Distinction between cheating and breach of contract are as follows:
A mere breach of contract gives rise to a criminal prosecution. The distinction between a case of mere breach of contract and one of cheating depends upon the intention of the accused at the time of the alleged inducement which must be judged by his subsequent act but of which the subsequent act is not the sole criterion.
Mere breach of contract cannot give rise to criminal prosecution under Section 420 IPC unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed.
In Hridaya Ranjan pd. Verma v. State of Bihar [AIR 2000 SC 2341]. This case involved an agreement for sale of property. The allegation in the complaint was that the seller had not disclosed that one of his brothers had filed a petition suit which was pending. There was no allegation that non-disclosure of the suit was intentional.
The dishonest intention on the part of the accused at the beginning of negotiations was not made out by averments in the complaint. The Supreme Court felt that the High Court was wrong in declining to quash the criminal proceedings.