Franchise Dispute Cannot Be Given Criminal Colour; Madras High Court Quashes FIR Against 5K Car Care Owner
The Madras High Court recently quashed an FIR registered against the owner of 5K Car Care, holding that a dispute arising out of a franchise arrangement was purely commercial in nature and did not attract criminal liability.
Justice G.K. Ilanthiraiyan was dealing with a petition filed under Section 482 CrPC seeking quashing of an FIR registered for offences under Sections 406, 420 and 506(2) IPC. The complainant had obtained franchise rights to operate a 5K Car Care outlet at Madhavaram, Chennai, and had invested substantial amounts towards franchise fees, machinery, branding, interior decoration and other related expenses.
The complainant alleged that the the franchise owner had allegedly overcharged for machinery, branding and operational services and had caused financial loss to the franchisee. The complainant further alleged that when he sought refund of the amounts invested and decided to disengage from the franchise arrangement, he was threatened by persons associated with the accused .On these allegations an FIR was registered.
The Counsel for the petitioner submitted that the dispute arose out of a franchise arrangement between the parties and that the complainant had voluntarily entered into the transaction after being apprised of its terms and conditions. It was also contended that it was the complainant who later chose to discontinue the franchise and commence business independently under the name “Autodoc Enterprises”, following which he sought refund of the amounts paid.
The Court noted that the complainant had approached the accused seeking a franchise and had invested money after being informed of the costs and liabilities involved. The Court further observed that machinery and other services had been provided and that the complainant had continued to operate the franchise business for nearly three years before seeking to run the business independently and demanding a refund.
The Court observed that after availing the benefits of the franchise arrangement and operating the business for several years, the complainant could not subsequently convert a commercial dispute into a criminal prosecution merely because he was dissatisfied with the amounts paid under the arrangement. The Court noted that any grievance regarding pricing, consideration or recovery of money was a matter for adjudication before a civil forum.
Holding that the essential ingredients of offences under Sections 406, 420 and 506(2) IPC were not made out, the Court concluded that the dispute was entirely civil and commercial in nature. Accordingly, the FIR in Crime No.38 of 2023 was quashed and the Criminal Original Petition was allowed.
Case Title; Karthick Kumar Chinnaraj v. State represented by the Inspector of Police & Anr.
Case No; Crl.O.P. No.17275 of 2023, decided on 20.04.2026
Advocates For Petitioner : Ms.S.Niharika for Mr.Ashwinkumar A of AMS legal
Advocates For Respondent No.1 Mr.A.Gopinath.