Road Repair Scam: HC says breach of contract is not same as cheating

In a major breather to six contractors accused in the road repair scam, the Bombay High Court recently confirmed their anticipatory bail; resultantly, the police need not arrest them for any custodial interrogation.

The court, while granting them relief, held that a mere breach of contract does not amount to cheating. It has also granted this relief to an Executive Engineer of the BMC, who was accused of hampering the probe against the contractors.

The six contractors, who are now breathing a sigh of relief, are – J. Kumar, RPF Infraprojects Pvt Ltd, Relcon Infraprojects Construction of Roads, Mahavir Roads and Infrastructure Pvt Ltd, K R Constructions and R K Madhani and Company.

A single-judge bench of Justice Anant Badar said, “A distinction has to be kept in mind between mere breach of contract and the offence of cheating. It depends upon the intention of the accused at the time of the inducement. The subsequent conduct is not the sole test.”

“Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent and dishonest intention is shown at the beginning of the transaction,” Justice Badar observed.

The observations were made after noting that the BMC never contended any deceit, cheating or fraudulent intention of the contractors at the time of entering into the agreement.

The court noted that after entering into contract with the BMC, the contractors had commenced work under the contract and executed a major portion of it.

The court also noted that despite the BMC’s contention of work bot being as per the design and specifications, still it paid the amount to the contractors.

Justice Badar said, “Importantly, the BMC has not even opted for cancellation of the contracts in question, or initiated a civil action for claiming damages till date. In the wake of this fact, prima facie, at this stage, no case is made out for cheating offence. But this dispute appears predominantly of a civil nature.”

Justice Badar also noted that during all this, large amount of money (deposited by the contractors) towards security for fulfilling the obligations under the contract are still lying with the BMC. Accordingly, Justice Badar was of the view that the ‘interest’ of the BMC is fully secured by the amount which it has held towards the security for performance of contract, which has a defect liability period ranging up to 10 years.