TMI Blog2020 (1) TMI 1445X X X X Extracts X X X X X X X X Extracts X X X X ..... he very beginning of the transaction. Even there are no specific allegations and averments in the FIR/chargesheet that the Appellants were in-charge of administration and management of the company and thereby vicariously liable. In light of the aforesaid, the prayer of the Appellants to quash the criminal proceedings against the Appellants for the offence Under Section 420 Indian Penal Code is required to be considered. In the case of Bhajan Lal [ 1990 (11) TMI 386 - SUPREME COURT ], this Court has categorised the cases by way of illustration wherein the powers Under Article 226 or the inherent powers Under Section 482 Code of Criminal Procedure could be exercised either to prevent the abuse of the process of any court or otherwise to secure the ends of justice. The chargesheet has been filed against the Appellants for the offences Under Section 420 read with Section 120B of the Indian Penal Code. However, it is required to be noted that there are no specific allegations and averments in the FIR and/or even in the chargesheet that fraudulent and dishonest intention of the Accused was from the very beginning of the transaction. It is also required to be noted that contract bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility period for the works of M/s. SPML Infra Limited expired in the month of January, 1998. That thereafter the project became operational and started generating electricity and according to the Appellants till 20.09.1998 the project had generated 90 lakhs KW units. According to the Appellants even the said project is also in operation today. There were some disputes with respect to the payment of maintenance by the Respondents. The Appellants issued notice to the Respondents to take over the project before 31.03.2000 on account of non-payment of maintenance, vide notice dated 09.03.2000. 2.1. That thereafter the Respondents - original complainant lodged the complaint against the Appellants and others being Jang PS Case No. 05/2000 for the offence Under Section 420 of the Indian Penal Code alleging inter alia that the Appellants provided inferior quality materials in contravention with the provisions of the contract which stipulated specific percentages of nickel and chromium to be used. It was alleged in the complaint that the Appellants were required to supply the equipments as per the terms of the contract. As per the complaint, in course of physical inspection of the plant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riously liable. Number of other submissions were also made on merits in support of their submission that the offence Under Section 420 Indian Penal Code has not been made out at all. It was also submitted that as soon as the company/Appellants were informed with respect to the defect, despite the defect liability period was over, they changed the turbines in the year 2000. It was also submitted that all throughout the project has run and even still running. 2.3. That by the impugned judgment and order, the High Court has refused to quash the criminal proceedings. While rejecting the quashing petition, the High Court has observed that there are allegations not only against the Appellants, but also against the connected company executives and engineers of the Government of Arunachal Pradesh and there are allegations of criminal conspiracy amongst themselves in the supply of sub-standard runner turbines and receiving the sub-standard runner turbines which were not in conformity with the specified standard and the others co-Accused persons have not come up with a similar petition Under Section 482 Code of Criminal Procedure and therefore at this stage it is not possible to segregate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he maintenance work and the project is running. It is submitted that in fact the project was commissioned in the year 1996 and the project had generated 90 lakhs KW units till 20.09.1998 even as per the certificate issued by the Department of Power. 3.6. It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the Appellants that the High Court has failed to appreciate the fact that the impugned FIR and the complaint subsequently filed has been filed with a mala fide intention and after the company demanded to pay the amount for regular maintenance work. 3.7. It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the Appellants that the High Court ought to have appreciated that the FIR was lodged on 26.06.2000 only after the Appellants issued notice dated 9.3.2000 by which the complainant was called upon to take over the project before 31.03.2000 on account of non-payment of the maintenance charges. 3.8. It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the Appellants that the High Court has failed to appreciate and consider the fact that the disputes between the parties were pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urbines. It is submitted that therefore if the intention of the company and/or the Appellants was to cheat, in that case, they would not have changed/replaced the runner buckets. 3.14. It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the Appellants that the High Court has not properly appreciated and considered the role of the Appellants and their company in the entire contract. It is submitted that the entire contract was not to manufacture the turbines and the runner buckets by the Appellants and the company, but to only procure the same from the manufacturer and supply the same to the Respondents. It is submitted that the company relied upon the certificate issued by the manufacturer and simply used the said turbines in the project. It is submitted that therefore also the Appellants cannot be saddled with the criminal liability for any manufacturing defect when the same was not even in the domain of the Appellants and their company. 3.15. It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the Appellants that even otherwise when the final report has been filed by the investigating officer, the chargeshe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 420 read with 120B Indian Penal Code. It is submitted that as per the inspection carried out by the Department and even as revealed during the investigation the Appellants supplied the sub-standard runner turbines which are used by the Accused though they were not in conformity with the specified standards. It is submitted that therefore a prima facie case of criminal conspiracy between the Accused to cheat the government has been made out. 4.3. It is further submitted by the learned Counsel appearing on behalf of the Respondents that there being enough material/evidences against the Appellants and therefore this is a fit case wherein the Appellants are liable to be prosecuted for the commission of an offence Under Section 420, 120B Indian Penal Code. 4.4. It is further submitted by the learned Counsel appearing on behalf of the Respondents that the arbitration proceedings initiated by the Appellants/company has nothing to do with the criminal dispute. It is submitted that therefore it cannot be said that the civil dispute is tried to be converted into a criminal dispute. 4.5. It is further submitted by the learned Counsel appearing on behalf of the Respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore being Managing Director/Director of the company, naturally they were in charge of the administration and management of the company and therefore are vicariously liable. It is submitted that the aforesaid has been elaborately considered by the High Court in the impugned judgment and order. It is submitted that even otherwise as rightly observed by the High Court at this stage it is not possible to segregate only the Appellants case. 4.10. It is further submitted by the learned Counsel appearing on behalf of the Respondents that whatever submissions are made on behalf of the Appellants are their defences which are required to be considered at the time of the trial. It is submitted that after thorough investigation, the investigating agency has filed the chargesheet against the Appellants and other Accused for the offences Under Section 420 read with 120B Indian Penal Code and more particularly with respect to criminal conspiracy, the High Court has rightly refused to quash the criminal proceedings in exercise of powers Under Section 482 Code of Criminal Procedure, which powers are required to be exercised sparingly and in exceptional cases, as observed by this Court in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the Appellants to quash the impugned criminal proceedings against the Appellants for the offence Under Section 420 Indian Penal Code, few decisions of this Court on exercise of powers Under Section 482 Code of Criminal Procedure are required to be referred to. 7.1. In the case of Bhajan Lal (supra), in paragraph 102, this Court has categorised the cases by way of illustration wherein the powers Under Article 226 or the inherent powers Under Section 482 Code of Criminal Procedure could be exercised either to prevent the abuse of the process of any court or otherwise to secure the ends of justice. In paragraph 102, it is observed and held as under: 102. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extraordinary power Under Article 226 or the inherent powers Under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either 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 ..... give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the very inception. It is further observed and held that for the purpose of constituting an offence of cheating, the complainant is required to show that the Accused had fraudulent or dishonest intention at the time of making promise or representation. It is further observed and held that even in a case where allegations are made in regard to failure on the part of the Accused to keep his promise, in the absence of a culpable intention at the time of making initial promise being absent, no offence Under Section 420 Indian Penal Code can be said to have been made out. It is further observed and held that the real test is whether the allegations in the complaint disclose the criminal offence of cheating or not. 7.3. In the case of Hira Lal Hari Lal Bhagwati (supra), in paragraph 40, this Court has observed and held as under: 40. It is settled law, by a catena of decisions, that for establishing the offence of cheating, the complainant is required to show that the Accused had fraudulent or dishonest intention at the time of making prom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was an agreement between the parties for doing an unlawful act. It is further observed and held that it is difficult to establish conspiracy by direct evidence. 7.4. In the case of V.Y. Jose (supra), it is observed and held by this Court that one of the ingredients of cheating is the existence of fraudulent or dishonest intention of making initial promise or existence thereof, from the very beginning of formation of contract. It is further observed and held that it is one thing to say that a case has been made out for trial and as such criminal proceedings should not be quashed, but it is another thing to say that a person should undergo a criminal trial despite the fact that no case has been made out at all. 7.5. In the case of Sharad Kumar Sanghi (supra), this Court had an occasion to consider the initiation of criminal proceedings against the Managing Director or any officer of a company where company had not been arrayed as a party to the complaint. In the aforesaid decision, it is observed and held by this Court that in the absence of specific allegation against the Managing Director of vicarious liability, in the absence of company being arrayed as a party, no proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect. The contract was in the year 1993. Thereafter in the year 1996 the project was commissioned. In the year 1997, the Department of Power issued a certificate certifying satisfaction over the execution of the project. Even the defect liability period ended/expired in January, 1998. In the year 2000, there was some defect found with respect to three turbines. Immediately, the turbines were replaced. The power project started functioning right from the very beginning - 1996 onwards. If the intention of the company/Appellants was to cheat the Government of Arunachal Pradesh, they would not have replaced the turbines which were found to be defective. In any case, there are no specific allegations and averments in the complaint that the Accused had fraudulent or dishonest intention at the time of entering into the contract. Therefore, applying the law laid down by this Court in the aforesaid decisions, it cannot be said that even a prima facie case for the offence Under Section 420 Indian Penal Code has been made out. 8.2. It is also required to be noted that the main allegations can be said to be against the company. The company has not been made a party. The allegations are restr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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