Bombay High Court quashes FIR in a crypto investment case, holding vague allegations of inducement insufficient for criminal prosecution. The Bench stresses role-specific evidence, prima facie dishonest intent, and misuse of criminal law in failed or high-risk investment schemes.
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MUMBAI: In a significant ruling reinforcing the limits of criminal prosecution in investment-related disputes, the Bombay High Court (Nagpur Bench) has quashed an FIR against four accused in a cryptocurrency-linked investment case, holding that vague and omnibus allegations of “inducement” are insufficient to sustain criminal charges.
The judgment is a timely reminder that even in cases involving alleged crypto or token-based investment schemes promising unrealistic returns, criminal liability must still be assessed on role-specific allegations and prima facie evidence, not on guilt by association.
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Case Background
The prosecution arose from Crime No. 470/2023, registered at Civil Lines Police Station, Akola, for offences under:
- Section 406 IPC (Criminal Breach of Trust)
- Section 420 IPC (Cheating)
- Section 34 IPC (Common Intention)
The complainant alleged that he was introduced to a purported investment scheme branded as “Platin Ultima / PLC Ultima”, which promised extraordinary returns:
- 2% daily
- 60% monthly
- 720% annually
It was further alleged that investors were induced by representations that investments made in Indian currency would yield returns in dollars, and that seminars were organised to promote the scheme.
While the FIR was framed under conventional IPC provisions, the factual matrix was unmistakably crypto-linked, involving digital platforms, online communications, and token-based investment language.
Multiple accused approached the High Court seeking quashing of the FIR under Section 482 of the Code of Criminal Procedure, contending that:
- No specific role was attributed to them beyond their alleged presence at a seminar
- There was no material showing entrustment, misappropriation, or personal gain
- The allegations amounted to a broad inducement narrative, not evidence of cheating
The applicants argued that criminal law cannot be invoked merely because an investment failed or promised returns were unrealistic.
The State opposed the quashing petitions on the ground that:
- The accused had actively induced investors
- Multiple investors were allegedly duped
- The total stake involved exceeded ₹50 crores
According to the prosecution, the magnitude of the alleged fraud justified the continuation of criminal proceedings.
Findings of the Bombay High Court
1. “Inducement” Is Not a Substitute for Evidence
The Court held that inducement cannot be treated as a legal conclusion without a factual foundation. Encouraging or motivating investors to participate in an investment pitch, however questionable, does not automatically satisfy the ingredients of cheating unless:
- There is dishonest intention at inception, and
- A specific false representation is attributable to the accused
2. No Prima Facie Case Against Four Accused
Upon examining the FIR and investigation material, the Court found that allegations against four accused:
- Did not go beyond general participation or presence at seminars
- Did not show that they:
- Controlled investor funds
- Made specific dishonest representations
- Derived wrongful personal gain
The Court observed that investors acted with a clear profit motive, lured by the promise of unusually high returns.
Compelling such peripheral participants to face trial would amount to an abuse of the process of law.
3. Disclaimers and Risk Clauses Are Relevant Context
The Court also perused the general terms and conditions of “PLC Ultima”, which included disclaimers such as:
- Participation is “at the user’s risk”
- No guarantee of legality under national laws
- No assurance of uninterrupted or faultless services
While disclaimers do not automatically absolve criminal liability, the Court treated them as part of the overall factual ecosystem of digital/token platforms, reinforcing the need to distinguish platform-level marketing from individual criminal conduct.
4. Different Standard for Accused Who Received Funds
Importantly, the Court refused to quash the FIR against one accused (Akshay Pradeep Khade), noting that:
- Witness statements indicated cash collection from investors
- Bank records showed receipt and withdrawal of funds
- There was prima facie material showing personal financial benefit
In such circumstances, the Court held that the prosecution deserved to proceed to trial.
The judgment reiterates settled law laid down in:
- State of Haryana v. Bhajan Lal (1992 Supp (1) SCC 335)
- Rajiv Thapar v. Madan Lal Kapoor (2013) 3 SCC 330
- State of Karnataka v. L. Muniswamy (1977) 2 SCC 699
Criminal proceedings cannot be sustained on vague, improbable, or omnibus allegations, particularly when role-specific material is absent.
Appearance:
For applicants: Senior Advocate Ashish Deep Verma, assisted by Advocate Prashant Vyas
For Non-applicant No. 1, State: Mrs. Sneha Dhote, Additional Public Prosecutor
Case Title:
Walmik Versus The State of Maharashtra Through Police Station Officer & Ors.
CRIMINAL APPLICATION (APL) NO. 100 OF 2024
READ JUDGMENT
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