When There Is Complaint & Counter-Complaint On Similar Allegations, Parties Cannot Seek Quashing Saying Case Is Of Civil Nature : Karnataka HC

The court while dismissing the petitions held that once a party files a criminal complaint against the other and if such others were to file a criminal complaint against the first complainant, then the first complainant cannot be heard to say that the second complaint is purely commercial and has to be quashed.

Justice Suraj Govindaraj said "The documents filed give rise to a very sorry state of affairs between two companies who claim to be the leaders in their field. The documents produced would indicate the mud-slinging campaign resorted to by both companies against each other."

It added

"One of the cardinal rules for a party to claim for quashing of the criminal proceedings on the ground that the allegations made therein are relating to a civil dispute is that such a person ought not to have filed a criminal complaint on the very same set of facts and/or on very similar allegations."

It added :

"In the present case, both 'Mygate' and 'NoBroker' have made similar if not identical allegations against each other. According to both of them their data has been stolen by the other. Having made such a complaint against the other, it would not now lie for either of the parties to contend that the complaint filed against their clients cannot be continued since the disputes are commercial in nature."

Case details:

A complaint came to be filed by 'Mygate' against 'NoBroker' and its Directors/Officers on 19.06.2020 with CID, Cyber Crime Division, Bangalore for offences punishable under Section 406, 408, 411 and 420 of IPC and Sections 66(C) of the Information Technology Act, 2000. It is alleged that 'Mygate's confidential information has been stolen by 'NoBroker' and its employees. 'NoBroker' has been misusing the information of 'Mygate' in order to establish business relationships with the 'Mygate' existing customers and also defame 'Mygate'.

It was claimed that a detailed internal investigation was carried out by 'Mygate' leading to a conclusion that 'NoBroker' was stealing the data of 'Mygate'. 'Mygate' set up traps in Bangalore by setting up a mock customer and also mock customer information. The said mock customer received a call from 'NoBroker'. An employee of 'NoBroker' who sought to sell the 'NoBroker' package and/or services. This according to 'Mygate' establish that 'NoBroker' had access to the information of 'Mygate', which had not been shared with anybody else and this according to 'Mygate' amounts to theft of information and data by 'NoBroker' of that available with 'Mygate'.

Subsequently, 'NoBroker' filed a complaint on 28.06.2020 against 'Mygate' and its employees for offence punishable under Sections 420 of IPC and Sections 66, 43 of the Information Technology Act, 2000, complaining of various sharp and unethical practices of 'Mygate'.

It is stated that 'NoBroker' had set up a mock society, mock crime as also mock customer and the mock customer received calls from 'Mygate' employees offering 'Mygate' services to such mock clients. It is alleged that the details of the account created for the mock society was not available in public domain yet 'Mygate' and its employees having access to the information and contacted the mock customer. In this background, it is alleged that there is theft of data of 'NoBroker' committed by 'Mygate'.

To support and establish the above allegations, it is stated that there are various whatsApp messages, which are available, which could be provided to the Investigating Agency. It is further alleged that 'Mygate' had planted its employees or agents in the Corporate Office of 'NoBroker' with an intention of stealing 'NoBroker's confidential information and to misappropriate 'NoBroker' sensitive data and as such, action was sought to be taken against 'Mygate' and its employees for the

Submissions made on behalf of the petitioner:

Counsel for the either parties contend in respect of complaints filed against their respective clients that the offences alleged are commercial in nature, civil in nature and criminal proceedings ought not to be continued, however, when it came to complaints by their respective clients they wanted the investigation to go on.

Court observed:

The bench observed "Though there are criminal complaints filed, investigation is in progress and this Court is seized of the matter, it is seen from the documents produced that while the above matter was pending before this Court both 'NoBroker' and 'Mygate' have involved themselves in a vicious battle in the social media like Facebook, Whatsapp, Twitter, etc. The contents of the said posts in those social media indicates as if there is a no holds barred battle between 'NoBroker' and 'Mygate' in the social media each making allegations and counter allegations against the other."

It added "One of the cardinal rules for a party to claim for quashing of the criminal proceedings on the ground that the allegations made therein are relating to a civil dispute is that such a person ought not to have filed a criminal complaint on the very same set of facts and/or on very similar allegations."

Following which it held "When there is a complaint and counter complaint filed on the basis of similar allegation alleging criminal offences neither of the parties can be heard to say that the complaint against it is civil/commercial in nature, while the complaint filed by it is proper and correct."

The bench has directed CID to investigate both the complaints.

Investee Directors of NoBroker To Be Probed.

The directors of NoBroker Technologies Solutions Private Limited—sought quashing of the complaints- registered by CID Police, insofar as they are concerned. The contention raised by these Directors is that they are Investee Directors inasmuch as they represent the investor in 'NoBroker', in that, the investor is a venture Capital Company and only for the purpose of safeguarding the investment made by the investor - Venture Capital Company.

Advocate D.P.Singh, a/w Advocate Raghuram Kadambi, appearing for the directors submitted that "The petitioners are only investee Directors, they have no role to play in day to day functioning of 'NoBroker'. In the complaint filed by 'Mygate', there are no particular allegations made against these investee Directors, merely stating that they are in-charge of the day to day affairs of the company is not sufficient to initiate proceedings against the investee directors. He relied on the Master Circular No.1/2011 dated 29.07.2011 issued by Government of India, Ministry of Corporate Affairs. General Circular, 1/2020 issued by the Ministry and judgments of the Supreme Court to support his contention.

The petition was opposed by counsel appearing for 'Mygate', saying that the investee directors are incharge of the day to day affairs of the company for the reason that they are in control of the finances of the company, without the investment made by the Investor - venture capital company 'Nobroker' would not have the financial resources to spend for the offences to be committed. Without their concurrence and approval 'NoBroker' could not spend any amount. Hence, he submits that they have committed the offences and are required to be prosecuted.

The court observed:

The documents which have been produced by 'MyGate', indicates a concerted campaign by 'Nobroker' to contend that the services offered are superior to that of 'Mygate' as also making scathing remarks on 'Mygate's' business and activity, all these at this stage cannot be said have been carried out without the Investee director's involvement. When admittedly they are appointed for the purpose of maintaining financial integrity and or discipline of the investee company by the venture capital company.

The bench said "The actions taken by 'Nobroker' are admittedly to increase the revenue and or business of 'Nobroker', the direct beneficiary of which would be the investor, venture capital company. It is but required for the so called investee directors who are vested with the obligation of maintaining the financial integrity or discipline of the company to see to it that 'Nobroker' does not spend monies in an improper manner and or for commission of criminal offences, that being their sole duty on the board. Since monies have been spent on the commission of the offences and financial benefit derived by the investor company from such action, it cannot without investigation be categorically stated that the investee directors were not involved in the commission of the offence as alleged."

It added "The documents produced as observed above indicate substantial use of the financial resources of no-broker in the commission of the offences if proved, which could not have been done without the concurrence and/or approval of the investee directors. For all the aforesaid reasons it cannot at this stage be said that the investee directors were not in charge of or were not knowledgeable of or did not participate in the commission of the offence, for the purposes of exercise of jurisdiction under section 482 of the Cr.P.C."

Accordingly the bench held "A director appointed by a venture capital company can be prosecuted as regards criminal offence alleged against the company where investment is made, subject however to investigation disclosing their involvement in the commission of the offence. Merely because a director has been appointed by an investor- venture capital company, it cannot be said that the director is a nominal or a non-executive director of the company to seek quashing of the FIR. The aspect of involvement of such a director in the offence can only be ascertained after investigation is completed. Such a director cannot be compared with an Independent Director who has no role to play in the business of the company and does not derive any benefit therefrom. A director appointed by an investor to safeguard the investment made by the investor cannot be said to be independent."

The court clarified that observations made herein are only for the purposes of consideration of the petitions under Section 482 of the Cr.P.C and have been necessitated due to the extensive arguments advanced by the counsels in this regard. The investigating agency to proceed with the investigation uninfluenced by the observations made herein.

Case Details:

Case Title: Shantanu Rastogi And State Of Karnataka

Case No: Criminal Petition 5084/2020

Date of Order: January 21, 2021

Coram: Justice Suraj Govindaraj

Appearance:

Advocate D P Singh a/w Nandakumar C K.

Senior Advocate Udaya Holla a/w Advocate Harish B N.

Advocate K Nageshwarappa and Advocate Mohammad Shakeeb