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CS Pooja (Company Secretary)     27 May 2009

Will breach of contract attract Criminal Liability??

A breach of contract leads to civil liability..but will it amount to Criminal Liability too...(by taking an example of a loss in business/ goodwill of a business man, occured due to non supply of goods in time to high end customers..due to a folly of a supplier..)


 10 Replies


For loss of business/goodwill, compensation can be claimed under civil suit only.  If there was a criminal intention (mens rea) (like cheating) in the contract or there was some criminal activity (like wilful destruction of goods), criminal complaint can be lodged.   

Swami Sadashiva Brahmendra Sar (Nil)     27 May 2009


n.k.sarin (advocate)     27 May 2009

I agree with the above view

n.k.sarin (advocate)     27 May 2009

Ms pooja,please go through the decision  of  hon, supreme court ,citation given below

A.I.R. 1999 S.C 1480

1 Like

K.C.Suresh (Advocate)     28 May 2009

It is civil unless prosecution prove mens rea

Srinivas Patnaik (Advocate Orissa High Court)     28 May 2009

Please refer AIR 2000SC 1869 and AIR 2000 SC 2341.Illustration (g) to Sec  415 makes the position clear eough to indicate that mere failure to deliver in breach of an areement would not amount to cheating but it is liable only to a civil action for breach of contract.

CS Pooja (Company Secretary)     28 May 2009




Thanks all, for your valuable opinions..

So is the conclude right that for criminal liability, mens rea is important, and it is for the court to decide...( means  depending upon evidence and facts of the case)

Will the same be applied in case of defamation too???


In the subject case, question of 'defamation' does not arise.  (It may be pleaded as 'loss of business reputation' for claiming damages under 'breach of contract').

Dushyant Pandya (Lawyer)     05 February 2010

Employee leave the organisation by giving resignation through email of fax and not completing his notice period then employer will take Criminal action for breach of contract? As employer has been suffering due to emmediete resign what will be the way out the same?

Sivadas Chettur (Chartered accountant)     15 February 2010

I am of the opinion that the there will not be any criminal liability under the Indian Contract Act towards breach of contract. Section 73 to 75 of the said Act clearly lays down the conscequences of breach. It is normally the damages, recission and termination of contract. The palintiff is entitled to the loss naturally arising in the usual course of business. There can be expectation loss as well as reliance loss. The parties can provide for damages themselves. Damages which are in the reasonable contemplation of the parties as a direct result of the breach can also be claimed.

                                I feel that criminal liability would arise not out of contract but out of the action itself which has nothing to do with the contract. Please note that if criminal action is a natural outcome of the contract such a contract should be void as per Sec23. So I am of the opinion that criminal liability is not the out come of breach of contract. Contract Act also do not provide for it.I am not concerned with liability under TORT which is a separate topic by itself. My opinion is confined to your query.

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