Criminal and civil remedies are not mutually exclusive and can co-exist despite overlapping facts. Investigative agencies are authorized to pursue prima facie cognizable offences involving unregulated deposit schemes, as such acts do not require prior regulatory complaints like those reserved for regulated deposit schemes under special statutory frameworks.

Headnote:(A) Unregulated Deposit Schemes Act, 2019 - Sections 3, 5, and 21 - Indian Penal Code/BNS 2023 - Allegations of cheating, criminal breach of trust, and fraud - FIR quashment - Whether civil and criminal proceedings can proceed simultaneously regarding commercial/money transactions - Held, merely because an act has a civil profile does not strip it of its criminal outfit; civil remedies are not an effective substitute for criminal prosecution when the act constitutes an offence. (Paras 4, 11, 13, 14, 15)

(B) Investigation - Power of police - Scope of quashing - FIR is not an encyclopedia requiring disclosure of every detail - Investigating agency should be permitted to collect evidence - Only in extreme exceptions can proceedings be interdicted. (Paras 9, 10, 17)

(C) Unregulated Deposit Schemes Act, 2019 - Cognizance - Distinction between regulated and unregulated deposit schemes - Offences under Sections 3 and 5 are cognizable and require investigation by police; the requirement of regulator-filed complaint under Section 27 applies specifically to regulated schemes under Section 4 - Prohibition on taking cognizance without regulator complaint is not applicable where schemes are illegal or unregulated. (Paras 20, 54, 57)

Facts of the case:
The petitioners sought to quash the criminal proceedings registered for cheating, fraud, and criminal conspiracy, alleging the dispute was purely civil in nature. The allegations involved inducements for investments with promises of high interest and profits in projects, which ultimately resulted in default and threats. The petitioners argued the registration of the FIR was an abuse of process and that the invocation of the special legislation regarding deposit schemes was procedurally illegal.

Findings of Court:
The court found that the complaint disclosed the ingredients of cognizable offences, noting that civil and criminal proceedings are not mutually exclusive and can run side by side. The court held that the allegations of cheating and fraud in commercial transactions warrant independent criminal investigation, irrespective of pendency of civil claims. Furthermore, regarding the special legislation, it concluded that offences concerning unregulated schemes are cognizable and mandate police investigation.

Issues: Whether the FIR should be quashed as a civil dispute and whether the police are barred from investigating offences under the specific special legislation without a regulatory complaint.

Ratio Decidendi: Criminal prosecution cannot be thwarted merely because civil proceedings are pending. Statutes dealing with unregulated financial schemes designate certain offences as cognizable, authorizing active police investigation, thereby excluding the requirement of a prior regulator-filed complaint which is reserved for regulated deposit schemes.

Result: Petitions dismissed.

CAV ORDER

Both these petitions arise out of Crime No.37/2024 dated 04.02.2025 registered by the 1^st respondent – Police for offences punishable under Sections 316(2) , 318(4) and 3(5) of BNS, 2023 Retyped and replaced vide Chamber order dated 15.11.2025 and Section 21 of the Banning of Unregulated Deposit Schemes, Act 2019 (for short ‘the BUDS Act’). It is an undisputed fact and the matter of record that the impugned FIR was registered pursuant to the impugned complaint dated 04.02.2025 lodged by Sri. Vivek P. Hegde, who is the 2^nd respondent – de facto complainant in both the petitions.

2. Crl.P.No.21995/2025 is preferred by accused Nos. 3 and 5, while Crl.P.No.5197/2025 is filed by accused No.2. Accused Nos. 1 and 4 are not before this Court in the present petitions.

3. Heard learned Senior counsel for the petitioner and learned Addl. SPP for 1^st respondent- State as well as learned counsel for 2^nd respondent and perused the material on record.

4. In addition to reiterating the various contentions urged in the petitions and referring to the material on record, learned Senior counsel for the petitioners submits that the impugned complaint and FIR seek to convert a civil dispute into a criminal dispute by giving a cloak of criminality to an essentially criminal transaction, which is impermissible in law. It is submitted that the impugned complaint and FIR do not disclose the commission of any cognizable offences by the petitioners and that the invocation of Section 21 of the BUDS Act and registration of the FIR by the 1^st respondent is also illegal and invalid as per the provisions contained in the BUDS Act. It is therefore submitted that the impugned complaint and FIR deserve to be quashed. In support of his submissions, learned Senior counsel placed reliance upon the following judgements:-

(i) Srijith vs. State of Karnataka - Crl.P. No. 201497/2024 dated 24.01.2025;

(ii) Nijamuddin Jakati vs. State of Karnataka - Crl.P. No. 103201/2024 dated 04.10.2024;

(iii) Abdul Rahman Khan vs. State of Karnataka - Crl.P. No. 101916/2023 dated 31.08.2023;

(iv) Shailesh Kumar vs. State of Uttar Pradesh - 2025 SCC OnLine SC 1462;

(v) Manish vs. State of Maharashtra - 2025 SCC OnLine SC 707;

(vi) Staish Chandra Ratan Lal vs. State of Gujarat - (2019) 9 SCC 148;

(vii) Manjunatha Reddy vs. State of Karnataka - Crl.P. No. 2390/2025 dated 16.06.2025.

5. Per contra, learned Addl. SPP for the 1^st respondent – State submits that the averments made in the impugned complaint and FIR clearly disclose the commission of the offences by the petitioners. It is also submitted that the complaint does not indicate that a purely civil transaction is sought to be converted into criminal proceedings, especially when it is permissible in law to initiate / institute both civil and criminal proceedings by the 2^nd respondent. It is also submitted that the Karnataka State Police Department has adopted a Standard Operating Procedure (SOP) dated 30.10.2021 under the BUDS Act, which clearly indicates that the invocation of Section 21 of the said Act in the FIR is perfectly legal and proper and the contention of the petitioners cannot be accepted in the light of the judgment of the co-ordinate Bench of this Court in the case of Yellappa Sham Managutakar- Crl.P.100048/2024 dated 17.01.2025. It is therefore submitted that there is no merit in the petition and the same is liable to be dismissed.

6. So also, learned counsel for 2^nd respondent – de facto complainant submits that there is no merit in the petition and that the same is liable to be dismissed.

7. Before adverting to the rival submissions, it is necessary to extract the impugned complaint (Translated version) which reads as under:-

04/02/2025

To,

The Police Inspector

Basaveshwaranagar Police Station

Basaveshwaranagar,

Bengaluru - 560 079

From,

Vivek P. Hegde, S/o Late Prabhakar J. Hegde,

Aged approximately 47 years,

Address: No. 76, 1^st J Cross,

Sharada Colony,

Basaveshwaranagar - 560 079.

Mobile: 9742210284

Respected Sir/Madam,

Subject: Req

Click Here to Read the rest of this document

2025 Supreme(Online)(Kar) 38506

Cases Referred (6)