Bombay High Court
Mr. Ajay Ramchandra Pimparkar And ... vs M/S Saraswati Auto Components ... on 15 December, 2017
Bench: Prakash Deu Naik
(1) Cri Appln. 3610-2015
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
BENCH AT AURANGABAD
CRIMINAL APPLICATION
NO.
3610
-201
5
1. Mr.Ajay Ramchandra Pimparkar,
Age : 49 Years, Occ. Chief Executive
Officer, of Godrej Infotech Private Ltd
having his office at Pirojshanagar,
Vikhroli, Mumbai- 400-079
2. Mr.K.P. Vinod,
Age : 56 Years, Occ. General Manager,
of Godrej Infotech Pvt. Ltd, having
his office at Pirojshanagar, Vikhroli,
Mumbai- 400 079.
3. Mr. Sebastian Fernandez
Age : 54 Years, Occ. Project Co-ordinator
of Godrej Infotech Pvt. Ltd, having his
office at Pirojshanagar, Vikhroli
Mumbai 400 079. .. Applicants.
(ori. Accused No. 3 to 5)
VERSUS
M/s Saraswati Auto Components,
Through its Managing Director,
Mr. Dilip N Dharurkar,
Age : Major, Occ. Managing Director
G.39/25, M.I.D.C. Waluj, .. Respondent
Aurangabad. (Ori. Complainant)
::: Uploaded on - 15/12/2017 ::: Downloaded on - 16/12/2017 02:11:26 :::
(2) Cri Appln. 3610-2015
..
Mr. Joydeep Chatterji h/f Amit A. Yadkikar, Advocate, for the
Applicants.
Mr. Pranit Sonawane, Advocate for Respondent.
....
CORAM : PRAKASH D.NAIK, J.
Date of reserving the Judgment : 08.11.2017
Date of pronouncing the Judgment : 15.12.2017
JUDGMENT
1. Heard both parties for final disposal of the of the application.
2. The applicants are arrayed as accused in the complaint filed by
the respondent in the Court of Judicial Magistrate,First Class, at
Aurangabad, which is numbered as Regular Criminal Case No. 1551
of 2014. The applicants have invoked the inherent powers of this
Court under Section 482 of the Code of Criminal Procedure to
challenge the criminal proceedings arising out of the said complaint.
3. Brief facts, as alleged in the complaint, are as follows :-
(a) The complainant is Private Limited Company registered under
the provisions Companies Act. The complainant company is also
(3) Cri Appln. 3610-2015
known as ''NAC Group'' being a group of four companies. These
companies are in the business of manufacturing Auto Components
and supplies the products to Large Scale Automobile Industries, as
well as health related services through '' The Apollo Clinic''.
(b) The accused No.1 is a subsidiary of Godrej & Boyce Mfg.Co. Ltd.
The accused No.1 is engaged in rendering software services and
consulting to various companies. The accused No.2 is the Chairman
and Managing Director of Accused No.1. The accused No.3 is the
Chief Executive Officer of the accused No.1 Company. Accused No.4 is
Head of business activities. The accused No.5 is the project
consultant and accused No.6 was Assistant Manager of the accused-
Company. The accused No.2 to 6 are looking after the affairs of
conducting the business of accused No.1 Company. Therefore, they
are responsible for liabilities, if any, incurred on behalf of accused
No.1- Company.
(c) In the year 2006, the complainant-company decided to have up-
gradation in the modes of operations and functioning of the company.
The whole intent behind it was to have easy control over the
managing operations, transactions and reporting amongst the group
(4) Cri Appln. 3610-2015
of companies. For this,it was essential to connect the database of all
group companies by implementing common software such as SAP.
Therefore, the complainant was in need of a professional software
services company to design and implement the '' SAP system'' as per
the requirement and function of the complainant's company.
(d) Co-incidentally, A Marketing Officer of the Accused-Company
had visited MIDC area, Waluj, Aurangabad, for business purpose. He
learnt that the complainant was interested to upgrade its office
administration by implementing SAP system. Hence, he approached
the complainant and represented about the competency and
capabilities of the accused No.1-Company in rendering services for
implementation of SAP system.
(e) A meeting was organized at the office of accused No.2 as
Mumbai, for discussion about implementation and working of the
said project. The accused Nos.2 to 5 persuaded the complainant to
place order with the accused Company to purchase and
implementation of ERP, SAP B1 at complainant Company. It was also
represented that the accused is a SAP Certified Partner and that they
have all in-house facility to develop system as per the requirement of
(5) Cri Appln. 3610-2015
the complainant and that they have expertise in SAP implementation
methodology. It was also represented that such services were to
facilitate rapid work successfully and they would implement SAP B-1
as per the requirement of the complainant. The accused No. 2 to 5
gave a rosy picture about credentials of the Company.
(f) Considering the potential ability represented by the accused, the
complainant placed work order dated 4th December, 2007. On 30th
July, 2008, the accused No.6 visited the Complainant Company and
submitted their work plan for implementation of the said project. It
was agreed that the accused to receive rupees one lakhs on the date
of the purchase order from the complainant and balance of Rs. 21
lakhs will be parted with during the course of the implementation of
the project. The accused assured the complainant that the final
system test of implementation as well as the working of the system
will be completed by the end of October, 2008, and the project would '
GO LIVE ' by the end of 2nd week of November, 2008.
(g) After commencement of actual work for implementation of the
project, the accused Nos. 2 to 6 made the complainant to disburse
the amount of Rs. 21 Lakhs, time and again under the pretext of
(6) Cri Appln. 3610-2015
showing progress of implementation of the project. The complainant
was induced to purchase/invest about Rs. 70 lakhs for hardware and
raising infrastructure essential for the project.
(h) Despite the payment of the entire cost of the project by the
complainant, accused were found reluctant to complete the project
within stipulated period. The complainant also informed accused
Nos.5 and 6 about incomplete work and problems in implementation
of the SAP system. The complainant accepted that accused No.5 in
his capacity as project co-coordinator shall endure to resolve the
subsisting problem and complete the remaining work till mid March,
2009. The accused No.5 however, expressed inability and disclosed
that his Company is unable to develop requisite add-ons as per the
requirement of the complainant. It was represented that the accused
would hire the services from outside consultant for completion of
remaining work. The accused hatched the criminal conspiracy and
deceived the complainant with mala-fide intention by giving hopes of
completing the project.
(i) The complainant approached the accused time and again to
pursue them to complete the project. Despite sufficient opportunities,
(7) Cri Appln. 3610-2015
the accused failed and neglected to comply with the assurance for
completion of the project up till September, 2011. The complainant
realized that the accused have deceived the complainant. It was
revealed that the accused were not capable of completing the project
and implementation of the SAP B-1 system, in spite of having
knowledge that Company was unable to implement the project, the
complainant was induced to obtain the purchase order. After about
two years and realizing that the implementation of the project has
failed, the complainant decided to revoke the purchase order vide
letter dated 23rd October, 2011. The accused were informed about
revocation of purchase order and requested to release the Debit note
for refund of the amount paid by the complainant company.
(j) The accused thereafter, conveyed the meeting with the
complainant to discuss the issue. The accused retreated and
conceded that SAP B1 system does not support requisite
Modules/components as per the requirement of the Complainant.
The accused also accepted liability to refund the cost of the
implementation. The minutes of the meeting were prepared
accordingly and the same were acknowledged by the accused Nos. 3,
(8) Cri Appln. 3610-2015
4 and 5.
(k) The complainant kept reliance on the assurance given by the
accused. The accused then started avoiding the refund of amount to
the complainant. However, vide e-mail dated 18th October, 2012,
forwarded by the accused No.4, it was informed that, the complainant
was itself responsible for the failure of the SAP B1 project. The
complainant in its E-mail dated 18th December, 2012, forwarded
detailed information about the fraudulent activities of the accused.
However, as a last hope, accused No.2 was requested for amicable
settlement of the issue. Initially, accused No.2 gave assurance about
completing entire project successfully within time frame. However,
subsequently, the said accused also lost interest. The complainant
forwarded several reminders to accused.
(l) Accused Nos. 2 to 5, with dishonest intention have willfully
induced the complainant to place the purchase order under the
pretext that the accused Company is competent and would complete
the project. They suppressed the fact that they have no expertise in
that regard. The same has resulted into the huge loss to the
complainant. They had invested about Rs. 78 lakhs in the said
(9) Cri Appln. 3610-2015
project and the entire amount was disbursed in favour of the
accused. The accused thereby committed an offence of cheating and
breach of trust. The accused Nos. 2 to 6 hatched criminal
conspiracy to cause loss and damage to the complainant. The
accused Nos. 2 to 6 had intentionally given false assurance with
fraudulent intention to cause loss to the complainant. The complaint
was filed on 30th August, 2014 alleging offences punishable under
Sections 406, 418, 420 read with 120 B of the Indian penal Code.
4. The learned Magistrate, by order dated 11th November, 2014,
issued process against the accused for the offences punishable under
Sections 418, 420 read with Section 34 of the Indian Penal Code.
5. The learned Advocate for the applicants submits that the
complaint does not make out any offence as, alleged. The learned
Magistrate ought not to have issued process for the offences
punishable under Sections 418 and 420 of the Indian Penal Code. It
is submitted that upon reading complaint as it is no penal offences
are made out and, therefore, the trial Court ought not to have taken
( 10 ) Cri Appln. 3610-2015
the cognizance of the complaint. It is submitted that the trial Court
ought to have conducted the enquiry as mandated under Section 202
of the Code of Criminal Procedure. The applicants are residing
beyond the jurisdiction of the trial Court and, therefore, it was
mandatory to hold enquiry under the said provision. It is submitted
that applicants/accused are not concerned with alleged offence and
they have been implicated being employees of Godrej Infotech Private
Limited. It is submitted that from the documents placed on record
along with the complaint it is clear that the complainant has failed to
perform in accordance with the contract and is attempting to
implicate the accused to cover up for its own lapses. The applicants
are mere employees of Godrej Infotech Pvt. Ltd and cannot be held
responsible for any offence. The dispute, if any, is purely of civil
nature and the complainant has tried to give a criminal colour to the
said dispute and filed impugned complaint. The learned Magistrate
has failed to realize that the complaint was filed belatedly with a view
to cause harassment to the accused. Limitation to initiate civil
proceedings had expired and, therefore, to cause the accused
company to submit to demand of the complainant, criminal
( 11 ) Cri Appln. 3610-2015
prosecution is initiated. But, the averments in the complaint do not
make out offence of cheating. The complainant has not placed on
record any document which would show any mala fide intention to
commit alleged offence. In the absence of concept of 'vicarious
liability', the applicants should not have been implicated as accused
being officials of the accused No.1 Company. It is submitted that
there was contractual relationship between the complainant and the
accused and complainant had alleged a breach of the contract. In the
circumstances, the remedy (if any), was to initiate the civil
proceeding. It is also submitted that there existed clause for
arbitration between the parties in the event of dispute, which is
suppressed by the complainant. The complainant has tried to give
colour of criminal prosecution by picking up the wordings of the
penal provision while filing the complaint. Therefore, the proceeding
initiated by the respondent deserves to be quashed and set-aside.
6. The learned counsel placed reliance on the decision of the
Hon'ble Supreme Court in the case of Thermax Ltd. and Others Vs.
K.M. Johny and Others ( 201 2
Cri L J 438 )
( 12 ) Cri Appln. 3610-2015
7. Shri. Pranit Sonvane, the learned counsel for the respondent
strongly opposed the relief sought in the present application. It is
submitted that the complainant makes out the offences for which the
trial Court has issued the process. It is submitted that ground raised
by the applicants/accused cannot be considered at this stage and the
proceedings may not be quashed at threshold. It is submitted that,
averments made in the complaint prima facie make out a case for
issuance of process and, therefore, there is no infirmity in the order
taking cognizance passed by the trial Court. It is submitted that in
the complaint it has been categorically stated that false assurance
was given by the accused and the complainant was induced to
entered into the project by parting huge amount and in spite of the
knowledge that the accused would not be in a position to implement
or complete the project, they were induced to do so. The accused
have therefore, played deceit. It is submitted that the accused have
deliberately committed an act, which has resulted into the loss to the
complainant. There was dishonest intention on the part of the
accused to deceive the complainant right from inception. At the time
of the issuance of process, the Court is required to see whether a
( 13 ) Cri Appln. 3610-2015
prima facie case is made out and on perusal of the order of the
process, it is apparent that on the basis of the averments made in the
complaint and the submissions of the complainant, the case was
made out for issuance of the process. The complainant ought to be
given opportunity to lead the evidence in the trial. It is submitted
that the complainant has attributed specific overt act to the
applicants, who had participated in the subject project, made false
representation and had acted in connivance with each other and,
therefore, they are liable to be prosecuted for offence. The learned
counsel placed reliance on the affidavit in reply filed by the
complainant along with the requisite documents. It is submitted that
perusal of the allegations made in the complaint, it is clear that the
applicants/accused had acted with ulterior motive to deceive the
complainant Company and had induced it to place the work order,
despite knowledge of the fact that they were not capable to complete
the project as per the requirement of the complainant Company. The
averments made in the complaint can prima facie satisfy the
ingredients of the offence, which are alleged in the complaint and
thereby trial Court had issued process against the accused. It is
( 14 ) Cri Appln. 3610-2015
submitted that the annexures to the complaint establish the offences
against the accused/applicants. It is submitted that from the
complaint and correspondence between the parties, it can be
ascertained that the accused had dishonest intention right from the
inception since they kept on giving assurance fraudulently without
any intention to do work. The complainant had invested huge amount
into the project on the basis of representation and the assurance
made by the accused Company. The accused also admitted that they
are unable to develop the requisite add-ons ( software system) as
required by the complainant and that they assured of completing the
project by hiring consultant. The accused have deceived the
complainant with mala fide intention to extract money. It is further
submitted that it is not only a simple money transaction, dishonest
intention of the accused is apparent from the documents. The
accused kept on giving assurance to the complainant for a period of
about two years, although there was commitment of three months.
The accused also admitted their liability and agreed to repay the
amount. It is further submitted that purchase order was placed vide
letter dated 4th December, 2007. Schedule for completing project was
( 15 ) Cri Appln. 3610-2015
also provided, which is evident from the correspondence relied upon
by the complainant and which has been annexed to the reply filed in
this application. The project was to be completed in November, 2008.
The learned counsel pointed out the documents annexed to the reply,
which includes the minutes of the meeting held on 9 th June, 2011,
with regard to completion of the project. The correspondence with
regard to the debit note for investment done and purchase made to
implement the project as per the minutes of the meeting held on 17 th
November, 2011, wherein assurance was given by the accused that
pending work will be completed by June, 2012. It is submitted that,
the documents relied upon by the complainant and the averments
made in the complaint clearly establish that prima facie case for
issuance of process is made out and, therefore, interference in the
said order is not called for. It is also submitted that the trial Court
has applied its mind to the complaint, verification statement and after
going through all the documents, cognizance of the complaint was
taken. Considering the object of Sections 202 of the Code of Criminal
Procedure, the same was fulfilled in the present proceedings by
application of mind depicted by the trial Court. It is, therefore,
( 16 ) Cri Appln. 3610-2015
submitted that, application preferred by the accused may be
dismissed.
8. I have gone through the documents on record. Perused the
complaint and the order passed by the Trial Court. The dispute
between the parties arises out of contractual obligations. The work
order of project was given in the year 2007. The complaint was filed
in the year 2014. The parties had executed the agreement, which
contains the arbitration clause. As per clause 16 of the said
Arbitration, in the event of a dispute or difference of opinion of any
nature whatsoever between GITL and customer during the course of
the assignment, arising as a result of this proposal, the same will be
referred to arbitration in the terms of Arbitration and Reconciliation
Act, 1996 and its rules. GITL and Customer will each nominate an
Arbitrator to the Board and both these Arbitrators will appoint a third
Arbitrator, who will act as the umpire. The agreement also stipulates
that, through Mutual Consent- either of the parties can terminate the
agreement with 30 days notice on mutual consent .
( 17 ) Cri Appln. 3610-2015
9. From the record it is apparent that there was contract between
the complainant and accused No.1 Company and allegedly there was
breach of the contract by the accused No.1 Company. Taking into
consideration the nature of the transaction, it is apparent that it was
civil dispute and the remedy would lie in the civil Court. There existed
an agreement between the parties. They did not opt for arbitration.
The complainant also did not chose to file a suit for specific
performance or for recovery of money. It is true that the commercial
dispute may be having facets of criminal prosecution and the
complaint for penal offences may lie in a appropriate case. It is also
true that merely because there is an arbitration clause, it cannot be
said that criminal complaint for offences under IPC is not
maintainable, however, I do not find any element of offences under
criminal law. To constitute the offence of cheating there has been
dishonest intention right from inception which is not existing in the
present proceeding. Mere use of words such as cheating, dishonest
intention itself would not prevent Court from analyzing the complaint
where it is constitute the offence under penal code. The substance of
the complaint is required to be seen and merely use expression
( 18 ) Cri Appln. 3610-2015
cheating would be of no consequence. The law relating to the
requirement of offence of cheating has been reiterated time and again
by the Supreme Court in various decisions. It has been observed by
the time and again mere breach of contract cannot be given rise to the
criminal prosecution for cheating unless fraudulent or dishonest
intention appears right from the beginning. The Supreme Court in
the case of Indian Oil Corporation Vs. NEPC
India Limited, (
AIR
2006 SC 2780) has observed that, ''it is necessary to take notice of a
growing tendency in business circles to convert purely civil disputes
into criminal case. This is obviously on account of a prevalent
impression that civil law remedies are time consuming and do not
adequately protect the interest of lenders/creditors. Such a tendency
is seen in several family dispute also, leading to irretrievable break
down 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 efforts to settle civil
disputes and claims, which, do not involve any criminal offence, by
applying pressure though criminal prosecution should be deprecated
and discouraged.''
( 19 ) Cri Appln. 3610-2015
10. Similar view was expressed in the case of G. Sagar Suri Vs.
State of U.P. ( 2000 Cri.L.J. 824) In the said decision, it is observed
that, '' It is to be seen if a matter, which is essentially of 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.
11. In the decision relied upon by learned Advocate for the
applicants in the case of Thermax Ltd and Others Vs. K.M. Johny
and Others ( 2011 ALLLMR (Cri) 3603 SC) the Court has dealt with
the proceedings relating to the offence of breach of trust and cheating
and adjudicated upon the requirement to constitute the said offence.
The Supreme Court has considered various decisions rendered by the
Court in respect to the proceedings wherein the criminal prosecution
was launched in the matter involving civil dispute. It was observed
that it is settled law that for proving offence under Section 420 of the
I.P.C essential ingredient is that, there has to be dishonest intention
to deceive another person. If the dispute pertains to contractual
( 20 ) Cri Appln. 3610-2015
obligation between the parties in the absence of dishonest intention,
right from the inception, the prosecution would be untenable. It was
also observed that concept of ' vicarious liability' is unknown to
criminal law. The Court also considered the fact that proceedings
were initiated belatedly.
12. In the present case also, the dispute contains the flavour of civil
nature and the complainant has resorted to initiation of the criminal
prosecution after a period of seven years. The applicants are being
impleaded as persons who were acting as officers of the accused
No.1 Company. There is no question of applying ' ' vicarious liability'
in respect of the provision of Section 418, 420 of the Indian Penal
Code. In any case, the correspondence annexed with the complaint
and, correspondence relied upon by the complainant do not indicate
that involvement of the applicants as persons responsible for
commission of penal offence. In the circumstances, assuming that
there was non-performance of the contract, it would at the most give
rise to the civil cause of action and not the offence of cheating. In the
circumstances, this is a fit case to exercise powers under Section 482
( 21 ) Cri Appln. 3610-2015
of the Code of Criminal Procedure and to quash said proceedings.
13. Since the proceedings are required to be quashed on the ground
that the offence of cheating is not made out against the applicants I
do not consider it necessary to adjudicate on the issue of non
compliance of the provision of the Sections 202 of the Code of
Criminal Procedure on the ground that the applicants were residing
beyond the territorial jurisdiction of the trial Court. Hence, I pass the
following order.
ORDER
1. Criminal Application No. 3610 of 2015 is allowed.
2. The order issuing process dated 11th November, 2014 passed by
the learned Judicial Magistrate, First Class, Aurangabad in Regular
Criminal Case No. 1551 of 2014 and the proceedings of the said
complaint are hereby quashed and set-aside.
[PRAKASH D.NAIK, J.]
YSK/Cri Appln. 3610-2015
