The court held that allegations of fraud and misappropriation of funds in investment cases require a full-fledged investigation, underscoring that these are not purely civil matters but implicate criminal liability.

ORDER :

J.M.KHAZI, J.

Petitioners who are arraigned as accused Nos.1 and 2 have filed this petition under Section 482 Cr.P.C, with a prayer to quash the criminal proceedings initiated against them in FIR No.230/2022 of HSR Layout P.S, on the file of III ACMM, Bengaluru, for the offences punishable under Sections 403, 406 and 420 of IPC.

2. In support of the petition, the petitioner has contended that petitioners promoted a start-up company by name M/s Fundscorner Fintech Solutions Private Ltd ('FCFSPL' for short) during the year 2019 and they are the promoter directors. They presented the business model to various investors and sought investment. However, they never promised any guaranteed returns immediately. Complainant claims to have invested ₹6.5 Crores and in this regard has entered into a agreement dated

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30.10.2019. In March 2020, after few months of rising the funds, the global market was shattered due to First wave of COVID-19 Pandemic and therefore, the company could not effectively do the business and it was first to stop its operations temporarily. It was explained to the investors in March 2020 on 23.6.2020. An email was sent to all the investors about the status of the company and also highlighting the Supply Chain Finance Business Model and the Olx used car business model and queries from the investors relating to usage of data to access creditworthiness, etc, are also addressed over emails. A detailed investor status report was also sent to the investors.

2.1. On 17.12.2020, the promoter directors for better prospects of the company decided to amend the objects of the company and received the consent of all the shareholders. On 21.06.2021, a detailed status report on the post COVID-19 situation and proposal to merge with another non-banking finance company was also shared with investors through email. However, on 28.07.2021, it was decided to stop the operations of the company. Most of the employees were let to go by June 2021 and all the operations were stopped in September 2021. In May 2022, Sri Nader, one of the investors expressed his intention to join the board of directors. Petitioner No.1 welcomed the proposal. Complainant also wanted to join the board and requested for documents. He wanted an external audit firm to do the audit before joining the board. To avoid a heavy rent and to reduce the overhead of the company, office was shifted from Bengaluru to the residence of petitioner No.1 at Hyderabad.

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2.2 In the above facts and circumstances filing of the complaint and registering of the case suffers from malafides, arbitrary and liable to be quashed. The allegations do not constitute offences punishable under Sections 403, 406 and 420 IPC. Petitioners have already shared the entire details with the shareholders on the current situation of the new company to be formed and short-term arrangements to place the funds with the Arman under OCRPS, FCFSPL and the company also shared Arman OCRPS details to Mr. Nader over whatsapp on 19.07.2022 and in the end of July 2022, petitioner and others having 66% votes decided to go ahead with the said proposal. However, another company replied back with the disproval of the same. Company is not made party. Continuation of the proceedings would amount to abuse of the process of the Court and pray to dismiss the complaint.

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3. In support of his arguments, learned counsel for petitioner has relied upon the following decisions:

(i) Mohammed Ibrahim & Ors. Vs. State of Bihar and Anr. (Mohammed Ibrahim), (2009) 8 SCC 751

(ii) Sri.Naleen Kumar Kateel Vs. State of Karnataka and Ors. (Naleen Kumar Kateel), Crl.P.No.10321/2024 Dt 03.12.2024

(iii)