Karnataka High Court Allows Criminal Investigation in MyFitness Trademark Investment Dispute Despite Arbitration

Investment and trademark dispute

The complaint concerns an investment of approximately ₹143 crore made in 2022 by Mensa in Tanvi Fitness Private Limited, associated with the MyFitness brand. According to the complainant, the investment resulted in a controlling stake of about 51.66 percent and was based on representations that the company held unrestricted rights to the trademark. Mensa alleged that a 2019 co-existence agreement with Paradise Nutrition had not been disclosed. That agreement was said to limit use of the mark for certain products, including peanut butter and related goods.

The complainant maintained that restrictions on the trademark materially affected the valuation and commercial opportunities for which it invested. The promoters disputed the criminal allegations and pointed to the contractual nature of the controversy. Tanvi had issued a termination notice in February 2026 alleging fraud and diversion of funds by Mensa, and proceedings were initiated before an arbitral forum and the company tribunal. Those parallel proceedings formed an important part of the promoters' argument that the police case should not continue.

Legal issue before the High Court

The central issue was whether a court should prevent investigation merely because the same business relationship has also produced contractual and corporate disputes. The promoters argued that the FIR lacked the necessary ingredients of cheating and criminal breach of trust, and that any grievance concerning trademark warranties should be decided through civil mechanisms. Mensa's position was that it had been induced to invest through allegedly dishonest suppression of a material agreement, which required independent criminal investigation.

The High Court distinguished an ordinary breach of contract from an allegation that a false representation was knowingly made at the beginning of a transaction. That distinction matters because a failed commercial relationship does not automatically become a criminal offence. Equally, the presence of an arbitration clause does not confer immunity from investigation if the complaint independently discloses cognisable criminal allegations. The Court did not decide that Mensa's version was correct; it decided that the allegations warranted examination by investigators.

Reasoning and procedural outcome

The Bench noted that the complaint was registered in May 2026 and that substantial investigation had not yet occurred when the petitioners sought quashing. Referring to Supreme Court principles in Neeharika Infrastructure and Somjeet Mallick, the Court observed that an FIR need not contain every detail that a completed investigation might reveal. It considered the allegation of concealed restrictions on trademark ownership sufficiently material to justify allowing police inquiry to proceed.

The Court dissolved the interim protection previously operating in favour of the promoters and declined to terminate the FIR. It expressly kept the parties' substantive contentions open and recognised that the promoters could seek appropriate remedies if the investigation later produced an adverse final report. The outcome therefore preserves procedural avenues on both sides. It should not be reported as a conviction, a finding of fraud or a ruling on the validity of the investment agreement.

Practical significance

For businesses, the case highlights the importance of clear disclosures concerning intellectual property rights during investment transactions. For criminal lawyers, it reinforces the distinction between testing whether an FIR discloses a cognisable allegation and deciding whether that allegation can be proved beyond reasonable doubt. Arbitration may resolve contractual liabilities, while criminal proceedings examine alleged offences under a separate legal framework. The immediate next step is police investigation, subject to ordinary statutory safeguards and any future judicial challenge.

Important legal principles

• Parallel arbitration does not automatically bar investigation of an independent cognisable offence.
• The refusal to quash an FIR is not a judicial finding that the accused committed fraud.