Civil disputes should not be converted into criminal proceedings without evidence of intent to cheat; mere allegations are insufficient.

ORDER

The petitioner is the accused in Crime No.387 of 2023 registered at the Marad Police Station for offences under Sections 406 and 420 of IPC , now pending as C.C. No.167 of 2024 on the files of the Judicial Magistrate of First Class-V, Kozhikode. The crime was registered based on a private complaint filed by the 2^nd respondent and forwarded to the Police by the jurisdictional Magistrate for investigation. The allegations against the petitioner are to the following effect;

The petitioner misled the 2^nd respondent into believing that he is the owner of the chain of food joints named 'Burger Lounge' engaged in the business of selling burgers and other meat based delights. With the intention of deceiving the 2^nd respondent for financial gain, the petitioner falsely represented that he would sell the 'Burger Lounge' outlets located across Kerala and received Rs.70 Lakhs as advance sale consideration. Thereafter, when the 2^nd respondent enquired about the business, he came to understand that, by offering to sell the business, the petitioner had collected money and deceived many other persons. Thereupon, the 2^nd respondent demanded the petitioner to return the advance paid and after much insistence, the petitioner issued two cheques for Rs.30 Lakhs and Rs.40 Lakhs respectively. Contrary to the assurance given, the cheques were dishonoured on presentation.

2. Learned Counsel for the petitioner contends that even if the allegations are accepted in their entirety, the alleged offences will not be attracted. Reference is made to Annexure A4 Memorandum of Understanding, entered between the petitioner and his partner on one side and the 2^nd respondent on the other, to contend that the tax dispute is purely civil in nature. In terms of the Memorandum of Understanding, the 2^nd respondent was bound to conduct due diligence and in the event of there being an adverse report, he could refuse to pay the balance amount. Even according to the 2^nd respondent, he had entered into the Memorandum of Understanding based on positive reports about the business and the balance sale consideration was not paid since adverse information was received after entering into the MoU. The 2^nd respondent has filed a suit seeking recovery of the amount of Rs.70 Lakhs by the 2^nd respondent and has also initiated prosecution under Section 138 of the Negotiable Instruments Act , consequent to the dishonour of the cheques allegedly issued towards discharge of the liability.

3. Learned Counsel for the 2^nd respondent submits that his client was deceived into investing in the business by creating an impression that the petitioner had exclusive rights over the brand 'Burger Lounge'. Based on such impression, Annexure R2(a) MoU was entered into on 17.03.2022 between the petitioner and the 2^nd respondent, fixing Rs.4 Crores as value for the petitioner's business establishment named 'Ridge Foods', along with the outlets of 'Burger Lounge' across Kerala. On execution of Annexure R2(a) MoU, the 2^nd respondent paid Rs.55 Lakhs to the petitioner. Thereafter, the 2^nd respondent came to know that another person named Hakkeem also had ownership rights over the business. As a large amount was already invested, the 2^nd respondent entered into Annexure A4 MoU with the petitioner and Hakkeem. Later, the 2^nd respondent got information that the petitioner had sold the rights over the brand 'Burger Lounge', alleging fraud to some other persons and crimes had been registered against him at the instance of those persons. As it became evident that the petitioner's intention was to cheat the 2^nd respondent, he asked the petitioner to return the money and the petitioner issued two cheques totalling Rs.70 Lakhs. Those cheques, were dishonoured due to insufficiency of funds and the 2^nd responden