M/S Switz International Private ... vs The State Of Karnataka
2022 Latest Caselaw 10545 Kant

                            1



       IN THE HIGH COURT OF KARNATAKA AT BENGALURU

            DATED THIS THE 08TH DAY OF JULY, 2022

                           BEFORE

          THE HON'BLE MR. JUSTICE M. NAGAPRASANNA

              CRIMINAL PETITION No.1891 OF 2022

BETWEEN:

1.     M/S. SWITZ INTERNATIONAL PRIVATE LIMITED
       NO.609/610, C-3, 6TH FLOOR
       BALARAMA CO-OP SOC. LTD.,
       BANDRA KURLA COMPLEX
       BANDRA EAST, MUMBAI 400 051
       REPRESENTED BY ITS
       AUTHORISED SIGNATORY.

2.     MR.MUKUND VENKATRAMAN
       S/O GOPALARATHNAM VENKATARAMAN
       AGED ABOUT 66 YEARS
       NO.609/610, C-3, 6TH FLOOR
       BALARAMA CO-OP SOC. LTD.,
       BANDRA KURLA COMPLEX
       BANDRA EAST
       MUMBAI - 400 051.
                                              ... PETITIONERS
(BY SRI K.ARVIND KAMATH, SR. ADVOCATE A/W
    SRI ANAND MUTTALLI, ADVOCATE)

AND:

1.     THE STATE OF KARNATAKA
       REPRESENTED BY
       INDIRANAGAR POLICE STATION
       SPECIAL PUBLIC PROSECUTOR
       HIGH COURT OF KARNATAKA.
                           2



2.   THE STATE OF KARNATAKA
     REPRESENTED BY
     CENTRAL CRIME BRANCH
     SPECIAL PUBLIC PROSECUTOR
     HIGH COURT OF KARNATAKA.

3.   MR.K.VENKATRAMAN
     DIRECTOR
     M/S. MEDIENTE FILMS
     INTERNATIONAL PVT. LTD.,
     AGED ABOUT 59 YEARS
     RESIDING AT NO.177, GROUND FLOOR
     2A CROSS, 2ND MAIN, DOMLUR
     BENGALURU - 560 071.
                                            ... RESPONDENTS

(BY SMT.K.P.YASHODHA, HCGP FOR R1 AND R2;
    SRI A.S.PONNANNA, SR. ADVOCATE A/W
    SRI CHINMAY J.MIRJI, ADVOCATE FOR R3)


      THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF
CR.P.C., PRAYING TO A. QUASH THE COMPLAINT DATED
20.01.2022 (ANNEXURE-B) FILED BY THE 3rd RESPONDENT
BEFORE THE 1st RESPONDENT FOR OFFENCE P/U/S.420 OF IPC
1860; B. QUASH THE FIR IN CR.NO.12/2022 (ANNEXURE-A)
REGISTERED BY THE 1st RESPONDENT AGAINST THE PETITIONER
HEREIN FOR OFFENCE P/U/S.120-B, 406, 420, 424, 149 OF IPC
1860.


    THIS CRIMINAL PETITION HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 13.04.2022, COMING ON FOR
PRONOUNCEMENT THIS DAY, THE COURT MADE THE
FOLLOWING:-
                                    3



                                  ORDER

The petitioners/accused Nos. 5 and 6 call in question

proceedings in Crime No.12 of 2022 registered for offences

punishable under Sections 120B, 406, 420, 424 and 149 of the

IPC pending before the IV Additional Chief Metropolitan

Magistrate, Bangalore City.

2. Brief facts leading to the filing of the present petition, as

borne out from the records, are as follows:-

The first petitioner M/s Switz International Private Limited

(for short 'the SIP') is in the business of finance, financing films

in particular. The 3rd respondent-M/s Mediente Films

International Private Limited ('the Company' for short) is a film

making company. The complainant is the Director of the said

Company. The Company acquired remaking rights of Hindi

movie 'Queen' into four Indian regional languages viz., Kannada,

Telugu, Tamil and Malayalam. In order to complete the project

the Company sought finance from the hands of SIP and the SIP

and the Company entered into an agreement of financing the

feature film on 6-11-2018. Rs.25/- crores was taken as advance

in terms of the said agreement and the repayment was to be

made within 120 days. The Company failed to adhere to the

agreement and again on mutually agreed terms it was extended

on the condition that the SIP would acquire all the rights of

production and distribution of the said film. After the agreement

so entered into also, money was not paid. SIP caused a legal

notice upon the Company cancelling all the agreements

including the agreement as regards right of transfer of the movie

on account of continuous breach of the agreement by the

Company. This was replied to by the Company, after which, the

Company registers a complaint against the petitioners before the

jurisdictional Police contending that the petitioners have

breached the agreement and the money that had to be paid to

the Company is to be recovered.

3. Pursuant to registration of the said complaint, the Police

registered a FIR against the petitioners and other accused for

offences punishable under Sections 120B, 406, 420, 424 and

149 of the IPC. The petitioners are accused 5 and 6. Accused

No.6 is the SIP and accused No.5 is the Director of the said

company. Accused 1 to 4 are not before this Court in these

proceedings. The moment the crime is registered against the

petitioners, the petitioners knocked the doors of this Court in

the subject petition seeking quashment of entire proceedings.

4. Heard Shri K.Aravind Kamath, learned senior counsel

appearing for the petitioners, Smt. K.P.Yashodha, learned High

Court Government Pleader for respondents 1 and 2 and Sri

A.S.Ponnanna, learned senior counsel appearing for respondent

No.3.

5. The learned senior counsel representing the petitioners

would vehemently argue and contend that the entire complaint

was registered against the petitioners arising out of breach of

agreement and alleged recovery of money from the hands of the

petitioners. It is in fact the petitioners who have been cheated

have to receive money from the hands of the Company. The 3rd

respondent in order to arm-twist the petitioners has registered

the complaint against the petitioners. The learned senior counsel

would emphasize on the fact that the petitioners who had

financed the film are yet to receive their funds back. Though

these petitioners have been cheated, the complaint is registered

against them for recovery of money that too alleging offences

punishable under Sections 406 and 420 of the IPC, the

ingredients of which cannot even be seen to be present in the

case at hand and would submit that the proceedings be quashed

which is purely civil in nature which arises out of a mutually

agreed terms and conditions.

6. On the other hand, the learned senior counsel

representing the complainant/Company while taking this Court

through the documents appended to the petition as well as the

application seeking vacation of the interim order would submit

that it is not purely a matter that arises out of the agreement.

There is one more protagonist in the dispute between the

parties. The post-production work was stolen from Unifi media

at Hyderabad which held the entire material of the movie as a

trust. It is the petitioners who had communicated by way of a

mail to hand over all the production material to them. Unifi

media on receiving their amount has straight away handed over

the entire production material which belonged to the Company

to the hands of the petitioners without even informing the

Company. He would therefore submit that a property belonging

to the Company which was kept in trust with Unifi media for

post-production work is dishonestly handed over to the

petitioners. This according to the learned senior counsel

amounts to criminal breach of trust and conspiracy to cheat the

complainant.

7. In reply to the said submissions, the learned senior

counsel appearing for the petitioners would contend that the

petitioners had in fact all the rights to do anything with the post-

production work in the event the Company would not pay the

amount and places on record a communication from the

Company to whomsoever it may concern to hand over all the

materials i.e., post production work to the petitioners. The

learned senior counsel would submit that it is on the strength of

the said communication the petitioners have communicated to

Unifi media and took over all the post-production material and

would submit that even if it is so, all these things spring from an

agreement between the parties. The criminal law cannot be set

in motion to settle score with regard to breach of agreement or

for recovery of money. He would place reliance upon the

judgments of the Apex Court, this Court and Gujarat High

Court, in particular, the following judgments:

(i)     KRISHNA LAL CHAWLA v. STATE OF U.P.
        (2021) 5 SCC 435;

(ii)    VIJAY KUMAR GHAI v. STATE OF WEST BENGAL
        MANU/SC/0348/2022;

(iii) G.ANJANA REDDY v. STATE OF KARNATAKA MANU/KA/5492/2021 and

(iv) MAHINDRA AND MAHINDRA FINANCIAL SERVICES LIMITED v. DELTA CLASSIC PRIVATE LIMITED (2011) 6 GLR 604.

8. I have given my anxious consideration to the

submissions made by the respective learned senior counsel and

perused the material on record.

9. The afore-narrated facts are required to be reiterated in

greater detail to consider the submissions made by the

respective learned senior counsel. In the month of May 2017 one

Manu Kumaran approached the SIP for finance on account of

his procuring re-making rights of Hindi film 'Queen' in four

Indian regional languages. In furtherance of the discussion

between the parties, a production finance agreement is executed

on 27-05-2017. The production finance agreement was for the

purpose of borrowing funds. Rs.7/- crores in terms of the

agreement was disbursed on 27-05-2017 and the remaining

amount of Rs.20.20 crores was sought as additional funds for

completion of shooting. This was taken as loan and the

agreement stipulated that the loan would be repaid not later

than 30-06-2018 unless otherwise agreed upon by the parties.

Finance in terms of the said agreement is transferred between

the parties. In terms of the production finance agreement the 1st

petitioner was granted 95% stake in the Company from the

existing share holders.

10. On 6-11-2018 another agreement was entered into

between the 1st petitioner and the Company for financing the

feature film. The said agreement was an agreement that resulted

in an advance of Rs.25/- crores being given to the Company by

the petitioners. The repayment clause which is germane for

consideration of the present lis is as follows:

"(d). For repayment of the amounts advanced by the Lenders to the Producers together with the commission herein, the Producers hereby create paramount charge, lien and security in favour of the Lenders, (i) upon the said remake of the picture originally titled "Queen" in four languages namely Kannada, Telugu, Tamil and Malayalam (with any other change in its titles or name) and upon all the rights directly and/or indirectly attached to the said picture, (ii) as also upon the copyright and all rights of distribution, exhibition and exploitation of the said picture in any mode and manner whatsoever and howsoever and in any size whatever and through any media whatever including its theatrical or non-theatrical exhibition (including video rights, satellite rights, television rights, cable rights, DVD rights, internet rights, Air borne rights, Pay television rights etc.) or howsoever, and (iii) upon all the receipt, income and realization of the said picture."

In terms of the said clause the producers created paramount

charge, lien and security in favour of the lenders upon the said

remaking of the picture originally titled 'Queen" in four

languages and all copyright, distribution right, exhibition and

exploitation of the said picture including satellite and television

rights were handed over to the 1st petitioner. In terms of the said

agreement again funds were transferred from the 1st petitioner to

the Company. It transpires that on resignation of certain

Directors, the 1st petitioner communicates to the Company to

hand over all statutory documents of the Company to the 1st

petitioner. The newly constituted Board declined or denied the

fact that the 1st petitioner was a majority share holder in the

Company as no shares were allotted by the new Board that was

constituted. Not stopping at that, the Company causes a legal

notice upon the SIP to terminate the agreement between the

parties. During the subsistence of these correspondences

between the 1st petitioner and the Company, the post-production

material of the Company was stored at Unifi media for

completion of such post-production work.

11. Things standing thus, another agreement was entered

into between the parties with regard to assignment of residual

rights held in the re-making of film 'Queen' being handed over to

the SIP. The agreement dated 12-08-2020 reads as follows:

"Date: 12 August 2020

SWITZ INTERNATIONAL PRIVATE LIMITED 609/610, balarama Bandra Kurla Complex Bandra East Mumbai 400051(India)

Subject: Assignment of all residual rights held in the remake of the film entitled "Queen", in four (4) regional languages excluding the digital rights on o.t.t., platform.

Dear Sir,

Based on our various telephone calls and discussions, We / I confirm the following:

1. Mediente Films International Pvt. Ltd., -

India ("Mediente-India") had proposed to Switz International Pvt Ltd India("SIPL") that it wants to remake the hit Hindi film movie "Queen" in 4(four) regional language feature films titled and renamed to "That Is Mahalakshmi", "Paris Paris", "Zam Zam" and "Butterfly" (the "Remake movies") and sought financing for it.

2. Mediente-India had requested for and SIPL had agreed to fund the production to the extent of Rs.25 Cr as per "Agreement for Financing the Feature Film" dated 6th November 2018. under a set of terms and conditions as detailed in that agreement. ALL those terms and obligations are still valid and in force. Mediente India has, thus, produced the remake movies and is the creator of the copyright in those Remake moves.

3. Under an agreement dated 12th April 2018, Mediente India has licensed certain rights in

Remake movies (inter alia OTT worldwide and International Satellite and theatrical) to TFK INVESTMENTS LTD (Mauritius) referred to as the "International Distribution License Agreement "The full consideration for the purchase of such rights has been paid and these rights vest with TFK INVESTMENTS LTD Mauritius.

4. Under an agreement dated 2nd Jan 2018 Mediente India has licensed music rights of Remake movies to Zee Music and has been paid consideration as per the agreement terms. These rights vest with Zee Music.

5. Now Mediente India has averred that certain IP Rights and underlying rights in are with Mediente International Films Ltd (the "Mediente-UK")

6. NOW By this document, all rights not already transferred under clause 3 and 4 (the Residual rights) along with full copyright in the said Remake Movies are hereby transferred to SIPL.

7. Any legitimate and contracted expenses due on films and necessary for their completion and release will be paid from the revenues of the rights transferred in this agreement.

Yours sincerely

1. For MEDIENTE UK 2. For MEDIENTE INDIA 7 Aintree Road, UB6 7LA, 213, Raheja Chambers, United Kingdom 2nd Floor, Nariman-Point Mumbai - 400021 (India) Sd/- Sd/-

Authorised Signatory Authorised Signatory Director.

3. Mr.Manu S.Kumaran Sd/-

Founder."

(Emphasis added)

On the claim that the aforesaid communication had transferred

entire rights viz., existing, subsisting and residual rights to the

SIP, the SIP communicates to Unifi media before whom the

entire post-production material was stocked to release the said

material in favour of the Company. The communication by way

of mail is replied by Unifi media contending that they are to be

paid huge sums of money and only after receipt of entire

payment the final output delivery will be made to the 1st

petitioner. Whatever was due with regard to the post-production

material, the 1st petitioner appears to have cleared with Unifi

media and the Unifi media releases the same in favour of the 1st

petitioner. All these happen without communicating anything

whatsoever to the Company. It is later the Company comes to

know about the transfer of all the post-production material by

Unifi media without informing them. It is at that juncture, the

Company registers the complaint against the petitioners along

with others in Crime No.12 of 2022 on 20-01-2022.

12. Since the entire issue now springs from the complaint,

the relevant portion of the same is extracted herein for the

purpose of quick reference:

6. Our company in the interest of the release of the movies, agreed to the intention of the rights transfer of the movies to Switz (TaizoonKhorakiwala's company). However, the primary considerations for the parties were that after the said LOI Switz would proceed to release the movies and bear the costs of the same. However, this was a clear misrepresentation on the part of Switz and therefore on October 20, 2020, since no further payments were made by Switz to release the movies, we cancelled the letter of intent and refused to enter into any rights transfer agreement with Switz.

7. This was done through our lawyer and the relevant notice is marked and attached herewith as Annexure - 3.

8. After several attempts to unlawfully take the movies by TaizoonKhorakiwala, Unifi Media has been absolutely silent on any communication and we are at the apprehension that the movie material

has been handed over to the racket of TaizoonKhorakiwala, Bobby Bedi and MuraadKhan.

9. The value of he movies is estimated to be around INR 42 crores and we have invested around INR 4.7 crore. The material has probably been handed over to above by Unifi Media through Uday Ravi Hegde.

10. We feel it is a case of cheating to not pay the money owed to us, so kindly take this complaint and file an FIR against he parties involved in order to recover our money and"

(Emphasis added)

Paragraphs 6, 9 and 10 are germane to be noticed in particular

and accordingly emphasis is laid on them. In terms of

paragraph -10 it constitutes the prayer in the complaint to

recover money of the Company from the hands of the 1st

petitioner. At paragraph 9 it is observed that the value of movie

is estimated to be around Rs.42 crores and they had invested

Rs.4.7 crores and the entire material is probably handed over to

the 1st petitioner by Unifi media through accused No.1.

Therefore, what is to be now considered is, whether the

complaint makes out an offence that would become punishable

under Section 406 or Section 420 of the IPC. Section 406 of the

IPC reads as follows:

"406. Punishment for criminal breach of trust.-- Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both."

To consider the offence punishable under Section 406 of the IPC

what is germane to be noticed is, ingredients as available under

Section 405 IPC. Section 405 of the IPC reads as follows:

"405. Criminal breach of trust.--Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or willfully suffers any other person so to do, commits "criminal breach of trust".

Explanation 1.--A person, being an employer 3 [of an establishment whether exempted under section 17 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952) or not] who deducts the employee's contribution from the wages payable to the employee for credit to a Provident Fund or Family Pension Fund established by any law for the time being in force, shall be deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default in the payment of such contribution to the said Fund in violation of the said law, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.

Explanation 2.--A person, being an employer, who deducts the employees' contribution from the wages payable to the employee for credit to the Employees' State Insurance Fund held and administered by the Employees' State Insurance Corporation established under the Employees' State Insurance Act, 1948 (34 of 1948), shall be deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default in the payment of such contribution to the said Fund in violation of the said Act, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid."

Section 405 of the IPC directs whoever being in any manner

entrusted with the property or with any dominion over the

property, dishonestly uses or disposes of that property in

violation of any direction of law prescribing the mode in which

such trust is to be discharged, it would amount to criminal

breach of trust.

13. Agreement apart, the exchange of materials between

the 1st petitioner and Unifi media which leads to handing over of

the entire post-production work to the hands of the 1st petitioner

does amount of accused No.1 and the 1st petitioner acting in a

manner that would become an offence under Section 406 of the

IPC as the 1st petitioner has communicated to Unifi media to

hand over all the material which were kept in trust by the

Company in it without the knowledge of the Company. It is only

this ingredient that would amount to breach of trust. Though

the 1st petitioner had every right over distribution and exhibition

of the films that were already shot, the taking away of the post-

production work without the knowledge of the Company does

amount to breach of trust, a criminal breach of trust as is

alleged.

14. The other allegation is Section 420 of the IPC. Section

420 of the IPC which deals with cheating has its ingredients in

Section 415 of the IPC. Section 415 reads as follows:-

"415. Cheating.--Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat".

Explanation.--A dishonest concealment of facts is a deception within the meaning of this section."

The soul of Section 415 of the IPC is inducing the victim by the

accused to part with a property with a dishonest intention. The

intention that is dishonest must be discernible from inception.

The complainant is the Company. It is the Company which

approaches the 1st petitioner for finance and certain agreements

had been entered into between the parties with regard to

handing over of rights of the film on account of grant of such

finance. Therefore, it is a clear case where terms are mutually

agreed upon from time to time. The crux of the complaint so

registered, as quoted supra, clearly indicated that the complaint

is registered for recovery of money. Criminal law cannot be used

as a platform for such recovery. If it is allowed, it would amount

to giving civil liability a colour of crime and if the submission of

the Company is accepted, it would amount to permitting

criminal law to be taken recourse for recovery of money in a

dispute that is purely civil in nature. It would thus fall foul of

the judgments rendered by the Apex Court in plethora of cases

wherein it is held that breach of agreement does not per se give

rise to a criminal law, particularly of cheating under Section 420

of the IPC, as agreement was entered into on meeting of minds

and, therefore there cannot be an element of mens rea or an

element of cheating right from inception of the transaction.

Therefore, the offence of cheating, so alleged, is unsustainable.

15. The other allegation is offence punishable under

Section 424 of the IPC. Section 424 of the IPC would make the

person punishable if he dishonestly or fraudulently conceals or

removes any property of himself or any other person or assists

such concealment or removal thereof. Therefore, Section 424

also gets attracted in the case at hand in the light of Section 406

of the IPC being sustained. Wherefore, the allegation and

registration of FIR under Section 424 of the IPC is also

sustained. Sections 120B and 149 of the IPC being an offshoot

of the afore-quoted sustenance of offences under Section 406

and 424 of the IPC, they would also become sustainable.

Therefore, except the offence of Section 420 of the IPC, all other

offences in the facts and circumstances of the case, are held to

be sustainable.

16. For the aforesaid reasons, I pass the following:

ORDER

i. The Criminal Petition is allowed in part.

ii. Registration of FIR in Crime No.12 of 2022 stands quashed only insofar as it pertains to the offence punishable under Section 420 of the IPC. The reminder of the offences, so alleged against the petitioners, are sustained.

iii. It is made clear that the observations made in the course of this order are only for the purpose of consideration of the case of the petitioners under Section 482 of the Cr.P.C. and the same shall not influence the investigation or bind the competent Court while taking up further proceedings against the accused.

I.A.No.2/2022 stands disposed of, as a consequence.

Sd/-

JUDGE

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