Dismissed

Mr Balaji Venugopal Bhat v. State of Karnataka

Karnataka HC25 Oct 2024CRL.P/1963/2023

Case brief

AI extract

What is this about?

The High Court of Karnataka examined a criminal petition under Section 482 Cr.P.C. seeking to quash criminal proceedings for alleged cheating and criminal breach of trust. The court held that specific allegations against the petitioner revealed an intention to cheat at the inception of the agreement, rejecting the defense that the matter was merely civil or that the company's winding up impacted t

What did the court decide?

Criminal Petition No.1963/2023 was dismissed against the petitioner; criminal proceedings against him were allowed to continue.

Mr Balaji Venugopal Bhat Vs State of Karnataka — Quashing and FIR | Karnataka HC (2024)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 25^TH DAY OF OCTOBER, 2024

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BEFORE

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THE HON'BLE MR. JUSTICE H.P. SANDESH

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CRIMINAL PETITION NO.1963/2023

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BETWEEN:

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1 . MR. BALAJI VENUGOPAL BHAT s/o VENUGOPAL BHAT, AGED ABOUT 66 YEARS, R/AT NO.302, EMBASSY ORCHID, 8^TH MAIN, RMV EXTENSION, BENGALURU-560008. … PETITIONER

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(BY SRI ANAND MUTTALLI, ADVOCATE)

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AND:

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1 . STATE OF KARNATAKA REPRESENTED BY ASHOK NAGAR POLICE STATION, REP. BY STATE PUBLIC PROSECUTOR, HIGH COURT OF KARNATAKA

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2 . SMT. SUNITHA POOJARY W/O NARENDRA PUJARI, AGED ABOUT 55 YEARS, GODANAND MUNICIPAL OFICE COLONY, RAILWAY LANES, SOLAPUR CITY, MAHARASHTRA-431001. … RESPONDENTS

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(BY SMT. RASHMI JADHAV, ADDL. SPP FOR R1; SMT. RATTIHALLI GEETHA VEERANNA, ADVOCATE FOR R2)

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THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 CR.P.C BY THE ADVOCATE FOR THE PETITIONER PRAYING TO QUASH THE ENTIRE PROCEEDINGS IN C.C.NO.26570/2017 ON THE FILE OF THE LD. 3^RD ADDITIONAL CHIEF METROPOLITAN MAGISTRATE, BENGALURU IN C.C.NO.26570/2017.

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THIS CRIMINAL PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 23.10.2024 THIS DAY, THE COURT PRONOUNCED THE FOLLOWING:

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CORAM: HON'BLE MR JUSTICE H.P.SANDESH

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CAV ORDER

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This petition is filed under Section 482 of Cr.P.C praying the Court to quash the entire proceedings in C.C.No.26570/2017 on the file of learned III Addl. Chief Metropolitan Magistrate, Bengaluru and grant such other relief as deems fit in the circumstances of the case.

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The factual matrix of case of the petitioner is that 2^nd respondent on 22.07.2015 filed the P.C.R and the same was referred to 1^st respondent Police. The 1^st respondent police registered the FIR in Cr.No.699/2015 dated 25.10.2015 for the offences punishable under Section 406, 409 and 420 of IPC against the petitioner and others. The FIR is produced as Annexure-C. It is also the contention that the petitioner herein

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was erstwhile Directors of M/s Primus Retail Private Limited and

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hereafter referred as company. It is the case of the 2^nd respondent that one of the representatives of the company Mr.Sourabh Talukdar had approached the 2^nd respondent in Solapur on 10.06.2010 for establishing a new franchisee business with the 2^nd respondent as she was running a ladies readymade cloth shop in Solapur. It is alleged that authorized representative managed to convince the 2^nd respondent complainant to become a franchisee partner.

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It is also the allegation that after the confirmation of the business with the company, the representative of the company had informed the 2^nd respondent/complainant to go ahead with the agreement for the premises, and he informed that the petitioner will visit the place and accordingly the Petitioner came to Solapur and represented that the 2^nd respondent to deposit a sum of rupees 1,00,000/- (Rupees One Lakh only) immediately for confirmation of the business deal and also asked the 2^nd respondent to deposit a sum of rupees Rs.8,00,000/- (Eight Lakhs only) for which the company will supply the stock for the same value and will provide a commission of 8% on the net sales.

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The original complainant believing the words of the petitioner had invested the money and waited for the stock and received the stock and complainant was supposed to get stock worth of Rs.8,00,000/- (Rupees Eight Lakhs), but only supplied stock worth of Rs.4,00,000/-. The 2^nd respondent brought this issue forward on phone and this petitioner assured that the remaining stock will be supplied. Inspite of complainant pursued the matter, balance stock did not arise and company never responded or provided the stock to the 2^nd respondent/complainant. The company did not adhere to its commitment as per the agreement and company owes a sum of Rs.53.70 lakhs. The Police investigated the matter and filed the B-report and the same has been challenged and Magistrate took the cognizance and issue the process and B-report is produced as Annexure-D.

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It is contended in the petition that only with an intention to harass the petitioner has instituted a criminal complaint. The complainant was converted civil dispute into a criminal case and looking into the factual aspects, it is a contractual dispute between the complainant and the company.

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The filing of complainant is only to prejudice the petitioner. It is also contended that the Apex Court in the judgment reported in

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(2000) 4 SCC 168 in case of Hridaya Ranjan Pd, Verma &

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Ors V/s State of Bihar and another taking into note of fact mere breach of contract cannot give rise to criminal prosecution of cheating unless dishonest intention is made out, question of initiating criminal proceedings does not arise. Merely because company fail to honor its commitments does not amount to cheating or breach of trust. There is no any material with an intention to deceive an agreement is entered. If really company having intention, it should not have supplied the materials to the complainant. It is also contended that this Court vide order dated 08.10.2012 ordered for winding up of the company and once the company got wound up immediately the affairs were handed over to the official liquidator and hence the entire business operation of the company came to be stopped. The order of winding up is produced as Annexure-E. The counsel would contend that Trial Court took the cognizance erroneously and no ingredients of offence under Section 406, 409 attracts in a case on hand and it does not constitute any offence of

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whatever in nature. The liquidator is also appointed to the company to claim the dues and also produced the Franchise Agreement as Annexure-F.

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The counsel also relies upon the judgment reported in (2015) 4 SCC 609 in case of Sunil Bharti Mittal V/s CBI wherein it is held that the corporate entity is an artificial person which acts through its officers, Directors, Managing Director, Chairman, etc., if such a company commits an offence involving mens rea , it would normally be the intent and action of that individual who would act on behalf of the company. It is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute specifically provides. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made an accused along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated in those cases where statutory regime itself attracts the doctrine of vicarious liability by specifically invoking such a provision. When the company is the offender, vicarious liability

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of the Directors cannot be imputed automatically, in the absence

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of any statutory provision to this effect.

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The complaint filed by the original complainant is a

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blatant misuse and abuse of process of Court. The counsel also in his argument would vehemently contend that the Magistrate has taken cognizance against accused Nos.1 and 2 and the same has been challenged in Crl.R.P.No.368/2018 on the file of City Civil and Sessions Judge, Bengaluru and the Crl.R.P is allowed. The complainant challenged the same and the same was dismissed vide Annexure-H and order passed in revision petition is produced as Annexure-G. The counsel also submits that the company should be made as party in the case and original complainant knowingfully well that company has wound up have approached the liquidating officer for recovery of the amount but not opted this tactic of filing the criminal complaint to pressurize the petitioner to recover the disputed amount.

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The initiation of the criminal case against the petitioner is with a malicious intention to twist the civil case into a criminal case and 2^nd respondent/complainant has not approached any other forum to recover the amount nor has

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initiated criminal proceedings. Hence, this Court has to quash the proceedings. The counsel also would contend that there was no any intention to cheat the complainant.

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Per Contra, the counsel appearing for the State/respondent No.1 i.e., Addl. SPP would vehemently contend that specific allegations are made against this petitioner and quashing of proceedings against accused Nos.1 and 2 not a ground and revisional Court and also this Court taken note of the material on record and quash the same and quashing of proceedings will not comes to the aid of this petitioner since this petitioner only played key role in getting received the advance amount and also given instructions to establish the business and invest the money for interiors and entered into an agreement and from the date of inception of the contract, played the fraud and intention is very clear to cheat the complainant played the key role and allegation against accused Nos.1 and 2 is not material and allegation against this petitioner is the material. This Court also while passing an order of confirmation of the order passed by the revisional Court specifically made an observation that entire allegation is against this petitioner.

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Though the complainant represented through

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counsel and counsel did not chose to appear and make submission. This Court vide order dated 16.10.2024 made it clear that if respondent’s counsel does not appear in the next date of hearing, matter will be heard in his absence and inspite of the said order, the counsel appearing for the complainant did not chose to appear and contest the matter and hence taken as no arguments of respondent No.2. Having heard the petitioner’s counsel and also counsel appearing for the State and point that would arise for the consideration of this Court that

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1) Whether the petitioner has made out a ground to invoke Section 482 of Criminal Procedure Code to quash the proceedings initiated against the petitioner herein?

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2) What Order?

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Having perused the grounds urged in the petition as

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well as oral submissions of petitioner’s counsel and also counsel appearing for the State, this Court has to take note of material on record. The Annexure-A is the FIR wherein allegations are

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made against all the 3 accused persons stating that they entered into an agreement and made them to invest the money of Rs.8,00,000/- and violated the terms of the contract and cheated the complainant to the tune of Rs.53,00,000/-.

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It is important to note that complaint filed by the complainant and specific allegation is made against this petitioner that one Mr.Sourabh Talukdhar told that this petitioner will discuss who is the Managing Director of M/s Primus Retail Private Limited and he is visiting Solapur and also in paragraph No.8 stated that this petitioner visited on 1^st week of August2010 along with this official and request the complainant to give a final nod and directed him to make the initial payment and also assured that going to give 8% commission on the sales and also directed the complainant to invest the money of Rs.8,00,000/and agreement would be for a period of 3 years. Based on the assurance given by this petitioner only an investment of Rs.8,00,000/- was made and also specific allegation is made that only sent old stock worth of Rs.4,00,000/- and immediately brought to the notice of this petitioner. This petitioner assured that by mistake it was sent and going to send the remaining

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stock but not sent any stock and hence it is attributed in the complaint that with a sole intention to deceive the complainant entered into an agreement and agreement with the company was for a period of 3 years without the consent of both the parties none could move back and closed the business without any intimation and hence initiated the complaint. It is also not in dispute that when the complaint was filed, matter was referred under Section 156(3) of Cr.P.C to investigate and file final report and final report is filed as B-report and the same is challenged and the learned Magistrate took the cognizance and rejected the B-report. It is also not in dispute that accused Nos.1 and 2 have also approached revisional Court and revisional Court allowed and quashed the cognizance taken against them and while quashing the same, made it clear that Court below has to proceed with the complaint against the accused No.3 alone for the offences for which cognizance has been taken. No doubt the said order Annexure-G is challenged vide Annexure-H and this Court confirmed the order of the revisional Court. No doubt it is also the ground urged by the petitioner that it is a civil dispute

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and the same is given criminal colour and no doubt there is an agreement between the parties.

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It is also important to note that on perusal of the complaint, specific allegations are made against the petitioner in paragraph Nos.7 to 14 and details are given with regard to the minimum guarantee of Rs.1,00,000/- was agreed for 30 months and also agreed for 8% commission and he had spent an amount of Rs.8.50 lakhs for furniture and interior and also made the deposit with the company to the tune of Rs.8,00,000/-. No doubt an allegation is also made that old stocks worth of Rs.4,00,000/supplied and specifically pleaded that only with an intention to cheat entered into agreement and assured all the facilities including commission and also it is important to note that specific allegation is made that at the inception played the fraud on the complainant. It is also not in dispute that law is settled even in the judgments referred by the petitioner in the petition that if any intention at the inception for cheating criminal prosecution is maintainable. In the case on hand, no doubt there is an agreement and petitioner not disputed the investing the money of Rs.8,00,000/- in terms of the assurance given by the

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petitioner and also specific allegations are made against the petitioner that he indulged in making the complainant to invest the money and establish the business concern and accordingly he had established the same. When such being the case, the very contention that there is no any intention of cheating at the inception cannot be accepted. The averment of complaint is very specific against the petitioner and so also it is not in dispute that there is an agreement but in terms of the agreement not supplied the stock and even when the same is brought to the notice of this petitioner, no stock was supplied for the investment made by the complainant. Having taken note of this fact into consideration and from the beginning itself, there was an intention to cheat the complainant and got invested the money by this petitioner making an assurance to the complainant and having received the money did not send the stock and even did not allow the complainant to continue the business by sending the stock and when the said alleged act was done from the beginning itself and it is clear that there was an intention to cheat at the inception and prima facie materials discloses that to deceive the complainant, he went and discussed

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with the complainant and made assurance and paragraph No.8 is very clear about the allegations made against this petitioner.

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It is also important to note that this Court while confirming the quashing of proceedings in respect of accused Nos. 1 and 2, made an observation that specific allegations are made against accused No.3 that is this petitioner and not against accused Nos.1 and 2 and taken note of no role played by the accused Nos.1 and 2 and main role is played by this petitioner to invest the money and he had discussed with the complainant and assured the 8% commission as well as supply of the stock to the worth of Rs.8,00,000/- and when such specific allegations are made, the very contention of the petitioner’s counsel cannot be accepted. No doubt counsel appearing for the petitioner brought to notice of this Court Annexure-E, allowing of company petition for winding up of company and directed official liquidator to take possession of papers and merely because of company is winded up and the contention of the petitioner that if any dues to be recovered from the official liquidator cannot be accepted. In the complaint, specific allegations are made against the petitioner that at the inception, he had deceived and also the

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transaction was taken place in the year 2010 and order was passed in the year 2012 and specific allegations against the petitioner that he had persuaded the complainant to invest the money and when specific allegation of cheating is made against this petitioner and the very contention that company is winded up cannot be a ground to quash the proceedings against this petitioner. The other ground urged by the petitioner is that company was not made as accused, but in the complaint specific allegation is made against the Directors and specific allegations is made against this petitioner that this petitioner is the Managing Director and he acted upon and when he has played key role in getting invested the money of the complainant and he only persuaded the petitioner to invest the money. The very contention of the petitioner that in the absence of the company, he cannot be prosecuted, cannot be accepted at this stage for quashing of proceedings to quash the cognizance taken against the petitioner. The material available before this Court is very clear that specific allegation is made against this petitioner in the complaint and this Court has already observed that when this petitioner is indulged in such an act of persuading the

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complainant to invest the money and found intention to cheat at the inception and hence criminal prosecution can be continued against the petitioner and did not supply the stock from the beginning itself. When specific allegations are made in the complaint against this petitioner and the order passed by this Court and revisional Court also will not comes to the aid of this petitioner for quashing of proceedings against accused Nos.1 and 2 grounds are different. Hence, there is no any merit in this petition to quash the proceedings against the petitioner herein.

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In view of the discussions made above, I pass the

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following:

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ORDER

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The Criminal Petition is dismissed .

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Sd/(H.P. SANDESH) JUDGE

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RHS

Mr Balaji Venugopal Bhat v. State of Karnataka

Case brief

What is this about?

What did the court decide?

Mr Balaji Venugopal Bhat v. State of Karnataka

Case brief

What is this about?

What did the court decide?

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