- 1 - NC: 2025:KHC:7405 CRL.P No. 4877 of 2017 C/W CRL.P No. 4876 of 2017 CRL.P No. 4878 of 2017 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 19TH DAY OF FEBRUARY, 2025 BEFORE THE HON'BLE MRS JUSTICE M G UMA CRIMINAL PETITION NO. 4877 OF 2017 C/W CRIMINAL PETITION NO. 4876 OF 2017 CRIMINAL PETITION NO. 4878 OF 2017 IN CRL.P NO. 4877/2017 BETWEEN: SANJAY SURI AGED ABOUT 34 YEARS, S/O SRI. SAMPAT SURI R/A 22053, PRESTIGE SHANTINIKETA WHITE FIELD MAIN ROAD, WHITE FIELD BANGALORE - 560 048. …PETITIONER (BY SRI. K.R. KRISHNAMURTHY, ADVOCATE) IN CRL.P NO. 4876/2017 BETWEEN: V. SANTOSH KUMAR AGED ABOUT 30 YEARS S/O SRI. V. DIVAKARA RAJU R/A 664 PAPAIAH REDDY LANE, NE THIPPASANDRA, BANGALORE - 560 075. …PETITIONER (BY SRI. K.R. KRISHNAMURTHY, ADVOCATE) IN CRL.P NO. 4878/2017 BETWEEN: ANUPAM SHRIVASTAVA AGED ABOUT 35 YEARS, Digitally signed by V N BADIGER Location: HIGH COURT OF KARNATAKA - 2 - NC: 2025:KHC:7405 CRL.P No. 4877 of 2017 C/W CRL.P No. 4876 of 2017 CRL.P No. 4878 of 2017 S/O SRI. SHREEMOHAN SHRIVASTAVA, R/A FLAT A103, MANTRI CLASSIC APARTMENT, 4TH BLOCK, KORAMANGALA, BANGALORE - 560 034. …PETITIONER (BY SRI. K.R. KRISHNAMURTHY, ADVOCATE) AND: 1. STATE OF KARNATAKA REPRESENTED BY CCB (F & M) POLICE STATION BENGALURU CITY - 560 053 DEPUTY SUPERINTENDENT OF POLICE, REPRESENTED BY SPP HIGH COURT OF KARNATAKA BENGALURU - 560 001. 2. SRI. NITIN VAIDYA AGED ABOUT 34 YEARS, S/O. NARENDRA KUMAR VAIDYA #718, 2ND FLOOR, ARAKERE MAIN, BANNERGHATTA ROAD, BENGALURU CITY - 560 001 KARNATAKA …COMMON RESPONDENTS (BY SMT. K.P. YASHODHA, HCGP FOR R1 SRI. NITIN VAIDYA, R2, V/O DATED 09.12.2024, R2 PERMITTED TO APPEAR THROUGH VC) THESE CRIMINAL PETITIONS ARE FILED U/S.482 CR.P.C PRAYING TO QUASH THE COMPLAINT DATED 10.04.2016 (ANNEXURE-A) FIR LODGED PURSUANT THERETO IN CR.NO.163/2016 (ANNEXURE-B) BEFORE THE I ACMM, BANGALORE THE CHARGE SHEET (ANNEXURE-C SERIES) AND THE PROCEEDINGS THERETO IN C.C.NO.22067/2016 BEFORE THE I ACMM, BANGALORE, AS AGAINST THE PETITIONER. - 3 - NC: 2025:KHC:7405 CRL.P No. 4877 of 2017 C/W CRL.P No. 4876 of 2017 CRL.P No. 4878 of 2017 THESE CRIMINAL PETITIONS, COMING ON FOR FURTHER HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MRS JUSTICE M G UMA ORAL COMMON ORDER The petitioner in Crl.P.No.4876/2017 being accused No.2, petitioner in Crl.P.No.4877/2017 being accused No.3 and petitioner in Crl.P.No.4878/2017 being accused No.1, are seeking to quash the criminal proceedings initiated against them registered in Crime No.163/2016 by the Koramangala Police Station pending in C.C.No.2067/2016 on the file of learned I Additional Chief Metropolitan Magistrate, Court, Bengaluru for the offences punishable under Sections 406, 420 and 120-B read with Section 34 of IPC and under Sections, 3, 4 and 5 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (for short, 'the Act'). 2. The brief facts of the case are that, respondent No.2 filed the first information with Koramangala Police against the accused alleging commission of the above mentioned offences. On the basis of the same, FIR came to be registered in Crime No.163/2016 and investigation was undertaken. After investigation, the Investigating Officer filed the charge sheet - 4 - NC: 2025:KHC:7405 CRL.P No. 4877 of 2017 C/W CRL.P No. 4876 of 2017 CRL.P No. 4878 of 2017 for the aforesaid offences contending that accused Nos.1 to 6 projecting themselves as the representatives of 'M/s. Vihaan Direct Selling (India) Private Limited (for short, 'Vihaan Company') indulged in illegal Q-NET Multi-level chain link business marketing activity. They deceived the general public by inducing them to invest the amount in the business with flowery language, promising to double the amount quickly and easily, and also induced the investors to bring more investors to be the part of the system, so that they can earn attractive returns. Being induced by such words of the accused, CW.1, 3 to 14 have invested huge sums of amount by transferring the amount to the personal accounts of accused Nos.1 to 3 who are the petitioners herein. Thereafter, the complainant and the victims have never received any incentives or the returns nor the amount that they have invested was ever returned. Therefore, it is contended that there is a criminal breach of trust and cheating by the accused by conspiring together, and they have committed the offences punishable under Sections 3, 4 and 5 of the Act. The petitioners being accused Nos.1 to 3 are before this Court, seeking to quash the criminal proceedings initiated against them. - 5 - NC: 2025:KHC:7405 CRL.P No. 4877 of 2017 C/W CRL.P No. 4876 of 2017 CRL.P No. 4878 of 2017 3. Heard Sri.K.R.Krishna Murthy, learned counsel for the petitioners, Smt.K.P.Yashodha, learned High Court Government Pleader for respondent No.1-State and Sri Nitin Vaidya, learned counsel for respondent No.2. Perused the materials on record. 4. Learned counsel for the petitioners contended that the allegations are against Vihaan Company, but the same is not made as party, nor have any Directors of Vihaan Company been made as parties in the compliant. Petitioners being accused Nos.1 to 3 are said to be only the representatives of Vihaan company. 5. Learned counsel further contended that Vihaan Company, which is indulged in carrying on QNET Multi-level business. Such business cannot be termed as illegal. He relied upon the decision of the Co-ordinate Bench of this court in Naresh Balasubramaniam v. State of Karnataka1, wherein it is held that the companies which are carrying on its business legally and when such business is not prohibited under law as it is one of the modes of financial trade that is undertaken in the Country. Accordingly, Co-ordinate Bench quashed the criminal 1 Crl.P.No.9308/2016 order dated 15.02.2017 - 6 - NC: 2025:KHC:7405 CRL.P No. 4877 of 2017 C/W CRL.P No. 4876 of 2017 CRL.P No. 4878 of 2017 proceedings initiated against one of the accused in the said case, which is apparently applicable to the present case. 6. Thirdly, the learned counsel contended that the petitioners have paid back the amount collected from the complainant, and the offences in question are compoundable in nature. The complainant has stated that he has no objection for compounding the offences. In spite of that, the learned Magistrate has not accorded permission for compounding the offences but proceeded to take cognizance of the offences ignoring the fact that the Company is not made as party, nor its Directors are arrayed as accused. Under such circumstances, the criminal proceedings are liable to be quashed. 7. Learned counsel placed reliance on the decision of the Hon'ble Apex Court in Sunil Bharti Mittal v. Central Bureau of Investigation2, in support of his contention that, when the offender is the Company, and it is not arrayed as one of the accused nor its Directors are arrayed as accused then taking cognizance by the learned Magistrate is without application of mind and such criminal proceedings is liable to be quashed. He 2 2015 (4) SCC 609 - 7 - NC: 2025:KHC:7405 CRL.P No. 4877 of 2017 C/W CRL.P No. 4876 of 2017 CRL.P No. 4878 of 2017 also contended that while taking cognizance of the offence by the learned Magistrate, the Court has to consider the materials on record. Its objective satisfaction regarding availability of the materials for having committed the offence in question is necessary. When the learned Magistrate has not considered this legal position and has taken cognizance of the offence such an order is liable to be set aside and accordingly prays for allowing the petitions. 8. Per contra, learned High Court Government Pleader opposing the petitions submitted that the complainant has specifically stated in the complaint that petitioners along with the co-accused, induced the general public to invest with them under the guise of they being the representatives of the Vihaan Company. The money in question was transferred by the complainant and others to the personal accounts of the petitioners and not to the account of the Vihaan Company. Specific allegations are made in the charge sheet that the petitioners have projected themselves as the representatives of the Vihaan Company, and they have collected money through their personal account. Said money was not transferred to the Vihaan Company and therefore, Vihaan Company or its - 8 - NC: 2025:KHC:7405 CRL.P No. 4877 of 2017 C/W CRL.P No. 4876 of 2017 CRL.P No. 4878 of 2017 directors are not arrayed as accused. When the accused have acted individually by projecting themselves as the representatives of Vihaan Company, the Company or its Directors cannot be made liable. The petitioners and the co- accused who collected money in their individual capacity by inducing the general public, committed criminal breach of trust and cheating by conspiring together and have committed the offences as alleged and therefore, the criminal proceedings initiated against them is not liable to be quashed. 9. Learned High Court Government Pleader also submitted that the Co-ordinate Bench of this Court in Naresh Balasubramaniam (supra) dealt with a matter, where the Directors of the Company were arrayed as accused where there was no transfer of money into the individual account, and the Court held that Vihaan Company is carrying on its business legally. The Court also highlighted the high handed acts of independent representatives (IRs) in collecting the money which constitute an offence against them, but the Directors of the Company cannot be made vicariously liable. Under such circumstances, the criminal proceedings was quashed. The - 9 - NC: 2025:KHC:7405 CRL.P No. 4877 of 2017 C/W CRL.P No. 4876 of 2017 CRL.P No. 4878 of 2017 facts of the present case is entirely different and therefore, the criminal proceedings is liable to be dismissed. 10. Thirdly, learned HCGP submitted that it was never the contention of the petitioners before this Court that the petitioners have deposited any amount paid by the complainant and sought for compounding of the offences. The order rejecting the prayed for compounding the offence is not produced before the Court nor it is challenged. Copy of the order taking cognizance was also not produced before this Court. Under such, circumstances, the petitioners are not entitled for any relief. Hence, sought for dismissal of the petitions. 11. In view of the rival contentions urged by the learned counsel for both the parties, the point that would arise for my consideration is: "Whether the petitioners have made out any grounds to allow the petitions and to quash the criminal proceedings initiated against them?" My answer to the above point is in the 'Negative' for the following: - 10 - NC: 2025:KHC:7405 CRL.P No. 4877 of 2017 C/W CRL.P No. 4876 of 2017 CRL.P No. 4878 of 2017 REASONS 12. The first contention raised by the learned counsel for the petitioners is that when the Vihaan Company is accused of collecting the amount from the general public through the petitioners, the Company and its Directors are required to be made as parties. In the absence of the Company and its Directors, the petitioners are not liable for prosecution. But the first information filed by respondent No.2 makes it clear that petitioners projecting themselves as the representatives of Vihaan Company, collected huge sums of amount which was transferred to their personal accounts. 13. It is not the contention of the petitioners that they were legally appointed representatives of Vihaan Company nor it is their contention that they have transferred the amount that was collected from the complainant and other victims to the account of the Vihaan Company. The contention of the learned counsel for the petitioners that when the petitioners are entitled to keep silent without disclosing any of those defence cannot be accepted as it is the petitioners who have approached this Court seeking quashing of the criminal proceedings. The petitioners may be having right to keep silent - 11 - NC: 2025:KHC:7405 CRL.P No. 4877 of 2017 C/W CRL.P No. 4876 of 2017 CRL.P No. 4878 of 2017 before the trial Court without disclosing any defence as the burden is on the prosecution to prove the guilt. But when the petitioners approached this Court seeking quashing of the criminal proceedings on specified grounds, they have to substantiate the same by placing cogent materials. When the petitioners have not placed any materials to evidence the fact that they are the authorized representatives of Vihaan Company and that they have transferred the amount that was collected from the complainant and other victims to the accounts of Vihaan Company, they are not entitled to contend that the offence in question was in fact committed by the Company and therefore, the Company and its Directors are to be arrayed as accused. The Investigating Officer, while filing the charge sheet made it very clear that accused Nos.1 to 6, in collusion with one of the co-accused conspired together, induced the informant and others and have successfully collected some amount through their personal accounts and they have committed the offences. Under such circumstances, the contention of the learned counsel for the petitioners that the offence was committed by the Vihaan Company and - 12 - NC: 2025:KHC:7405 CRL.P No. 4877 of 2017 C/W CRL.P No. 4876 of 2017 CRL.P No. 4878 of 2017 therefore, Company and its Directors are to be arrayed as accused, cannot be accepted. 14. The next contention taken by the learned counsel for the petitioners is that the Co-ordinate Bench of this Court in Naresh Balasubramaniam (supra) upheld the validity of the Q-net Direct Selling Marketing activities as undertaken by the Vihaan Company and under such circumstances, the act of the petitioners in collecting the amount from the complainant and others cannot be held to be illegal. But the facts of the case dealt by the Co-ordinate Bench of this Court was entirely different wherein the petitioner Naresh Balasubramaniam was one of the Directors of Vihaan Company and arrayed as one of the accused in his capacity as a Director. The Vihaan Company was also an accused and it was contended that they have committed the offences punishable under Sections 417, 419 and 420 read with Section 34 of IPC, Section 66 (D) of the Information Technology Act, 2000 and Sections 4 and 5 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. - 13 - NC: 2025:KHC:7405 CRL.P No. 4877 of 2017 C/W CRL.P No. 4876 of 2017 CRL.P No. 4878 of 2017 15. Considering the facts and circumstances of the said case, the Co-ordinate Bench of this Court referring to the decision of the Bombay High Court insofar as Multi-level marketing business is concerned held that while rejecting the claim for anticipatory bail and held that the multi-level marketing business is conducted at the lower level of the pyramid through independent representatives (IRs) and simply because they conduct aggressive marketing and threaten the people for selling the product, the Directors of the Company cannot be made vicariously liable. The Co-ordinate Bench also held that the company is conducting multi marketing business in India indulging in direct selling which is a global industry. It is held that there is no bar for conducting such business in India as it is one of the forms of direct selling businesses. It is also observed that the Union Government and the State Government have issued the Model Framework for guidelines on direct selling. Therefore, such businesses are not held to be illegal. In view of these facts, the Co-ordinate Bench quashed the criminal proceedings initiated against the Directors of the Company as no offence was made against them. But the facts in the present case is entirely different as it is specifically - 14 - NC: 2025:KHC:7405 CRL.P No. 4877 of 2017 C/W CRL.P No. 4876 of 2017 CRL.P No. 4878 of 2017 contended that the petitioners and the co-accused projecting themselves as the representatives of Vihaan Company, managed to collect huge sums of money by inducing complainant and others to invest through their personal bank accounts and have committed the aforementioned offences. Under such circumstances, the decision of the Co-ordinate Bench is of no help to the petitioners. 16. The third contention raised by the learned counsel for the petitioners is that, the alleged offences are compoundable in nature, and that the petitioners have deposited the amount that was collected by the complainant before the Trial Court. It is stated that the complainant had no objection for compounding the offence. But the Trial Court refused to compound the offences and took cognizance without application of mind. But this was never the contention of the petitioners while filing the petitions. The order taking cognizance refusing to compound the offences which is said to have been passed by the Trial Court is not the subject matter of these petitions. The prayer made by the petitioners is only to quash the criminal proceedings, but not to quash any of the said orders. Interestingly, no such orders are produced before - 15 - NC: 2025:KHC:7405 CRL.P No. 4877 of 2017 C/W CRL.P No. 4876 of 2017 CRL.P No. 4878 of 2017 this Court to draw the attention of this Court referring to its illegality. Under such circumstances, I do not find any merits in the contentions taken by the petitioners in that regard. 17. Learned counsel for the petitioners placed reliance on the decision of the Hon'ble Apex Court in Sunil Bharti Mittal (supra), to contend that the Company and its Directors are necessary parties and in their absence, criminal proceedings against the accused cannot be proceeded with. In view of the discussions and opinion expressed above that the Company is not the offender, nor its Directors representing the Company have committed the offences, I do not find any merits in the contention taken by the petitioners in that regard. Since the order taking cognizance is never challenged by the petitioners nor they produced documents for perusal, the contention of the learned counsel for the petitioners that there is non-application of mind by the Trial Court while taking cognizance, cannot be upheld. 18. Thus, in view of the discussions made above, I do not find any merits in the contentions taken by the petitioners and therefore, the petitioners are not entitled for any relief. Hence, - 16 - NC: 2025:KHC:7405 CRL.P No. 4877 of 2017 C/W CRL.P No. 4876 of 2017 CRL.P No. 4878 of 2017 I answer the above point in the negative and proceed to pass the following. ORDER The Criminal Petitions are dismissed. In view of disposal of the main petitions on merits, pending I.A.No.1/2017 filed seeking stay shall stand disposed off. Sd/- (M G UMA) JUDGE MKM List No.: 1 Sl No.: 10