Delhi High Court

M/S. Infopac Software Pvt. Ltd. & ... vs M/S. Elofic Industries Ltd. on 24 May, 2011

Author: Ajit Bharihoke

*      IN THE HIGH COURT OF DELHI AT NEW DELHI
                      Judgment reserved on: May 04, 2011
                      Judgment decided on: May 24, 2011

+      CRL.M.C. 1490/2009
       M/S. INFOPAC SOFTWARE PVT. LTD. & ANR.
                                                ....PETITIONERS
                Through: Mr. O.P.Aggarwal, Advocate with Mr.
                          Nirmal Mittal, Advocate.
                     Versus

       M/S. ELOFIC INDUSTRIES LTD.             ....RESPONDENT
                Through: Mr. P.R.Sikka, Advocate with Mr.
                         V.K.Gupta, Advocate.

        CORAM:
        HON'BLE MR. JUSTICE AJIT BHARIHOKE

1.     Whether Reporters of local papers
       may be allowed to see the judgment?

2.     To be referred to the Reporter or not ?
3.     Whether the judgment should be
       reported in Digest ?

AJIT BHARIHOKE, J.

1. M/s. Infopac Software Pvt. Ltd. and its Managing Director Shri P.R.

Seshadri vide this petition under Section 482 Cr.P.C. are seeking

quashing of the complaint No.36/1/2003 filed against them by the

respondent alleging commission of offence under Section 403, 405,

415, 420 and 120B IPC pending in the court of ACMM, Patiala House

Courts, New Delhi.

2. Briefly stated, facts relevant for the disposal of this petition are

that M/s. Elofic Industries Ltd (respondent) filed above referred criminal

complaint against the petitioners claiming that the petitioner No.1 is a

company dealing in the development and implementation of computer

software and petitioner No. 2 is the Managing Director of petitioner

No.1 company. Earlier, he was the Chief Consultant of the company. It

is alleged in the complaint that the petitioners/accused persons

contacted the respondent through its Hosur Office and thereafter

submitted their request for consideration of their Enterprise Resource

Planning (ERP) Software for implementation vide their letters dated 27th

March, 1999 and 28th April, 1999. In the said letters, the petitioners

have made a false and exaggerated picture of their expertise in the

development of software and on being misled by said

misrepresentation, the respondent company entered into a software

supply and implementation contract with petitioner No. 1 company on

18th October, 1999. The contract was duly executed and signed on

behalf of the petitioner company by petitioner No. 2.

3. It is alleged in the complaint that pursuant to their design to

cheat the respondent/complainant, the petitioners sent their team to

the respondent's location at Faridabad in early November, 1999 for

commencement of the work of development of software. The staff of

the petitioners interacted with each department of the

complainant/respondent and formulated system design documents for

each of the department. The work of development of software as per

the system design documents commenced thereafter with regular

meetings to review the progress of the project and update

customization requirements. The main effort of the petitioners' team

was to develop the purchase, inventory and MRP-I Modules by April,

2000 with some work also to be put in for the development of sales,

finance and excise modules. However, the team sent by petitioner No.

1 company though ostensibly engaged in the development of software

as per contract but actually the team's commitment to do the software

development work was lacking and they kept on misleading the

complainant regarding the actual projects.

4. In the process, it is alleged that the petitioners managed to

receive ` 5 lakhs from the complainant company out of the contract

value of ` 7.8 lakhs, although not even a single module developed by

the petitioners team was fully functional even six months after the

commencement of development work.

5. It is also the case of the complainant that the petitioners were

kept regularly informed about the problems and shortcomings in the

various Modules so far development vide various letters and emails

sent by the complainant. When the petitioners realised the futility of

their dishonest design to extract further payments from the respondent

complainant on the pretext of progress in completion of software, they

withdrew their team from the complainant's location after mid June,

2000 on the pretext that they were required to attend a technical

upgradation seminar as also to discuss the progress of all pending

issues relating to the project. This withdrawal was done despite the

complainant's objection that the team should not be withdrawn without

completion of software.

6. That a meeting was held in the petitioners office in Bangalore on

19.07.2000 and an MOU was signed between two parties regarding

further development and completion of the contract and the payment

schedule with special reference to the module wise final execution

summary which contains a list of reports that were to be completed for

implementation. The petitioners were informed of all the shortcomings

in the software so far development vide complainant's letter dated 18th

August, 2010.

7. That pursuant to the MOU, the petitioners sent two coordinators

to the location of the complainant/respondent for implementation

activities at Hosur. The said two coordinators, however, had to return

after spending 22 days at the respondent's location without being able

to assist in implementation of software at Hosur. Subsequently, after

the repeated reminders, a representative of the petitioner visited the

complainant's location at Faridabad in November, 2000 and signed

minutes of meeting dated 10.11.2000 purportedly with a CD of

software package for testing and implementation. The CD project by

the representative of the petitioners was found to be awfully

inadequate and not in conformity with the agreed customisation

requirement. All the shortcomings in the CD was brought to the notice

of the petitioner, but those were not corrected.

8. That team sent by the petitioners periodically worked at the

respondent's location at Faridabad during year 2001, but to no

advantage. On the aforesaid allegations, respondent claimed that the

petitioners have cheated the respondent of `5 lakhs on the basis of

false representation about their expertises in development of the

software which the petitioner was not capable of developing.

9. Learned M.M. took cognizance of the complaint and after

conducting preliminary inquiry issued process under Section 204

Cr.P.C. summoning the petitioners to appear and undergo trial for the

offence punishable under Section 420 IPC.

10. Learned counsel for the petitioners has submitted that the above

referred complaint No. 36/1/2003 pending in the court of ACMM, Patiala

House Courts, New Delhi and the summoning order dated 04th March,

2009 issued by the concerned Magistrate against the petitioners are

liable to be quashed for the reason that the allegations in the

complaint disclose only a dispute of civil nature regarding which,

admittedly, a suit for recovery has been filed by the

complainant/respondent against the petitioner company and the

allegations do not disclose commission of the offence of cheating.

Learned counsel contended that Section 415 of the IPC defines the

offence of cheating and one of the most essential ingredients of

cheating is the dishonest intention, which is lacking in this case.

Learned counsel argued that it would be evident from the allegations in

the complaint that the petitioners had every intention to fulfil their

obligations under the contract and pursuant to their desire to do so,

the petitioner company admittedly sent a team of workers to develop

software programme, which continued to work for the respondent at

their location at Faridabad initially for a period of about six months and

even thereafter. This conduct of the petitioners, it is submitted, rules

out any intention to deceive or cheat the respondent/complainant.

Thus, learned counsel for the petitioners has strongly urged for

quashing of the complaint, summoning order dated 04th March, 2009

and the subsequent proceedings.

11. Learned counsel for the complainant/respondent, on the other

hand, has submitted that the allegations in the complaint do disclose

the commission of offence of cheating as defined under Section 415

IPC. He contended that from the allegations in the complaint, it is

obvious that petitioner company did not have the necessary expertise

to develop the software programme as per the requirement of the

respondent/complainant company. The petitioner company made

exaggerated claim regarding their expertise which they did not have

and this misrepresentation alone misled the respondent to enter into a

contract with the petitioner company and part with a sum of ` 5 lakhs

out of the contracted amount of ` 7.8 lakhs, which the respondent

would not have done but for dishonest misrepresentation and

exaggerated claim regarding expertise by the petitioner company as

well as petitioner No. 2. Thus, learned counsel for the respondent has

strongly urged for dismissal of the petition. In support of this

contention, respondent has relied upon Adalat Prasad Vs. Rooplal

Jindal & Ors. (2004) 7 SCC 338, Chand Dhawan Vs. Jawahar Lal,

AIR 1992 SC 1379, Mrs. Dhanalakshmi Vs. R.Prasanna Kumar &

Ors, AIR 1990 SC 494 and State of Madhya Pradesh Vs. Harsh

Gupta, 1999 Crl.L.J. 5011.

12. I have considered the rival contentions and perused the record.

13. The petitioners have been summoned to undergo trial for the

offence of cheating punishable under Section 420 IPC. Cheating is

defined under Section 415 IPC as under:

"415. Cheating.--Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat".

Explanation.--A dishonest concealment of facts is deception within the meaning of this section.

14. From the aforesaid definition, it is apparent that to constitute the

offence of cheating, there has to be deception, which precedes the

fraudulent or dishonest inducement to the person deceived to part with

the property or do or omit to do any act which he would not have done

or omitted to do but for the deception. The ingredients of the offence

of cheating as required by the Section are:

(1) Deception of any person.

(2) (a) Fraudulently or dishonestly inducing that person

(i) to deliver any property to any person; or

(ii) to consent that any person shall retain any property;

or

(b) intentionally inducing that person to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property;

15. I have perused the judgments relied upon by the respondent.

The judgment of Supreme Court in Adalat Prasad Vs. Rooplal Jindal

& Ors.(supra) has no relevance to the facts of this case for the reason

that in the aforesaid case the Supreme Court has dealt with the powers

of the subordinate court to review its own order and held that

Magistrate cannot review its own order. The present petition has been

filed under Section 482Cr.P.C. conferring inherent powers on the High

Court to do substantial justice and it is based on the allegations that

the complaint filed by the respondent company does not disclose the

commission of any offence and as such it is an abuse of process of law

to continue with the complaint and put the petitioners to unnecessary

rigors of trial. In the matter of Chand Dhawan Vs. Jawahar Lal

(supra), the Supreme Court has dealt with the scope of powers of High

Court to quash the complaint under Section 482 Cr.P.C. In the above

said case, it was held by the Supreme Court that the High Court can

exercise its own inherent jurisdiction of quashing a criminal

proceedings only when the allegations made in the complaint do not

constitute an offence or that the exercise of the power is necessary

either to prevent the abuse of process of the court or otherwise to

secure the ends of justice. The Supreme Court also observed that no

inflexible guidelines or rigid formula can be set out and it would

depend upon the facts and circumstance of each case wherein such

powers should be exercised. When the allegation in the complaint,

prima facie, constitute the offence against any or all of the

respondents, in absence of material on record to show that

continuation of the proceedings would be an abuse of process of court

or defeat the ends of justice, the High Court would not be justified in

quashing the complaint. Similar view was taken by the Supreme Court

in the matter of Dhanalakshmi Vs. R.Prasanna Kumar &

Ors(supra).

16. There can be no dispute with the aforesaid proposition of law.

Now the question for determination is whether the above referred

ingredients constitute the offence of cheating are satisfied on prima

facie reading of the complaint?

17. On reading of the complaint, it is apparent that after entering into

the contract, the petitioner did send team of workers at Faridabad

location of the respondent company for development of customised

software as per the requirement of the respondent/complainant

company. Admittedly, aforesaid team worked for about six months at

the location of the complainant company to develop the software

modules. When the slow progress and unsatisfactory development of

software was brought to the notice of the petitioners, they sent their

co-ordinators and team to remove the snag. From this, it is evident

that the petitioner company had no intention to deceive the

respondent and it actually did whatever possible to perform its part of

the contract. Further, the petitioners have placed on record Annexure

'A', a certificate purportedly issued by Lt. Col. N.K.Banerjee, Manager,

Administration (ERP Co-ordinator), strongly recommending the

petitioner No. 1 company's software to any industry, which reads thus:

"This is to confirm that our company, Elofic Industries Ltd., Faridabad, Haryana have entered into a contract with Infopac Software Ltd. having their registered office at 67 Rustam Bagh, Bangalore for implementation of Infopac ERP software, initially at our HO/factory premises, and subsequently, customisation of the same to all our depots located across the country.

As per the above contract terms, the Infopac team has developed the following modules of Phase-I, to our satisfaction, with all features and functions.

*Purchase *Inventory *MRP I In addition, the Infopac team has achieved commendable progress in developing the following modules at our site, to our satisfaction, which they are likely to complete before the end of this month.

*Excise * Sales *General Ledger *Accounts Payable * Accounts Receivable * Multi-currency

We hereby strongly recommend Infopac ERP Software to any industry".

18. On reading of this certificate, it is obvious that till 06th April, 2000,

the respondent company was satisfied with the progress of

development of software by the team sent by the petitioner company.

Otherwise also, Manager, Administration (ERP Co-ordinator) of

respondent company would not have recommended Infopac ERP

Software to any other industry. This circumstance in itself rules out

any fraudulent intention on the part of the petitioner company to

deceive and cheat the respondent company. Thus, one of the most

essential ingredients of the offence of cheating i.e. fraudulent or

dishonest deception by the accused is missing in this case.

19. In view of the above, it is apparent that the dispute between the

parties is a purely civil nature and the essential ingredients of the