Allahabad High Court denies pre-arrest bail to builders accused of diverting retired partners’ ₹14.9 crore

Friends Land Developers’ retiring partners, Rakesh Garg and Atul Garg, disputed the applicants’ handling of approximately ₹14.90 crore associated with external development charges deposited with the Ghaziabad Development Authority (GDA).

The applicants were continuing partners. The retirement deed recorded an amount due to the retiring partners and provided for transfer of specified land in certain circumstances.

After the High Court set aside the GDA demand, the applicants allegedly procured adjustment of the amount against compounding fees for unauthorised construction, rather than securing its refund or transferring land to the retirees.

Following an alleged threat and demand for ₹5 crore, an FIR was registered under Sections 111(1), 111(3), 316(2), 308(6), 352 and 351(3) of the Bharatiya Nyaya Sanhita, 2023.

The applicants sought anticipatory bail, arguing that the dispute was contractual and subject to arbitration; the informant and State opposed the application, relying, among other things, on the alleged misappropriation and the applicants’ supplementary agreement of 8 January 2026.

1. Whether the applicants were entitled to anticipatory bail where the allegations, including the alleged use of funds belonging to the retiring partners, disclosed a prima facie criminal case despite the contractual and arbitral remedies available.

2. Whether the nature of the allegations and the investigation’s stated need for custodial interrogation weighed against granting pre-arrest protection.

The application was considered under Section 482 of the Bharatiya Nagarik Suraksha Sanhita, 2023, governing anticipatory bail.

The Court applied the principle that a civil or contractual remedy, including arbitration, does not by itself bar criminal proceedings where the allegations prima facie disclose an offence; it relied on Priti Saraf v. State (NCT of Delhi), Trisuns Chemical Industry v. Rajesh Agarwal and S.W. Palanitkar v. State of Bihar.

It also relied on Sushila Aggarwal v. State (NCT of Delhi) for considering the nature and gravity of the offence, the applicant’s role and the risk of interference with investigation, and on authorities including P. Chidambaram v. Directorate of Enforcement for the cautious exercise of anticipatory-bail discretion, particularly in economic offences.

The Court treated the alleged dishonest conversion of property over which the applicants had dominion as potentially attracting Section 316 BNS.

The Court considered the retirement deed and the alleged deposit and subsequent adjustment of the funds sufficient, at the anticipatory-bail stage, to support a prima facie case that the applicants had dominion over money due to the retiring partners and used it for their own benefit.

It also noted that the applicants had not shown that the agreed land had been transferred and regarded the supplementary agreement as supporting the retirees’ claim to the amount.

The arbitration clause and pending arbitral proceedings did not, in the Court’s view, establish that the dispute was exclusively civil or negate the alleged criminal conduct.

Given the seriousness of the allegations, the preliminary stage of investigation and the stated need for custodial interrogation, the Court found no basis to grant pre-arrest protection.

Any interim order was vacated, and the Registrar (Compliance) was directed to send the order to the court concerned, which was to direct the Investigating Officer to proceed in accordance with law.