Section 120A of the Indian Penal Code: At the Cusp of Civil and Criminal Jurisprudence

By shiny g mahima 

Two individuals enter into a contract of services, however, due to unforeseen circumstances, it so happens that the fulfilment of such contract turns out to be equally fruitless to both. They ‘agree to end’ the contract; as a result, neither party is obligated to perform their contractual duties. In essence, they agree to act in a manner prohibited under the Indian Contract Act. Does this amount to a Criminal Conspiracy under Section 120A?

Section 120 A of the Indian Penal Code describes criminal conspiracy. The section looks to hold two or more persons liable for conspiring to do an ‘illegal act’, liable for an offence which they have either ‘planned and done’ or ‘planned to do’.

The question answered herein, is whether an efficient breach of contract as explained above, would be caught in the ambit of Section 120A of the Indian Penal Code (hereinafter ‘IPC’)?

The law on conspiracy was imported to India by the colonizers from their motherland; thus it is only fair that one refers to their writing so as to appreciate the intricacies of the concept. One of the notable instances where ‘criminal conspiracy’ has been extensively dealt with: is the case of Mulcahy v R (1868). The Court held that when two or more persons agree to carry a criminal scheme into effect, the very plot is the criminal act itself, the conspiracy.

The emphasis on ‘a criminal scheme’ is essential. In Mulcahy v. R, an agreement and plot of conducting a criminal act are punished as a criminal conspiracy. The understanding of ‘criminal conspiracy’ developed in this case, differs from that in the IPC Section 120A as opposed to the court’s understanding in Mulcahy v. R, IPC which punishes an agreement to conduct illegal acts.

The present section on criminal conspiracy, Section120A of the IPC, is often used against any agreement towards actions which are ‘illegal’ in nature. In turn, the term “illegal” has been defined under IPC Section 43, as follows:

“The word illegal is applicable to everything which is an offence or which is prohibited by law, or which furnishes ground for a civil action; …”.

The section outlining punishment for criminal conspiracy i.e., “120 B”, in its ‘Part 1.’ penalizes: “a ‘person party to a criminal conspiracy’ ‘to commit an offence punishable [under the IPC] with death, life imprisonment etc.’ which is understandable. The above-mentioned punishments are required for the maintenance of order and tranquillity in society; they are used as recourse & deterring mechanism against the commission of serious crimes, as under the IPC. The other part of Section 120 B penalizes persons part of a criminal conspiracy [as defined under 120A], to commit an action apart from those “punishable under 120B part 1”.

If one reads Section 120A with Section 43, and subsequently applies Section 120B, the outcome would result in: ‘acts which are civil wrongs in nature, being brought to a criminal trial’- as under criminal conspiracy. “According to Section 43, civil wrongs are illegal; 120 A&B (ii) thereafter penalizes such civil wrongs”.

This deems the ‘agreement to do a civil wrong’, such as “the breach of a contract” punishable under the IPC, with six-month imprisonment. A breach of contract: even though, is principally wrong; one cannot blur the distinction between the words ‘illegal ‘and criminal’. These words attach different implications, intent and recourse mechanisms.

In the case of “breach of contract”, ‘the party to the contract having done the wrong’ compensates ‘the party having suffered the losses of the wrong’. These compensations are often in the form of ‘monetary reimbursements’ or, specific performance of the ‘object of the contract’. The compensation for a wrong deemed as a tort is also similar [often pecuniary in nature]. These measures are often to make up for the loss, in a person’s own best interest. But, in the case of a crime- the state imposes certain measures on the perpetrator; the said measures are seen to be necessary for the general welfare of society and not the benefit/recovery of loss of a particular individual.

In the modern world, the process of facilitation of the complex economic functions of entities needs tools which extend far beyond a simple contract. The best economic outcome for both parties may lie in breaching their respective contractual obligations; the party breaching the contract would rather ‘breach the contract and pay the compensation’ [e.g. liquidated damages], than ‘perform their required duties under the contract’: keeping both parties content in their own ways. This is called the efficient breach of contract, and it is practised in a fair few instances around the world.

The critics of the ‘Theory of Efficient Breach’ suggest that such a practise contravenes the basic principle of contract law: i.e. to impose the word of a man as perceived by the other. The practice of efficient breach of contract would lead to parties breaching their contract, hence not fulfilling their word. A strong argument to the contrary stands as: “contractual duty is a duty to perform or pay damages”. By undertaking either recourse, a party completes their obligation under a contract. Dr. Klass also puts forth that in cases where the performance of the contract may be detrimental to the contract and the interest of the aggrieved party [such as the Contract for Sale of a rare/unique commodity]: the courts do order specific performance. The efficient breach of contract dwells upon “the satisfaction of one party to the contract by breaching and the satisfaction of the other by compensation”.

Such practices may be seen more in the west with developed economic practices, and are rather unheard of in India. However, in a country like India which is fast developing, there would be a time where practices such as efficient breach of contracts are imminent too. If the current law stands, in as much as “Section 120A and B(ii) of the IPC”, such breach of contract would give rise to a criminal suit, which gives rise to the aforementioned issues. It is worth noting this is only applicable in the case of an ‘efficient breach a contract’, and not an ordinary breach of contract.

To help solve these issues, the scope of Section 120A may have to be changed. The root of the fault lies here, in the fact that 120A cover “illegal acts” as opposed to “criminal acts”. In his article, Dr. John Coffee puts forth the distinction between the two and the necessity of creating such a distinction.

Dr. Coffee puts forth the ulterior objective of the Criminal Justice system as distinguished from the Civil Justice System. In his paper, he sets out the distinction in the following words: “the factor that most distinguishes the criminal law is its operation as a system of moral education and socialization”. It is implied that criminal law, is meant to maintain social balance, prohibiting certain acts from their very basis i.e. the mental element. On these grounds, section 120B(i) stands right in punishing certain ‘agreements to do these acts’.

The standard of cure established in law, qua breach of contract is compensation. The loss accrued to a party as a result of a breach of contract can be compensated, which is to say that the aggrieved party can be restored to its original position [in as much as the breach of contract/other civil wrongs]. As far as the objective/motive of the Criminal justice system is concerned, mere compensation does not suffice; neither can the aggrieved party be restored to the position that it was prior to the action being done. Dr. Coffee puts forth a further distinction: in as much as “Civil Law Prices while Criminal Law Prohibits”. This suggests that both the justice systems have separate kind and degree of penalization associated with them. Dr. Coffee puts forth, that this distinction has to be maintained, so as to uphold the higher degree of public obedience, where the matter at hand is provisions of criminal law.

In the case of a contract, the requisite state of mind is that of consent: towards the terms of the contract, is ‘consensus ad idem’: a common understanding of the contract and its objective agreed upon by the two parties. Crime, on the other hand, requires the requisite Mens Rea, to form in the minds of the perpetrator; meaning the person doing the said act, must have the intent to do so.

There is a clear clash of the two in case of an efficient breach of contract. Where there is a mere agreement to breach a contract between the two parties, the element of consent comes into play. This element of consent and agreement can suffice as the mens rea for the crime of criminal conspiracy [as defined under 120 A]. This, however, is not needed because, the breach of a contract, is regulated by contract law; the party in breach, has to compensate the others, or in certain situations, upon the order of the Courts perform the objectives of the contract.

This overlap between the criminal and civil justice system may be detrimental to the public obedience of criminal law. This to a certain degree brings out the fact that the scope of the IPC Section 120A and B(ii) should be reduced from Illegal acts to criminal acts. In India, civil situations, like a breach of contract are dealt with by civil Justice systems like the Indian Contract act. It provides for the all necessities in the contract along with measures in the case of breach of the same.  There appears to be no reason as to why there needs to be an overlap between contract law and criminal law when the prior sufficiently regulates all situations of conflict in the contract. This helps illustrate the idea that ‘Prohibition, more so than Price: defines the Morals of society in general, and shouldn’t be tampered with’.

A possible critique of this argument may come from the fact that such a cause of action may never arise against persons committing an efficient breach of contract. Agreeably this is an instance with a narrow scope of occurrence, but it enables me to illustrate the unnecessarily wide scope of Section 120A.

With all that has been said against it, the importance of conspiracy laws, cannot be denied. As described in the case of Krulewitch v. United States [336 U.S. 440]: “the basic conspiracy principle has some place in modem criminal law, because to unite, back of a criminal purpose, the strength, opportunities and resources of many is obviously more dangerous and more difficult to police than the efforts of a lone wrongdoer.” This argument is agreeable because the idea is not only to deter crime after it has been done but to also deter any agreement or unification over the said crime. Yet, it doesn’t furnish enough grounds to enable an agreement to Breach a Contract or any other civil wrong to have scope for a criminal trial.