Karnataka High Court rejects company director's plea against crime for data theft

Bengaluru: The Karnataka High Court has refused to interfere with the investigation into a data theft crime against the former director of a company engaged in the business of quantitative trading.

Negating the arguments that being one of the founder directors and equal shareholder, the petitioner cannot be accused of stealing data, the court held that by virtue of shareholding one does not possess ownership over the entirety of the company's data.

The petitioner Aashay Harlalka and two others had founded the company - Plutus Research Private Limited, which was registered in Ahmedabad, Gujarat with its corporate office in Bengaluru.

The company is engaged in the business of quantitative trading in which the company makes proprietary algorithms to trade in Indian stock markets. The petitioner had become a shareholder and director in March 2018 and was terminated on March 24, 2025.

The complainant Saurabh Bhola, one of the directors, alleged that the petitioner was found stealing data which brought disrepute to the company. It was stated that he had been intentionally and unauthorizedly altering the parameters of trading models, causing significant financial loss to the company.

The petitioner challenged the crime registered against him for offences under BNS sections 316 and 318 (4) and sections 65 and 66 of Information Technology (IT) Act. It was contended that when he is an equal shareholder and founder director, it cannot be said that he has stolen the data.

On the other hand, the complainant contended that no shareholder could claim himself to be the owner of the data and that the company is the owner of the data. It was further contended that the act of the petitioner amounts to insider theft and grave breach of fiduciary duty.

Justice M Nagaprasanna rejected the argument by the petitioner that the data in question also belonged to him, and the allegation is akin to a father being accused of kidnapping his own child. The court cited the judgement in the Bacha F Guzdar case wherein the Apex Court held that the company, as a juristic entity, stands distinct from its shareholders and it alone is the owner of the property.

“Once a Company is incorporated under the Companies Act, it acquires a distinct juristic personality, separate and independent of its shareholders and directors. The property of the Company, whether tangible or intangible, vests in the Company alone. The number of shareholders or directors, whether few or many, would not dilute this foundational principle. To accept the proposition that each shareholder may lay claim to the Company's assets would lead to juridical chaos, eroding the very edifice of corporate personality,” Justice Nagaprasanna said.

The court further said, “It is the allegation of downloading, copying, deletion of source code, proprietary data and confidential digital assets. All these are hues and forms of cybercrime and cybercrime investigations are highly technical and complex involving forensic reconstitution of data.”