TMI Blog2016 (3) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 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. 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. - CRL.A. 2128 OF 2011 - - - Dated:- 22-9-2015 - J.S. KHEHAR R. BANUMATHI, JJ. JUDGMENT 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 Resea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cil (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CI, 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent 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 dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emedies 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verments 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 ..... 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