Criminal Remedies Against Absconding Builders in Bangalore

What Criminal Remedies Are Available to Bangalore Allottees When a Builder Defaults on Construction and Absconds With the Collected Funds?

By the Property Law Team | Legal Brigade | Bar Council of Karnataka

When a Bangalore developer collected instalments from multiple flat allottees – often totalling crores of rupees across dozens of buyers – and then abandoned the project, stopped construction, became uncontactable and appears to have absconded with the collected funds without any intention of completing the project or refunding the allottees, the situation goes beyond a civil RERA remedy and into criminal territory: the developer’s conduct may constitute criminal breach of trust under Section 406 of the Indian Penal Code, cheating under Section 420 IPC and conspiracy under Section 120B IPC – offences that carry imprisonment and that can result in the developer’s arrest and the attachment of their personal assets.

When Does a Builder’s Default Become Criminal Rather Than Civil?

Not every construction delay or project default is a criminal matter – a builder who delays due to genuine financial difficulty or regulatory obstacles is in civil default (giving rise to RERA and civil remedies) rather than criminal conduct. The criminal dimension arises when: the builder collected funds with no genuine intention of completing the project; the builder diverted the collected funds to personal assets or unrelated businesses; the builder misrepresented the project’s approvals or financial position to induce buyers; or the builder is a repeat offender who has done the same in multiple projects.

The distinction between civil breach and criminal fraud is important for the allottee’s strategy: civil RERA remedies (compensation, refund) are faster and more predictable for genuine defaults. Criminal remedies (FIR, arrest, asset attachment) are appropriate for deliberate fraud – and are often more effective than civil remedies when the developer has absconded because they result in arrest warrants that compel the developer to appear and engage.

What Criminal Remedies Can Allottees Pursue?

Step 1: File a First Information Report (FIR) at the local police station – specifically the police station in whose jurisdiction the developer’s registered office is located. The FIR should cite Section 406 (criminal breach of trust) and Section 420 (cheating) with specific details of the amount collected, the project’s status and the developer’s disappearance.

Step 2: If the police do not register the FIR despite a written complaint, file a private complaint before the Chief Judicial Magistrate under Section 200 of the CrPC – the magistrate can take cognizance and issue summons or arrest warrants.

Step 3: File an application before the Economic Offences Wing (EOW) of the Bengaluru City Police – the EOW specifically handles large-scale financial fraud cases involving multiple victims and large amounts.

Step 4: Apply to the court for attachment of the developer’s personal assets – the developer’s residential property, vehicles and bank accounts can be attached pending trial.

Step 5: Have a criminal lawyer coordinate the FIR, the magistrate complaint and the EOW application – presenting the case as a coordinated criminal fraud rather than individual complaints.

Q1. What is Section 406 criminal breach of trust and how does it apply to a builder who absconded?

Section 406 IPC makes criminal breach of trust punishable with up to 3 years’ imprisonment. Criminal breach of trust requires: the accused was entrusted with property; the accused used the property for their own benefit or for a purpose other than the one for which they were entrusted. A builder who collected allottees’ money for flat construction and then diverted it to personal use or absconded fits this definition – the money was entrusted for construction and was dishonestly misappropriated.

Q2. What is Section 420 cheating and when does it apply to a builder?

Section 420 IPC makes cheating (defined as dishonest inducement to deliver property by deception) punishable with up to 7 years’ imprisonment. A builder who made false representations about approvals, construction progress or RERA registration to induce allottees to pay instalments – when the builder knew these representations were false – has committed cheating. The deception element distinguishes Section 420 from Section 406: Section 406 is about misappropriation of entrusted funds; Section 420 is about inducing payment through fraud.

Q3. What is the Economic Offences Wing and when should allottees approach it?

The Economic Offences Wing of the Bengaluru City Police is a specialised unit that investigates financial crimes affecting multiple victims involving large amounts. A developer who collected crores from dozens of allottees and absconded is a classic EOW case. The EOW can investigate across multiple FIRs filed by different allottees against the same developer, trace the developer’s assets and coordinate with other law enforcement agencies. A coordinated complaint by an association of allottees is more effective than individual complaints.

Q4. Can the developer’s directors be arrested even if the company is the RERA registrant?

Yes – the developer company’s directors who were personally involved in the fraud can be arrested under Sections 406 and 420 IPC. The company’s separate legal personality does not shield the directors from personal criminal liability for criminal acts they committed in the company’s name. A director who signed the allotment letters, collected the instalments and then absconded with the funds is personally criminally liable.

Q5. Can allottees get an asset attachment order against an absconding developer?

Yes – a criminal court can attach the accused’s property pending trial under Section 83 CrPC. The attachable assets include the developer’s personal residential property, vehicles and bank accounts – not just the project land. This is particularly powerful because it freezes the developer’s personal assets even if the project’s land is already encumbered by bank loans or RERA escrow claims.

Q6. Does a criminal complaint affect the RERA remedy?

A criminal complaint and RERA proceedings can be pursued simultaneously – they are parallel remedies based on different legal frameworks. The RERA remedy provides a quicker path to a refund order; the criminal complaint provides coercive pressure through arrest and prosecution. Many allottees pursue both – filing the K-RERA complaint for the refund and the FIR for the criminal accountability. The RERA refund order and the criminal punishment are both available.

Q7. What if the developer came back after absconding and claimed force majeure?

A developer who absconded and then returned claiming force majeure is in a difficult position – absence without communication is hard to characterise as force majeure. The criminal FIR will be processed regardless of the developer’s return and claimed justification. The developer must face the criminal proceedings while also addressing the civil RERA claims. A developer who genuinely did not intend to defraud (a civil default rather than criminal fraud) must demonstrate this before the criminal court.

Q8. Can allottees in a RERA project that entered NCLT also file a criminal complaint?

Yes – NCLT insolvency proceedings do not bar criminal prosecution of the developer’s directors for pre-insolvency fraud. The NCLT moratorium restricts civil proceedings against the company’s assets – not criminal prosecution of the directors personally. An allottee can simultaneously file as a financial creditor in NCLT and file a criminal complaint against the directors for the fraud.

Q9. What if the FIR is filed but the police are reluctant to investigate?

Police reluctance to investigate real estate fraud is not uncommon – particularly when the developer has political connections. Allottees facing police inaction can: file a petition before the Karnataka High Court directing the police to investigate (a “mandamus” petition); approach the State Human Rights Commission or the Ombudsman for police accountability; escalate to the senior police officers and the Commissioner of Police; and approach the EOW directly with a coordinated multi-victim complaint.

Q10. How does Legal Brigade assist allottees pursuing criminal remedies against an absconding builder?

Legal Brigade drafts the FIR complaint with the specific IPC sections, the amounts collected, the project’s status and the developer’s disappearance in a form that the police are obligated to register. Legal Brigade also drafts the EOW complaint coordinating multiple allottees’ cases, files the magistrate complaint if the police refuse the FIR and applies for the developer’s asset attachment order. Legal Brigade coordinates the criminal and RERA proceedings simultaneously.

Your Bangalore builder collected your money, abandoned the project and seems to have disappeared with no communication? Legal Brigade files the FIR, the EOW complaint and the K-RERA refund claim simultaneously.

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