Case Note & Summary
The High Court of Karnataka heard a criminal petition under Section 482 of the Code of Criminal Procedure, 1973, filed by Patel Engineering Limited and its officers seeking to quash FIR No.422/2024 registered by Hebbagodi Police Station for offences under Sections 406, 420, and 506(2) of the Indian Penal Code, 1860, along with the underlying complaint filed by Salman Khan. The dispute arose from a series of agreements executed between the company and entities connected to Gulam Mustafa and the complainant for the development and sale of immovable property in Anekal Taluk. The company had entered into a Memorandum of Understanding in 2016, followed by Joint Development Agreements, and had provided a corporate guarantee to State Bank of India in 2018 for loans availed by GM Infinite. After defaults, the bank initiated SARFAESI proceedings and sought to invoke the guarantee for over Rs 64 crores. The company then filed a commercial arbitration petition under Section 9 of the Arbitration and Conciliation Act and a civil suit seeking declaratory relief regarding the corporate guarantee liability; simultaneously, the bank filed an insolvency petition under Section 7 of the Insolvency and Bankruptcy Code before the NCLT Mumbai. In this context, the complainant alleged that he had paid Rs 36 crores as sale consideration pursuant to agreements and that the accused persons, including the company’s managing director now deceased, had cheated him by not executing the sale deed and by making him sign documents under duress. The petitioners argued that the entire matter was a pure commercial transaction with no criminal intent and that the FIR was an abuse of process. The respondent contended that the complainant was illiterate and coerced, and that criminal breach of trust and cheating were made out. The court heard detailed arguments and reserved the matter for orders. The judgment text does not include the final decision or reasons.
Issue of Consideration
Whether criminal proceedings for offences under Sections 406, 420 and 506(2) IPC can be quashed when the dispute emanates from a commercial transaction and is accompanied by pending civil and insolvency proceedings.
Final Decision
The court heard arguments and reserved the matter for orders. The judgment text provided does not include the final decision.
Law Points
- Ingredients of criminal breach of trust
- cheating under IPC
- distinction between civil wrong and criminal offence
- abuse of process
- power under Section 482 Cr.P.C.
- jurisdiction to quash FIR
Case Details
2024 LawText (KAR) (08) 5
Criminal Petition No. 6513 of 2024
K.G. Raghavan, Manu P. Kulkarni, B.N. Jagadeesh, Kiran S. Javali, Gaurav N.
Patel Engineering Limited, Rupen Patel, Kavita S. Shirvaikar, Rahul A. Agarwal, Amol S. Warke, Sandeep S. Shetty
The State of Karnataka (through Hebbagodi Police Station), Salman Khan
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Nature of Litigation
Criminal petition under Section 482 of the Code of Criminal Procedure, 1973 seeking quashing of FIR and complaint alleging offences under Sections 406, 420, and 506(2) of the Indian Penal Code, 1860.
Remedy Sought
The petitioners sought quashing of FIR No.422/2024 dated 26.06.2024 registered by Hebbagodi Police Station and the underlying complaint dated 26.06.2024.
Filing Reason
The petitioners contended that the dispute was purely commercial in nature, arising from property development agreements and financial transactions, and that the criminal proceedings were instituted with malafide intent, constituting an abuse of the process of law.
Previous Decisions
Prior to the criminal complaint, there were ongoing civil and commercial proceedings: (i) Commercial A.A.No.353 of 2023 filed by the Company under Section 9 of the Arbitration and Conciliation Act before the Commercial Court, Bengaluru; (ii) Commercial Original Suit O.S.No.1159 of 2023 before the Commercial Court against State Bank of India seeking declaration regarding corporate guarantee liability; (iii) Insolvency petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 filed by State Bank of India before NCLT Mumbai against the Company.
Issues
Whether the allegations in the FIR and complaint constitute offences under Sections 406, 420, and 506(2) of the Indian Penal Code, or whether the dispute is essentially civil/commercial in nature.
Whether the criminal proceedings amount to an abuse of the process of court given the pendency of related civil and insolvency proceedings.
Submissions/Arguments
Petitioners argued that the transaction was a pure commercial arrangement and did not involve any criminal intent; the complainant had signed agreements with full knowledge; the FIR was an attempt to criminalize a civil dispute; and the ongoing civil/insolvency proceedings preclude criminal action.
Respondent No.2 argued that the complainant was illiterate and forced to sign documents under threat; Rs 36 crores was paid but the petitioners failed to execute sale deed; this constituted breach of trust and cheating; and mere existence of civil remedy does not bar criminal prosecution.
Judgment Excerpts
The learned senior counsel Sri K.G. Raghavan appearing for the petitioners would vehemently contend that a pure commercial transaction between the two is projected to be a crime by setting the criminal law into motion.
I am an un-educated and not even to write or read the contents of the said documents. Immediately, I went to my advocate office and shown the above said document and after gone through the said documents, I came to know that the aforesaid Rupen Patel has played fraud on me by imposing several conditions in order to execution of sale deed
Procedural History
The parties entered into a Memorandum of Understanding on 15-03-2016 for development of aggregate property. Subsequently, they entered into Joint Development Agreements and sale deeds. In 2017, the Company provided a corporate guarantee to State Bank of India for loans taken by GM Infinite. After defaults, the Bank initiated SARFAESI proceedings and sought to invoke the guarantee for Rs 64,08,12,642/-. The Company filed a petition under Section 9 of the Arbitration and Conciliation Act (Commercial A.A.No.353 of 2023) and a Commercial Suit O.S.No.1159 of 2023 seeking declaration on the guarantee liability. The Bank filed an insolvency petition under Section 7 of the IBC before NCLT Mumbai. On 26-06-2024, the complainant Salman Khan filed a complaint and the Police registered FIR No.422/2024 for offences under Sections 406, 420, 506(2) IPC. The petitioners filed the present Criminal Petition No. 6513 of 2024 under Section 482 Cr.P.C. seeking quashing of the FIR and complaint.
Acts & Sections
- Indian Penal Code, 1860: 406, 420, 506(2)
- Code of Criminal Procedure, 1973: 482
- Arbitration and Conciliation Act, 1996: 9
- Insolvency and Bankruptcy Code, 2016: 7
