Ritesh Agarwal vs. State By - Police Inspector

Facts

This case involves a criminal petition filed under Section 482 of the Code of Criminal Procedure, 1973, by several individuals associated with Oravel Stays Private Limited (OYO) and OYO itself. They sought to quash a criminal complaint lodged by the second respondent, Mr. Uttam Bottolanda Muthappa, Managing Director of Kountheya Hotels Pvt. Ltd., and the subsequent FIR registered by the Chickmagalur Police Station. The complaint stemmed from a Marketing and Operational Consulting Agreement dated November 4, 2017. The core of the dispute revolves around allegations of non-payment of minimum assured revenue, misuse of entrusted hotel rooms, and the creation of false documents, leading to charges under various sections of the Indian Penal Code, including cheating and forgery. The petitioners argued that the dispute was civil in nature and the criminal FIR was an abuse of process.

Held

The Court held that the allegations in the FIR were purely civil in nature and had been given a criminal texture with an ulterior motive to pressurize the petitioners. Regarding the offence under Section 406 IPC (criminal breach of trust), the Court found no specific allegation of misappropriation of booking amounts collected from customers; the admission of paying only half the billed amount and the absence of details on how the amount was misappropriated meant the FIR was not permissible. For Section 420 IPC (cheating), the Court noted the absence of any allegation of dishonest intention at the time of agreement execution and that mere breach of agreement does not give rise to criminal prosecution for cheating. The payment of half the billed amount and the lack of essential ingredients for Section 420 IPC rendered the FIR unsubstantiated. Concerning forgery (Section 464 IPC and related sections), the Court stated that for an offence of forgery to be constituted, there must be a specific allegation of creating a false document with an intention to cause damage or injury. In the absence of material showing intent to cheat or any injury or loss caused to the second respondent by the alleged entry, the FIR for forgery was without substance. The Court also affirmed that an arbitration clause does not bar criminal prosecution if fraudulent or dishonest intent is disclosed, citing *Trisuns Chemical Industry*. Ultimately, the Court concluded that continuing the investigation would be an abuse of the process of law.

Key Issues

1. Whether the allegations in the FIR satisfy the essential ingredients to constitute the offences of criminal breach of trust (Section 406 IPC), cheating (Section 420 IPC), and forgery (Sections 467, 468, 470 IPC), or if the FIR has given a criminal texture to a civil dispute? - Petitioners' argument: The allegations, even if accepted, amount to a mere breach of contract and do not establish dishonest intention at the time of agreement execution, nor do they show injury or loss caused to the complainant, thus not constituting the alleged offences. They relied on *Binod Kumar vs. State of Bihar* and *Sheila Sebastian vs. R Jawaharaj*. 2. Whether the existence of an arbitration clause in the agreement bars criminal prosecution for alleged offences? - Petitioners' argument: The dispute is civil and should be resolved through arbitration as per the agreement. - Revenue/State's argument (implied by the Court's discussion): The existence of an arbitration clause does not preclude criminal prosecution if the allegations disclose fraudulent or dishonest intent. They relied on *Trisuns Chemical Industry vs. Rajesh Agarwal*.