Failure to repay loan is not fraud or criminal breach of trust: Important decision of Rajasthan High Court

The Rajasthan High Court in an important decision has reiterated that no criminal case can be made against a person who fails to repay the loan amount unless there is any other fact for the crime.

Praveen Sharma anytv, JaipurFri, 20 Sep 2024 09:27 AM Share

The Rajasthan High Court has reiterated in an important decision that no criminal case can be made against a person who is unable to repay the loan amount unless there is any other fact for the crime. The High Court has given this decision in the case of Madanlal Pareek vs State of Rajasthan and others.

A bench of Justice Rajendra Prakash Soni was hearing a plea filed by the accused under Sections 405 (breach of trust) and 415 (cheating) of the IPC. According to the FIR lodged on the basis of the complaint, the accused had taken a loan from the complainant on interest and failed to repay it.

According to a report by Live Law, the counsel for the petitioner made two important arguments in the High Court that the dispute was purely of a civil nature and instead of filing a suit for recovery of money, an attempt was made to give it the colour of a criminal offence. Secondly, the FIR was merely a means of harassing and pressurising the petitioner to recover the loan amount.

The High Court agreed with both the arguments of the counsel for the petitioner. The court highlighted that the sole basis of the FIR against the petitioner was the recovery of the amount given as loan.

The court held that mere breach of promise, agreement or contract does not constitute the offence of criminal breach of trust under the IPC, without there being any such matter which does not arise from the mere lending of money as a loan. Therefore, the offence of criminal breach of trust does not arise.

The court said that the mere inability of the petitioner to repay the loan amount cannot satisfy the elements of this offence unless there is a fraudulent or dishonest intention shown from the very beginning of the transaction resulting in involuntary transfer of money by the complainant. Based on this, the High Court quashed the FIR registered against the petitioner.