The High Court's quashing of criminal proceedings was premature as prima facie evidence existed, necessitating a trial to determine the veracity of allegations.

JUDGMENT :

SANJAY KAROL, J.

Leave granted.

2. This appeal is at the instance of the complainant-Company aggrieved by the final judgment and order dated 19th February, 2024 in Criminal Petition No.5599 of 2023 passed by the High Court of Karnataka at Bengaluru, whereby under its inherent powers, the Court quashed the criminal proceedings as well as the chargesheet in C.C.No.8373 of 2023 which, in turn, was registered as a result of Crime No.287 of 2022 at Sanjay Nagar Police Station for offences punishable under Sections 406, 408, 409, 418, 420, 120B read with 34 of the Indian Penal Code, 1860, pending on the file of III Additional Chief Metropolitan Magistrate, Bengaluru.

Factual Background & Proceedings leading up to this Appeal

3. The instant case pertains to the alleged fraud having been committed by the respondent while in the employment of Daechang Seat Automotive Ltd.¹[Hereinafter “the Company”] The present appellant is the authorized representative of the said Company. The main business of this company is to manufacture seat related equipment for cars of the ‘KIA’ make. The services of Mr. Nikhil K.S. of M/s. N.K. Associates were engaged as Chartered Accountants and Financial Advisors. Over time, a close relationship developed. The substance of the dispute is that the Company was informed that it had wrongly claimed input tax credit amounting to Rs.9,73,96,225.80p., by N.K. Associates. It was further said that the said amount owed to the Goods and Services Tax Department and failure to pay the same entails serious consequences. N.K. Associates then informed the Company that it is the standard practice in India for tax amounts payable to be transferred to the financial advisors who would then pay it onward to the concerned department. In furtherance of the same, the Company, after some internal transfer of money from one account to another, made a transfer from its Indian Overseas Bank Account, which was used for payments, statutory or otherwise, totaling to Rs.10,18,54,894.80p. The complaint, which is appended as Annexure P-3 to the paperbook, provides the following breakup of payments :

Extracted hereinbelow is the portion of the said complaint, which describes the discovery of the alleged deceit perpetrated by N.K. Associates :

“13. In the month of October, 2022, the management of the shareholders of the Company in Korea was enquiring into the state of finances of the Company including statutory payments. It was noticed that huge payments such as the aforesaid had been made, and the reason for such payments was sought from the Indian employees. After enquiry and discovery, the Company and its shareholder discovered the following shocking facts :

(a) The GST portal itself has all the information related to GST payments by the Company;

(b) Rs.7,26,25,840/- was due for GST as suggested by the report Issued by NK & Associates dated 5th March 2022;

(c) On 03.04.2022, GST payment of Rs.7,26,25,840/- was made by adjusting the input tax credit already available with the Company;

(d) There wa