Karnataka HC Lets Probe Of Sangha Leaders Continue Over Alleged Diversion Of ₹1 Crore Grant Transferred Out In Four Days

The petitioners, respectively stated to be the President and Secretary of the Kumbhara Sangha, sought to quash an FIR registered under Sections 403, 406, 417, 420 read with Section 34 IPC.

The case concerned a Government grant of ₹1 crore sanctioned for renovation works.

The prosecution relied on bank records showing that the grant was transferred out of the Sangha’s account within four days of receipt, including payments to persons and entities allegedly connected with the accused.

The petitioners contended that the renovation works had been completed and relied on a utilisation certificate and third-party inspection report; they also alleged political motivation behind the complaint.

A charge sheet had been filed against other accused, but not the petitioners because of an interim order restraining further investigation as to them.

Section 405 IPC defines criminal breach of trust, requiring entrustment of property or dominion over it followed by dishonest misappropriation, conversion, use or disposal contrary to the terms of the entrustment; Section 406 prescribes its punishment.

Sections 415 and 420 IPC concern cheating and its punishment for dishonestly inducing delivery of property; cheating requires dishonest or fraudulent intention at the time of inducement, while a subsequent breach alone does not establish that intention.

Relying on Delhi Race Club (1940) Ltd. v. State of Uttar Pradesh, [(2024) 10 SCC 690], and K.S. Keerthikumar v. State of Karnataka & Anr., Criminal Petition No. 11 of 2026 (decided 29 September 2026), the Court held that cheating and criminal breach of trust have distinct ingredients and should not be mechanically characterised as arising from the same act; however, both may be alleged where distinct acts or transactions independently satisfy their respective ingredients.

The Court considered the alleged representation that the grant would be used for specified renovation works separately from the alleged subsequent diversion of the funds.

If dishonest intention existed when the grant was sought and induced its release, the allegations could prima facie support Section 420; if the funds were entrusted for renovation and then dishonestly diverted, they could prima facie support Section 406.

The bank transfers, together with the grant’s stated purpose and the other investigation material, provided a basis for further investigation, while the utilisation certificate and inspection report required assessment against that material rather than conclusively resolving the allegations at the quashing stage.

The Court also directed that each petitioner’s individual role be examined; their positions in the Sangha alone would not establish criminal liability.

It permitted the State to complete the investigation and file the appropriate final report in accordance with law.

The Court clarified that it had made no finding of guilt or conclusive determination that the offences were established, and left the petitioners’ merits contentions open.