Telangana High Court
M/S.Techsmarat India Pvt Ltd And ... vs The State Of Telangana.,Rep.,Pp And ... on 13 March, 2025
THE HONOURABLE SMT. JUSTICE K. SUJANA
CRIMINAL PETITION No.15175 of 2016
ORDER:
This Criminal Petition is filed under Section 482 of Code of
Criminal Procedure, 1973 (for short 'Cr.P.C.') to quash the
proceedings against the petitioners in Crime No.545 of 2015 of
Banjara Hills Police Station, Hyderabad, registered for the offences
punishable under Sections 406 and 420 of the Indian Penal Code,
1860 (for short 'IPC').
2. The brief facts of the case are that on 14.05.2015, a
complaint was received from Sri Satish Vanthair, Vice President of
Mphasis Ltd, stating that Techsmart India Pvt. Ltd, along with its
Managing Director Ponduri Venkata Staya Kumar, Additional
Director Venkata Janardhana Kutchu, and Director Vidya Ponduri,
approached Mphasis Ltd claiming they had been awarded a
contract by the Commissioner of Civil Supplies Department,
Government of Andhra Pradesh, and Registrar, UIDAI. They
persuaded Mphasis Ltd to enter into a teaming agreement on
December 10, 2010, to jointly deliver services. Mphasis Ltd
invested Rs.14.6 crores and incurred significant costs for software
development, implementation, and procurement of kits for UIDAI
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contract enrollment. However, Techsmart India Pvt. Ltd failed to
deliver services, leaving an outstanding balance of
Rs.8,07,61,097/-. Despite a settlement agreement, Techsmart
India Pvt. Ltd paid only Rs.2,96,00,000/-, leaving a balance of
Rs.5,52,00,000/-. The complainant alleged that Techsmart India
Pvt. Ltd made false allegations, claiming they had paid the amount
to M/s Jayani Software, a company registered and operated by
them.
3. Heard Sri M. Abhinay Reddy, learned counsel appearing on
behalf of the petitioners as well as Sri Syed Yasar Momoon, learned
Additional Public Prosecutor appearing on behalf of respondent
No.1-State and Sri M. Pranav, learned counsel appearing on behalf
of respondent Nos.2 and 3.
4. Learned counsel for the petitioners submitted that the
present complaint filed against the petitioners/accused pertains to
a contractual issue that is purely civil in nature and subject to
adjudication and that the High Court of Karnataka, by order dated
19.08.2016, appointed Dr. Justice N. Kumar, a former Judge of the
Hon'ble High Court of Karnataka, as the sole arbitrator to
adjudicate the dispute between the parties. He further submitted
that even if the allegations in the FIR are taken at face value, they
do not disclose any ingredients of the specific offences mentioned
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therein and that as the FIR does not disclose the commission of
any offence, the investigation based on the said FIR is liable to be
quashed. He further submitted that the respondents themselves,
in their application before the Hon'ble High Court of Karnataka
concerning the Teaming Agreement dated 10.12.2010,
acknowledged that any dispute or difference between the parties
was to be resolved amicably through discussions and negotiations,
and unresolved disputes were to be referred to arbitration as per
the Arbitration and Conciliation Act, 1996, with the venue of
arbitration being Bangalore.
5. Learned counsel for the petitioners contended that the
complainant, acting with mala fide intentions, is attempting to drag
a purely civil matter arising out of a contractual dispute into
criminal proceedings to take vengeance against the petitioners,
avoid civil liability, and exert undue pressure. The act of the
complainant of approaching criminal courts for this purpose
renders the FIR liable to be quashed and that there exists an
exclusive jurisdictional clause in the agreement, conferring
jurisdiction upon the Courts of Karnataka, thereby rendering the
present proceedings outside the jurisdiction of P.S. Banjara Hills.
He further contended that the respondents did not approach the
Court with clean hands, as they failed to disclose material facts
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concerning payments made by the petitioners to M/s. Mphasis
Software & Services (India) Pvt. Ltd., and misled the Court by
suppressing these facts, thereby abusing the process of law.
6. In support of the submissions of the learned counsel for the
petitioners, he placed reliance on the decision in MCD v. State of
Delhi & Anr 1, where it was held that a litigant withholding vital
documents or suppressing material facts to gain advantage would
be guilty of committing fraud upon the Court and the opposite
party. Additionally, he refers to the judgment of the Hon'ble
Supreme Court in Anjani Kumar vs. State of Bihar & Anr 2 ,
wherein it is held that a complaint filed as an after-thought to
extract more money from the petitioner is liable to be quashed. The
counsel further submits that it is a settled position of law that
directors of a company are not vicariously liable for offences
committed by the company under the Indian Penal Code unless
there is a statutory provision extending such liability, which is
absent in the present case. Further, the dispute, as evident from
the FIR, is centered around payment issues between the parties,
which is a civil matter requiring adjudication by the appropriate
forum as agreed upon by the parties. He also relies on the
2005 SCC (Cri) 1322
(2008) 2 SCC (Cri) 582
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judgment in Chandran Ratnaswami vs. K.C. Palanisamy 3, which
held that criminal proceedings initiated to evade civil liability or
convert purely civil disputes into criminal cases should be quashed
to prevent abuse of the legal process.
7. Furthermore, the counsel contends that the FIR has been
filed to evade civil liability with an ulterior motive of harassing the
petitioners. In V.Y. Jose & Anr vs. State of Gujarat & Anr 4, the
Hon'ble Supreme Court held that an offence of cheating under
Section 420 IPC requires a showing of fraudulent or dishonest
intention at the time of making a promise or representation. In the
present case, there is no allegation of fraudulent or dishonest
intention at the time of executing the contract, and subsequent
disputes over payment do not attract the ingredients of Section 420
IPC. Therefore, he prayed the Court to quash the proceedings
against the petitioners by allowing this criminal petition.
8. On the other hand, learned counsel for respondent No.3
opposed the submissions made by the learned counsel for the
petitioners, stating that the case is at the stage of FIR. There are
clear averments in the complaint demonstrating how the
respondents were cheated by the petitioner, who, through
inducement, led them to enter into the contract. After entering
(2013) 6 SCC 740
(2009) 3 SCC 78
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into the contract, the petitioners failed to perform their contractual
obligations, which amounts to criminal breach of trust and
cheating. He relied upon the judgment of the Hon'ble Supreme
Court in Indian Oil Corporation v. NEPC India Ltd. and Others 5,
stating that even though a civil remedy is available, the criminal
case cannot be quashed. In the present case, the petitioners
entered into a contract with the respondents, received the amount,
and cheated the respondents. The petitioners entered into an
MOU, but even after the MOU, they paid only two crores, leaving a
balance of five crores and fifty-two lakhs unpaid. He further
submitted that negotiations or proceedings under arbitration are
not grounds to quash the proceedings. As such, he requested the
Court to dismiss the criminal petition.
9. In the light of the submissions made by both the learned
counsel and a perusal of the material available on record, the
averments in the complaint show that the complainant-company
entered into the contract with the petitioner-company and the
petitioner-company failed to pay the amount for the services
rendered by the complainant-company. As a result, the
complainant-company approached the Karnataka High Court for
the appointment of an arbitrator, and the Karnataka High Court
appointed one of the former judges of the Karnataka High Court as
(2006) 6 Supreme Court Cases 736
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an arbitrator, who constituted the arbitral Tribunal to adjudicate
the dispute.
10. The arbitral proceedings were conducted under A.C.No.108
of 2016, wherein M/s Mphasis Ltd. had raised claims against M/s
Techsmart India Pvt. Ltd. regarding unpaid invoices and the cost of
100 UIDAI kits based on a teaming agreement dated 10.12.2010
and a subsequent corporate guarantee deed dated 16.12.2010.
The Arbitral Tribunal, by its award dated 14.06.2017, directed
Techsmart to pay Mphasis ₹5.52 crores with 6% interest from
01.05.2012 and ₹2.08 crores towards the cost of 100 kits with 6%
interest from the same date. Aggrieved by this award, Techsmart
filed a petition under Section 34 of the Arbitration and Conciliation
Act, 1996 vide Com.A.S.No.113 of 2017, challenging the award on
grounds of lack of jurisdiction, invalid documents, and improper
appreciation of evidence. However, the Commercial Court
dismissed the petition on 10th December 2021, upholding the
validity of the arbitration agreement and confirming that the
Arbitral Tribunal had properly appreciated the evidence and
followed due procedure. The Court reiterated that it could not act
as an appellate body to reappreciate evidence or substitute its own
findings.0
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11. It is the specific contention of the learned counsel for the
respondent is that even though there is a civil remedy, the criminal
case has to be continued, in view of the judgment of the Indian Oil
Corporation (supra). However, the facts of the present case do not
disclose ingredients of criminal offences but are purely civil in
nature. The complaint fails to establish any fraudulent or
dishonest intention on the part of the petitioners at the time of
executing the contract, which is a necessary ingredient for invoking
Section 420 IPC, as held by the Hon'ble Supreme Court in V.Y.
Jose (supra).
12. Further, as seen from the record, when a complaint discloses
several transactions that may also have criminal breach, but civil
remedies are available and have already been adjudicated, there is
no need to continue the proceedings in the criminal case. The
arbitral Tribunal has already concluded the proceedings, and the
award has been confirmed by the Commercial Court. Moreover,
the exclusive jurisdiction clause conferring jurisdiction upon the
Courts of Karnataka renders the proceedings before the Banjara
Hills Police Station, Hyderabad, without legal basis.
13. In view of the above, this Court is of the opinion that the
continuation of the criminal proceedings would be unjustified and
the proceedings against the petitioners are liable to be quashed.
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14. Accordingly, this Criminal Petition is allowed and the
proceedings against the petitioners in Crime No.545 of 2015 of
Banjara Hills Police Station, Hyderabad, are hereby quashed.
Miscellaneous applications, if any pending, shall stand
closed.
_______________
K. SUJANA, J
Date: 13.03.2025
SAI
