Karnataka HC Keeps Probe Alive Into Developer’s Role In Society Land Sale And Alleged ₹15 Lakh Misappropriation

Respondent No. 4, a co-operative housing society, alleged that the petitioner, proprietor of M/s Jaji Developers, and another person sold Society property under a Joint Development Agreement and failed to remit the sale proceeds, allegedly causing a loss of ₹15 lakh.

The police registered Crime No. 25/2023 for offences including Sections 408 and 420 read with Section 34 IPC.

The petitioner sought to quash the FIR and investigation, contending that the dispute was civil and that arbitration had commenced.

He also challenged his arrest, alleged to have occurred on the day a notice under Section 41A CrPC was served, and sought compensation.

The High Court considered its inherent power under Section 482 CrPC, read with Articles 226 and 227 of the Constitution, to quash criminal proceedings.

Applying the principles in Prashant Bharti v. State (NCT of Delhi), (2013) 9 SCC 293, which draws on Rajiv Thapar v. Madan Lal Kapoor, (2013) 3 SCC 330, the Court stated that quashing may be appropriate where the accused’s material is of sterling and impeccable quality, displaces the allegations, cannot justifiably be refuted, and continuation of proceedings would amount to abuse of process or defeat the ends of justice.

A complaint need not contain every relevant detail; it sets the criminal law in motion, while investigation may result in a report under Section 173 CrPC.

The Court found that the material produced by the petitioner did not meet the Prashant Bharti standard for quashing.

The record indicated that Society property had been sold, while the amount remitted to the Society and the outstanding balance were unclear.

The petitioner could not identify a general-body resolution authorising the sale, and the Society’s counsel denied that such a resolution existed.

These disputed matters, alongside the allegation that the sale proceeds were not fully remitted, required investigation and could not be resolved in the petitioner’s favour at the quashing stage.

As to the arrest and compensation claim, the Court held that the petitioner’s remedy lay in an appropriately constituted writ petition.

It reserved liberty to the petitioner to challenge any adverse report by a successive petition and to pursue the arrest-related grounds in an appropriate writ petition.