Karnataka High Court lets probe continue into alleged falsification of Opto Circuits’ balance sheet over ₹456-crore DBS dues

The petitioners, accused Nos. 1, 4, 5 and 8, sought to quash the complaint, FIR and investigation in Crime No. 339/2019, registered for offences under Sections 420 and 477A read with Sections 34 and 120B of the Indian Penal Code (IPC).

DBS Bank alleged that OPTO Circuits (India) Ltd.’s 2015–16 balance sheet wrongly stated that its Bengaluru loan liability had been extinguished following action concerning its US subsidiary, Cardiac Science Corporation.

The petitioners argued that the complaint arose from a loan-recovery dispute and that recovery proceedings showed excess assets had been attached; the bank maintained that the Indian and US loan accounts were separate and that the recovery officer’s order was stayed.

The petitioners invoked Articles 226 and 227 of the Constitution and Section 482 of the Code of Criminal Procedure (CrPC) to seek quashing.

Whether the complaint and FIR disclosed grounds to quash the criminal proceedings as an abuse of process, on the basis that the dispute was essentially civil and no cognizable offence was made out.

Whether the allegation that the company’s Bengaluru loan liability had been extinguished, as recorded in its balance sheet, required investigation for alleged falsification of accounts and related offences.

The Court considered the High Court’s quashing jurisdiction under Articles 226 and 227 of the Constitution and Section 482 CrPC, applying the principles governing intervention where criminal proceedings disclose no offence or constitute an abuse of process.

It acknowledged the principles in State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335, and the other authorities cited by the petitioners concerning the quashing of criminal proceedings, while holding that those principles did not justify quashing at this stage.

The alleged offences were under Sections 420 and 477A read with Sections 34 and 120B IPC; the Court considered whether the balance-sheet statement prima facie warranted investigation under Section 477A.

The Court accepted that the Indian and US loan accounts were distinct transactions and that action concerning Cardiac Science Corporation did not, by itself, extinguish OPTO Circuits’ separate Bengaluru liability.

Because the balance sheet stated that the Bengaluru loan liability and related interest stood extinguished, the Court considered the statement prima facie capable of amounting to falsification of accounts and found that the possible loss to the bank and misleading of shareholders also required investigation.

The conflicting positions on the recovery proceedings—including the petitioners’ reliance on the recovery officer’s order and the bank’s assertion that it had been stayed—were not a basis to terminate the investigation at the threshold.

The Court therefore considered it premature to hold that the proceedings were an abuse of process.

It reserved the petitioners’ liberty to challenge any adverse report after completion of the investigation; pending applications were consigned to the record.