No Quashing Of FIR In Multi-Crore Garment Investment Fraud: Telangana HC

In a decisive check against early intervention in complex multi-crore investment scams, the High Court has refused to scuttle criminal proceedings at the threshold when prima facie allegations of fake work orders and fund diversion exist. Justice J. Sreenivas Rao dismissed a quash petition filed by an accused involved in a ₹73 crore garment business investment fraud, holding that investigation into severe cognizable offences cannot be interdicted when substantial evidence points to criminal conspiracy.

Key Takeaways

Court Observations and Directions

The High Court emphasized that the facts presented do not depict a mere contractual breach or civil money recovery dispute, but rather a calculated criminal operation involving forged client contracts and systemic fund laundering. The Court noted that the petitioner along with co-accused created fake firms and diverted funds across personal and corporate accounts, causing massive wrongful loss to investors.

The Court, in its reasoning, observed: "The allegations levelled in the complaint prima facie disclose cognizable offences, and as the investigation is still in progress. Hence, this Court is of the considered view that the petitioner is not entitled to seek quashing of the proceedings at this stage and this case does not fall under rarest of the rare case to exercise the powers conferred under Section 528 of the BNSS.."

Ratio

Background

The case arose from a complaint lodged by a partner of M/s Touchstone Enterprises alleging that the accused persons fraudulently induced the firm to invest ₹73 crores in a school uniform manufacturing business between March 2024 and March 2025. It was alleged that accused persons furnished forged work orders and purchase orders from reputed educational institutions to lure investments under a profit-sharing mechanism. Upon receiving funds via RTGS transfers, the money was routed to various vendor accounts and eventually siphoned off into personal accounts and associated entities.

The petitioner/Accused No. 3 sought quashing of FIR No. 104 of 2025 registered under Sections 316(2), 318(4), 336(3), 338, and 340(2) read with 61(2) of the Bharatiya Nyaya Sanhita, 2023 and Section 5 of the Telangana Protection of Depositors of Financial Establishments Act, 1999. The petitioner contended that he was falsely implicated merely as the husband of Accused No. 1 and argued that criminal law does not recognize vicarious liability, relying on rulings such as Mohammad Ibrahim v. State of Bihar, Delhi Race Club (194) Ltd. v. State of U.P. ( "(2024) 10 SCC 690": 2024 CaseBase(SC) 209), Manish v. State of Maharashtra ( "2025 SCC OnLine SC 707": 2025 CaseBase(SC) 515), Rikhab Birani v. State of Uttar Pradesh ( "2025 SCC OnLine SC 823": 2025 CaseBase(SC) 685), Shailesh Kumar Singh v. State of Uttar Pradesh, and Sunil Bharti Mittal v. CBI ( "(2015) 4 SCC 609": 2015 CaseBase(SC) 704) to argue that the matter was purely civil in nature.

Rejecting these contentions, the prosecution highlighted that over 40 victims suffered losses exceeding ₹100 crores through similar fraudulent schemes executed by the accused across multiple jurisdictions. Relying on settled principles laid down in State of Haryana v. Bhajan Lal, Neeharika Infrastructure (P) Ltd. v. State of Maharashtra ( "(2021) 19 SCC 401": 2020 CaseBase(SC) 1378), and Mahendra K.C. v. State of Karnataka and others ( "(2022) 2 SCC 129": 2021 CaseBase(SC) 811), the High Court held that the FIR prima facie discloses serious cognizable offences and dismissed the quash petition.

Case Details:
Case No.: Criminal Petition No. 7243 of 2026
Case Title: Namburi Sreedhar v. The State of Telangana and another
Appearances:
For the Petitioner(s): Mr. A. Venkatesh, Senior Counsel representing Mrs. K.L.S. Sirisha
For the Respondent(s): Mr. Jithender Rao Veeramalla, learned Additional Public Prosecutor for Respondent No. 1-State

Source: 2026 CaseBase(TEL) 10962