Karnataka HC: money-laundering probes over home buyers' funds can't be quashed early, but unpaid bills aren't a crime

The Karnataka High Court refused to quash a cluster of criminal and money-laundering proceedings against a real-estate developer, Ozone Urbana Infra Developers, and its promoters, over allegations that funds collected from home buyers under subvention-scheme arrangements with banks were diverted. Home buyers had filed complaints alleging cheating and criminal breach of trust under Sections 406, 409, 420 and 120B of the Indian Penal Code and Section 9 of the Karnataka Protection of Interest of Depositors Act, and the Enforcement Directorate had opened an Enforcement Case Information Report and provisionally attached about ₹423 crore in assets under Section 5(1) of the Prevention of Money Laundering Act, 2002.

Justice M. Nagaprasanna held that economic offences with wide public ramifications, here the diversion of home buyers' life savings, must ordinarily be allowed to run their course, and that the Act is a self-contained statutory scheme whose adjudicating authority and appellate tribunal offer the correct remedy, so a writ court should not step in at an embryonic stage and strangle the investigation. In one connected petition, however, filed by a contractor over unpaid civil-works dues of about ₹1.32 crore rather than by a home buyer, the Court quashed the private criminal complaint, holding that criminal law cannot be used as a debt-recovery tool for what is really a civil, contractual dispute.