Contractual Defaults Cannot Be Treated as Criminal Offences: Kerala High Court

The Kerala High Court affirmed that disputes arising from contractual obligations, specifically the non-payment of consultancy charges, are essentially civil in nature and do not automatically attract criminal liability under penal statutes.

In a proceeding presided over by Justice G. Girish, the Court examined a revision petition challenging the dismissal of a criminal complaint. The bench looked into whether the refusal to pay agreed consultancy fees for real estate services could be prosecuted as criminal breach of trust or cheating. The Court ultimately found that the petitioner failed to establish the essential ingredients of the alleged offences, noting that the grievance primarily related to a civil liability to honor a contractual obligation.

Contractual Disputes vs. Criminal Offenses

While analyzing the allegations, the Court clarified the distinction between a breach of contract and criminal misconduct. It emphasized that for a criminal case to proceed, the specific legal requirements of the charged sections must be met with material evidence, rather than mere assertions of non-payment.

The Court, in its reasoning, observed: "Obviously, the contention in the above regard relates to the civil liability of the respondents 2 & 3 to honour their contractual obligation to pay remuneration to the petitioner for his services availed. For the offence under Section 316 Bharatiya Nyaya Sanhita, 2023 to be attracted it has to be shown that the petitioner had entrusted any property with the respondents 2 & 3 which they dishonestly misappropriated in violation of a legal contract. As far as the present case is concerned, the aforesaid requirement is not brought out from the facts of the case. Likewise, for the offence under Section 318 Bharatiya Nyaya Sanhita, 2023 to be brought out, there should be allegations supported by materials on record about the deception and fraudulent and dishonest inducement on the part of the respondents 2 & 3 in connection with the services availed from the petitioner. The facts and circumstances of the case do not make out the above essential requirement..."

Failure to Establish Criminal Intimidation

Regarding the charges of criminal intimidation, the Court found the petitioner's sworn statement insufficient. It noted that vague mentions of "false altercations" during discussions do not meet the threshold required for prosecution. Consequently, the High Court upheld the Magistrate's decision to dismiss the complaint under Section 226 of the Bharatiya Nagarik Suraksha Sanhita, 2023.

The Court has the following directions:

"Needless to say, this revision petition is devoid of merit. In the result, the revision petition is hereby dismissed."

Background:

The dispute originated when the petitioner, a proprietor of a global consultancy firm, was engaged by respondents 2 and 3 to find a corporate tenant for their building in Kottayam. The oral agreement stipulated that the petitioner would receive one month's rent as consultancy charges. Although the petitioner successfully arranged a tenant, the respondents allegedly refused to pay the fees and instead threatened him during a discussion in early 2023.

The petitioner initially filed a complaint seeking an investigation under Section 175(3) of the Bharatiya Nagarik Suraksha Sanhita, 2023. However, the Chief Judicial Magistrate of Kottayam opted to conduct an enquiry under Section 223 of the Bharatiya Nagarik Suraksha Sanhita, 2023 and subsequently dismissed the complaint, finding no sufficient grounds to proceed. The petitioner moved the High Court in revision, arguing that the Magistrate erred in not forwarding the matter for police investigation and in dismissing the case. The High Court, however, agreed with the lower court's finding that the matter was a civil dispute being given a criminal color.

Case Details:
Case No.: CRL.REV.PET NO. 87 OF 2026
NeutralCitation: 2026:KER:44619
Case Title: R. GEORGE v. STATE OF KERALA
Appearances:
For the Petitioner(s): Shri.Manu Nair G., Shri.Gopalakrishnan N., Shri.Bharath Murali, Sri.Thomas P.Makil, Shri.George K. George, Shri.Ajay Sankar, Shri.Vinayak P Nampoothiripad, Shri.Gengadharan K.R., Shri.Sidharth Murali, Advs.
For The Respondent(S): Sri.Rajeev V.Kurup, Adv.; Sri.Sameer.S, Public Prosecutor

Source: 2026 CaseBase(KER) 350