A dispute arising from a loan agreement that includes an arbitration clause is contractual and cannot form the basis for criminal prosecution under IPC sections 406 and 420, as it lacks criminal intent.

ORDER :

SACHIN SHANKAR MAGADUM, J.

The captioned is filed by the accused seeking quashing of the proceedings pending in FIR/Crime No.0555/2023 for the offences punishable under Sections 406 and 420 of INDIAN PENAL CODE .

2. The facts leading to the case are as under:

The respondent No.2/defacto complainant lodged a complaint before the jurisdictional Police Station alleging that she had entered into a loan agreement with the petitioner on 08.09.2017. Under the said agreement, respondent No.2 claims to have advanced a loan of USD 50,000/- for a period of one year, carrying interest at the rate of 15% per annum. It is further alleged that the loan amount was disbursed on 12.09.2017 through a cheque issued on the same date.

3. According to respondent No.2, the petitioner initially paid the monthly interest as agreed. However, of late, the petitioner stopped making the interest payments and also failed to furnish the monthly statements, thereby arousing suspicion in the mind of respondent No.2. Consequently, respondent No.2 approached the jurisdictional police and lodged a complaint alleging commission of offences punishable under Sections 406 and 420 of the IPC. Based on this complaint, a crime came to be registered for the said offences.

4. I have heard the learned counsel appearing for the petitioner, the learned counsel representing respondent No.2, and the learned High Court Government Pleader.

5. The short question that arises for consideration is whether the complaint lodged by respondent No.2, which on the face of it discloses a dispute of purely civil nature, could form the basis for registration of an FIR under Sections 406 and 420 of the IPC, and consequently, whether the proceedings in Crime No.0555/2023 are liable to be quashed.

6. Before adverting to the merits of the rival contentions, it is necessary to extract the relevant portions of the complaint lodged by respondent No.2. Paragraphs 3 to 7 and 10 to 12 of the written complaint are pertinent and are accordingly reproduced hereunder: "3. I state that in 2016 I joined as a Partner in Angaros Group at which time Mr. Madhu was the Chief Executive Officer of Angaros Group and approached me to make an investment in some trade finance deals in Dubai.

4. Initially I was reluctant in giving the loan, however after the assurances and guarantee given by Mr. Madhu in his personal capacity, I agreed to grant him a personal loan of USD 50,000.

5. Accordingly, I entered into a Loan Agreement dated 08 September 2017 ('said Agreement') with Mr. Madhu. As per the said Agreement, the loan of USD 50,000 was given for a period of one year at an annual interest rate of 15% ('said loan').

6. On September 12, 2017, I disbursed the loan amount of USD 50,000 vide cheque dated 12 September 2017 bearing No.174, in favour of Angaros Inc. drawn on Chase Bank USA. It is further stated that the said cheque was signed and dispatched from my residential address in Bangalore viz., V-004, Tower 5, Jasmine, Adarsh Palm Retreat, Devarabessanahalli, Bangalore - 560103 and sent by courier to Mr. Madhu's office situated at, Plot No.35, Navodaya Colony, Road No.2, Banjara Hills, Hyderabad - 560 034, Telangana.

7. I further state that, I would regularly receive monthly interest accrual statements for the loan given by me to Angaros. However, I became suspicious when I stopped receiving the monthly statements. The last statement received by me was dated 31 January 2020.

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10. To my utter shock and surprise, instead of repaying the said loan, Mr. Madhu began avoiding my messages and calls, and instructed his employees Mr