminal procedure to apply pressure in civil disputes.
• Deepak Gaba and Others v. State of Uttar Pradesh and Another, (2023) 3 SCC 423 (Supreme Court of India): Noted recurring attempts to invoke the jurisdiction of criminal courts by filing vexatious complaints camouflaging civil claims.
• Thermax Limited and Others v. K.M. Johny and Others, (2011) 13 SCC 412 (Supreme Court of India): Held that courts should be watchful of the difference between civil and criminal wrongs.
• Sharif Ahmed and Another v. State of Uttar Pradesh and Another, 2024 SCC OnLine SC 726 (Supreme Court of India): Drew out the ingredients required to establish an offense under Sections 406, 415, 420, 503, and 506 of the IPC.
• Bhushan Kumar v. State (NCT of Delhi) (Supreme Court of India): Referred to Sections 190 and 204 of the Code, observing that the expression “cognisance” in Section 190 merely means “becoming aware of”, and when used with reference to a court or a judge it connotes “to take notice of judicially”.
• H.N. Rishbud and Inder Singh v. State of Delhi (Supreme Court of India): Noted that the process of investigation generally consists of several stages including proceeding to the concerned spot, ascertainment of facts and circumstances, discovery and arrest, collection of evidence which includes examination of various persons, search of places and seizure of things, and formation of an opinion on whether an offence is made out, and filing the chargesheet accordingly.
• Abhinandan Jha v. Dinesh Mishra (Supreme Court of India): States that the submission of the chargesheet or the final report is dependent on the nature of opinion formed, which is the final step in the investigation.

Authority Treatment Table

Judgment

The Supreme Court allowed the appeal, quashing the FIR and the resultant proceedings, including the chargesheet. The Court emphasized the necessity of distinguishing between civil wrongs and criminal offenses, cautioning against the misuse of criminal proceedings to resolve civil disputes.

The Court also imposed costs of ₹50,000 on the State of Uttar Pradesh, to be paid within six weeks, and directed the state to conduct internal inquiries to recover the amount from the responsible officers. This was due to the repeated instances of civil wrongs being made the subject of criminal proceedings.

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Lalit Chaturvedi and Others v. State of Uttar Pradesh and Another, 2024 SCC Online SC 171: The Court quoted this authority to emphasize the essential ingredients of cheating under Section 420 of the IPC, reinforcing the need for dishonest intention from the outset.
• Mohammed Ibrahim and Others v. State of Bihar and Another, (2009) 8 SCC 751: This case was followed to define the essential ingredients of the offense of cheating, ensuring a clear understanding of the legal requirements.
• V.Y. Jose and Another v. State of Gujarat and Another, (2009) 3 SCC 78: The Court followed this precedent to highlight that a contractual dispute should not automatically lead to criminal proceedings unless there is fraudulent intention from the beginning.
• Delhi Race Club (1940) Limited and Others v. State of Uttar Pradesh and Another, (2024) 10 SCC 690: This authority was followed to distinguish between criminal breach of trust and cheating, emphasizing that they are antithetical and cannot coexist.
• Kunti and Another v. State of Uttar Pradesh and Another, (2023) 6 SCC 109: The Court referred to this case to reiterate that a breach of contract does not give rise to criminal prosecution for cheating unless fraudulent intention is shown at the beginning.
• Sarabjit Kaur v. State of Punjab and Another, (2023) 5 SCC 360: This case was used to support the view that a breach of contract does not warrant criminal prosecution for cheating without initial fraudulent intent.
• G. Sagar Suri and Another v. State of U.P. and Others, (2000) 2 SCC 636: The Court followed this authority to emphasize the need for caution in issuing process, especially in matters of a civil nature.
• Vijay Kumar Ghai and Others v. State of West Bengal and Others, (2022) 7 SCC 124: This case was followed to discourage the use of criminal procedure to apply pressure in civil disputes, reinforcing the separation of civil and criminal law.
• Deepak Gaba and Others v. State of Uttar Pradesh and Another, (2023) 3 SCC 423: The Court noted this case to highlight the recurring attempts to misuse criminal courts for civil claims, cautioning against such practices.
• Thermax Limited and Others v. K.M. Johny and Others, (2011) 13 SCC 412: This case was followed to ensure courts are vigilant about the distinction between civil and criminal wrongs, preventing the conflation of the two.
• Sharif Ahmed and Another v. State of Uttar Pradesh and Another, 2024 SCC OnLine SC 726: The Court followed this authority to outline the ingredients required to establish offenses under Sections 406, 415, 420, 503, and 506 of the IPC, providing a clear framework for analysis.
• Bhushan Kumar v. State (NCT of Delhi): The Court referred to Sections 190 and 204 of the Code, observing that the expression “cognisance” in Section 190 merely means “becoming aware of”, and when used with reference to a court or a judge it connotes “to take notice of judicially”.
• H.N. Rishbud and Inder Singh v. State of Delhi: The Court noted that the process of investigation generally consists of several stages including proceeding to the concerned spot, ascertainment of facts and circumstances, discovery and arrest, collection of evidence which includes examination of various persons, search of places and seizure of things, and formation of an opinion on whether an offence is made out, and filing the chargesheet accordingly.
• Abhinandan Jha v. Dinesh Mishra: The Court states that the submission of the chargesheet or the final report is dependent on the nature of opinion formed, which is the final step in the investigation.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle that civil disputes should not be converted into criminal cases unless there is clear evidence of dishonest intention from the outset. The Court emphasized that a breach of contract, without any fraudulent intent at the time of agreement, does not constitute a criminal offense. The Court also considered the previous dismissals of the criminal complaints by the Metropolitan Magistrate, which indicated that the matter was civil in nature.

The Court’s reasoning focused on the following points:

• ✓ Lack of evidence of dishonest intention at the time of entering into the agreement.
• ✓ Previous dismissals of criminal complaints by the Metropolitan Magistrate.
• ✓ The chargesheet’s failure to provide necessary particulars and details required under Section 173(2) of the Cr.P.C.
• ✓ The principle that criminal procedure should not be used to pressure parties in civil disputes.

Sentiment Analysis Ranking

Fact:Law Ratio

Logical Reasoning

Issue: Whether the dispute is civil or criminal?

Step 1: Examine the initial agreement and intentions of the parties.

Step 2: Determine if there was dishonest intention at the time of entering into the agreement.

Step 3: Review previous court orders and complaints.

Step 4: Analyze the chargesheet for necessary particulars and details.

Step 5: Apply the principle that criminal procedure should not be used to pressure parties in civil disputes.

Conclusion: If there is no evidence of dishonest intention and the matter is essentially civil, quash the FIR and resultant proceedings.

Key Takeaways

• Civil vs. Criminal: A breach of contract does not automatically constitute a criminal offense unless there is evidence of dishonest intention from the beginning.
• Abuse of Process: Criminal procedure should not be used to pressure parties in civil disputes.
• Judicial Caution: Courts must exercise caution in issuing process, particularly when the matter is essentially of a civil nature.
• Chargesheet Requirements: A chargesheet must contain the necessary particulars and details required under Section 173(2) of the Cr.P.C.

Implications

This judgment reinforces the importance of distinguishing between civil and criminal matters. It serves as a reminder to lower courts and law enforcement agencies that criminal proceedings should not be initiated lightly in cases where the dispute is primarily civil in nature. The decision also highlights the need for a thorough examination of the facts and intentions of the parties before invoking criminal law.

The imposition of costs on the State of Uttar Pradesh indicates the Supreme Court’s disapproval of the misuse of criminal proceedings and serves as a deterrent for similar actions in the future. This judgment is likely to be cited in future cases involving similar disputes, providing a clear framework for analyzing whether a breach of contract should be treated as a civil wrong or a criminal offense.

Conclusion

In Rikhab Birani & Anr. vs. State of Uttar Pradesh & Anr., the Supreme Court has firmly reiterated the principle that not every breach of contract warrants criminal prosecution. The Court’s emphasis on distinguishing between civil wrongs and criminal offenses serves as a crucial safeguard against the misuse of criminal law to resolve civil disputes. This judgment underscores the importance of carefully examining the intentions of the parties and ensuring that criminal proceedings are initiated only when there is clear evidence of dishonest or fraudulent conduct from the outset.

The Supreme Court’s decision to quash the FIR and impose costs on the State of Uttar Pradesh sends a strong message about the need for judicial caution and the responsibility of law enforcement agencies to avoid converting civil disputes into criminal cases. This judgment is a significant contribution to the jurisprudence on the distinction between civil and criminal law, providing valuable guidance for future cases and promoting a more balanced and fair application of the law.