Karnataka HC Quashes Cheating FIR Against Builder Directors After Investor’s Apartment-Cancellation Offer Was Accepted

The petitioners in the connected proceedings—company directors, a director’s wife, and a former director—sought to quash the FIR registered by Devanahalli Police in Crime No. 0195/2025.

The complaint alleged, among other things, cheating, criminal breach of trust, and fraud in connection with an apartment investment in the Ozone Urbana project.

The complainant had booked an apartment in 2017 and later offered to cancel the allotment; the company accepted the cancellation.

The apartment was subsequently allotted to a third party.

The complainant pursued a remedy before the RERA Authority, which ordered the company to pay the buyback amount.

The company had paid ₹1 crore of the ₹2.88 crore ordered, and insolvency proceedings were pending against it before the NCLT.

The petitions invoked the High Court’s quashing jurisdiction under Section 482 of the Code of Criminal Procedure, stated in the filings to be exercised under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023.

The complaint alleged offences under the Bharatiya Nyaya Sanhita, 2023, while the FIR was described in the proceedings as alleging offences under Sections 34, 406 and 420 of the Indian Penal Code, 1860.

The Court’s determination was fact-specific: it assessed whether investigation into this individual investor’s complaint was justified in view of the cancellation of the allotment and the remedy pursued and granted under RERA.

No separate precedent or general legal test was identified in the order.

The Court found that the complainant himself had offered to cancel the allotment, that the company accepted the offer, and that the RERA Authority subsequently directed repayment in accordance with the buyback scheme.

Because the allotment had been cancelled before the apartment was allotted to another person, the Court rejected the contention that the subsequent allotment was impermissible or that it established a second mortgage in the circumstances presented.

It also distinguished the cited coordinate Bench decision: that decision concerned allegations including money laundering and did not establish that every individual investor’s complaint required investigation.

On these facts, the Court held that investigation into this complaint was not justified, while expressly limiting its order to the complaint before it.

It clarified that the order did not affect any investigation by the Enforcement Directorate or express any view on the merits of the Enforcement Directorate’s complaint.

Pending interlocutory applications were disposed of as not surviving for consideration.