Case Note & Summary
The criminal petition was filed under Section 482 of the Code of Criminal Procedure, 1973 seeking to quash the entire proceedings in C.C.No.10486/2023 pending before the IV Additional Chief Metropolitan Magistrate, Bengaluru. The petitioners, who are the founder, directors, and officers of OYO Hotels and Homes Private Limited and its associated entities, were accused of offences under Sections 120B, 406, 409, 417, 420, 427, 506 and 34 of the Indian Penal Code. The dispute originated from three Master Service Agreements entered into between the predecessors of OYO and the second respondent/complainant concerning three hotels in Bengaluru. A fire tragedy occurred at one of the hotels on 23-12-2018. Subsequently, a notice was issued on 02-04-2019 demanding safety certificates and rectification of breaches. On 01-06-2019, internal restructuring transferred rights and obligations to Mypreferred Transformation and Hospitality Private Limited. In 2019, OYO entity registered a crime against the complainant, and proceedings under Section 9 of the Arbitration and Conciliation Act were initiated. The second respondent filed the subject complaint on 17-01-2023, leading to investigation and filing of a charge sheet. The petitioners contended that the case is a civil dispute cloaked as criminal, with pending arbitration covering the same issues, and that there can be no vicarious liability of directors in criminal law. The respondents argued that a prima facie case was made out, that civil proceedings do not bar criminal action, and that OYO engaged in unfair trade practices causing loss to the hotel owners and revenue loss to the government. The court heard arguments from both senior counsel and reserved judgment. The provided excerpt of the judgment does not contain the final decision or ratio; therefore, the outcome, directions, and legal principles applied by the court are not mentioned.
Issue of Consideration
Whether the criminal proceedings in C.C.No.10486/2023 for offences under Sections 120B, 406, 409, 417, 420, 427, 506 and 34 of the Indian Penal Code should be quashed under Section 482 of the Code of Criminal Procedure, 1973 on the ground that they are an abuse of process of law, the dispute being civil in nature
Case Details
2020 LawText (KAR) (09) 37
Criminal Petition No. 4606 of 2023
Sandesh J. Chouta (Sr. Advocate), Samartha S. (Advocate) for petitioners; B.N. Jagadeesha (Addl. SPP) for respondent No.1; Prabhuling K. Navadgi (Sr. Advocate), Sanjeevini Navadgi (Advocate) for respondent No.2
Mr. Ritesh Agarwal, Mr. Aniketh Jain, Mr. Anuj Tejpal, Mr. Prasun Choudhary, OYO Hotels and Homes Private Limited, Mypreferred Transformation and Hospitality Pvt. Ltd.
State by - Police Inspector Jayanagar Police Station and Mr. Rakesh Padachori
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Nature of Litigation
Criminal petition under Section 482 of the Code of Criminal Procedure, 1973 seeking quashing of entire criminal proceedings pending in C.C.No.10486/2023 for offences under the Indian Penal Code.
Remedy Sought
Petitioners seek quashment of the entire proceedings in C.C.No.10486/2023 before the IV Additional Chief Metropolitan Magistrate, Bengaluru, arising from FIR registered by respondent No.1.
Filing Reason
The petitioners contend that the criminal complaint is an abuse of process, as the dispute is essentially civil in nature, arising from Master Service Agreements, and no criminal offences are made out. They also argue that similar cases against them have been quashed by this Court.
Issues
Whether the criminal proceedings in C.C.No.10486/2023 should be quashed under Section 482 Cr.P.C. as an abuse of process when the dispute is purely civil and arbitration is pending.
Whether vicarious liability can be imposed on directors and employees of a company for offences under the IPC in the absence of specific allegations.
Submissions/Arguments
Petitioners: The case is a classic illustration of a civil dispute given a cloak of crime; the complaint is drafted with an ulterior motive; similar cases instituted against these petitioners have been quashed by coordinate Benches of this Court; even taking the complaint and charge sheet at face value, no offences under Section 406 or Section 420 IPC are made out; the entire issue arises from disputes over three agreements; arbitration proceedings dealing with similar claims are pending; the complainant has nothing to do with the present petitioners, who are dragged in on grounds of vicarious liability which does not exist in criminal law; summoning of the accused is a serious matter and should not be taken lightly.
Respondent No.2: A prima facie case is made out against the petitioners; it is no law that merely because arbitration or civil cases are pending, criminal law cannot be set in motion; the charge sheet summary shows discrepancies in ledger books and sales entries; the petitioners abandoned the three hotels to maximize profits; OYO has been consistently engaging in unfair trade practices with partner hotels, also causing revenue loss to the Government due to lowered GST remittances despite inclusive tax rates.
Judgment Excerpts
The petitioners/accused 1 to 5 and 7 are at the doors of this Court calling in question entire proceedings in C.C.No.10486 of 2023 registered for offences punishable under Sections 120B, 406, 409, 417, 420, 427, 506 and 34 of the Indian Penal Code.
The learned senior counsel Sri Sandesh J.Chouta appearing for the petitioners would vehemently contend that the case at hand is a classic illustration of a civil dispute being given a cloak of crime.
Even if the complaint and the charge sheet are taken note of, they would not amount to offences under Section 406 or Section 420 of the IPC, as the entire issue has cropped up on a dispute with regard to three agreements.
There cannot be vicarious liability on personnel or Directors of a Company in criminal law.
The list of discrepancies with regard to ledger books and sales entries was found as is observed in the summary of the charge sheet.
Procedural History
12-07-2019: Three Master Service Agreements entered into between Alcott Town Planners Private Limited (later OYO) and the second respondent concerning three hotels. 23-12-2018: Fire tragedy occurs at one of the hotels. 02-04-2019: Notice issued by Alcott Town Planners Private Limited demanding safety certificates and rectification of breaches. 01-06-2019: Internal restructuring transfers rights and obligations to Mypreferred Transformation and Hospitality Private Limited. 04-08-2019: Notice invoking arbitration issued by Alcott Town Planners; Arbitrator appointed. 2019: Crime No.131/2019 registered by OYO Hotels and Homes Private Limited against the complainant and others under IPC sections. Petition under Section 9 of Arbitration and Conciliation Act also filed. 17-01-2023: Respondent No.2 files the subject complaint for the IPC offences. Subsequently, police investigate and file charge sheet, leading to registration of C.C.No.10486/2023. Petitioners file the present Criminal Petition under Section 482 Cr.P.C. seeking quashing. During pendency, similar complaints against petitioners arising out of agreements were quashed by coordinate Benches. The petition was heard and reserved for orders on 08-07-2025 and pronounced on 09-09-2025.
Acts & Sections
- Indian Penal Code, 1860: 34, 120-B, 406, 409, 417, 420, 427, 506
- Code of Criminal Procedure, 1973: 482
- Arbitration and Conciliation Act, 1996: 9
