INTERNL.ADV.RES.CEN.FOR P.M.& N.M.& ORS. Vs. NIMRA CERGLASS (P) LTD.& ANR.
CODE OF CRIMINAL PROCEDURE, 1973 (CrPC)
Section 482 - Saving of inherent powers of High Court
Section 197 - Prosecution of Judges and public servants
Section 34 - Acts done by several persons in futherance of common intention
Section 420 - Cheating and dishonestly inducing delivery of property
Section 120 B - Punishment of criminal conspiracy
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Crl.), 2128 of 2011, Judgment Date: Sep 22, 2015
The legal position is well-settled that when a prosecution at
the initial stage is asked to be quashed, the test to be applied by the
court is, as to whether uncontroverted allegations as made in the complaint
establish the offence. The High Court being superior court of the State
should refrain from analyzing the materials which are yet to be adduced and
seen in their true perspective. The inherent jurisdiction of the High
Court under Section 482 Cr.P.C. should not be exercised to stifle a
legitimate prosecution. Power under Section 482 Cr.P.C. is to be used
sparingly only in rare cases. In a catena of cases, this Court reiterated
that the powers of quashing criminal proceedings should be exercised very
sparingly and quashing a complaint in criminal proceedings would depend
upon facts and circumstances of each case.
The essential ingredients
to attract Section 420 IPC are: (i) cheating; (ii) dishonest inducement to
deliver property or to make, alter or destroy any valuable security or
anything which is sealed or signed or is capable of being converted into a
valuable security and (iii) mens rea of the accused at the time of making
the inducement. The making of a false representation is one of the
essential ingredients to constitute the offence of cheating under Section
420 IPC. In order to bring a case for the offence of cheating, it is not
merely sufficient to prove that a false representation had been made, but,
it is further necessary to prove that the representation was false to the
knowledge of the accused and was made in order to deceive the complainant.
14. Distinction between mere breach of contract and the cheating
would depend upon the intention of the accused at the time of alleged
inducement. If it is established that the intention of the accused was
dishonest at the very time when he made a promise and entered into a
transaction with the complainant to part with his property or money, then
the liability is criminal and the accused is guilty of the offence of
cheating. On the other hand, if all that is established that a
representation made by the accused has subsequently not been kept, criminal
liability cannot be foisted on the accused and the only right which the
complainant acquires is the remedy for breach of contract in a civil court.
Mere breach of contract cannot give rise to criminal prosecution for
cheating unless fraudulent or dishonest intention is shown at the beginning
of the transaction.
The alleged acts of the appellants No. 2 and 3 were committed while acting
in discharge of their official duties, sanction from the competent
authority was necessary before initiating the criminal prosecution against
them. Since we have held that from the averments in the complaint, the
essential ingredients of dishonest intention is not made out, we are not
inclined to further elaborate upon this point.
In the
facts of the present case, in our view, the allegations in the complaint do
not constitute the offence alleged and continuation of the criminal
proceeding is not just and proper and in the interest of the justice, the
same is liable to be quashed.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 2128 OF 2011
INTERNATIONAL ADVANCED RESEARCH
CENTRE FOR POWDER METALLURGY
AND NEW MATERIALS (ARCI) & ORS. ...Appellants
Versus
NIMRA CERGLASS TECHNICS (P) LTD.
& ANR. ...Respondents
J U D G M E N T
R. BANUMATHI, J.
This appeal has been preferred assailing the judgment dated 17.03.2009
passed by the High Court of Andhra Pradesh in Criminal Petition No.7901 of
2008 dismissing the petition filed by the appellants under Section 482
Cr.P.C., thereby declining to quash the criminal proceedings initiated
against the appellants in CC No. 840/2008 under Sections
419 and 420 IPC.
2. Brief facts which led to the filing of this case are as under:-
The respondent-complainant is a private limited company engaged in the
manufacturing and marketing of scientific devices and equipments. The
respondent filed complaint against appellant-International Advanced
Research Centre for Powder Metallurgy and New Materials (for short ‘ARCI’)
and its officers i.e. appellant No.2-S.V.Joshi, Associate Director and
appellant No.3-G.Sunderarajan, Director alleging that the appellants have
represented that ARCI possessed of technology for manufacture of extruded
ceramic honeycombs which is used in manufacturing of catalytic converters
which are used in automobiles for controlling emission. On that
representation, the respondent entered into an agreement dated 18.06.1999
with ARCI for transfer of technology for the manufacturing process of
extruded ceramic honeycombs inclusive of transfer of extrusion die
fabrication technology which is an integral part of the manufacturing
process for a consideration of rupees ten lakhs in instalments exclusive of
royalty amount on the sales which would have been generated on the basis of
products manufactured and marketed by the respondent on the basis of
technology. The respondent had alleged that in pursuance of the agreement,
the respondent was permitted to establish its industrial unit within the
campus of ARCI at Balapur, Hyderabad for the purpose of installing and
commissioning production of preferred technology and for which respondent
spent around rupees one crore thirty lakhs for purchasing and installing
the comprehensive machinery. The respondent alleged that after having taken
number of trial runs for testing the efficacy of the extruded ceramic
honeycombs in the function organized by ARCI in May 2003, attended by
higher officials, the technology was handed over to the respondent and
accordingly the respondent was induced into remitting the third instalment
of rupees two lakhs in addition to the amount already paid. Respondent
states that he was informed that the initial trial runs conducted by the
Scientists of ARCI succeeded and the appellants thus, handed over a few
samples of the final product which were subsequently displayed at a joint
programme launched at Hyderabad. As a result, respondent spent an amount
of rupees fifteen lakhs for procuring raw materials in anticipation of
commencing commercial production in the belief that the final perfected
technology is in its hands. The respondent further alleged that after three
years, the respondent was informed vide letter bearing No.ARCI/AD/2006-2007
dated 23.10.2006 addressed to Technology Information, Forecasting and
Assessment Council (TIFAC) that the targeted specification of the end
product could not be achieved. The respondent alleged that scientists
working in ARCI had not perfected the honeycomb technology sufficient for
commencing commercial production and by their false representations induced
the respondent to spend huge amount and thus appellants have committed an
offence of cheating.
3. The respondent lodged a criminal complaint on 06.11.2007 before the
court of the II Metropolitan Magistrate Cyberabad seeking prosecution of
the appellants for the offences punishable under Sections 405, 415, 418,
420 IPC read with Sections 34 and 120B IPC. After investigation, the
investigating officer submitted final report dated 28.01.2008 stating that
the dispute is purely of civil nature and that no offence was made out
against the appellants and the same may be accepted and the case be treated
as closed. On protest petition filed by the respondent, the Magistrate took
cognizance of the case for offences under Sections 419 and 420 IPC read
with Section 34 IPC vide order dated 11.11.2008. Aggrieved by the
summoning order issued by the II Metropolitan Magistrate, Cyberabad, the
appellants filed petition under Section 482 Cr.P.C. before the High Court
to quash the proceedings in CC No. 840 of 2008 and the same was dismissed,
which is under challenge in this appeal.
4. Contention at the hands of the appellants is that when
Technology Transfer Agreement dated 18.06.1999 was entered into, NIMRA was
fully aware of ARCI’s honeycomb technology and second and third appellants
were involved in the process of developing the technology wholly in their
capacity as Associate Director and Director of ARCI and there was no
dishonest intention on their part to cheat the respondent. Taking us
through various clauses in the technology transfer agreement, Mr. Raju
Ramachandran, learned Senior Counsel submitted that the said technology
transfer agreement provides for a contingency that if the targeted
specifications are not achieved, then ARCI is liable to pay damages to the
tune of twenty percent of the lump-sum technology transfer fee charged. It
was contended that the case is purely of a civil nature and for the alleged
breach of contract, arbitral proceedings have already commenced and the
criminal prosecution is clear abuse of process of law.
5. Reiterating the above submissions, Mr. Manoj Sharma, learned
counsel for the appellant No.2 contended that in the year 1999, second
appellant was not in the ARCI campus and the second appellant was appointed
as the Associate Director and entrusted the responsibility of heading the
technology transfer activities of ARCI only in April 2005 and no dishonest
intention could be ascribed to the second appellant in his individual
capacity.
6. Mr. Mushtaq Ahmad, learned counsel for respondent No.1
submitted that the appellants made false representation to the respondent
that ARCI was possessed of proved ceramic honeycomb technology and the
appellants conspired and induced the respondent to enter into agreement and
based on the assurance of the appellants, respondent spent huge money in
purchasing and installing comprehensive machinery in its industrial unit
set up in ARCI campus and only in the year 2006, by the letter dated
23.10.2006, second appellant intimated that ceramic honeycomb technology
has failed and the facts and circumstances clearly show that the
representation was a fraudulent right from inception.
7. We have carefully considered the rival contentions and perused
the impugned order and the material on record.
8. ARCI, a grants-in-aid research and development institute under
the Ministry of Science and Technology, Government of India, carries out
research work for the development of a number of scientific products to be
used in various fields. As a part of its scientific development, ARCI
developed a process for extruded ceramic honeycombs. The said extruded
ceramic honeycombs were found suitable for manufacture of catalytic
converters which are used in vehicles for controlling the pollution in the
emission of vehicles and extruded gases. ARCI is said to have held the
intellectual property rights for the know-how i.e. the process for extruded
ceramic honeycombs and extrusion die fabrication technology.
9. ARCI entered into a technology transfer agreement on 18.06.1999
with respondent to transfer the know-how related to the process for
extruded ceramic honeycombs as per the specifications indicated thereon in
the annexure to the agreement. The agreement details the modalities of the
terms and conditions for the grant of licence by ARCI and NIMRA for
utilizing the said know-how and the rights and obligations of the parties
and the financial arrangements between them. As per Article 2.5 of the
agreement, NIMRA has seen ceramic honeycombs as per specifications
indicated thereon and felt that they could be a substitute for imported
honeycombs for manufacture of catalytic converter automotive application.
Further Article 2.6 of the agreement provides that NIMRA had made some
preliminary evaluation of ARCI honeycomb samples and found that the ceramic
honeycombs may be suitable for manufacture of catalytic converters for
automobile application.
10. Contention at the hands of respondent is that ARCI had already
developed and possessed know-how for extruded ceramic honeycombs. Article
2.2 of technology transfer agreement suggests that ARCI has the
intellectual property rights for the know-how of the ceramic honeycomb
technology and the extrusion die fabrication technology. It was contended
that the intellectual property rights could not have been given to ARCI
unless the Centre developed the process hundred percent successfully and
without such cent percent success appellants should not have entered into
an agreement for transfer of the technology. Further contention of
respondent is that believing the representation of the appellants,
respondent established an industrial unit within the Balapur Campus of the
Centre and in this regard spent an amount of rupees one crore and thirty
lakhs for purchasing and installing comprehensive machinery. It is
submitted that in the month of May 2003 officials of ARCI convened a
convention for trial run and they assured the respondent that the
technology was a proved one and was fully developed and believing their
assurances, respondent spent rupees fifteen lakhs for procuring raw
materials and three years thereafter, second appellant informed the
respondent that the targeted specification of the end project could not be
achieved and the second appellant marked a copy of the letter dated
23.10.2006 addressed to TIFAC that the ceramic honeycombs technology has
failed and act of the appellants made out a case of cheating and rightly
Magistrate has taken cognizance of the matter.
11. Learned counsel for the respondent further submitted that in
the letter addressed to TIFAC dated 23.10.2006, appellant No. 2 stated that
targeted specification of the end product could not be achieved implying
that the so-called perfect honeycomb technology which the appellants
asserted to be having was in fact, an imperfect technology. Drawing our
attention to the official website of ARCI, it was submitted that the ARCI
submitted an application for patent registration only on 03.07.2001 and
patent was granted on 13.01.2006 and while so, Article 2.2 of transfer
technology agreement mentioning that ARCI has the intellectual property
rights for the know-how and the extrusion die fabrication technology is
false and the appellants made a false representation to the respondent that
ARCI was having intellectual property rights for extruded ceramic
honeycombs and the Magistrate has rightly taken cognizance of the matter
for the offence punishable under Sections 419 and 420 IPC.
12. The legal position is well-settled that when a prosecution at
the initial stage is asked to be quashed, the test to be applied by the
court is, as to whether uncontroverted allegations as made in the complaint
establish the offence. The High Court being superior court of the State
should refrain from analyzing the materials which are yet to be adduced and
seen in their true perspective. The inherent jurisdiction of the High
Court under Section 482 Cr.P.C. should not be exercised to stifle a
legitimate prosecution. Power under Section 482 Cr.P.C. is to be used
sparingly only in rare cases. In a catena of cases, this Court reiterated
that the powers of quashing criminal proceedings should be exercised very
sparingly and quashing a complaint in criminal proceedings would depend
upon facts and circumstances of each case. Vide State of Haryana & Ors.
vs. Bhajan Lal & Ors., 1992 Supp.(1) SCC 335; State of T.N. vs. Thirukkural
Perumal, (1995) 2 SCC 449; and Central Bureau of Investigation vs. Ravi
Shankar Srivastava, IAS & Anr. (2006) 7 SCC 188.
13. In the light of the well-settled principles, it is to be seen
whether the allegations in the complaint filed against ARCI and its
officers for the alleged failure to develop extruded ceramic honeycomb as
per specifications disclose offences punishable under Sections 419 and 420
IPC. It is to be seen that whether the averments in the complaint make
out a case to constitute an offence of cheating. The essential ingredients
to attract Section 420 IPC are: (i) cheating; (ii) dishonest inducement to
deliver property or to make, alter or destroy any valuable security or
anything which is sealed or signed or is capable of being converted into a
valuable security and (iii) mens rea of the accused at the time of making
the inducement. The making of a false representation is one of the
essential ingredients to constitute the offence of cheating under Section
420 IPC. In order to bring a case for the offence of cheating, it is not
merely sufficient to prove that a false representation had been made, but,
it is further necessary to prove that the representation was false to the
knowledge of the accused and was made in order to deceive the complainant.
14. Distinction between mere breach of contract and the cheating
would depend upon the intention of the accused at the time of alleged
inducement. If it is established that the intention of the accused was
dishonest at the very time when he made a promise and entered into a
transaction with the complainant to part with his property or money, then
the liability is criminal and the accused is guilty of the offence of
cheating. On the other hand, if all that is established that a
representation made by the accused has subsequently not been kept, criminal
liability cannot be foisted on the accused and the only right which the
complainant acquires is the remedy for breach of contract in a civil court.
Mere breach of contract cannot give rise to criminal prosecution for
cheating unless fraudulent or dishonest intention is shown at the beginning
of the transaction. In S.W. Palanitkar & Ors. vs. State of Bihar & Anr.
(2002) 1 SCC 241, this Court held as under:
“21 ……In order to constitute an offence of cheating, the intention to
deceive should be in existence at the time when the inducement was made. It
is necessary to show that a person had fraudulent or dishonest intention at
the time of making the promise, to say that he committed an act of
cheating. A mere failure to keep up promise subsequently cannot be presumed
as an act leading to cheating.”
The above view in Palanitkar’s case was referred to and followed in Rashmi
Jain vs. State of Uttar Pradesh & Anr. (2014) 13 SCC 553.
15. Various clauses in the agreement indicate that technology
transfer agreement 1999 was only experimental in nature and ARCI shall
endeavour to achieve the performance as per the specifications. In the
agreement, there was no commitment on the part of ARCI to provide extruded
ceramic honeycombs as per expected specifications. Article 12 which deals
with performance guarantee suggests that ARCI is to conduct performance
test and shall endeavour to achieve product quality/specification as
mentioned in annexure I of the agreement. We may usefully refer to Article
12.2 to 12.6 of the agreement which read as under:
“12.2 When all guarantee figures as set forth in Article 12.1 are achieved
during the performance guarantee test, then ARCI shall be released
thereafter from any liability for the performance guarantee of the know-
how.
12.3 In the event of failure to achieve the performance as agreed in
Article 12.1 in the first performance test, ARCI shall make necessary
rectification and another performance test will be conducted.
12.4 In the event of failure to achieve the guarantee figures in the
second performance test, ARCI may at its option either (I) make necessary
rectification so that another performance test can be conducted or pay the
liquidated damages equal to 20% of the lump-sum technology transfer fee
charged.
12.5 When the liquidated damages are paid by ARCI as specified in Article
12.4, the performance guarantee shall be deemed to have been fulfilled as
ARCI shall be relieved from any liability or the performance guarantee.
12.6 If for reasons not attributable to ARCI, the performance guarantee
figures are not attained during the performance test, both parties shall
discuss and agree upon measures to be taken.”
16. By reading of the above clauses in the technology transfer
agreement, it is seen that the development of technology ceramic honeycombs
by ARCI was experimental. Terms and conditions of technology transfer
agreement clearly suggest that the Centre is to conduct performance
guarantee to achieve the product quality/specification of extruded ceramic
honeycombs as mentioned in annexure-1 of the technology transfer agreement
and make necessary rectification, if required. The agreement provides that
in the event of failure to achieve the guarantee figures as per
specification even after second performance test, option given to ARCI
either to conduct another performance test or pay the liquidated damages
equal to twenty percent on the lump-sum technology transfer fee charged.
As per the terms and conditions of the agreement, ARCI had the option to
conduct performance test to achieve the quality/specifications and when it
could not achieve these specifications, it cannot be said that ARCI acted
with dishonest intention to cheat the respondent attracting the essential
ingredients of Section 420 IPC.
17. Two important aspects are relevant to be noted to hold that
criminal liability cannot be foisted on the appellants. Firstly,
satisfaction of NIMRA as to suitability of ceramic honeycombs. As per
Article 2.5 of the technology transfer agreement, NIMRA felt that ARCI’s
honeycombs could be a substitute for imported honeycombs for manufacture of
catalytic converters automotive application. Further, as seen from Article
2.6, NIMRA made some preliminary evaluation of the honeycomb samples and
found that the ceramic honeycombs may be suitable for manufacture of
catalytic converters for automobile application. Secondly, as seen from
Article 2.8 of technology transfer agreement 1999, NIMRA had earlier
entered into an agreement with ARCI on 28.05.1997 to optimize the wash coat
and catalyst coating by NIMRA on ARCI’s substrate to achieve conversion
efficiency on two samples for two vehicles Maruti 800cc and Ceilo 1500cc.
As per the said agreement, ARCI paid rupees six lakhs fifty thousand to
respondent for optimization process to achieve conversion efficiency and
the said agreement was further extended vide amendment dated 06.05.1999. It
is seen that NIMRA first approached ARCI for co-operation and received
money from ARCI for developing part of the technology and finally NIMRA
opted for developing part of the technology by itself rather than jointly
transfer to a third party as provided for in 1997 agreement. No dishonest
intention could be attributed to the appellants as is apparent from the
fact that NIMRA earlier had collaboration with ARCI and ARCI put in
sufficient efforts by conducting repeated performance guarantee tests.
18. Respondent mainly relied upon the letter bearing
No.ARCI/AD/2006-2007 dated 23.10.2006 to contend that what appellant No.2
conveyed was that the so-called perfect honeycomb technology which they
asserted to be having, was in fact, an imperfect technology and thus act of
the appellants amounted to cheating. By perusal of the letter bearing
No.ARCI/AD/2005-2006 dated 05.04.2006, it is seen that the Centre was
trying their best efforts to improve the wall thickness uniformity and they
are expecting to accomplish all experimentation necessary for the purpose.
In the letter bearing No.ARCI/AD/2006-2007 dated 23.10.2006 addressed to
Technology Information, Forecasting & Assessment Council (TIFAC), copy of
which was marked to NIMRA states that targeted specifications could not be
achieved despite ARCI’s best efforts. The said letter further states as
under:-
“ …ARCI has already conveyed to NIMRA that ARCI may not be able to meet the
specifications as presently targeted. ARCI had further indicated to NIMRA
very clearly that it would write to TIFAC requesting short-closure of the
project for the above reasons. However, Mr. Khaja has dissuaded ARCI from
taking such a step, indicating that he does not want the project to be
termed as a failure and carry the image of not fully repaying the loan
amount received from TIFAC. Mr. Khaja has also indicated to ARCI that Nimra
Cerglass would, therefore, like to make one final effort to commercialize
the product despite the existing departure from the specifications. For the
purpose, Mr. Khaja has proposed to modify the canning process, involving a
flexible mat suitable for canning honeycomb substrates with warpage, to
explore the possibility of utilizing the currently developed honeycomb
structures….”
Thus, it is clear that before the said letter was sent to TIFAC, all the
details were discussed and well within the knowledge of NIMRA and NIMRA
proposed for modification of the canning process and evidently there was no
dishonest intention on the part of the appellants and no criminal liability
could be attributed to the appellants.
19. It is also pertinent to note that Article 21 of technology
transfer agreement dated 18.06.1999 contains arbitration clause. On
30.12.2007, the respondent invoked arbitration as provided in Article 21.1
of the technology transfer agreement and Dr. T. Ramasamy (sole arbitrator)
was appointed. On 06.02.2008, respondent filed an Arbitration Petition
No.42/2008 under sub-section (2) of Section 14 of the Arbitration and
Conciliation Act before the High Court of Andhra Pradesh praying to
substitute Dr. T. Ramasamy alleging that he is known to appellant No.3. In
view of objection raised by the respondent, Dr. T. Ramasamy recused himself
from hearing the matter. Subsequently, ARCI filed an Arbitration Petition
No.78/2008 before the High Court of Delhi for appointment of an independent
arbitrator to resolve the existing disputes between ARCI and the
respondent. The said arbitration petition was dismissed as withdrawn by an
order dated 08.07.2008. It was submitted at the Bar that an independent
arbitrator was in fact appointed to resolve disputes between ARCI and the
respondent and arbitrator has passed the award which again is the subject
matter of challenge before the High Court.
20. By analysis of terms and conditions of the agreement between
the parties, the dispute between the parties appears to be purely of civil
nature. It is settled legal proposition that criminal liability should not
be imposed in disputes of civil nature. In Anil Mahajan vs. Bhor Industries
Ltd. & Anr. (2005) 10 SCC 228, this Court held as under:-
“6. ……..A distinction has to be kept in mind between mere breach of
contract and the offence of cheating. It depends upon the intention of the
accused at the time of inducement. The subsequent conduct is not the sole
test. Mere breach of contract cannot give rise to criminal prosecution for
cheating unless fraudulent, dishonest intention is shown at the beginning
of the transaction.
7. …..
8. The substance of the complaint is to be seen. Mere use of the
expression “cheating” in the complaint is of no consequence. Except mention
of the words “deceive” and “cheat” in the complaint filed before the
Magistrate and “cheating” in the complaint filed before the police, there
is no averment about the deceit, cheating or fraudulent intention of the
accused at the time of entering into MOU wherefrom it can be inferred that
the accused had the intention to deceive the complainant to pay…. We need
not go into the question of the difference of the amounts mentioned in the
complaint which is much more than what is mentioned in the notice and also
the defence of the accused and the stand taken in reply to notice because
the complainant’s own case is that over rupees three crores was paid and
for balance, the accused was giving reasons as above-noticed. The
additional reason for not going into these aspects is that a civil suit is
pending inter se the parties for the amounts in question.”
21. In M/s Indian Oil Corporation vs. NEPC India Ltd. & Ors.,
(2006) 6 SCC 736, this court observed that civil liability cannot be
converted into criminal liability and held as under:-
“13. While on this issue, it is necessary to take notice of a growing
tendency in business circles to convert purely civil disputes into criminal
cases. This is obviously on account of a prevalent impression that civil
law remedies are time consuming and do not adequately protect the interests
of lenders/creditors. Such a tendency is seen in several family disputes
also, leading to irretrievable breakdown of marriages/families. There is
also an impression that if a person could somehow be entangled in a
criminal prosecution, there is a likelihood of imminent settlement. Any
effort to settle civil disputes and claims, which do not involve any
criminal offence, by applying pressure through criminal prosecution should
be deprecated and discouraged. In G. Sagar Suri v. State of U.P. (2000) 2
SCC 636 this Court observed: (SCC p. 643, para 8)
“It is to be seen if a matter, which is essentially of a civil nature, has
been given a cloak of criminal offence. Criminal proceedings are not a
short cut of other remedies available in law. Before issuing process a
criminal court has to exercise a great deal of caution. For the accused it
is a serious matter. This Court has laid certain principles on the basis of
which the High Court is to exercise its jurisdiction under Section 482 of
the Code. Jurisdiction under this section has to be exercised to prevent
abuse of the process of any court or otherwise to secure the ends of
justice.”
14. While no one with a legitimate cause or grievance should be prevented
from seeking remedies available in criminal law, a complainant who
initiates or persists with a prosecution, being fully aware that the
criminal proceedings are unwarranted and his remedy lies only in civil law,
should himself be made accountable, at the end of such misconceived
criminal proceedings, in accordance with law. One positive step that can be
taken by the courts, to curb unnecessary prosecutions and harassment of
innocent parties, is to exercise their power under Section 250 CrPC more
frequently, where they discern malice or frivolousness or ulterior motives
on the part of the complainant. Be that as it may.”
22. Learned counsel for the respondent submitted that any defence
to be taken by the appellants is to be raised only during the course of
trial and is not to be raised in the initial stage of the prosecution. In
support of his contention, the learned counsel placed reliance upon Trisuns
Chemical Industry vs. Rajesh Agarwal & Ors. (1999) 8 SCC 686; Rajesh Bajaj
vs. State NCT of Delhi and Ors. (1999) 3 SCC 259; P. Swaroopa Rani vs.
M.Hari Narayana Alias Hari Babu (2008) 5 SCC 765 and Iridium India Telecom
Ltd. vs. Motorola Incorporated & Ors. (2011) 1 SCC 74. Learned counsel for
the respondent further submitted that when the Magistrate has taken
cognizance of an offence and the power of the High Court to interfere is
only to a limited extent, the High Court cannot substitute its view for the
summoning order passed by the Magistrate. In support of this contention,
learned counsel placed reliance upon the decisions of this Court in Fiona
Shrikhande vs. State of Maharashtra & Anr. (2013) 14 SCC 44; Bhushan Kumar
& Anr. vs. State (NCT) of Delhi & Anr. (2012) 5 SCC 424 and Smt. Nagawwa
vs. Veeranna Shivalingappa Konjalgi & Ors. (1976) 3 SCC 736.
23. The above decisions reiterate the well-settled principles that
while exercising inherent jurisdiction under Section 482 Cr.P.C., it is not
for the High Court to appreciate the evidence and its truthfulness or
sufficiency inasmuch as it is the function of the trial court. High
Court’s inherent powers, be it, civil or criminal matters, is designed to
achieve a salutary public purpose and that a court proceeding ought not to
be permitted to degenerate into a weapon of harassment or persecution. If
the averments in the complaint do not constitute an offence, the court
would be justified in quashing the proceedings in the interest of justice.
24. Second appellant-Dr. S.V. Joshi was the Associate Director.
Third appellant Dr. G. Sunderarajan was the Director of ARCI and both of
them were acting in their official capacity. Appellants No. 2 and 3 neither
acted in their personal capacity nor stood to receive any personal monetary
benefits from the transfer of said technology. Appellants No.2 and 3 were
representatives of ARCI which is a grant-in-aid research and development
institute under the Ministry of Science and Technology, Government of India
and hence previous sanction as mandated under Section 197 Cr.P.C. must have
been obtained before proceeding against them as their act was only in
discharge of their official duties. In this regard, our attention was
drawn to a communication from Ministry of Science and Technology indicating
that for initiating criminal proceeding against appellants No. 2 and 3,
permission is required and the said communication reads as under:
“ ….. They have both been appointed by the Government of India and are
governed by all rules and regulations of the Government of India….
It is further stated that we have examined all the actions taken by Dr. G.
Sundararajan and S.V. Joshi in relation to the activities pertaining to the
Technology Transfer Agreement dated 18/06/1999 between ARCI and M/s Nimra
Cerglass, Hyderabad and are of firm view that these actions were taken by
the above officers while discharging their official duty in good faith and
in the best interest of ARCI.
Therefore, for initiating criminal proceeding against Dr. G. Sundararajan
and Dr. S.V.Joshi, Government of India permission is required.”
The alleged acts of the appellants No. 2 and 3 were committed while acting
in discharge of their official duties, sanction from the competent
authority was necessary before initiating the criminal prosecution against
them. Since we have held that from the averments in the complaint, the
essential ingredients of dishonest intention is not made out, we are not
inclined to further elaborate upon this point.
25. As per the terms of the technology transfer agreement, ARCI has
to conduct performance guarantee tests and in those tests when ARCI was
unsuccessful in achieving the targeted specifications, ARCI cannot be said
to have acted with dishonest intention to cheat the respondent. Appellants-
ARCI is a structure of Scientists, Team Leader and Associate Director and
it is the team leader who actually executes the project, the job of
Associate Director and Director is to monitor/review progress of the
project. Appellants No.2 and 3 who were the Associate Director and
Director of ARCI respectively were only monitoring the progress of the
project cannot be said to have committed the offence of cheating. In the
facts of the present case, in our view, the allegations in the complaint do
not constitute the offence alleged and continuation of the criminal
proceeding is not just and proper and in the interest of the justice, the
same is liable to be quashed.
26. In the result, the impugned order is set aside and this appeal
is allowed. The criminal proceedings against appellants No.1 to 3 in CC
No. 840 of 2008 on the file of II Metropolitan Magistrate at Cyberabad, is
quashed.
………………………J.
(J.S. KHEHAR)
………………………J.
(R. BANUMATHI)
New Delhi;
September 22, 2015
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