- 1 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 10TH DAY OF JANUARY, 2025 BEFORE THE HON'BLE MRS JUSTICE M G UMA WRIT PETITION NO. 16631 OF 2022 (GM-RES) C/W WRIT PETITION NO. 16991 OF 2022 (GM-RES) IN WP NO. 16631/2022 BETWEEN: MR. BRIJMOHAN. K.S. AGED 44 YEARS, S/O K L SWAMY, R/A M/S KHODAY RCA INDUSTRIES (KHODAY ESHWARSA AND SONS), NO.11, RACE COURSE ROAD, OPP. TO RAILWAY DIVISIONAL OFFICE, BENGALURU CITY - 560 009 …PETITIONER (BY SRI. P.P. HEGDE, SR. ADVOCATE FOR SRI. VENKATESH SOMAREDDI, ADVOCATE) AND: 1. STATE OF KARNATAKA REPRESENTED BY SECRETARY MINISTRY OF HOME AFFAIRS GOVERNMENT OF KARNATAKA VIDHANASOUDHA, AMBEDKAR VEEDHI, BENGALURU - 560 001 2. DIRECTOR GENERAL AND INSPECTOR GENERAL OF POLICE, NRUPATHUNGA ROAD, BENGALURU - 560 001 3. COMMISSIONER OF POLICE INFANTRY ROAD BENGALURU - 560 001 Digitally signed by SWAPNA V Location: high court of karnataka - 2 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 4. MR. K.P. GHANASHYAM S/O. K.L.A. PADMANABHASA AGED 51 YEARS, R/AT NO.,9, SHESHADRI ROAD, BENGALURU - 560 009. …RESPONDENTS (BY SMT. RASHMI PATEL, HCGP FOR R1 TO 3 SRI. PRAVEEN .S., ADVOCATE FOR SRI. AJESH KUMAR .S. ADVOCATE FOR R4) THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF CONSTITUTION OF INDIA READ WITH UNDER SECTION 482 OF CRPC. PRAYING TO - DIRECT THE R-1 AND 2 TO IMMEDIATELY EXECUTE THE NON-BAILABLE WARRANT ISSUED BY THE COURT OF IV ADDITIONAL CHIEF METROPOLITAN MAGISTRATE, BENGALURU IN CC NO.21893/2022 AS PER ORDER DTD 08.07.2022 AGAINST THE ACCUSED PERSONS AND REPORT COMPLIANCE BEFORE THIS HONBLE COURT VIDE ANNX-J. AND ETC., IN WP NO. 16991/2022 BETWEEN: 1. MR. K.P. GHANSHYAM, S/O. K.L.A. PADMANABHASA AGED ABOUT 51 YEARS, M/S. KHODAY R.C.A. INDUSTRIES (KHODAY ESHWARSA AND SONS) HAVING OFFICE AT GANDHINAGAR BENGLAURU - 560 009. PRESENTLY RESIDING AT NO.9, SHESHADRI ROAD, BENGALURU - 560 009. 2. MR. K.L.A. PADMANABHASA S/O LATE K. LASHMANSA AGED ABOUT 81 YEARS, (SENIOR CITIZEN BENEFITS NOT CLAIMED) M/S. KHODAY R.C.A INDUSTRIES (KHODAY ESHWARSA AND SONS) HAVING OFFICE AT GANDHINAGAR BENGALURU - 560 009 PRESENTLY RESIDING AT NO.9, - 3 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 SHESHADRI ROAD BENGLAURU - 560 009. 3. MR. SAHASRARJUN S/O K.P. GHANSHYAM AGED ABOUT 29 YEARS, RESIDING AT NO.9, SHESHADRI ROAD, BENGALURU - 560 009. ...PETITIONERS (BY SRI. PRAVEEN .S., FOR SRI. AJESH KUMAR .S., ADVOCATES) AND: 1. THE STATE OF KARNATAKA REPRESENTED BY SHESHADRIPURAM POLICE STATION, 1ST MAIN ROAD, SC ROAD, SESHADRIPURAM BENGALURU - 560 020 REPRESENTED BY PUBLIC PROSECUTOR HIGH COURT OF KARNATAKA HIGH COURT BUILDING, BENGALURU - 560 001. 2. M/S KHODAY R.C.A INDUSTRIES PARTNERSHIP CONCERN (KHODAY ESHWARSA AND SONS) NO.11, RACE COURSE ROAD, OPPOSITE TO RAILWAY DIVISIONAL OFFICE, BENGALURU - 560 009. REPRESENTED BY ITS PARTNERS AND AUTHORIZED REPRESENTATIVE MR. K.S. BRIJMOHAN ...RESPONDENTS (BY SMT. RASHMI PATEL, HCGP FOR R1 SRI. P.P. HEDGE, SR. ADVOCATE FOR SMT. RACHITHA RAJSHEKAR, ADVOCATE FOR R2) - 4 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF THE CODE OF CRIMINAL PROCEDURE PRAYING TO QUASH THE FIR IN CRIME NO.0008/2022 BASED ON THE COMPLAINT AGAINST THE PETITIONERS ALLEGING THAT THE PETITIONERS HAVE COMMITTED OFFENCES PUNISHABLE U/S 406, 408, 465, 468, 471, 420, 120B R/W SECTION 34 OF THE INDIAN PENAL CODE, 1860 AS PER ANENXURE-B AND A. THESE WRIT PETITIONS, COMING ON FOR FURTHER HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MRS JUSTICE M G UMA COMMON ORDER The petitioner in Writ Petition No.16631/2022 being the complainant in Crime No.8/2021 of Sheshadripuram Police Station, now pending in CC No.21893/2022 on the file of the learned IV Additional Chief Metropolitan Magistrate, Bengaluru, for the offence punishable under Sections 406, 408, 465, 468, 471, 420 and 120-B read with Section 34 of the Indian Penal Code (for short 'the IPC'), is seeking the following reliefs: (i) Issue writ of mandamus or any other writ or directions directing the Respondents No.1 and 2 to immediately execute the non-bailable warrant issued by the court of IV Additional Chief Metropolitan Magistrate, Bengaluru in CC No. 21893/2022 as per order dated 08.07.2022 against the accused persons and report compliance before this Hon'ble Court. - 5 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 (ii). Issue writ of mandamus or any appropriate writs and directions directing the respondents to initiate appropriate legal action both under Criminal Law and also under the Service rules against the concerned police officials for creating false records showing the accused persons as absconding in the charge sheet even though the accused persons are very much available and failure of the concerned police for not executing the arrest warrant issued by the Trial Court in CC No.21893/2022 on the file of IV ACMM, Bengaluru and also submit compliance report to this Hon'ble Court within the time limit as deemed fit in the facts and circumstance of the case; (iii). Issue appropriate writs or directions directing Respondent No.3 to complete investigation in Crime No.08/2021 of Sheshadripuram PS and submit compliance report to this Hon'ble Court within the time limit as fixed time limit by this Hon'ble Court; (iv). Grant such other reliefs as the Hon'ble Court deems fit in the facts and circumstances of the case in the interest of justice and equity. - 6 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 2. The petitioners in Writ Petition No.16991/2022 being accused Nos.1, 2 and 6 in Crime No.8/2021 of Seshadripuram Police Station as referred to above and pending before the Trial Court are seeking the following reliefs: (a) Issue a Writ of Certiorari or any other appropriate Writ, Direction or Order to quash the FIR in Crime No.0008/2022 based on the Complaint against the Petitioners alleging that the Petitioners have committed offences punishable under Section 406, 408, 465, 468, 471, 420, 120B read with Section 34 of the Indian Penal Code, 1860. (b) Issue a Writ of Certiorari or any other appropriate Writ, Direction or Order to quash the Charge Sheet dated 25.06.2022 filed by the Respondent No.1 Police in C.C. No. 21893/22 against the petitioners herein. (c) Issue a Writ of Certiorari or any other appropriate Writ. Direction or Order to quash the Order dated 08.07.2022 passed by the 4th Additional Chief Metropolitan Magistrate at Bengaluru and further proceedings in CC.NO. 21893/22. - 7 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 (d) To grant such other order/s as the Hon'ble Court may deem fit to grant under the circumstances of the case, in the interest of Justice and Equity. 3. For the sake of convenience, the parties are referred to as per their rank and status in Writ Petition No.16991/2022. 4. Brief facts of the case are that, respondent No.2- M/s Khoday R.C.A Industries (Khoday Eshwarsa & Sons) represented by its partner and authorised representative Sri.K.S.Brijmohan (hereinafter referred to as 'the complainant') filed the first information with Sheshadripuram police on 27.02.2021 alleging commission of the offences punishable under Sections 120-B, 406, 408, 420, 465, 468 and 471 read with Section 34 of IPC against accused Nos.1 to 5. It is alleged by the complainant that he is one of the partners in 'Khoday Eshwarsa & Sons' operating under the name and style as M/s Khoday R.C.A Industries (for short 'KRCAI') having its registered office at Bengaluru. The firm is into the business of manufacturing and sale of 'Indian Made Foreign Liquor' (for short 'IMFL') since about 60 years. KRCAI is the Excise license - 8 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 holder since the year 2002 and Unit is leased to 'Khoday India Limited' (for short 'KIL') which is the flagship Company of Khoday Groups. Even though KIL is into several other business, distilleries is its core business. The finance and the business in KRCAI is being managed and administered by 'KIL'. Sri.K.L.A.Padmanabhasa - accused No.2 along with K.L.Swami, who are amongst other Directors of the Company, were the authorized signatories to operate the bank accounts, including the bank account bearing No.0402201052375 with Canara bank, Avenue Road branch, which is now closed. 5. It is stated by the complainant that the business operations of 'KRCAI' was being managed by all the 11 partners. But accused No.2 - Padmanabhasa and his son - accused No. 1-Sri.K.P.Ghanashyam were primarily entrusted with the day-to-day operations and general administration of the business, including manufacture, marketing, sales, collections and finances. They were responsible for identifying and releasing the payments to various service providers and suppliers of raw materials. Accused No.1 was authorised to take decisions in respect of every single payment to be made - 9 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 by 'KRCAI' and either to approve or disapprove the same. Accused No.2 was authorised to release the payments on the recommendations by accused No.1. 6. It is contended that during August 2020, several complaints were received from the retailers regarding non- supply of the products and there being no promotional activities conducted. On verification, it disclosed that since June 2017 upto August 2020, an amount of Rs.17.73 crore has been shown as expenditure incurred by 'KRCAI' towards promotional and marketing activities of the branch in the State of Karnataka and various invoices were issued by 'Sri. Surabhi Enterprises' towards commission, TA/DA expenses and vendors/suppliers incentives. Those bills were not having any signatures, except a stamp. There were no supporting documents. There was no reference to any retailer, nor there was reference to any receipts, acknowledgements, name and other details of the sales executives, travel bills, advertisements, gifts or any such promotional activities. The complainant came to know that there has been a major fraud played by 'Sri. Surabhi Enterprises', through Sri.Dharmendra i.e., accused No.3 and - 10 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 others. Accused No.1 who approved such bills for payment, which on the face of it, appears to be false, fabricated and do not contain the original signature of the complainant nor supported by any document and the payment for such fraudulent bills were made by his father accused No.2 having knowledge of the fraudulent acts and deeds. Accused No.4- Ramachandra Singri, who was working as Manager was the main co-ordinator for all the transaction with 'Sri. Surabhi Enterprises' and accused No.3. 7. It is stated that after coming to know about all these facts, 'KRCAI' initiated the audit. The audit report revealed huge irregularities, unjustified expenses without support of any documents and spending of Rs.17.73 crore towards payment that was made to 'Sri. Surabhi Enterprises'. 8. The complainant further stated that it has discovered a document Styled as 'IMFL' promotional agreement purportedly entered into between 'KRCAI' represented by accused No.1 as its partner with 'Sri. Surabhi Enterprises' - 11 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 represented by accused No.3 as its authorized representative. This agreement is a fabricated document without there being any intent by both the parties to render any service termed as promotional or marketing, nor there has been any engagement of such service. The document was concocted only with an intention to siphon off and misappropriate the funds from the firm and thereby commit criminal breach of trust of all the partners of the firm. Complainant stated that the feedback from over 500 retailers across the State confirmed that since the last four years, there was absolutely no promotional or marketing activities nor any incentive was given. It is also revealed that not even a single representative had visited the retailers but however, bill for Rs.17.73 crore was shown as the expenditure incurred. 9. The complainant also stated that when the premises of 'Sri. Surabhi Enterprises' mentioned in the fraudulent bill was visited, it was found that, it was a place of residence. Accused No.3 was only a transporter of spirit, who operates few tankers through 'Devagiri Enterprises and Devagiri Bulk Carriers'. But this fact was fraudulently and dishonestly concealed. - 12 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 10. The complainant contended that these facts were detected during September 2020 and thereafter, accused Nos.1, 2 and 3 through 'Sri. Surabhi Enterprises', stopped raising any bills. It is contended that accused Nos.1 and 3 hatched a criminal conspiracy with the active involvement of accused No.2 for its execution for misappropriation of huge sums of money and carried out their criminal acts. They made wrongful gain for themselves causing wrongful loss to the firm and its partners by dishonestly and fraudulently creating false documents, using them as genuine and effecting fraudulent payments to a fictitious entity from June 2017 to August 2020. Further, it is stated that accused Nos.1 and 4 have committed several financial irregularities within the firm to defraud the firm and its partners for their personal gain with the help of other accused. Thus they have committed criminal conspiracy, criminal breach of trust, forgery, used the forged documents as genuine, cheated the business entity and caused loss of Rs.17.73 crore and therefore, requested the police to register the case and to initiate legal action. [ - 13 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 11. The police registered the FIR in Crime No.8/2021 at Seshadripuram Police Station against accused Nos.1 to 5 and the investigation was undertaken. After investigation, the charge sheet came to be filed against accused Nos.1 to 6 for above said offences, however, showing accused Nos.1, 2, 4 and 6 as absconding and seeking permission to conduct further investigation under Section 173(8) of Cr.PC. As per column No.17 of the final report, accused Nos.1 and 2 being the partners of KRCAI, entered into deed of reconstitution of partnership agreement dated 31.05.2017 along with CWs.1 to 6. Accused Nos.1 and 2 have opened the current account No.0402201052375 with Canara Bank, Avenue Road Branch. Accused No.2 was having the authority to sign the cheques. Accused No.1 was having the authority of managing the production, purchase and sale of the products, accused No.6 was looking after the financial affairs. Accused Nos.1, 2 and 6 used to produce the products through 'KRCAI' and used to market it through 'Karnataka State Beverage Corporation Limited' (KSBCL) . - 14 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 12. It is stated that accused No.3 was the distributor of spirit on contract basis to 'Khoday Eshwarsa & Sons' belonging to KIL and KRCAI being the Proprietor of Devagiri Bulk Carriers and Devagiri Enterprises. Accused No.4 was the Manager in KRCAI since 30.03.1994. Therefore, he is only an employee. Accused No.5 was the mother of accused No.3 and was the proprietor and promoter of the bogus Company by name 'Sri.Surabhi Enterprises'. 13. It is stated that accused Nos.1, 2 and 6 being the partners of 'KRCAI' along with CWs.1 to 6 and three others, committed breach of trust, conspired with accused Nos.3 and 4 in the matter of sale of liquor produced in 'KRCAI' through 'KSBCL' depot, throughout Karnataka. Accused Nos.1 and 3 entered into a nominal agreement styled as IMFL promotional agreement. As per the instructions of accused Nos.1, 2, 4 and 6, accused No.3 with the help of CW16, used the PAN card and other documents belonging to accused No.5 to launch an entity by name 'Sri. Surabhi Enterprises' with GST registration on 03.08.2017 by showing their residence as the corporate office - 15 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 for the entity, opened the Bank Account with Corporation Bank, ICICI Bank, Karnataka Gramina Bank, Hassan. 14. It is also stated that accused Nos.3 and 5 even though projected to be running 'Sri. Surabhi Enterprises', having dealings with KRCAI and dealing with liquor products, have not appointed any of the workers nor conducted any marketing or promotional activities anywhere in Karnataka. But launched a fake Company nominally by using the name 'Sri. Surabhi Enterprises' as accused No.5, accused Nos.1 to 4 and 6 conspired together and concocted various invoice summaries, debit note for commission, incentives, TA/DA and issued the sale invoice with the signature of accused No.3 without raising any bills. They have concocted various vouchers for having spent the amount for various market promotional activities by utilizing the bus tickets, vehicle bills, hotel bills pertaining to the workers in the Company and siphoned off Rs.17.73 crore belonging to 'KRCAI' through Canara Bank, Avenue Road Branch, current account by transferring it to 'Sri.Surabhi Enterprises' to its Bank accounts with Corporation Bank, ICICI Bank and Karnataka Gramina Bank, Hassan. Even - 16 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 though 'Sri. Surabhi Enterprises' has not involved in any of the marketing promotions, accused No.3 siphoned 20% of the amount and utilised it to pay salaries to his employees employed in bar and restaurant run by him and utilized the Bank account of employees of 'KRCAI' i.e., CWs.11 to 15 and the remaining 80% of the amount was siphoned off by accused Nos.1 and 3 by drawing the amount under the name of 'Sri.Surabhi Enterprises' by issuing self cheques. Thereby, the accused have committed the offences. 15. On the basis of charge sheet filed by the Investigating Officer, learned Magistrate took cognizance for the above said offences, registered CC.No.21893/2022 and issued summons to accused No.3. Since accused Nos.1, 2, 4 and 6 were shown as absconding, NBWs were issued against them. Accused Nos.1, 2 and 6 have filed WP.No.16991/2022 seeking to quash the criminal proceedings including FIR, charge sheet and the order taking cognizance against them. The complainant has filed WP.16631/2022 seeking various directions to the respondents as stated above. - 17 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 16. Heard Sri. P.P.Hegde, learned Senior Advocate for Sri. Venkatesh Somareddy, for the petitioner and Smt.Rashmi Patel, learned High Court Government Pleader for respondent Nos.1 to 3 and Sri. Praveen S., learned counsel for Sri. Ajesh Kumar,S., learned counsel for respondent No.4 in WP.No.16631/2022 and Sri. Praveen.S. learned counsel for Sri.Ajesh Kumar.S., learned counsel for the petitioner and Smt.Rashmi Patel, learned High Court Government Pleader for respondent No.1, Sri.P.P.Hegde, learned Senior Advocate for Smt. Rachitha Rajshekar, learned counsel for respondent No.2 in WP.No.16991/2022. Perused the materials on record. 17. Learned counsel for accused Nos.1, 2 and 6 being the petitioners in WP.No.16991/2022 contended that the main grievance of the complainant is that the petitioners siphoned off an amount of Rs.17.73 crore during the period from June 2017 to August 2020 by transferring the amount in favour of 'Sri. Surabhi Enterprises' claiming it as commission, TA/DA expenses, etc. Based on the same, FIR was registered. Later, the charge sheet came to be filed. Learned Magistrate without taking into consideration the materials that are placed before - 18 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 the Court, took cognizance of the offences and directed to issue NBW against accused Nos.1, 2, 4 and 6. 18. Learned counsel submitted that it was one K.L.Swamy, father of the complainant, who was in-charge and was authorized for payments to be made from KIL to 'Sri. Surabhi Enterprises'. Therefore, it was the said K.L.Swamy, the father of the complainant transferred the amount from the account of 'KIL' to 'Sri. Surabhi Enterprises'. The accounts maintained at 'KIL' reflects various payments made. He filed all statutory returns and signed all the necessary documents. The accounts of 'KIL' was audited and the auditor has not found out any illegalities. The accused have not committed any of the offences as alleged. Learned counsel submitted that the accused have fully co-operated with the Investigating Officer. He has drawn the attention of the Court to the order sheet dated 06.08.2021 in WP No.7294/2021, where the Court has directed the Investigating Officer not to file the final report till disposal of the petition. - 19 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 19. Learned counsel also contended that as per the order sheet dated 13.04.2022, the status report of the investigation was submitted by the Investigating Officer, which revealed that no action whatsoever was taken against accused Nos.1 and 2. At the instance of complainant, the report in sealed cover was asked to be submitted and accordingly, as per order dated 19.04.2022, the report in a sealed cover was submitted by the ACP, Seshadripuram Sub-Division. According to the report found in the sealed cover, investigation was conducted against accused Nos.1 and 2, who have co-operated with the Investigating Officer. No evidence was found against them and therefore, they were not arrested. The ACP who was personally present before the Court sought permission to file the final report and the same was permitted. Therefore, learned counsel for the accused contended that accused Nos.1, 2, 4 and 6 were never absconded, but they were assisting the Investigating Officer by participating in the investigation. Inspite of that they have been shown as absconding. The learned Magistrate proceeded to issue NBW without any reason. - 20 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 20. Learned counsel submitted that the allegations made against the accused is nothing but in the nature of civil dispute between the partners of the firm. Even according to the charge sheet, various payments were made through the account of KIL and no payment whatsoever was made by 'Khoday Eshwarsa & Sons'. 'KRCAI' is a part of 'Khoday Eshwarsa & Sons' and not a part of KIL as tried to be projected by the complainant. 21. Learned counsel contended that accused Nos.1 and 2 are the partners of 'Khoday Eshwarsa & Sons' having 25% interest and they have about 18.77% equity shares in KIL. There was an agreement as IMFL promotional agreement dated 19.07.2017 entered into between M/s KRCAI and 'Sri. Surabhi Enterprises'. The books of account were subjected to audit and the auditor has not found out any irregularities with the books of account. 22. Learned counsel contended that K.L.Swamy father of complainant had filed Com.A.A.No.90/2023 and filed an affidavit stating that there were no irregularities in the accounts - 21 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 of 'KIL'. The documents produced by the accused disclose that it was K.L.Ramachandra and K.L.Swami who are the authorized signatories to the Bank transactions pertaining to 'KIL'. Under such circumstances, the complainant could not have blamed the accused alleging commission of various offences. 23. Learned counsel contended that various payments made through 'KIL' to 'Sri. Surabhi Enterprises' were at the instance of K.L. Swamy, the father of the complainant. The statement of accounts of 'KIL' discloses the same. Even it has deducted TDS for the payments made to 'Sri. Surabhi Enterprises' in the name of its proprietor-accused No.5. This TDS certificate was signed by the father of the complainant. The 'KIL' maintained day book and ledger account in the name of 'Sri. Surabhi Enterprises' on a regular course of its business, which is registered and having GST certificate. The amount received by 'Sri. Surabhi Enterprises' from 'KIL' is reflected in its balance sheet. 24. Learned counsel contended that as per the agreement signed by K.L. Swami on 17.09.2018, KRCAI is the - 22 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 trade name belonging to 'Khoday Eshwarsa & Sons'. Inspite of that, as per GST certificate produced by the complainant, 'KRCAI' is shown as the trade name of 'KIL', and it is only to mislead the Court. 25. Learned counsel contended that on 17.02.2021, the public notice was issued by accused No.1 and other partners, cautioning the public at large, about the dispute with the complainant and his father. Within 10 days from there, i.e., on 27.02.2021 the present complaint came to be filed by the complainant and this discloses that the complainant has deliberately filed the complaint making false and frivolous allegations without there being any merits. 26. Learned counsel further submitted that in WP No.7294/2021, this Court has taken note of the fact that the petitioners were co-operating with the police as per its order dated 19.04.2022. There are absolutely no materials against accused Nos.1 and 2 and therefore, the Investigating Officer had not arrested them. Petitioner No.1 had filed a complaint against the complainant and his father on 05.02.2021, which - 23 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 was registered in Crime No.26/2021. However, later B-report was filed by the police. Petitioner No.2 had filed a complaint against the complainant and his father on 08.04.2021 registered in Crime No.46/2021, which is still under investigation. 27. Learned counsel further submitted that on 19.04.2021, the father of the complainant had filed a complaint with excise authority alleging that the petitioners have siphoned the money through 'Sri. Surabhi Enterprises'. But later on 04.09.2021, withdrawn the said complaint unconditionally. But in spite of that, the present complaint is being pursued only to pressurize the accused to agree for their terms. 28. Learned counsel submitted that in the meantime, in COMAP No.349/2022 the dispute between the petitioners, complainant and other partners of 'Khoday Eshwarsa & Sons' were referred to mediation and the matter is being mediated. - 24 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 29. Learned counsel contended that at the instance of K.L.Swamy-the father of the complainant, a Chartered Accountant by name Ganesh J.S. carried out a special review and verification of the financial transactions held by 'KRCAI' which is the business Division of 'Khoday Eshwarsa & Sons' for the period from 2015 to 2020. The said Chartered Accountant submitted his report to 'Khoday Eshwarsa & Sons', specifically saying that he has not been provided with the copy of agreement. He does not state that he has collected any information from the petitioners. Under such circumstances, it is contented by the learned counsel for the petitioners that the civil dispute between the partners was given the colour of a criminal offence, with an ulterior motive. There are absolutely no basis for making such allegations and therefore the criminal proceedings initiated against the petitioners is liable to be quashed. 30. Per contra, Sri. P P Hegde, learned senior advocate for respondent No.2 opposing the petitions submitted that during investigation, it is revealed that various cheques withdrawing the amount was signed by accused No.2 and the - 25 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 bills were processed by accused No.1 and his son - accused No.6. Accused No.1 is the son of accused No.2 and accused No.6 is the son of accused No.1. Accused No.3 was the transporter and accused No.4 was the Manager. Accused No.5 is the mother of accused No.3 and all these accused, in collusion with one another, managed to concoct various documents including the vouchers and receipts to siphon off Rs.17.73 crore, which in fact, was ultimately received by accused No.1. They have launched a bogus entity by name 'Sri. Surabhi Enterprises' showing accused No.5 - the mother of accused No.3 as the proprietor of the said concern. The amount was being transferred from the bank account maintained by 'KRCAI' in favour of 'Sri. Surabhi Enterprises' under the guise of payment of TA/DA, commission, gifts for promotion etc., Initial audit conducted by the auditor refers to tallying of the bills with the bank account and found it to be correct. The auditor has not considered the genuineness of the documents, nor verified or compared the bills with the invoice. Therefore, CW7-an Auditor was appointed to hold extensive audit of the accounts at the instance of the partners of KRCAI. CW7 after extensive audit, found that bills and vouchers were bogus to - 26 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 transfer huge sum of amount. Each and every bar owner were enquired about the promotional activities undertaken by the accused. But no such activities were ever undertaken by any of the accused including 'Sri. Surabhi Enterprises'. The office of 'Sri. Surabhi Enterprises' shown in the agreement is in fact the residential house of accused Nos.3 and 5. Initially accused Nos.3 and 4 were apprehended and their confessional statements were recorded. They categorically stated that they have withdrawn the amount of Rs.17.73 crore which was in turn paid to accused No.1. 31. Learned Senior Advocate submitted that looking to the magnitude of the offences committed, the Enforcement Directorate had also came into picture. It has conducted enquiry and found that there was money laundering. The investigation is still in progress. Similarly, the Department of Income tax also held enquiry regarding money laundering and tax evasion. During investigation, it was found that even though there was no actual expenses incurred under various heads, accused Nos.3 and 4 have drawn the amount from accused No.1 and 2 and some amount was retained by them as - 27 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 commission but the major portion was paid back to accused No1. 32. Learned Senior Advocate submitted that accused No.2 managed to get anticipatory bail only on the ground that he is aged more than eighty years. When the said order was challenged before this Court, the bail was cancelled as per order dated 19.01.2021 in Crl.P.No.2489/2021. Accused No.1 had sought for grant of anticipatory bail, but his prayer was repeatedly rejected by the Trial Court and also by this Court. 33. Learned Senior Advocate contended that the materials that are placed by the Investigating Officer while filing the charge sheet disclose that accused No.2 was authorized to maintain account No.0402201052375 with Canara Bank, Avenue Road Branch, Bengaluru, as per Resolution dated 21.04.2017. Immediately thereafter, a fake agreement styled as IMFL promotional agreement signed by accused No.1 in favor of Sri Surabhi Enterprises came into existence, even though there was no authority vested with accused No.1 to enter into such agreement. Thereafter, from 29.07.2017 till 18.08.2020, the accused in collusion with one - 28 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 another managed to transfer huge sum of Rs.17.73 crore from account No.0402201052375 to three different bank accounts opened in the name of 'Sri. Surabhi Enterprises', through the cheques signed by accused No.2. He submits that accused No.1 is the son of accused No.2 and accused No.6 is the son of accused No.1. Accused No.3 is the transporter and accused No.5 is his mother, who is shown as the owner of 'Sri. Surabhi Enterprises'. It was accused No.5 who was issuing the invoices, which were being approved for payment by accused Nos.1 and 6, while managing the affairs of RCA Industries and on getting the approval, accused No.2 used to issue the cheque. Accused No.3 obtained a document authorizing him to deal with the account of 'Sri. Surabhi Enterprises' and accordingly, he used to withdraw the amount from three different bank accounts standing in the name of 'Sri. Surabhi Enterprises' and the accused used to distribute the amount as clandestinely agreed between them. 34. Learned Senior Advocate contended that since the Department of Income Tax intervened in the matter and initiated investigation, the accused were subjected to - 29 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 interrogation. During interrogation, accused Nos.1, 3 and 6 have categorically admitted about the modus operandi they adopted for the purpose of siphoning off more than Rs.17 crore and distribution of the amount so siphoned off, as commission. Therefore, it is clear that the Investigating Officer secured the presence of the accused, including accused Nos.1, 2 and 6, who are the petitioners before this Court. But the Investigating Officer showed them as absconding, while filing the charge sheet. 35. Learned Senior Advocate further submitted that, during 2017-18, marketing and sales expenses increased drastically, but there was no increase in the sales. Further, there was decrease in the profit. Therefore, suspicion cropped up. In the meantime, many distributors started informing the marketing and sales division complaining about not initiating any marketing promotional activity by RCA division and the sales representatives not visiting them for promoting marketing. A market survey team was constituted by the General Manager to find out the reason for reduction in sales and increase in the expenses and the survey report disclosed - 30 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 that no sales executives from the Company conducted any sales/marketing promotion. There were no sales schemes introduced. Since the suspicion regarding the manner in which the expenses towards marketing and sales was being increased, the same was considered in light of the market survey report and Sri. Ganesh Shettigar-the Auditor was appointed to conduct Special Audit, who submitted his report, which made the position clear that an amount of Rs.17.73 crore was siphoned off by the accused under the guise of amount spent for sales promotion through 'Sri. Surabhi Enterprises', which is a shell Company promoted by the accused themselves, in collusion with one another. 36. Learned Senior Advocate drawn the attention of the Court to the audit report submitted by the Auditor to contend that there was drastic increase in the sales incentives and sales commission paid, while there was a drastic decrease in the sales. The observations and comments made by the Auditor in his report makes the position very clear that there was decrease of 20.73% in the liquor sale during 2017-18 when compared to the financial year 2016-17. However, the - 31 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 expenses incurred shoot up by 341.19%. The audit report also highlights the agreement/contract with 'Sri. Surabhi Enterprises' and the agreements including the terms and conditions related to payment of sales incentives were never produced by the accused before the Auditor. Major portion of the amount towards sales and marketing expenses were paid to 'Sri. Surabhi Enterprises'. There were no credible information and documentary evidence to justify incurrence and reimbursement of the expenses and therefore, the Auditor advised the management to conduct a detailed verification of sales incentives. The Auditor had also noticed that the invoices of 'Sri. Surabhi Enterprises', Hassan were bearing scanned signatures of accused No.3 and a similar scanned signatures of accused No.3 were also found on the invoices of Ms.Devagiri Enterprises, Hassan, who was the authorized transporter for neutral spirit for liquor division. It is thereafter, the complaint came to be filed by the complainant seeking police investigation. 37. Learned Senior Advocate contended that even though there are strong prima facie material to constitute the - 32 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 offence against the accused, the Investigating Officer has washed off his hands by filing the charge sheet showing accused Nos.1, 2, 4 and 6 as absconding, even when they were appearing before the Investigating Officer and were subjected to interrogation. Even though NBW was issued by the Trial Court, the same was never executed. When this fact was highlighted before the Co-ordinate Bench of this Court in WP.No.7294/2021, on 06.04.2021 the Investigating Officer Sri.Chandan Kumar N appeared in-person and submitted his report in a sealed cover and further stated that accused Nos.1 and 2 are co-operating with the police in the investigation and further he also submitted that there is no evidence forthcoming against accused Nos.1 and 2 and therefore, they were not arrested. This submission made by the Investigating Officer before the Co-ordinate Bench of this Court is glaringly inconsistent with the materials that are part of the charge sheet, which was filed on 25.06.2022. 38. Even though the NBWs were repeatedly issued by the learned Magistrate, the same were not being executed deliberately, as the Investigating Officer was in hand-in-glove - 33 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 with the accused. He further submitted that even though clinching materials were available to invoke Sections 409 and 467 of IPC, the same were not invoked, as they were punishable with imprisonment for life. The Investigating Officer conveniently invoked the penal provisions, which are punishable only up to seven years, apparently to assist the accused to get anticipatory bail on the ground that the investigation is completed, the final report is filed and as per the charge sheet, only the offences punishable up to seven years is made out. The Investigating Officer, who is cited as CW81 colluded with the accused in making mockery of fair investigation. He has also hoodwinked the Court under the guise of conducting investigation and finally appearing before the Co-ordinate Bench of this Court and making a candid submission that accused Nos.1 and 2 are co-operating with the investigation and no materials are available against them. Therefore, the said Investigating Officer is answerable to this Court about his conduct. 39. Learned Senior Advocate contended that it is the right of the complainant to have a fair and time-bound - 34 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 investigation, when sufficient materials are available on record to constitute the offence not only invoked by the Investigating Officer while filing the final report, but also to invoke Sections 409 and 467 of IPC, which are punishable with imprisonment for life. Inspite of that, the Investigating Officer has not chosen to apprehend the accused, including accused Nos.1, 2 and 6, who are the petitioners herein. The original invoices and the agreements were never seized, the misappropriated amount was never traced or seized. But for the audit report submitted by the Auditor highlighting the manner in which the agreement, invoices and other documents were concocted for the purpose of siphoning off the amount, the Investigating Officer would not have filed the charge sheet against the accused. However, suppressing the materials that are highlighted in the audit report, he has filed the charge sheet favoring the accused. The complainant is not having any faith in the Investigating Officer and therefore, WP.No.16631 of 2022 is filed by the complainant seeking necessary reliefs. 40. Learned Senior Advocate also submitted that accused Nos.1 and 2 have approached the Trial Court for grant - 35 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 of anticipatory bail, contending that no case is made out against them. The Trial Court even though rejected the prayer for grant of anticipatory bail to accused No.1, had granted anticipatory bail to accused No.2, which was challenged before this Court seeking cancellation of the anticipatory bail. The said petition was allowed by this Court and the anticipatory bail granted in favour of accused No.2 was rejected. Prayer made by accused Nos.1 and 2 for grant of anticipatory bail was consistently rejected by this Court, holding that there are prima-facie materials, which require the accused for custodial interrogation. 41. Learned counsel submitted that the prosecutors representing the State opposed the petition for bail filed by the accused before the Trial Court, as well as before this Court, contending that there are strong prima-facie materials and voluminous documents which prima facie discloses commission of the offences, but inspite of that, the Investigating Officer was dare enough to make submission before the Co-ordinate Bench of this Court stating that there are no materials available against the accused and therefore, they were not apprehended. - 36 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 42. In view of all these facts and circumstances, the petition filed by the complainant is liable to be allowed. No grounds are made out to quash the criminal proceedings against accused Nos.1, 2 and 6 and therefore prays for dismissal of Crl.P.No.16991/2022 and allowing Crl.P.No.16631/2022. 43. In view of the rival contentions urged by the learned counsel for both the parties, the point that would arise for my consideration is: 1. Whether the petitioner-complainant in WP.No.16631/2022 has made out any grounds to allow the petition? 2. Whether the petitioners in WP.No.16691/22 have made out any grounds to allow the petition and to quash the criminal proceedings initiated against them?" My answer to point No. 1 is in ‘affirmative' and for point No.2 is in the 'negative' for the following: - 37 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 R E A S O N S 44. The complainant i.e., M/s. Khoday RCA Industries represented by its partner and authorized representative filed the first information with Sheshadripuram Police on 27.02.2021 alleging commission of the offences by the accused under Sections 120B, 406, 420, 465, 468, 471 R/w Section 34 of IPC. According to the complainant, KRCAI is into business of manufacturing and sale of IMFL having excise license since 2002. The Unit is leased to KIL, which is into several other businesses even though distilleries is its main business. The finance and business of KRCAI is managed and administered by KIL. Accused No.2 is one of the Director of the Company and the authorized signatory to operate the bank accounts, including the bank account with Canara Bank, bearing No.0402201052375. Accused No.1 is the son of accused No.2 and accused No.6 is the son of accused No.1. 45. It is stated that the accused were managing the affairs of the Company. Accused No.1 is primarily responsible for the day-to-day operations and general administration of the business. He is responsible for identifying and releasing the - 38 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 payments. He was authorized to take decision in respect of every single payment to be made by KRCAI with an authority either to approve or disapprove any payment. Accused No.2 is authorized to release the payment on the recommendations of accused No.1. Accused No.4 being the Manager is an employee, who was working with accused Nos.1 and 2. Accused No.3 is the transporter and the authorized signatory to 'Sri. Surabhi Enterprises'. Accused No.5 is the mother of accused No.3, in whose name, 'Sri. Surabhi Enterprises' was functioning. 46. It is stated that these accused Nos.1 to 6 in collusion with one another, misusing the authority to approve payments and to deal with the bank account, managed to transfer huge amount of over Rs.17 crore to three different bank accounts standing in the name of Sri. Surubhi Enterprises with the Corporation bank, Hassan, ICICI Bank, Hassan, Karnataka Grameen Bank, Hassan by raising fake invoices and fake bills under the guise of promotional activities, even though there was no such activity undertaken. 47. The modus operandi alleged against the accused is that accused Nos.1 and 6 used to approve the payments and - 39 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 based on the same, accused No.2 used to issue the cheques relying on the fake invoices that are issued by accused No.3 as the authorized signatory for accused No.5 and accused No.4 being the Manager used to manage the entire things, as a result of which, the amount was transferred from the bank account No.0402201052375 to the accounts of 'Sri. Surabhi Enterprises' and all these transactions were for the period from 29.07.2017 till 18.08.2020. The market survey conducted by the Company disclosed that there were no promotional activities conducted during that period. No sales representative visited the distributors. When a special audit was undertaken by the auditor, he found huge irregularities in dealing with the finance of the Company. There was approval of the fake invoices with the scanned signatures of accused No.3. Issuance of the cheque by accused No. 2 and transfer of the amount to the account of 'Sri. Surabhi Enterprises', which is said to be a shell Company. In turn, accused No.3 used to withdraw the amount from the said bank account and all the accused used to share the same amongst themselves. Accused No.4 being the Manager was also entitled for commission of 5%. - 40 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 48. The materials on record discloses that there are strong prima-facie materials available for invoking the penal provisions including Sections 409 and 467 of IPC. I do not find any justification for the Investigating Officer for not invoking these penal provisions which are punishable with imprisonment for life. I find considerable force in the contention taken by the learned Senior Advocate for the complainant that in order to help the accused, the Investigating Officer filed the charge sheet without apprehending the main accused and without invoking Sections 409 and 467 of IPC, so that the accused can seek anticipatory bail on the ground that the investigation is completed and the offences alleged are not punishable for more than seven years. There are no other reasonable grounds for the Investigating Officer for not invoking Sections 409 and 467 of IPC. Moreover, the charge sheet that was filed on 25.06.2022 showing accused Nos.1, 2, 4, and 6 as absconding and the Investigating Officer sought for issuance of warrant. Admittedly, the warrant was never executed even though issued by the Trial Court. When WP.No.7294/2021 was taken up by the Co-ordinate Bench of this Court on 17.08.2021, the Investigating Officer - Sri.Chandan Kumar.N appeared before - 41 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 the Court and gave his report in a sealed cover. When the sealed cover was opened in the Court, the report showed that the investigation is being conducted against accused Nos.1 and 2 and they are co-operating with the police in investigation, further no evidence is forthcoming against them and therefore they were not arrested. This submission made by the Investigating Officer before this Court is against the materials that are available on record, which are glaring at accused Nos.1 and 2. Unfortunately, accused No. 2 died during the pendency of this petition. However, that will not absolve the responsibility of other accused, who are prima-facie hand-in-glove with one another. 49. I do not find any reason to reject the contention taken by the complainant that the Investigating Officer is also sailing with the accused in safeguarding their interest for the reasons best known to him. Therefore, I am of the opinion that WP.No.16631/2022 filed by the complainant is liable to be allowed and necessary directions will have to be issued to see that a fair investigation is undertaken for the purpose of filing the additional final report and to find out the truth in the - 42 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 matter. It is needless to re-iterate that fair and speedy investigation is the fundamental right of the complainant, which apparently, is being denied and therefore, I answer point No.1 in the affirmative. 50. Learned Senior Advocate for the complainant drawn the attention of the Court to the audit report submitted by the Auditor, who is cited as one of the witness in the charge sheet. My attention was also drawn to the observations, conclusions and the recommendations made by the Chartered Accountant, who is cited as a witness. He has reported that no original documents and the invoices were produced before him and he recommended for a detailed enquiry into those transactions, which are suspicious in nature. He quantified siphoning off the amount of over Rs.17 crore and suggested for enquiring into the matter. It is thereafter, the complaint came to be filed. 51. The Investigating Officer, even though not apprehended accused Nos.1, 2, 4 and 6, proceeded to file the charge sheet showing them as absconding, even though there are prima-facie materials to constitute the offence as stated above. When there are prima-facie materials to constitute the - 43 - NC: 2025:KHC:1291 WP No. 16631 of 2022 C/W WP No. 16991 of 2022 offence, the petition filed by accused Nos.1, 2 and 6 for quashing the criminal proceedings cannot be entertained. Hence, I answer point No.2 in the negative and proceed to pass the following: ORDER Writ Petition No. 16631 of 2022 is allowed. Writ Petition No. 16991 of 2022 is dismissed. DG & IGP is directed to appoint a competent Police Officer, not below the rank of DCP to take over further investigation forthwith and to complete the same in a time bound manner, atleast within three months and to submit the report in that regard before this Court. DG & IGP is further directed to see that NBWs issued against accused Nos.1 and 6 are executed promptly without further delay for the purpose of conducting fair investigation. Communicate this order to DG & IGP, forthwith. Sd/- (M G UMA) JUDGE BH: List No.: 2 Sl No.: 25