Karnataka High Court
Smt Kavitha Shirvaikar vs The State Of Karnataka on 23 January, 2026
Author: Mohammad Nawaz
Bench: Mohammad Nawaz
-1-
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 23rd DAY OF JANUARY 2026
BEFORE
THE HON'BLE MR. JUSTICE MOHAMMAD NAWAZ
CRIMINAL PETITION NO. 9918 OF 2025
C/W CRIMINAL PETITION NO.9924 OF 2025
IN CRL.P No. 9918/2025
BETWEEN:
SHRI SANDEEP SHETTY SON OF SEENA SHETTY,
AGE: 52 YEARS, RESIDING AT 601,
MANGAL BAUG ROAD, MANGAL SAVEAR,
MAHARASHTRA, SANTACRUZ WEST,
MUMBAI-400 054.
...PETITIONER
(BY SRI. PRABHULING K. NAVADGI, SENIOR COUNSEL FOR
SRI. VISHWAS N., ADVOCATE)
AND:
1. THE STATE OF KARNATAKA
THROUGH HEBBAGODI POLICE STATION,
VIJAYALAKSHMI NEAR HEBBAGODI BUS STOP,
M KANKUPPI HEBBAGODI TOWN, ANEKAL TALUK,
BENGALURU - 562 125.
Digitally signed by
VIJAYALAKSHMI M
KANKUPPI
Date: 2026.02.07 REPRESENTED BY STATE PUBLIC PROSECUTOR
11:05:41 +0530
HIGH COURT OF KARNATAKA, BENGALURU - 560 001.
2. SHRI GULAM MUSTAFA
SON OF LATE GULAM RASOOL,
AGED ABOUT 56 YEARS,
HAVING OFFICE AT CMD GULAM MUSTAFA ENTERPRISE
PVT. LTD. NO.44/1, DICKENSON ROAD,
BENGALURU - 560042.
3. THE POLICE INSPECTOR,
SPECIAL ENQUIRY WING,
CENTRAL CRIME BRANCH, BENGALURU-560053,
-2-
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
REPRESENTED BY THE STATE PUBLIC PROSECUTOR,
HIGH COURT OF KARNATAKA, BENGALURU-560001.
...RESPONDENTS
(BY SRI. RAHUL RAI K., HCGP FOR R1 AND R3;
SRI. VIVEK S. REDDY, SENIOR COUNSEL FOR
SRI. GOVARDHAN REDDY, ADVOCATE FOR R2)
THIS CRL.P IS FILED UNDER SECTION 482 CR.PC, 1973 R/W
SECTION 528 BNNS 2023, PRAYING TO A. QUASH THE FIR
NO.0345/2025 DATED 03.07.2025 REGISTERED BY HEBBAGODI
POLICE STATION, ANEKAL SUB DIVISION, BENGALURU RURAL
DISTRICT FOR OFFENCES PUNISHABLE UNDER SECTIONS 120B,
405, 406, 415, 417, 420, 34 IPC (ANNEXURE-A) IN 2ND ADDL. CIVIL
JUDGE (JR.DN.) AND J.M.F.C COURT ANEKAL, BENGALURU RURAL,
BENGALURU. B. QUASH THE COMPLAINT DATED 03.07.2025 FILED
BY RESPONDENT NO.2 BEFORE RESPONDENT-1 POLICE (ANNEXURE-
B) C. QUASH THE NOTICE DATED 07.07.2025 (ANNEXURE-G)
ISSUED BY RESPONDENT-NO.3 AND ETC.
IN CRL.P NO. 9924/2025
BETWEEN:
1. SMT. KAVITHA SHIRVAIKAR
WIFE OF SHRI SANJIV SHIRVAIKAR,
AGE: 53 YEARS,
MANAGING DIRECTOR PATEL ENGINEERING LIMITED,
HAVING OFFICE AT PATEL ESTATES V ROAD,
JOGESHWARI (WEST), MUMBAI-400102.
2. SHRI RAHUL AGARWAL
SON OF SHRI. ARUN KUMAR AGARWAL
AGE: 42 YEARS,
SENIOR GENERAL MANAGER - FINANCE
PATEL ENGINEERING LIMITED,
HAVING OFFICE AT PATEL ESTATES V ROAD,
JOGESHWARI (WEST), MUMBAI-400102.
3. SHRI AMOL WARKE
SON OF SURESH WARKE,
AGE: 44 YEARS, JOINT GENERAL MANAGER - FINANCE,
PATEL ENGINEERING LIMITED,
HAVING OFFICE AT PATEL ESTATES V ROAD,
JOGESHWARI (WEST), MUMBAI-400102.
...PETITIONERS
(BY SRI. MANU PRABHAKAR KULKARNI, ADVOCATE)
-3-
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
AND:
1. THE STATE OF KARNATAKA
THROUGH HEBBAGODI POLICE STATION,
NEAR HEBBAGODI BUS STOP,
HEBBAGODI TOWN, ANEKAL TALUK,
BENGALURU-562 125,
REPRESENTED BY PUBLIC PROSECUTOR,
HIGH COURT OF KARNATAKA, BENGALURU-560 001.
2. SHRI GULAM MUSTAFA
SON OF LATE GULAM RASOOL,
AGED ABOUT 56 YEARS,
HAVING OFFICE AT CMD GULAM
MUSTAFA ENTERPRISE PVT. LTD. NO.44/1,
DICKENSON ROAD, BENGALURU-560 042.
3. THE POLICE INSPECTOR
SPECIAL ENQUIRY WING,
CENTRAL CRIME BRANCH, BENGALURU-560053,
REPRESENTED BY THE PUBLIC PROSECUTOR,
HIGH COURT OF KARNATAKA, BENGALURU-560001.
...RESPONDENTS
(BY RAHUL RAI K, HCGP FOR R1 AND R3;
SRI. GOVARDHAN REDDY J.S, ADVOCATE FOR R2)
THIS CRL.P FILED UNDER SECTION 482 CR.PC (FILED UNDER
SECTION 528 BNSS, 2023) PRAYING TO 1. QUASH THE FIR
NO.0345/2025 DATED 03.07.2025 REGISTERED BY RESPONDENT
NO.1 I.E HEBBAGODI P.S. ANEKAL, SUB DIVISION BENGALURU
RURAL DISTRICT FOR THE OFFENCES PUNISHABLE UNDER
SECTIONS 120B, 405, 406, 415, 417, 420, 34 OF IPC (ANNEXURE-
A) 2. QUASH THE COMPLAINT DATED 03.07.2025 FILED BY
RESPONDENT NO.2 BEFORE RESPONDENT NO.1 (ANNEXURE-B)
3. QUASH THE NOTICES DATED 07.07.2025 ISSUED BY
RESPONDENT NO.3 (ANNEXURE G AND G1) AND ETC.
THIS CRIMINAL PETITIONS HAVING BEEN HEARD AND
RESERVED ON 21.11.2025, COMING ON FOR PRONOUNCEMENT OF
JUDGMENT THIS DAY, COURT DELIVERED THE FOLLOWING:
CORAM: HON'BLE MR. JUSTICE MOHAMMAD NAWAZ
-4-
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
CAV ORDER
1. These two petitions are filed under Section 482
of the Code of Criminal Procedure, 1973/Section 528 of the
Bharatiya Nagarik Suraksha Sanhita, 2023 seeking to quash
the FIR 0345/2025 registered by Hebbagodi Police Station
for the offences punishable under Sections 120B, 405, 406,
415, 420 and 34 of the IPC, to quash the complaint dated
03.07.2025 lodged by respondent No.2 and also to quash
the notices dated 07.07.2025 issued by respondent No.3.
2. Accused Nos.1, 2 and 4 have preferred Crl.P.
No.9924/2025, whereas accused No.3 has preferred Crl.P.
No.9918/2025. As both petitions arise out of the same FIR,
they are heard together and are being disposed of by this
common order.
3. Heard the learned senior counsel for petitioners,
the learned High Court Government Pleader for respondent
No.1/ State and respondent No.3/C.C.B, learned senior
-5-
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
counsel for respondent No.2/defacto-complainant and
perused the material on record.
4. Brief Facts of the case:
The complaint is lodged on 03.07.2025 by one Gulam
Mustafa, son of late Gulam Rasool, the Chairman and
Managing Director of M/s Gulam Mustafa Enterprises Pvt.
Ltd., stating that he has been engaged in the business of
building development. During the years 2012-2013, while
he was carrying out a building development project, the
adjoining land was being developed by M/s Patel
Engineering Limited. During this period, he came into
acquaintance with the officials of Patel Engineering Limited,
who proposed that both parties could jointly develop the
property. On such representation, the complainant
undertook joint development activities in respect of the
land shown and offered by M/s Patel Engineering Limited.
In the year 2016, when the complainant was undertaking
land development work near Electronic City, Neo Town, the
officials of M/s Patel Engineering Limited, i.e., accused
-6-
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
No.1/Managing Director, accused No.2/CFO, accused
No.3/Additional Director and accused No.4/ Vice-President,
approached the complainant with a fraudulent intention and
in furtherance of a criminal conspiracy. It is alleged that the
said officials/accused persons induced him to invest funds
in another company allegedly belonging to them, namely
M/s Niche Infra Projects & Developers, by assuring him that
he would receive high returns. Believing their
representations to be true, the complainant asserts that he
was persuaded to invest an amount of Rs.80 crores. It is
alleged that, acting on the assurances of the accused
persons, the complainant invested a total sum of
₹75,16,14,049/- from 2016 upto 21.03.2021, through his
companies M/s Azeem Infinite Dwelling (India) Pvt. Ltd. and
Allam Infinite India Pvt. Ltd., into the entity indicated by
Patel Engineering Limited. It is further stated that although
the accused persons maintained contact with the
complainant for some time, when he sought information
regarding the status of the investment and the expected
-7-
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
returns, the accused not only failed to give any satisfactory
response but allegedly abused him in filthy language and
informed him that he had not paid any money to them and
that they would not return any amount. It is alleged that
the accused persons, with the intention to cheat, conspired
amongst themselves, induced the complainant to invest
large sums of money, misappropriated the same and
dishonestly breached the trust reposed in them.
5. Contentions of the learned Senior counsel
appearing for the petitioners are as under:
a) The very registration of the impugned FIR is vitiated
in law, as the crime has been registered by invoking
provisions of a statute which is no longer in existence,
thereby rendering the registration and investigation wholly
without jurisdiction and reflective of total non-application of
mind. A bare perusal of the complaint does not disclose the
essential ingredients of the offences punishable under
Sections 405, 406, 415 and 420 of the IPC, as there is
-8-
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
neither any averment of inducement at the inception nor
any entrustment of property to the petitioner. The
allegations, even if accepted in entirety, disclose at best a
civil dispute arising out of commercial transactions between
corporate entities, which has been deliberately clothed with
criminal colour. Vicarious liability is not automatic in
criminal law and, in the absence of specific overt acts
attributed, prosecution is impermissible.
b) The alleged transactions pertain to the period
between 2016 and 21.03.2021, whereas the impugned
complaint has been lodged only on 03.07.2025, suffering
from enormous, long, unexplained and inordinate delay and
laches, which is fatal to the prosecution and investigation.
Further, the offences of cheating and criminal breach of
trust cannot co-exist on the same set of allegations, in the
absence of mens rea at the inception. It is also urged that
no preliminary enquiry was conducted as mandated under
Section 173(3) of the BNSS, though the dispute is purely
commercial in nature. The allegations are omnibus, the
-9-
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
dispute is inter-corporate, and in the absence of any
statutory basis for fastening vicarious liability, individuals
cannot be prosecuted. A similar complaint against
petitioners was quashed by a Co-ordinate Bench of this
Court in Crl.P. No. 6513/2024 dated 06.08.2024, which has
attained finality. Hence, FIR and consequential proceedings
are illegal and unconstitutional.
c) Even if the allegations are accepted in entirety,
they disclose at best a civil or commercial dispute arising
out of contractual and partnership arrangements, which has
been deliberately given a criminal colour with malafide
intent to harass the petitioners. The petitioners are in no
manner connected with the firm in which the alleged
investments were made, as is evident from the documents
on record, and therefore their prosecution is wholly
unwarranted. The complaint, therefore, is manifestly mala
fide and amounts to an abuse of the process of law.
- 10 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
d) The FIR itself discloses that the grievance arises
out of an alleged failure to return money, which at best
constitutes breach of promise and not cheating as defined
under Section 415 IPC. The allegations against the
petitioners, who are stated to be directors and officers of
Patel Engineering Limited, are omnibus and collective,
without attribution of specific overt acts, and that vicarious
liability is not automatic in criminal law in the absence of a
statutory provision. The Company itself not having been
arrayed as an accused, the prosecution of the petitioners is
impermissible. Reliance is also placed on the existence of
multiple partnership deeds between the parties, containing
an arbitration clause, which provides an efficacious civil
remedy. On these grounds, it is contended that the
impugned complaint, FIR and consequential proceedings
are unconstitutional, illegal, malafide and liable to be
quashed.
6. The learned High Court Government Pleader
appearing for respondent No.1 and respondent no.3 would
- 11 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
vehemently contend that the impugned FIR has been
registered strictly in accordance with law on the basis of a
complaint disclosing cognizable offences. It is contended
that the allegations made in the complaint, if taken at face
value and accepted in their entirety, prima facie disclose
the commission of offences punishable under the provisions
of the Indian Penal Code invoked therein. The learned HCGP
would further contend that the scope of interference under
Section 482 Cr.P.C./528 BNSS is limited and that this
Court, at the stage of investigation, ought not to embark
upon a meticulous examination of the factual matrix or
adjudicate upon the disputed questions of fact, which are
matters to be tested during investigation or trial.
7. It is also contended that the defence sought to
be raised by the petitioners, including the nature of the
transaction, alleged absence of mens rea, entrustment,
delay in lodging the complaint, existence of civil remedies
or contractual arrangements between the parties, are all
mixed questions of fact and law, which cannot be gone into
- 12 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
at this stage. The learned HCGP contends that the
investigation is still in progress and the Investigating Officer
must be permitted to place the final report before the
jurisdictional Court. On these grounds, it is urged that the
petitions do not warrant interference at this stage and are
liable to be dismissed.
8. Learned senior counsel for Respondent No.2/de-
facto complainant would contend that the impugned
complaint and FIR clearly disclose the commission of
cognizable offences, and therefore registration of the FIR
was mandatory in law. It is submitted that the allegations
pertain to serious financial fraud involving huge monetary
transactions, wherein accused Nos.1 to 4, being individuals
connected with M/s Patel Engineering Limited, personally
induced the complainant (CW-1) to invest substantial
amounts in M/s Niche Infra Projects & Developers, and
thereafter cheated and threatened him. Learned counsel
would contend that at this stage, the Court is only required
to examine whether a prima facie case is made out, and not
- 13 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
to adjudicate upon the correctness of the allegations. The
issues raised by the petitioners, including the nature of the
transaction, alleged absence of mens rea, and inter se
partnership arrangements, are disputed questions of fact,
which cannot be gone into under the inherent jurisdiction of
this Court. It is further contended that when cognizable
offences are disclosed, no preliminary enquiry is permissible
and the contention to the contrary is misconceived.
9. It is further contended that the investigation is
in progress, and the petitions seeking quashing at this
stage are premature and liable to be rejected. Learned
counsel contends that criminal proceedings ought not to be
scuttled at the very threshold, particularly when allegations
of financial fraud and tracing of money trail are involved.
The mere availability of civil remedies or existence of
partnership deeds cannot absolve the accused from criminal
liability, as fraud vitiates all transactions, and even within a
partnership, criminal liability is attracted in cases of
cheating or breach of trust, as recognized under Section 10
- 14 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
of the Indian Partnership Act. It is urged that whether the
allegations ultimately constitute cheating or criminal breach
of trust cannot be conclusively determined at this stage,
and the complaint clearly makes out a prima facie case
warranting investigation. Reference is also made to the fact
that multiple criminal cases are stated to be registered
against Patel Engineering Limited, demonstrating a pattern
of conduct. Hence, contended that the petitions are liable to
be dismissed.
10. Having heard the arguments, the points that
arise for consideration are as under:
(i) Whether the allegations made in the
impugned complaint and FIR, even if accepted at
face value, disclose the essential ingredients of the
offences punishable under Sections 120B, 405, 406,
415, 417 and 420 read with Section 34 of the IPC as
against the petitioners?
(ii) Whether the dispute, on the admitted facts,
is predominantly civil/commercial in nature and has
been impermissibly given a criminal colour?
- 15 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
(iii) Whether the continuation of criminal
proceedings against the petitioners warrants
interference by this Court in exercise of its inherent
powers under Section 482 Cr.P.C./Section 528
BNSS?
11. The gravamen of the complaint pertains to alleged
investments made between 2016 and March 2021, arising
out of business and partnership arrangements between
corporate entities. The FIR itself discloses that the
complainant's grievance emanates from an alleged failure
to return money or provide expected returns, which, on the
face of it, flows from contractual and commercial dealings.
12. A bare reading of the complaint does not disclose
any specific act of inducement attributable to any of the
petitioners at the inception of the transaction, which is a
sine qua non for attracting the offence of cheating under
Section 415 IPC. Equally, there is no clear averment of
entrustment of property to any of the petitioners so as to
attract the ingredients of criminal breach of trust under
Sections 405 and 406 IPC. The allegations are omnibus and
- 16 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
collective, lacking particulars as to the individual role of
each petitioner, which is impermissible in criminal law.
13. The material on record further reveals that the
transactions are governed by multiple partnership deeds,
including a deed dated 04.08.2022 containing an arbitration
clause, and that the complainant's entities had retired from
the partnership owing to their own defaults. These admitted
facts fortify the conclusion that the dispute is essentially
civil in nature. It is well settled that every breach of
contract or failure to honour a commercial obligation does
not give rise to criminal liability, unless the necessary
criminal intent is demonstrated at the inception, which is
conspicuously absent in the present case.
14. This Court also finds considerable force in the
submission regarding enormous and unexplained delay. The
alleged cause of action pertains to transactions culminating
in March 2021, whereas the complaint has been lodged only
on 03.07.2025, after a lapse of nearly four years, without
any satisfactory explanation. Such delay, particularly in
- 17 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
commercial disputes, seriously dents the credibility of the
prosecution and supports the inference of an afterthought
aimed at exerting pressure.
15. At the outset, this Court finds that the
simultaneous invocation of offences under Sections
415/420 IPC (cheating) and Sections 405/406 IPC (criminal
breach of trust) on the same set of allegations is legally
unsustainable. The essential ingredients of the two offences
are conceptually distinct and operate in different factual
fields. Cheating postulates a dishonest or fraudulent
intention at the inception of the transaction, whereas
criminal breach of trust presupposes lawful entrustment
followed by subsequent dishonest misappropriation. The
two offences, therefore, cannot ordinarily co-exist on
identical factual assertions.
16. The Hon'ble Supreme Court in Delhi Race Club
(1940) Ltd. v. State of U.P., reported in (2024) 10 SCC
690, has categorically reiterated this principle. In
paragraph 38 which is extracted hereunder:-
- 18 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
"38. In our view, the plain reading of the complaint
fails to spell out any of the aforesaid ingredients noted
above. We may only say, with a view to clear a serious
misconception of law in the mind of the police as well as
the courts below, that if it is a case of the complainant
that offence of criminal breach of trust as defined under
Section 405 IPC, punishable under Section 406 IPC, is
committed by the accused, then in the same breath it
cannot be said that the accused has also committed the
offence of cheating as defined and explained in Section
415 IPC, punishable under Section 420 IPC."
17. Para 51 of the above judgment, extracted herein
is also aptly applicable to the present case:-
" 51. If it is the case of the complainant that a
particular amount is due and payable to him then he
should have filed a civil suit for recovery of the
amount against the appellants herein. But he could
not have gone to the Court of the Additional Chief
Judicial Magistrate by filing a complaint of cheating
and criminal breach of trust. It appears that till this
date, the complainant has not filed any civil suit for
recovery of the amount which according to him is
due and payable to him by the appellants. He seems
to have prima facie lost the period of limitation for
filing such a civil suit."
- 19 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
18. The Apex Court held that where the allegations
disclose that the complainant had voluntarily parted with
money pursuant to commercial arrangements, and the
grievance essentially arises from an alleged failure to
honour financial commitments, the offence of criminal
breach of trust is not attracted in the absence of specific
averments of entrustment, dominion over property, and
subsequent misappropriation. The Court further cautioned
against mechanically invoking both cheating and criminal
breach of trust in commercial disputes, as such practice
reflects non-application of mind.
19. Similarly, in Jayaramaiah and another v. State
of Karnataka, 2025 SCC OnLine Kar 17448, this Court,
relying upon settled Supreme Court jurisprudence, has held
in paragraphs 4 and 6 that cheating and criminal breach of
trust cannot be alleged in the same breath, unless the
complaint clearly demonstrates (i) dishonest inducement at
inception, and (ii) independent entrustment followed by
misappropriation. It was further held that where the factual
- 20 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
foundation is a business transaction and the dispute
pertains to non-return of money or non-payment of dues,
invocation of both offences amounts to abuse of the
criminal process.
20. In the present case, "the plain reading of the
complaint fails to spell out any of the aforesaid ingredients
noted above". The complaint conspicuously fails to satisfy
either test. There is no pleading of dishonest intention at
the inception of the alleged investments so as to attract
Section 415 IPC. Equally, there is no specific averment of
entrustment of property to the petitioners in a fiduciary
capacity, nor any material indicating subsequent dishonest
conversion so as to attract Sections 405 or 406 IPC. The
allegations, at their highest, indicate a case of alleged
breach of commercial assurances or failure to repay
investments, which does not ipso facto constitute either
offence.
- 21 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
21. The Hon'ble Supreme Court in Sushil Sethi v.
State of Arunachal Pradesh, (2020) 3 SCC 240,
particularly in paragraphs 7.6 to 8 has observed as under :
"7.6. In Joseph Salvaraj A. v. State of Gujarat [Joseph
Salvaraj A. v. State of Gujarat, (2011) 7 SCC 59 : (2011)
3 SCC (Cri) 23] , it is observed and held by this Court
that when dispute between the parties constitutes only a
civil wrong and not a criminal wrong, the courts would
not permit a person to be harassed although no case for
taking cognizance of the offence has been made out.
7.7. In Inder Mohan Goswami v. State of
Uttaranchal [Inder Mohan Goswami v. State of
Uttaranchal, (2007) 12 SCC 1 : (2008) 1 SCC (Cri) 259] ,
it is observed and held by this Court that the Court must
ensure that criminal prosecution is not used as an
instrument of harassment or for seeking private vendetta
or with an ulterior motive to pressurise the accused. It is
further observed and held by this Court that it is neither
possible nor desirable to lay down an inflexible rule that
would govern the exercise of inherent jurisdiction. It is
further observed and held that inherent jurisdiction of the
High Courts under Section 482 CrPC though wide has to
be exercised sparingly, carefully and with caution and
only when it is justified by the tests specifically laid down
in the statute itself.
- 22 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
8. Applying the law laid down by this Court in the
aforesaid decisions to the facts of the case on hand, we
are of the opinion that this is a fit case to exercise powers
under Section 482 CrPC and to quash the impugned
criminal proceedings."
22. Viewed thus, the invocation of both cheating and
criminal breach of trust in the present FIR is not only legally
impermissible but also demonstrative of an attempt to
convert a purely civil dispute into a criminal prosecution
with a view to exert pressure.
23. While it is true that criminal proceedings ought not
to be interdicted lightly, it is equally settled that where the
complaint does not disclose the commission of any offence
and the proceedings are manifestly attended with mala
fides, this Court is duty-bound to exercise its inherent
jurisdiction to prevent abuse of process of law.
24. It is useful to refer to the principles laid down by
the Hon'ble Supreme Court in State of Haryana v. Bhajan
Lal (1992 Supp (1) SCC 335) :
- 23 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
" 102. In the backdrop of the interpretation of the
various relevant provisions of the Code under Chapter XIV
and of the principles of law enunciated by this Court in a
series of decisions relating to the exercise of the
extraordinary power under Article 226 or the inherent
powers under Section 482 of the Code which we have
extracted and reproduced above, we have given the
following categories of cases by way of illustration wherein
such power could be exercised either to prevent abuse of
the process of any court or otherwise to secure the ends of
justice, though it may not be possible to lay down any
precise, clearly defined and sufficiently channelised and
inflexible guidelines or rigid formulae and to give an
exhaustive list of myriad kinds of cases wherein such power
should be exercised.
(1) Where the allegations made in the first
information report or the complaint, even if they are
taken at their face value and accepted in their entirety
do not prima facie constitute any offence or make out
a case against the accused.
(2) Where the allegations in the first
information report and other materials, if any,
accompanying the FIR do not disclose a cognizable
offence, justifying an investigation by police officers
under Section 156(1) of the Code except under an
order of a Magistrate within the purview of Section
155(2) of the Code.
- 24 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
(3) Where the uncontroverted allegations
made in the FIR or complaint and the evidence
collected in support of the same do not disclose the
commission of any offence and make out a case
against the accused.
(4) Where, the allegations in the FIR do not
constitute a cognizable offence but constitute only a
non-cognizable offence, no investigation is permitted
by a police officer without an order of a Magistrate as
contemplated under Section 155(2) of the Code.
(5) Where the allegations made in the FIR or
complaint are so absurd and inherently improbable on
the basis of which no prudent person can ever reach a
just conclusion that there is sufficient ground for
proceeding against the accused.
(6) Where there is an express legal bar
engrafted in any of the provisions of the Code or the
concerned Act (under which a criminal proceeding is
instituted) to the institution and continuance of the
proceedings and/or where there is a specific provision
in the Code or the concerned Act, providing efficacious
redress for the grievance of the aggrieved party.
(7) Where a criminal proceeding is manifestly
attended with mala fide and/or where the proceeding
is maliciously instituted with an ulterior motive for
wreaking vengeance on the accused and with a view
to spite him due to private and personal grudge."
- 25 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
25. In above stated judgments Supra, the Hon'ble
Supreme Court has categorically held that in the absence of
mens rea at the inception, criminal prosecution arising out
of commercial transactions amounts to abuse of process.
The facts of the present case stand on an even stronger
footing, as the FIR itself attributes the delay to an alleged
promise to repay, thereby negating any initial dishonest
intention.
26. This Court also finds support from the decision of
the Co-ordinate Bench of this Court in Patel Engineering
Limited v. State of Karnataka (Crl.P. No. 6513/2024
dated 06.08.2024), wherein, upon an elaborate
consideration of several judgments of the Hon'ble Supreme
Court, the criminal proceedings were quashed. The Co-
ordinate Bench held that where the dispute between the
parties arises out of a purely commercial transaction,
involving alleged breach of contractual obligations, the
same cannot be permitted to be camouflaged as a criminal
- 26 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
offence. It was observed that invocation of criminal law in
such circumstances amounts to abuse of the process of law
and warrants interference under Section 482 Cr.P.C. The
ratio laid down in the said decision squarely applies to the
facts of the present case.
27. In Vijay Kumar Ghai v. State of W.B., reported
in (2022) 7 SCC 124, it is observed by the Apex Court
that :-
"24. This Court in G. Sagar Suri v. State of U.P. [G.
Sagar Suri v. State of U.P., (2000) 2 SCC 636 : 2000 SCC
(Cri) 513] observed that it is the duty and obligation of the
criminal court to exercise a great deal of caution in issuing
the process, particularly when matters are essentially of civil
nature.
25. This Court has time and again cautioned about
converting purely civil disputes into criminal cases. This
Court in Indian Oil Corpn. [Indian Oil Corpn. v. NEPC India
Ltd., (2006) 6 SCC 736 : (2006) 3 SCC (Cri) 188] noticed
the prevalent impression that civil law remedies are time
consuming and do not adequately protect the interests of
lenders/creditors. The Court further observed that : (Indian
Oil Corpn. [Indian Oil Corpn. v. NEPC India Ltd., (2006) 6
SCC 736: (2006) 3 SCC (Cri) 188] , SCC p. 749, para 13)
- 27 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
'13. ... Any effort to settle civil disputes and claims, which
do not involve any criminal offence, by applying pressure
through criminal prosecution should be deprecated and
discouraged.' "
28. The learned counsel for Respondent No.2 has
placed reliance upon the decisions of the Hon'ble Supreme
Court in Skoda Auto Volkswagen (India) Private
Limited v. State of Uttar Pradesh reported in (2021) 5
SCC 795;, Neeharika Infrastructure Private Limited v.
State of Maharashtra reported in (2021) 19 SCC 401; ,
Somjeet Mallick v. State of Jharkhand reported in
(2024) 10 SCC 52; and Kathyayini v. Sidharth P.S.
Reddy reported in 2025 SCC Online Sc 1428, to contend
that criminal proceedings ought not to be interdicted at the
threshold and that investigation must be permitted to run
its course. There can be no quarrel with the broad legal
propositions enunciated in the said judgments. However, a
careful examination of the facts of the present case would
demonstrate that the reliance placed on the aforesaid
decisions is misconceived and misplaced.
- 28 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
29. In Skoda Auto Volkswagen (India) Private
Limited (SUPRA) and Neeharika Infrastructure
Private Limited (SUPRA), the Hon'ble Supreme Court
reiterated the settled principle that the power under Section
482 Cr.P.C. is to be exercised sparingly and that ordinarily
investigation should not be stalled at the nascent stage. At
the same time, the Apex Court has unequivocally
recognized that where the allegations in the FIR, even if
taken at face value, do not disclose the commission of any
cognizable offence, or where the criminal process is
manifestly attended with malafides or is used to settle civil
disputes, interference is not only permissible but necessary.
Therefore, the said judgments do not lay down an absolute
bar against quashing; rather, they preserve the inherent
power of the High Court to prevent abuse of process.
30. In the present case, the dispute between the
parties undeniably emanates from a purely
contractual/commercial transaction, and the allegations
essentially relate to non-fulfillment of contractual
- 29 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
obligations. The FIR, when read as a whole, does not
disclose the essential ingredients of the alleged penal
offences, particularly mens rea or dishonest intention at the
inception of the transaction, which is a sine qua non for
offences such as cheating or criminal breach of trust. Thus,
the ratio of Neeharika Infrastructure (SUPRA), which
cautions against premature interference where a prima
facie cognizable offence is made out, cannot be
mechanically applied to the facts at hand.
31. The reliance placed on Somjeet Mallick v. State
of Jharkhand (SUPRA) is equally untenable. In the said
case, the Hon'ble Supreme Court found specific allegations
of dishonest conduct, continued false assurances, and
retention/misappropriation of property, which necessitated
investigation to ascertain criminal culpability. In contrast,
the present case does not disclose any such factual
foundation. There are no specific allegations demonstrating
dishonest intention from the inception, nor any act
amounting to entrustment followed by misappropriation.
- 30 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
Mere failure to honour contractual terms or repay amounts,
without more, does not ipso facto give rise to criminal
liability.
32. Similarly, the judgment in Kathyayini v.
Sidharth P.S. Reddy(SUPRA) reiterates the well-settled
principle that pendency of civil proceedings is not a bar to
criminal prosecution where a prima facie criminal offence is
made out. The said decision was rendered in a fact situation
involving systematic exclusion, fraudulent conduct, and
intimidation, clearly attracting criminal elements
independent of the civil dispute. The present case,
however, stands on a wholly different footing. The
allegations herein do not transcend the realm of civil law,
and the attempt to invoke criminal machinery appears to be
an arm-twisting tactic to exert pressure in a commercial
dispute.
33. It is therefore evident that the judgments relied
upon by Respondent No.2 are fact-specific and rendered in
circumstances where clear criminal intent and overt
- 31 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
criminal acts were discernible at the threshold. The same
cannot be pressed into service to justify continuation of
criminal proceedings in a case which, at its core, involves a
commercial disagreement dressed up as a criminal offence.
34. Consequently, this Court is of the considered view
that the judgments relied upon by Respondent No.2 do not
advance the case of the prosecution and are clearly
distinguishable on facts and in law, and hence, cannot be
made the basis to deny relief to the petitioners.
35. On the other hand, the facts of the present case
squarely attract the principles laid down by the Hon'ble
Supreme Court and this Court in several decisions relied
upon by the petitioners, which consistently held that
criminal law cannot be permitted to be used as a tool for
recovery of money or enforcement of contractual
obligations, and that such misuse of the criminal process
warrants interference under Section 482 Cr.P.C. The points
raised are accordingly answered.
- 32 -
NC: 2026:KHC:6642
CRL.P No. 9918 of 2025
C/W CRL.P No. 9924 of 2025
HC-KAR
36. For the foregoing reasons, the following:-
ORDER
Both the petitions are allowed. The FIR bearing Crime No. 345/2025 registered by Hebbagodi Police Station, Bengaluru, for the offences punishable under Sections 120B, 405, 406, 415, 417 and 420 read with Section 34 of the Indian Penal Code, the complaint dated 03.07.2025 lodged by respondent No.2, and the consequential notices dated 07.07.2025, insofar as they relate to the petitioners/Accused Nos.1 to 4, are hereby quashed.
SD/-
(MOHAMMAD NAWAZ) JUDGE kmv CT:PA List No.: 19 Sl No.: 1