M/S Diamond Cables Limited And vs Central Bureau Of Investigation ...
2021 Latest Caselaw 1110 j&K

      HIGH COURT OF JAMMU & KASHMIR AND LADAKH
                      AT JAMMU

                                                Reserved on :         30.07.2021
                                                Pronounced on:        15.09.2021


                                                CRMC No. 235/2012
                                                IA No. 268/2012
                                                CrlM No. 459/2021

M/s Diamond Cables Limited and                       .....Appellant(s)/Petitioner(s)
others

                       Through: Mr. Sunil Sethi, Sr. Advocate with
                                Mr. Ankesh Chandel, Advocate

                  vs

Central Bureau of Investigation and another                     ..... Respondent(s)

                       Through: Ms. Monika Kohli, Advocate


Coram: HON'BLE MR. JUSTICE RAJNESH OSWAL, JUDGE

                                 JUDGEMENT

1. The present petition has been filed by the petitioners under Section

561-A Cr.P.C (now 482 Cr. P.C.) for quashing of the charge sheet bearing No.

RC0042011A0005 for commission of offence under Section 420-A RPC

pending before the court of learned Chief Judicial Magistrate Jammu

(hereinafter referred to be as the trial court), on the following grounds:-

a. That the investigating agency has not carried out investigation in

its true spirit and particularly has not taken the samples of the

material in question and got it tested in the laboratory in

accordance with the guidelines issued by the Bureau of Indian

Standard IES 398.

b. That the petitioner-Company got all the breaking load tests done

by ERDA, which is the Government testing laboratory and

results thereof, cannot be questioned at any point of time.

c. That there was 18 months warranty period. During that period

no complaint was ever received and after the period of more

than two years NHPC has raised an issue about the supply of

material not in compliance with the breaking load requirements,

which cannot be sustained in view of the fact that warranty

period was over and there was no complaint whatsoever during

the warranty period.

d. That the dispute, if any, is purely civil in nature.

e. That there is an inordinate delay in registering the FIR and no

plausible explanation is forthcoming from the side of the

prosecution, explaining the delay.

f. That the goods were supplied on 07.09.2007 and the samples

were sent to the laboratory in the year 2009, 2011 and 2012 for

testing in different laboratories and it is obvious that during the

said period, the life of the conductors naturally gets affected by

the efflux of time and its strength to bear the load will diminish.

g. That the Investigating Agency has exonerated Ranjeet Thakur,

the person who had certified that the AAAC weasel conductors

conformed the specifications and the breaking load to be more

than 1.44 kN and once Ranjeet Thakur was exonerated, the

petitioners too were required to be exonerated

h. That the Directors of the Company are not at all involved in the

manufacturing and quality control process and the same is taken

care of by the Head of the Department of the particular

Department. The Directors do not sit and attend the factory,

where the manufacturing activities are carried on. Therefore the

charge-sheet, so far as, the petitioners are concerned, is required

to be quashed.

i. That the CBI had no jurisdiction to investigate the offence under

section 420-A RPC in the then State of Jammu and Kashmir.

2. The respondents have filed the response, in which it is stated that

the petitioners have a remedy of approaching the Magistrate concerned for

discharge and further that the petitioners deliberately supplied the substandard

material thereby causing loss to the NHPC and the Managing Director of the

petitioner-company has admitted that all the decisions of the petitioner-company

are taken with the prior approval of the Chairman. Besides, the factual aspects of

the matter have been narrated in detail in the response filed by respondents.

Arguments:

3. Mr. Sunil Sethi, learned senior counsel for the petitioners

vehemently argued that once Ranjeet Thakur was exonerated by the

respondents, in whose presence the material was tested in the factory premises

of the petitioners, so the petitioners cannot be held liable particularly when

Ranjit Thakur had certified the tensile strength of the weasel conductor as per

the specifications required under the contract. He further argued that section

420-A RPC is not applicable in the instant case as there was no privity of

contract between the petitioner company and the NHPC, because the product

was supplied by the petitioner-company to M/s. L&T Limited, which is not a

government company, as such, the charge-sheet is required to be quashed. He

further submitted that the petitioner-company cannot be held liable for any

defect beyond the warranty period. The petitioners were under obligation to

rectify the defect during that period only. No such defect arose within the

warranty period. Dispute, if any, is at the most of civil in nature, so the

continuance of impugned charge sheet shall be an abuse of process of law. Mr.

Sethi further argued that with the passage of time the quality of the product gets

affected and once the warranty period had expired, any test conducted upon the

samples of the product supplied by the petitioners was of no relevance. He

further submitted that there are no allegations against petitioner Nos. 2 to 4, so

they cannot be prosecuted. Mr. Sethi placed much reliance upon the judgment of

Apex Court in Sushil Sethi v State of Arunachal Pardesh reported in 2020(3)

SCC 240. Though numerous other grounds were also raised in the petition but

Mr. Sethi restricted his arguments only on the issues mentioned above.

4. Ms. Monika Kohli, learned counsel appearing for the Central

Bureau of Investigation has vehemently argued that the petitioners can raise the

issues raised by them in the present petition before the learned Magistrate. He

further submitted that while exercising jurisdiction under section 561-A Cr. P.C.

(now 482) Cr.P.C, the evidence cannot be appreciated. She further submitted

that the petitioner-company supplied sub-standard material, thereby causing

wrongful loss to the government exchequer and wrongful gain for itself and

merely Ranjit Thakur was exonerated by the Investigating Officer would not

mean that the petitioners have not committed any offence as they were under

legal and contractual obligation to supply the material as per the specifications

prescribed in the contract but they supplied the material that was substandard

and not as per the specifications prescribed, so they are liable for prosecution.

She also submitted that the petitioner-company is one of approved subcontractor

of NHPC so it cannot be said that there was no privity of contract between the

petitioner and NHPC.

5. Heard learned counsel for the parties and perused the record

meticulously.

Prosecution Case:

6. The brief facts necessary for the disposal of the present petition are

that a case was registered on the basis of source information that Sh. Ranjeet

Thakur, Deputy Manager (E), NHPC, QA&I, Faridabad, in conspiracy with the

Directors of M/s. Diamond Cables Ltd., Village Vadalia, Tah. Savil District

Baroda and unknown others, abused his official position and committed

cheating by facilitating acceptance of substandard All Aluminum Alloy Weasel

Conductors in a Government contract for rural electrification under Rajiv

Gandhi Grameen Vidyutikaran Yojana (RGGY) for provision of electric supply

to below poverty line consumers in District Udhampur, awarded to M/S Larsen

& Toubro Ltd New Delhi. Mr. Ranjeet Thakur, Deputy Manager, falsely

certified the substandard AAAC Weasel Conductor to be acceptable under his

joint inspection report dated 07.09.2007/08.09.2007. It was also alleged that as

per drawing and contract agreement, minimum breaking load of individual

AAAC weasel conductor wire should have been 1.44 kN. Mr. Ranjeet Thakur

had conducted pre-dispatch inspection of the material at M/s. Diamond Cables

Limited Baroda on 07.09.2007 and 08.09.2007 at the factory premises and had

prepared joint inspection report, in which he had fraudulently shown the

breaking load of AAAC weasel conductor to be more than 1.44 kN and

recommended that the material was fit for use. It was further alleged that the

samples of AAAC Weasel conductor were collected by the vigilance wing of

NHPC on 29.10.2009 and got tested from Shriram Institute for Industrial

Research, New Delhi and as per test report dated 18.03.2010 of the said

Institute, the minimum breaking load was found ranging between 1.23-1.26 kN

for the samples, which was below specification and hence substandard. None of

the samples could withstand minimum breaking load stipulated in the contract

agreement.

7. Investigation revealed that pursuant to NIT dated 18.09.2006,

contract for rural electrification work at Udhampur under RGGY scheme was

awarded to M/s. L&T Ltd. under contract agreement No: NH/Cont.(E&M)-

III/RE-25/PR-273/711/07/I dated 01.06.2007 and second contract agreement

No: NH/Cont.(E&M)-III/RE-25/PR-273/711/07/II dated 01.06.2007. As per the

contract agreement, AAAC equivalent to ACSR weasel conductor 7/2.50(34

sq.mm) was required for 11 KV HT line for 1454 kms and AAAC weasel

conductor (30 sq. mm) was required for LT line for 611 kms for the said work.

As per the contract agreement, besides other technical specifications, the

required minimum breaking load of AAAC conductor 7/2.50(34 sq.mm) strand

after stranding should be 1.44 kN (Kilo Newton). Investigation revealed that

M/s. L&T Ltd placed supply order for procurement of weasel conductor 7/2.50

(34 sq.mm) on 16.07.2007 to M/s. Diamond Cables Ltd Baroda, which was one

of the 07 NHPC approved subcontractors (as per clause 37 and 37.1 of the

agreement between M/s. L&T Ltd and NHPC Ltd.) for supply of conductors

after their mutual agreement (Minutes of meeting) dated 21.05.2007 and

07.06.2007. As per contract agreement, M/S Diamond Cables Ltd submitted

guaranteed technical particulars (GTP) and Drawings and Quality Assurance

Plan for conductors including AAAC Weasel conductors 7/2.50 (34 sq.mm)

dated 30.06.2007 to NHPC through M/S L&T Ltd, under which all

specifications of AAAC weasel conductor as per Bureau of Indian Standards

(BIS) manual IS 398 (part-4) 1994 and tests/inspection required to be conducted

on the material were mentioned, which was approved by NHPC vide letter dated

09.07.2007 and 03.09.2007. When the material AAAC weasel conductor 7/2.50

(34 sq.mm) was got ready by M/s. Diamond Cables Ltd, same was conveyed to

main contractor M/s. L&T Ltd through inspection call dated 21.08.2007 for

inspection of material at work/factory premises of Diamond Cables Ltd and

breaking load (tensile strength) test of full conductor at Electrical Research

Development Association (ERDA), Baroda. Mr. Ranjeet Thakur was deputed

for pre-dispatch inspection of the said material by QA&I Division, NHPC

Faridabad, who conducted the pre-dispatch inspection/acceptance test of said

material including breaking load test of individual wire of said conductor in the

factory premises of M/s Diamond Cables Ltd Baroda on 07.09.2007 and

08.09.2007.

8. Mr. Ranjeet Thakur also conducted breaking load (tensile strength)

test of full conductor at laboratory Electrical Research Development Association

Baroda on 07.09.2009. Tests were conducted at the factory premises after

drawing samples from 21 drums of AAAC weasel conductor randomly selected

by Ranjeet Thakur out of total 207 drums offered to him and the tests included

breaking load/tensile test of individual wire. The test report of factory premises

dated 08.09.2007 revealed that the material cleared all tests conducted and

breaking load of individual wire of AAAC weasel conductor was found to be

ranging between 1.52 to 1.83 kN, which was more than minimum required

specification i.e. 1.44 kN. Further as per Joint Inspection Report breaking load

(tensile strength) test of full AAAC weasel conductor was conducted in the

ERDA, Baroda on 07.09.2007, which was witnessed by Ranjeet Thakur and it

was found that the test was conducted on the full AAAC conductor and not on

the individual wire of the conductor and result of test was in conformity i.e

10.85 Kn with the required approximately calculated breaking load of complete

AAAC weasel conductor i.e. 10.11 Kn. Investigation further revealed that after

pre-dispatch inspection/acceptance test, M/S Diamond Cables ltd supplied entire

lot of AAAC weasel conductor 7/2.50 (34 sq.mm) (207 drums, 2065 kms) to

NHPC both for HT and LT line as AAAC weasel conductor (30 sq. mm) is not

manufactured by the companies. As per the contract agreement, the price of said

AAAC equivalent to ACSR weasel conductor 7/2.50 (34 sq.mm) required for 11

KV HT line for 1454 kms at the rate of ₹ 20,618/ per kms. was ₹ 2,99,78,572/

and AAAC weasel conductor (30 sq. mm) required for LT line for 611 kms at

the rate of ₹ 17,378/ per kilometer was ₹ 1,06,17,958. The total contract amount

was ₹ 4,05,96,350/. On 29.10.2009, Vigilance Team of NHPC Faridabad took

the samples from the store of M/s. L&T Ltd at Udhampur after the complaint

was received regarding discrepancies in the execution of rural electrification

work at Udhampur. The said samples were sent to Shriram Institute for

Industrial Research New Delhi for testing and the result of the test report dated

revealed that the specification of breaking load of individual wire of AAAC

weasel conductor was between 1.23 kN to 1.26 kN, which was much below the

required minimum specification of breaking load i.e. 1.44kN.

9. During investigation by the CBI, fresh samples of AAAC weasel

conductor 7/2.50(34 sq.mm) were collected from installed HT line, where the

flow of electricity was not energized from Akhla Chennani Block on 27.09.2011

through Mr. M. D. Ananath Basu, Joint Director/Testing Engineer, Vibration

Laboratory, Mechanical Engineering Division, Central Power Research Institute

(CPRI), Bangalore, in presence of representative of M/s. Diamond Cables Ltd

Baroda Mr. Ganshyam Singh VP Quality and in presence of representative of

M/S L&T Ltd and independent witnesses. Test report dated 10.10.2011 received

from CPRI Bangalore revealed that the tensile strength of individual wire of all

03 samples of AAAC weasel conductor on which the tests were conducted was

found to be much below the required minimum specification that is 1.44 kN.

Further the samples were also sent to National Metallurgical Laboratory

Jamshedpur for conducting further tests with regard to the quality of material

used for the purpose of manufacturing of said AAAC weasel conductor as well

as the effects of environmental factors upon the tensile strength of the product.

NML Jamshedpur submitted the report and clarifications were also replied

accordingly. During the investigation, the experts were also examined with

regard to the tensile strength of a conductor, who stated that effect with the

passage of time or variation of seasonal temperature is not significant enough to

cause change in the tensile strength. During the course of investigation it was

also found that Mr. Ranjeet Thakur did not have independent access to the

testing equipments and also no evidence emerged that the said machines were

deliberately manipulated to ensure that the conductors conform to the laid down

specifications and he was in conscious knowledge of such manipulations.

Rather M/s. Diamond Cables Ltd as a manufacturer was bound to ensure that

minimum standards/specifications of the contract agreement are met. It was

established during investigation that the substandard material in violation of the

contract has been supplied by M/s. Diamond cables Ltd causing wrongful loss to

Government exchequer to the tune of ₹ 3,23,01,790/. Thus, it is stated that the

petitioners have committed an offence under section 420-A of RPC. After the

completion of investigation, the charge sheet for commission of offence under

Section 420-A RPC was presented before the learned trial court.

Discussion:

10. The preliminary objection that has been raised by Ms. Kohli,

learned counsel appearing for the respondents is that the petition is not

maintainable, as the charge sheet has been filed, so the petitioners can approach

the trial court for discharge. This issue is no more res integra that the criminal

proceedings can be quashed notwithstanding the filing of the charge sheet,

provided the Court comes to the conclusion that prima facie from the perusal of

the charge-sheet as well as evidence relied upon by the prosecution, no offence

is made out. The Apex court in Joseph Salvaraj A. v. State of Gujarat, (2011)

7 SCC 59 has observed as under:

"16. Thus, from the general conspectus of the various sections under which the appellant is being charged and is to be prosecuted would show that the same are not made out even prima facie from the complainant's FIR. Even if the charge-sheet had been filed, the learned Single Judge could have still examined whether the offences alleged to have been committed by the appellant were prima facie made out from the complainant's FIR, charge-sheet, documents, etc. or not."

11. Further, the Apex court in Anand Kumar Mohatta v State

reported in 2019(11) SCC 706 has reiterated the same principle of law and has

held as under:

"16. There is nothing in the words of this section which restricts the exercise of the power of the Court to prevent the abuse of process of court or miscarriage of justice only to the stage of the FIR. It is settled principle of law that the High Court can exercise jurisdiction under Section 482 CrPC even when the discharge application is pending with the trial court. Indeed, it would be a travesty to hold that proceedings initiated against a person can be interfered with at the stage of FIR but not if it has advanced and the allegations have materialised into a charge-sheet. On the contrary it could be said that the abuse of process caused by FIR stands aggravated if the FIR has taken the form of a charge-sheet after investigation. The power is undoubtedly conferred to prevent abuse of process of power of any court."

12. Thus, the contention of the respondents that the charge sheet has

been filed, this Court cannot entertain a petition under section 561-A (Now 482)

Cr.P.C, is required to be rejected

13. Before appreciating the rival contentions of the parties, it needs to

be noted here that the merits of the allegations leveled in the charge sheet are not

required to be gone into as if this Court is exercising the powers as an appellate

court or conducting the trial. The only exercise that is required to be undertaken

is to find out as to whether the un-rebutted allegations contained in the charge

sheet and evidence collected in support thereof make out a commission of

offence or not. Reliance is placed upon the decision of Apex court in Kaptan

Singh v The State of Uttar Pradesh, MANU/SC/0529/2021, in which Apex

Court has held as under:

"9.1. At the outset, it is required to be noted that in the present case the High Court in exercise of powers Under Section 482 Code of Criminal Procedure has quashed the criminal proceedings for the offences Under Sections 147, 148, 149, 406, 329 and 386 of Indian Penal Code. It is required to be noted that when the High Court in exercise of powers Under Section 482 Code of Criminal Procedure quashed the criminal proceedings, by the time the Investigating Officer after recording the statement of the witnesses, statement of the complainant and collecting the evidence from the incident place and after taking statement of the independent witnesses and even statement of the Accused persons, has filed the charge- sheet before the Learned Magistrate for the offences Under Sections 147, 148, 149, 406, 329 and 386 of Indian Penal Code and even the learned Magistrate also took the cognizance. From the impugned judgment and order passed by the High Court, it does not appear that the High Court took into consideration the material collected during the investigation/inquiry and even the statements recorded. If the petition Under Section 482 Code of Criminal Procedure was at the stage of FIR in that case the allegations in the FIR/Complaint only are required to be considered and whether a cognizable offence is disclosed or not is required to be considered. However, thereafter when the statements are recorded, evidence is collected and the charge-sheet is filed after conclusion of the investigation/inquiry the matter stands on different footing and the Court is required to consider the material/evidence collected during the investigation. Even at this stage also, as observed and held by this Court in catena of decisions, the High Court is not required to go into the merits of the allegations and/or enter into the merits of the case as if the High Court is exercising the appellate jurisdiction and/or conducting the trial. As held by this Court in the case of Dineshbhai Chandubhai Patel (Supra) in order to examine as to whether factual contents of FIR disclose any cognizable offence or not, the High Court cannot act like the Investigating agency nor can exercise the powers like an Appellate Court. It is further observed and held that question is required to be

examined keeping in view, the contents of FIR and prima facie material, if any, requiring no proof. At such stage, the High Court cannot appreciate evidence nor can it draw its own inferences from contents of FIR and material relied on. It is further observed it is more so, when the material relied on is disputed. It is further observed that in such a situation, it becomes the job of the Investigating Authority at such stage to probe and then of the Court to examine questions once the charge-sheet is filed along with such material as to how far and to what extent reliance can be placed on such material.

9.2. In the case of Dhruvaram Murlidhar Sonar (Supra) after considering the decisions of this Court in Bhajan Lal (Supra), it is held by this Court that exercise of powers Under Section 482 Code of Criminal Procedure to quash the proceedings is an exception and not a rule. It is further observed that inherent jurisdiction Under Section 482 Code of Criminal Procedure though wide is to be exercised sparingly, carefully and with caution, only when such exercise is justified by tests specifically laid down in Section itself. It is further observed that appreciation of evidence is not permissible at the stage of quashing of proceedings in exercise of powers Under Section 482 Code of Criminal Procedure. Similar view has been expressed by this Court in the case of Arvind Khanna (Supra), Managipet (Supra) and in the case of XYZ (Supra), referred to hereinabove."

14. Now, it is to be seen as to whether the interference of this Court is

warranted in the present facts and circumstances of the case or not. The first

issue that has been raised by the petitioners is that the respondents cannot be

proceeded against, once Ranjit Thakur has been exonerated by the investigating

officer. From the record, it is evident that inspection of the material was

conducted at the factory premises of the petitioner and at that point of time the

breaking load of the weasel conductor under reference was found to be more

than 1.44 kN and the said joint inspection report was signed by Ranjit Thakur.

Ranjit Thakur in his statement has stated that he had no independent access to

testing equipments and tests were conducted by the testing engineers and he had

only witnessed the Results and recorded the readings generated from the

machines. The petitioners cannot claim the parity vis-a-vis Ranjit Thakur and

seek quashing of charge-sheet as there is material on record to demonstrate that

the petitioners have caused wrongful loss to the Government exchequer and in

turn causing wrongful gain for themselves, have deliberately supplied the

substandard material, which they were supposed to supply as per the

specifications of the contract. The tensile strength of the weasel conductor

conducted in CPRI Bangalore clearly establishes that the tensile strength was

found to be less than 1.44 kN. The trial court has yet to examine the issue with

regard to the charge/discharge and the trial court can still examine the

culpability of Ranjit Thakur, if any. So, the first contention of the petitioners

deserves to be rejected.

15. The second issue that has been raised by the petitioners is with

regard to the fact that there was no privity of contract between the petitioner-

company and NHPC. It needs to be noted that as per the allegations leveled in

the charge-sheet, the petitioner-company is one of the 07 approved

subcontractor for supply of conductors as per the contract agreement between

M/s. L&T and NHPC. Otherwise also, it was well within the knowledge of the

petitioners that the product to be supplied by the petitioner-company was meant

for NHPC and that is why the representative of NHPC i.e Mr. Ranjit Thakur

visited the factory premises of the petitioners, where the inspection of the weasel

conductor was conducted and joint inspection report was prepared. Even the

petitioner-company has admitted to have received the amount from NHPC

through M/S L & T, so this contention too lacks any force.

16. The third contention raised by the petitioners is that the dispute is

of civil nature and the petitioners cannot be made liable after the expiry of the

warranty period. As per the contention of the petitioners, there was a warranty

period of eighteen months from the date of supply of product, within which

NHPC could have raised the issue with regard to the quality of the defective

product supplied by the petitioner and had there been any defect in the product,

the petitioners would have been under obligation to replace the same within

fifteen days from the issue of intimation from the buyer with regard to the

product in question. From the averments made in the charge-sheet, it is revealed

that the FIR was registered on 07.06.2011 pursuant to the source information

that Ranjit Thakur in conspiracy with the Directors of M/s. Diamond Cables Ltd.

and unknown others, abused his official position and committed cheating by

facilitating the acceptance of substandard material in the Government contract.

The said allegation with regard to the supply of substandard material by the

petitioners was established during the course of investigation. However, the

complicity of Ranjit Thakur was not established. Even Virender Salman, the

Chief Engineer (Vigilance), Vigilance Wing of NHPC on the basis of

information with regard to the discrepancies in the scheme under reference, took

the sample from the stores of M/S L&T Udhampur in the month of October

2009. Thereafter, the samples were put to test by NHPC, those were found to be

substandard. Thereafter in the presence of representative of the petitioner-

company, the samples were collected from installed HT line on 27.09.2011,

those too were found to be substandard. Merely because the samples were found

to be substandard after the warranty period, so it cannot be said that the

petitioners cannot be prosecuted. It would be profitable to take note judgment of

Apex court in Priti Saraf & Anr Vs State of NCT of Delhi reported in 2021

SCC On Line SC 206, wherein the Apex Court has observed as under:

"30. In the instant case, the complaint/FIR/charge-sheet as noticed above, does, however, lend credence to the questions posed. It is settled that one is not supposed to dilate on this score, or intend to present that the allegations in the complaint will have to be accepted on the face of it and the truth or falsity of which would not be gone into by the Court at this stage, as noticed above, whether the allegations in the complaint were true is to be decided on the basis of the evidence led at the stage of trial and the observations on this score in the case of Nagpur Steel & Alloys Pvt. Ltd. Vs. P. Radhakrishna19 ought to be noticed. In para 3, this Court observed:--

"3. We have perused the complaint carefully. In our opinion it cannot be said that the complaint did not disclose the commission of an offence. Merely because the offence was committed during the course of a commercial transaction, would not be sufficient to hold that the complaint did not warrant a trial. Whether or not the allegations in the complaint were true was to be decided on the basis of evidence to be led at the trial in the complaint case. It certainly was not a case in which the criminal trial should have been cut short. The quashing of the complaint has resulted in grave miscarriage of justice. We, therefore, without expressing any opinion on the merits of the case, allow this appeal and set aside the impugned order of the High Court and restore the complaint. The learned trial Magistrate shall proceed with the complaint and dispose of it in accordance with law expeditiously."

31. Be it noted that in the matter of exercise of inherent power by the High Court, the only requirement is to see whether continuance of the proceedings would be a total abuse of the process of the Court. The Criminal Procedure Code contains a detailed procedure for investigation, framing of charge and trial, and in the event when the High Court is desirous of putting a halt to the known procedure of law, it must use proper circumspection with great care and caution to interfere in the complaint/FIR/charge-sheet in exercise of its inherent jurisdiction.

32. In the instant case, on a careful reading of the complaint/FIR/charge-sheet, in our view, it cannot be said that the complaint does not disclose the commission of an offence.

The ingredients of the offences under Sections 406 and 420 IPC cannot be said to be absent on the basis of the allegations in the complaint/FIR/charge-sheet. We would like to add that whether the allegations in the complaint are otherwise correct or not, has to be decided on the basis of the evidence to be led during the course of trial. Simply because there is a remedy provided for breach contract or arbitral proceedings initiated at the instance of the appellants, that does not by itself clothe the court to come to a conclusion that civil remedy is the only remedy, and the initiation of criminal proceedings, in any manner, will be an abuse of the process of the court for exercising inherent powers of the High Court under Section 482 CrPC for quashing such proceedings.

33. We have perused the pleading of the parties, the complaint/FIR/charge-sheet and orders of the Courts below and have taken into consideration the material on record. After hearing learned counsel for the parties, we are satisfied that the issue involved in the matter under consideration is not a case in which the criminal trial should have been short-circuited. The High Court was not justified in quashing the criminal proceedings in exercise of its inherent jurisdiction. The High Court has primarily adverted on two circumstances, (i) that it was a case of termination of agreement to sell on account of an alleged breach of the contract and (ii) the fact that the arbitral proceedings have been initiated at the instance of the appellants. Both the alleged circumstances noticed by the High Court, in our view, are unsustainable in law. The facts narrated in the present complaint/FIR/charge-sheet indeed reveal the commercial transaction but that is hardly a reason for holding that the offence of cheating would elude from such transaction. In fact, many a times, offence of cheating is committed in the course of commercial transactions and the illustrations have been set out under Sections 415, 418 and 420 IPC. Similar observations have been made by this Court in Trisuns Chemical Industry vs. Rajesh Agarwal (supra):--

"9. We are unable to appreciate the reasoning that the provision incorporated in the agreement for referring the disputes to arbitration is an effective substitute for a criminal prosecution when the disputed act is an offence. Arbitration is a remedy for affording reliefs to the party affected by breach of the agreement but the arbitrator cannot conduct a trial of any act which amounted to an offence albeit the same act may be connected with the discharge of any function under the agreement. Hence, those are not good reasons for the High Court to axe down the complaint at the threshold itself. The investigating agency should have had the freedom

to go into the whole gamut of the allegations and to reach a conclusion of its own. Pre-emption of such investigation would be justified only in very extreme cases as indicated in State of Haryana vs. Bhajan Lal [1992 Supp (1) SCC 335]"

17. Further there is evidence on record of the Experts that the age and

exposure to the environment is not detrimental to the strength and ductility of

the material. So in view of the law laid down by the Apex Court, this contention

is without any force and deserves to be rejected.

18. Lastly, it was submitted that there is no evidence against the

Directors of the company. Mr. Sethi placed strong reliance on the judgment of

Apex Court in case, titled, Sushil Sethi & Anr v State of Arunachal Pradesh

reported in 2020(3) SCC 240. In Sushil Sethi v. State of Arunachal Pradesh,

reported in (2020) 3 SCC 240, the Hon'ble Apex Court while quashing the

charge-sheet against the Managing Director and Director, observed that even

there are no specific allegations and averments in the FIR/charge-sheet that the

appellants were in-charge of administration and management of the company

and thereby vicariously liable.

19. In Sunil Bharti Mittal v. CBI, reported in (2015) 4 SCC 609,

Hon'ble the Apex Court in paragraphs 42 and 43 has held as under:

"42. No doubt, a corporate entity is an artificial person which acts through its officers, Directors, Managing Director, Chairman, etc. If such a company commits an offence involving mens rea, it would normally be the intent and action of that individual who would act on behalf of the company. It would be more so, when the criminal act is that of conspiracy. However, at the same time, it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute specifically provides so.

43. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made an accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated is in those cases where the statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision."

20. Further, in Shiv Kumar Jatia v. State (NCT of Delhi), reported in

(2019) 17 SCC 193, the Apex Court held as under:

"20. Though there are allegations of negligence on the part of the hotel and its officers who are incharge of day-to-day affairs of the hotel, so far as appellant-Accused 2 Shiv Kumar Jatia is concerned, no allegation is made directly attributing negligence with the criminal intent attracting provisions under Sections 336, 338 read with Section 32 IPC. Taking contents of the final report as it is we are of the view that, there is no reason and justification to proceed against him only on ground that he was the Managing Director of M/s Asian Hotels (North) Ltd., which runs Hotel Hyatt Regency. The mere fact that he was chairing the meetings of the company and taking decisions, by itself cannot directly link the allegation of negligence with the criminal intent, so far as appellant-Accused 2. Applying the judgment in Sunil Bharti Mittal [Sunil Bharti Mittal v. CBI. we are of the view that the said view expressed by this Court, supports the case of appellant-Accused 2."

21. So far as instant case is concerned, it has come in the evidence of

PW-Ghanshyam Singh, who is the Vice President of the petitioner-company that

the whole affairs of the company are being looked after by his sons i.e.

petitioner Nos. 3 and 4. So far as petitioner No. 2 is concerned, there is nothing

on record to show that he was involved in the day-to-day affairs of the company

and rather in the statement of above mentioned prosecution witness, it has come

on record that the petitioner No. 2 is an old man of 74 years of age and is merely

a Chairman of the Board and not whole time Director. He is further stated to

have been suffering from heart ailments and has no active role in the business of

the company. Thus, there is no evidence against the petitioner No. 2 so as to

warrant his prosecution, but so far as other petitioners are concerned, there is

evidence against them.

Result:

22. In view of above discussion, the petition, qua petitioner No. 2, is

allowed and charge-sheet against him is quashed. So far as the other petitioners

are concerned, the petition is found to be bereft of any merit and as such, the

same is dismissed.

(Rajnesh Oswal) Judge Jammu:

15.09.2021
Rakesh

                         Whether the order is speaking     :    Yes
                         Whether the order is reportable   :    Yes