Karnataka High Court
Sri Prasad Ramappa vs State Of Karnataka on 21 April, 2025
Author: Hemant Chandangoudar
Bench: Hemant Chandangoudar
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NC: 2025:KHC:16484
CRL.P No. 13392 of 2024
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 21ST DAY OF APRIL, 2025
BEFORE
THE HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR
CRIMINAL PETITION NO. 13392 OF 2024 (482(Cr.PC) /
528(BNSS))
BETWEEN:
1. SRI PRASAD RAMAPPA
S/O RAMAPPA VENKATAPPA,
AGED ABOUT 62 YEARS,
R/AT: NO.1358, 1ST H MAIN,
8TH CROSS, GIRINAGAR,
BANASHANKARI 3RD STAGE,
BANGALORE-560 085.
2. SRI. DHANASHEKAR REDDY B N,
S/O NARAYANASWAMY B H,
AGED ABOUT 37 YEARS,
R/AT NO.2375, 1ST MAIN ROAD,
Digitally RPC LAYOUT, HAMPI NAGAR,
signed by R BANGALORE-560 104.
HEMALATHA
Location:
High Court of 3. SMT. SAVITHA PRASAD,
Karnataka W/O PRASAD RAMAPPA,
AGED ABOUT 52 YEARS,
R/AT NO 1358, 1ST H MAIN,
8TH CROSS, GIRINAGAR,
BANASHANKARI 3RD STAGE,
BANGALORE-560 085.
4. SMT. BINDU P REDDY,
W/O SRI. DHANASHEKAR REDDY B N,
AGED ABOUT YEARS,
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NC: 2025:KHC:16484
CRL.P No. 13392 of 2024
R/AT NO.2375, 1ST MAIN ROAD,
RPC LAYOUT, HAMPI NAGAR,
BANGALORE-560 104.
...PETITIONERS
(BY SRI. DHYAN CHINNAPPA, SENIOR ADVOCATE FOR
SRI. MANU K, ADVOCATE)
AND:
1. STATE OF KARNATAKA
REP. BY JAYANAGARA POLICE STATION,
REP. BY STATE PUBLIC PROSECUTOR,
HIGH COURT OF KARNATAKA,
BENGALURU-560 001.
2. SRI. SHREYAS A,
S/O P R ASHOK
AGED ABOUT 30 YEARS
RESIDING AT NO-1107,
28TH MAIN ROAD, 35TH D CROSS,
4TH T BLOCK, JAYANAGAR,
BANGALORE-560 100.
...RESPONDENTS
(BY SRI. M R PATIL, HCGPF FOR R1;
SRI. S S NAGANAND, SENIOR ADVOCATE FOR
SRI. SWAROOP ANAND R, ADVOCATE FOR R2)
THIS CRL.P IS FILED U/S 482 CR.PC (FILED U/S 528
BNSS) PRAYING TO QUASH ALL THE PROCEEDINGS IN
CR.NO.0392/2024 OF THE JAYANAGARA POLICE STATION,
BENGALURU, PENDING BEFORE THE IIND ADDL. CMM COURT,
BENGALURU SO FAR AS THE ACCUSED NOS.1 TO 4 /
PETITIONERS HEREIN ARE CONCERNED FOR THE ALLEGED
OFFENCE P/U/S 420 R/W 34 OF IPC AND TO PASS ANY OTHER
APPROPRIATE ORDERS AS MAY BE NECESSARY, TILL THE
FINAL DISPOSAL OF THIS PETITION.
THIS PETITION, COMING ON FOR ORDERS, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR
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NC: 2025:KHC:16484
CRL.P No. 13392 of 2024
ORAL ORDER
The petitioners, in the present criminal petition, have challenged the registration of the First Information Report (FIR) in Crime No. 392/2024 and the consequential investigation initiated by respondent No.2/complainant, for the offence punishable under Section 420 read with Section 34 of the Indian PenalCode,1860.
1.1 It is the specific allegation of respondent No.2/complainant that petitioner No.1, a retired officer of the Bruhat Bengaluru Mahanagara Palike (BBMP), approached him with a business proposal to establish a brewery under the name and style of Hyperion Hospitality Ventures Pvt. Ltd., with assurances that the complainant would be made a director in the said venture. Based on these representations, respondent No.2 claims to have invested substantial amounts through multiple bank accounts.
2.1 Subsequently, a lease agreement was executed among petitioner Nos. 1 and 2, respondent No.2, and M/s. Bangalore Timber and Plywoods, along with other individuals, for the purpose of constructing a bar and restaurant. It is alleged that respondent No.2 invested a sum of Rs. 19,54,00,000/- towards the said project.
-4-NC: 2025:KHC:16484 CRL.P No. 13392 of 2024 2.2 However, according to the petitioners, the project suffered delays primarily due to respondent No.2's alleged failure to provide financial and operational support as required. On 25.01.2024, respondent No.2 is stated to have voluntarily withdrawn from the project through a WhatsApp communication, citing personal inability to remain involved in the venture.
2.3 Following his exit, respondent No.2 instituted a civil suit in O.S. No. 3378/2024 before the City Civil and Sessions Judge, Bengaluru, seeking a temporary injunction to restrain the ongoing construction and to prevent execution of third-party agreements. The said application was rejected. The appeal preferred by respondent No.2 in M.F.A. No. 5885/2024 before this Court was also dismissed by order dated 24.09.2024.
2.4 Additionally, respondent No.2 has instituted money recovery suits in O.S. Nos. 5377/2024 and 5378/2024 against petitioner Nos. 2 and 3 are pending adjudication before the competent Civil Court at Bengaluru.
3. Subsequently, on 27.11.2024, respondent No.2 lodged a criminal complaint before the Jayanagar Police Station alleging that the petitioners had committed the offence of cheating, which resulted in the registration of -5- NC: 2025:KHC:16484 CRL.P No. 13392 of 2024 FIR in Crime No. 392/2024 for offences under Section 420 read with Section 34 of IPC. Being aggrieved by the registration of the said FIR and the continuation of the criminal investigation, the petitioners have approached this Court seeking appropriate relief.
4. Shri Dhyan Chinnappa, learned Senior Counsel appearing for the petitioners, submitted that respondent No.2 has filed a false complaint against the petitioners alleging offences punishable under Section 420 of the Indian Penal Code. It is contended that the allegation that the petitioners induced respondent No.2 to transfer funds on the false assurance that he would be made a director of the company is unfounded. The learned Senior Counsel submitted that despite the petitioners' willingness, respondent No.2 did not cooperate with the statutory procedure required to obtain a Director Identification Number (DIN). Moreover, the civil suit filed by respondent No.2 in O.S. No. 3378/2024 and the applications in I.A. Nos. 2 and 3 seeking interim relief were dismissed on merits. Therefore, it is argued that the essential ingredients required to constitute the offence of cheating under Section 420 IPC are absent in the present case.
5. Per contra, Shri S.S. Nagananda, learned Senior Counsel for respondent No.2, submitted that the petitioners dishonestly induced respondent No.2 to invest -6- NC: 2025:KHC:16484 CRL.P No. 13392 of 2024 a substantial amount in the proposed business under the false assurance that he would be made a director in the company. Despite such representation, the petitioners failed to honour their commitment and did not return the amount invested. It is further submitted that the complaint discloses the necessary elements to constitute the offence of cheating under Section 420 IPC. The learned Senior Counsel also contended that, in law, the existence of a civil dispute does not preclude the maintainability of a criminal complaint arising from the same set of facts, provided the allegations disclose a distinct criminal offence.
In support of his submission, he relied upon the following decisions:
(i) D. Purushotama Reddy and Another v. K. Sateesh, (2008) 8 SCC 505
(ii) Syed Askari Hadi Ali Augustine Inam and Others v. State (NCT of Delhi) and Others, Criminal Appeal No. 416/2009
(iii) Smt. Vanitha and Another v. State of Karnataka and Another, Criminal Petition No. 5522/2024
6. I have heard the submissions made by Shri Dhyan Chinnappa, learned Senior Counsel for the petitioners, and Shri S.S. Nagananda, learned Senior Counsel for respondent No.2, as well as Shri M.R. Patil, learned High Court Government Pleader for the State, in part.
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7. A perusal of the FIR indicates that Petitioner Nos. 1 and 2 had approached respondent No.2 with a proposal to start a brewery business under the name and style of Hyperion Hospitality Ventures Pvt. Ltd., assuring him that he would be made a director. Pursuant to this, a joint bank account was opened by Petitioner Nos. 1 and 2 along with respondent No.2 at HDFC Bank, Jayanagar Branch. Based on the alleged assurances, respondent No.2 transferred several sums of money to the joint account and to the personal accounts of the petitioners.
8. It is alleged that respondent No.2 transferred Rs. 2,35,50,902/- to the joint account and an additional Rs. 50,00,000/- to the personal account of petitioner No.1 from YES Bank. Furthermore, between 03.10.2020 and 23.08.2022, respondent No.2 transferred Rs. 1,72,50,000/- to the bank account of petitioner No.3, who is the wife of petitioner No.1. It is also alleged that an amount of Rs. 55,00,000/- was paid in cash to petitioner No.1. Though Rs. 25,00,000/- was allegedly repaid by petitioner No.1 to respondent No.2, the remaining sum was not returned. It is further alleged that, despite earlier assurances, respondent No.2 was not made a director in the company, and instead, petitioner No.4 was appointed as a director.
-8-NC: 2025:KHC:16484 CRL.P No. 13392 of 2024 8.1 The cumulative grievance of respondent No.2 is that the petitioners collectively owe a sum of Rs. 4,88,00,902/-, which has not been repaid. It is also noted that in the civil suits bearing O.S. Nos. 5377/2024 and 5378/2024, the petitioners have taken the defence that the sums transferred by respondent No.2 were in the nature of gifts. However, those suits were dismissed.
9. A perusal of the lease agreement dated 27.01.2023, produced at Annexure-C, indicates that the said agreement was executed between petitioner Nos. 1 and 2, respondent No.2, M/s Bangalore Timber and Plywoods, and others, for the purpose of constructing a bar and restaurant project over land bearing Sy. No. 41/9, measuring approximately 16 guntas, situated at Doddakannelli Village. The agreed monthly rent was Rs. 6,51,000/-, and the security deposit was fixed at Rs. 58,64,000/-, out of which respondent No.2 contributed a sum of Rs. 19,54,000/-.
10. Subsequently, respondent No.2/plaintiff filed a civil suit in O.S. No. 3378/2024 before the City Civil Court, Bengaluru, against petitioner Nos. 1 and 2 and M/s Hyperion Hospitality Ventures Pvt. Ltd./defendants. In I.A. No.2 (produced at Annexure-E), the plaintiff sought an order of temporary injunction to restrain the defendants from constructing the restaurant and bar on the suit -9- NC: 2025:KHC:16484 CRL.P No. 13392 of 2024 property. The Trial Court dismissed I.A. No.2, observing that the suit property was vacant land before the defendants took possession, and that the defendants had thereafter developed the property by investing a substantial amount, and any interim relief would result in significant monetary loss to the defendants and adversely affect the project.
11. In the same suit, the plaintiff also filed I.A. No.3 (produced at Annexure-F), seeking to restrain the defendants from entering into any operation or management agreements in respect of the restaurant and bar being constructed on the suit property. The Trial Court dismissed I.A. No.3 as well, noting that the defendants were required to enter into contracts with third parties for the supply of food, beverages, and other services, and had already made substantial investments to obtain a DIN license and progress the project.
12. Thereafter, an appeal was filed by respondent No.2 in M.F.A. No. 5885/2024 c/w M.F.A. No. 5886/2024 before the Co-ordinate Bench of this Court, challenging the orders passed by the Trial Court in I.A. Nos. 2 and 3 (produced at Annexure-G). The Co-ordinate Bench dismissed the appeals, holding that respondent No.2 himself was not interested in participating in the business, and therefore, the wife of petitioner No.1 and petitioner
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NC: 2025:KHC:16484 CRL.P No. 13392 of 2024 No.2 were appointed as directors of the company. The Court further noted that the reliefs sought were bare injunctions and that the defendants had already invested approximately Rs. 16 Crores in the project, whereas the plaintiff had invested Rs. 2,74,00,000/-. Accordingly, the balance of convenience was held to be in favour of the defendants.
13. Respondent No.2 has also instituted a suit for recovery of money in O.S. No. 5377/2024 against petitioner No.3, claiming a sum of Rs.2,72,37,600/-, which was allegedly paid at the instance of her husband (petitioner No.1). It is alleged that despite repeated demands, the amount has not been repaid. In a connected suit, O.S. No. 5378/2024, respondent No.2 has filed a claim for recovery of Rs.1,59,39,995/- against petitioner No.2, alleging that the said amount was advanced for business purposes (produced at Document No.4). Both suits are currently pending adjudication before the City Civil Court and Sessions Court, Bengaluru.
14. At this juncture, it is pertinent to refer to Section 420 of the Indian Penal Code, which outlines the essential ingredients required to constitute the offence of cheating, as under:
" 420. Cheating and dishonestly inducing delivery of property.--
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NC: 2025:KHC:16484 CRL.P No. 13392 of 2024 Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine".
15. The Hon'ble Supreme Court, in the case of S.W. Palanitkar & Others v. State of Bihar & Another, reported in (2002) 1 SCC 241, has authoritatively laid down the essential ingredients required to constitute the offence of cheating punishable under Section 420 of the Indian Penal Code.
15.1 Accordingly, in order to attract the penal consequences under Section 420 IPC, the following essential elements must be satisfied:
1. Deception of a person, which may be by means of a false or misleading representation, or by any other dishonest or fraudulent act, including by omission of material facts.
2. Fraudulent or dishonest inducement of such person to:
a. deliver any property to any person; or b. consent that any person shall retain any property; or
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3. Intentional inducement of such a person to do or omit to do any act, which they would not have done or omitted had they not been so deceived.
4. Causation of harm: Where the inducement is of the nature mentioned in point 3, such act or omission should cause or be likely to cause damage or harm to the person's body, mind, reputation, or property.
15.2 Furthermore, the existence of mens rea, i.e., the intention to defraud or dishonest intention, is an essential component of the offence of cheating. Such intention must exist at the inception of the transaction.
Mere breach of contract, in the absence of fraudulent or dishonest intention at the time of the inducement or delivery of property, cannot give rise to criminal prosecution for cheating.
15.3 The Hon'ble Supreme Court has reiterated this principle in Hridaya Ranjan Prasad Verma and Others v. State of Bihar and Another, reported in (2000) 4 SCC 168, wherein it was held that the distinction between mere breach of contract and the offence of cheating is indeed a fine one. While a breach of contract may give rise to civil liability, fraudulent or dishonest intention at the inception of the transaction forms the crux of the offence under Section 420 IPC.
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16. Applying the above settled principles to the present case, it appears that respondent No.2 had allegedly lent money for the construction and establishment of a bar and restaurant, pursuant to a mutual understanding with the petitioners. The petitioners are stated to have invested approximately Rs. 16 Crores in the said project and have acted upon the objective for which the investment was made. To constitute the offence of cheating, it is imperative to establish that deception was practised upon the complainant by means of false or misleading representations. However, in the present case, a perusal of the averments in the complaint and the FIR does not disclose any such false or misleading representations made by the petitioners so as to dishonestly or fraudulently induce respondent No.2 to invest in the business.
17. It is further alleged by respondent No.2 that the petitioners induced him to invest funds into the business by assuring that he would be made a director in the company. However, it is evident from the records that on 25.01.2024, respondent No.2 himself communicated his intention to exit from the project through a WhatsApp message addressed to petitioners Nos. 1 and 2, within a group created for incorporating the company (produced at Annexure-H). Additionally, the complainant failed to
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NC: 2025:KHC:16484 CRL.P No. 13392 of 2024 cooperate in the procedural requirements for the allotment and validation of his Director Identification Number (DIN) and the filing of DIR-3 KYC, by not furnishing the requisite documents. Hence, the contention of respondent No.2 that he was falsely induced by the petitioners to invest in the business lacks merit, and the essential ingredients required to constitute the offence of cheating under Section 420 IPC are conspicuously absent in the present case.
18. In the case of Mariam Fasihuddin and Anr v. State by Adugodi Police Station and Anr, reported in (2024) SCC OnLine SC 58, the Hon'ble Supreme Court has categorically held that in order to attract the offence of cheating under Section 420 of the IPC, the prosecution must not only prove the act of cheating, but must also establish that such act led to an inducement, resulting in the delivery of property, which in turn caused loss or destruction of property to the person who was so induced.
19. Respondent No.2 has contended that the existence of parallel civil and criminal proceedings based on the same cause of action does not per se invalidate the criminal prosecution. It is further submitted that the petitioners induced Respondent No.2 to transfer the money with dishonest and malicious intent. In support of
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NC: 2025:KHC:16484 CRL.P No. 13392 of 2024 this contention, reliance is placed on the following decisions:
19.1 In D. Purushotama Reddy and Anr v. K. Sateesh, (2008) 8 SCC 505, the Hon'ble Supreme Court upheld the maintainability of both civil and criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881, based on the same cause of action. In that case, although the Civil Court decreed the suit without considering the judgment of conviction and sentence passed in the criminal proceedings, the Hon'ble Supreme Court held that under Section 357 of the CrPC, it is the duty of the Civil Court to take into account the compensation amount paid or recovered in the criminal proceedings, and accordingly directed the Trial Court to draw up a fresh decree, taking into consideration the compensation already paid by the appellants.
19.2 In Syed Askari Hadi Ali Augustine Inam and Ors v. State (Delhi Administration) and Ors [Criminal Appeal No. 416/2009], the issue involved was the pendency of a probate proceeding vis-à-vis a criminal case involving allegations of forgery of a will. In that case, a criminal case under Sections 420, 468, 444, and 34 of the IPC was registered for alleged forgery of a will, even though a civil suit challenging the genuineness of the will
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NC: 2025:KHC:16484 CRL.P No. 13392 of 2024 was already pending, and the appellants had also filed a probate petition in respect of the same will.
19.2.1 The Hon'ble Supreme Court in the above- stated case has observed that ordinarily, criminal proceedings take precedence over civil proceedings, especially when the latter are likely to be protracted. It was further held that civil suits must be determined on their own merits, based on the evidence presented therein, and not on the basis of evidence led in the criminal proceedings. Given the facts of the said case, the Apex Court refused to quash the criminal proceedings since the FIR was lodged prior to the filing of the civil suit for probate and contained allegations not only of forgery but also of house trespass. However, in the present case, the essential ingredients required to constitute an offence of cheating under Section 420 IPC are conspicuously absent, despite the pendency of civil suits arising from the same transaction.
19.3 In Smt. Vanitha and Anr v. State of Karnataka and Anr [Crl.P No.5522/2024], a Co- ordinate Bench of this Court considered the maintainability of criminal proceedings for the alleged offences of cheating and forgery of a will during the pendency of a civil suit seeking an injunction. Upon examining the mutation entries, the will, and other materials on record, the Court
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NC: 2025:KHC:16484 CRL.P No. 13392 of 2024 found a prima facie case of forgery and observed that the petitioners had benefited from such alleged forgery. While dismissing the criminal petition, the Court observed that:
"there is no law that merely because an issue brought before the Court appears to be Civil and is standing on the heels of a crime, it should be obliterated."
However, in the present case, there are no allegations against the petitioners with respect to forgery of documents or any deceptive conduct involving false or misleading representations made to respondent No.2.
20. It is thus a well-settled principle of law that, for a similar cause of action, both Civil and Criminal proceedings may be maintainable. However, a criminal petition must be adjudicated independently on the basis of whether a prima facie case exists. In the present case, the essential ingredients required to constitute the offence of cheating under Section 420 IPC are clearly absent. A perusal of the complaint and the FIR does not disclose any prima facie material to suggest that the petitioners, with dishonest or malicious intent, induced respondent No.2 to deliver the money for business purposes. Further, there is no allegation that the petitioners subsequently misappropriated the said amount for any unlawful gain.
Accordingly, I pass the following order;
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NC: 2025:KHC:16484 CRL.P No. 13392 of 2024 ORDER:
(i) The Criminal petition is allowed.
(ii) The impugned FIR registered by the Jayanagar Police Station against the petitioner Nos. 1 to 4 in Cr. No. 392/2024 for the offences punishable under Section 420 r/w 34 of IPC is hereby quashed.
Sd/-
(HEMANT CHANDANGOUDAR) JUDGE BKM, List No.: 2 Sl No.: 1