Criminal law cannot be invoked for mere breaches of contract; fraudulent intent must be established for criminal liability under IPC sections 409 and 420.

CAV ORDER

The petitioners, three in number, are knocking at the doors of this Court calling in question registration of a crime in Crime No.34 of 2023 for offences punishable under Sections 409 , 420 and 34 of the IPC, pending before the III Additional Chief Metropolitan Magistrate, Bengaluru.

2. Facts adumbrated, are as follows:

The three petitioners are office bearers of one Zonta Infratech Private Limited (‘the Zonta Company’ for short). The 1^st petitioner/accused No.1 is its Managing Director and petitioners 2 and 3 are employees of the Company. The Zonta Company is not an accused. It is in the business of waste management, water and waste-water management in India and beyond the shores of the Nation and has contracts with several municipal corporations in the country.

3. The 2^nd respondent is the complainant and he is the Managing Director of a German Company “Bauer GmBH” (‘the Germany Company’ for short). The Zonta Company and the German Company establish a Joint Venture Company for setting up manufacturing facility at Peenya Industrial Area for production of underground waste containers by entering into a shareholding agreement. On 21-02-2017, Zonta Company and the German company - complainant further enter into equity subscription and debt financing agreement, the second agreement. In furtherance of aforesaid agreements, Zonta Company receives an investment from the complainant through aforesaid agreement dated 21-02-2017, in particular. Zonta Company then avails loan from Axis Bank for expanding business even beyond the shores of the Nation for which, the complainant furnishes a guarantee by way of a stand by letter of credit for 2.28 million Euros. The Nation then engulfed with COVID-19. Several transactions have happened between the parties. On 30-11-2021, Zonta Company holds its Annual General Meeting which confirms certain new orders bagged by it at different places. The father of the complainant who was also a Managing Director of the German company causes a legal notice upon the petitioners demanding certain payment. Disputes on those payments arose. All the parties sit together and enter into a settlement agreement on 06-10-2022. In terms of the settlement agreement, Zonta Company makes part payment of 27,500 Euros to the complainant. Pursuant to the said payment, certain disputes arose with regard to interpretation of what would be the part payment. Alleging violation of the settlement agreement, the impugned complaint comes to be registered on 08-03-2023 in Crime No.34 of 2023. Therefore, the entire issue has now sprung from the breach of agreements.

4. Heard Sri Prabhuling K.Navadgi, learned senior counsel appearing for the petitioners, Sri B.N. Jagadeesha, learned Additional State Public Prosecutor appearing for respondent No.1 and Sri R.V.S. Naik, learned senior counsel appearing for Sri Nitin Prasad, learned counsel for respondent No.2.

5. The learned senior counsel appearing for the petitioners would take this Court through the documents appended to the petition and seeks to demonstrate that a seemingly civil dispute is given a colour of crime. The complainant has set the criminal law into motion on two counts – one breach of settlement agreement and the other, recovery of money in terms of settlement agreement. He would, therefore, contend that such misuse should not be permitted and the complainant should be left with remedies available in law.

6. Per contra, the learned senior counsel representing the 2^nd respondent would vehemently refute the submissions to contend that a given case can raise both civil and criminal law. Therefore, it is not a case where every crime registered which has a flavour of civil law should be quashed. It is his submission that there is undoubtedly a breach of settlement agreement and huge chunks of Euros has not been paid in terms of the said agreement. He would, therefore, contend that it is a matter of investigation in the least and this Court should not interfere at t