A breach of contract does not constitute criminal liability unless fraudulent intent is established; civil disputes may involve criminal elements.

ORDER :

V.G.ARUN, J.

Petitioners are the accused in Crime No.449 of 2024 registered at the Maradu Police Station for offences punishable under Sections 120B, 406, 420 and 468 read with Section 34 of the IPC. The crime was registered based on a complaint filed by the 2^nd respondent before the Judicial First Class Magistrate Court - VIII, Ernakulam and forwarded to the Police under Section 156(3) Cr.P.C. The allegations in the complaint are to the following effect;

The accused approached the complainant, representing themselves to be the active partners of M/s.Parava Films LLP and requested him to invest in the production of a cinematographic film under the name and title “Manjummal Boys”. Based on the assurances and promises made by the accused, the complainant entered into Annexure-A3 Investment Agreement dated 30.11.2022 with M/s.Parava Films LLP represented by the 1^st accused. While entering into the agreement, the accused had made the complainant believe that the total cost of production of the movie is Rs.22 crores and the accused will be investing the balance amount. In terms of the agreement, the complainant invested Rs.7 crores, out of which Rs.5.99 crores was given by way of bank transfer to the account of M/s.Parava Films LLP, Rs.50 lakhs transferred to the account of the 1^st accused and the balance Rs.51 lakhs handed over in cash. As per the terms of the agreement, the complainant is entitled to 40% of the producer's net profit, which includes the gross receipts from world theatrical rights of the original film, satellite rights, OTT rights, music rights, dubbing rights etc. After investing in the project, the complainant got information that the accused had taken Rs.8 crores funding from a third party named 'Listen Stephen' and a further amount of Rs.11 crores as loan from Dream Big Films Ltd. The complainant also came to know that the accused had received Rs.2 crores from Pharse Films, Rs.1,15,00,000/- from Think Music and Rs.2 crores from Mythri Movie Makers. The said transactions were undertaken without the knowledge and consent of the complainant. The project culminated with the release of an enormously successful film, which grossed collection of Rs.150 cores from theatres across India and Rs.75 crores from overseas. From the sale of the film's OTT rights, the accused received an amount of Rs.20 crores. Thus, the total revenue from the project is nearly Rs.250,15,00,000/- and after deducting the cost of production, the net profit would be around Rs.100 crores. The complainant is therefore entitled to Rs.40 crores, being 40% of the producer's share. But, contrary to the promises and assurances given, the accused failed to disburse the amount due to the complainant and even after repeated demands paid only Rs.50,00,000/-. It thus became evident that the accused had no intention of keeping their promise while taking money from the complainant and having utilised the profit for personal purposes, are guilty of cheating and breach of trust.

2. Senior Counsel S.Sreekumar appearing for the petitioners made the following forceful submissions;

The dispute between the parties is purely civil in nature and as per Clause 15.1 of Annexure-A3 Investment Agreement dated 30.11.2022, any dispute or difference arising out of or pertaining to the agreement should first be resolved through negotiation and in case negotiation fails, through arbitration. The criminal complaint is filed after initiating arbitration proceedings by filing a petition under Section 9 of the Arbitration and Conciliation Act, 1996 and obtaining an order of attachment. Having thus invoked the proper remedy, the de facto complainant cannot seek to criminally prosecute the petitioners based on the same allegations. A breach of contract by itself will not give rise to cause of action for initiating criminal prosecution for cheating, unless fraudulent or dishonest intention is shown right at the beginning of the transaction. The petitioners having repaid the amount