Karnataka High Court
Mr Anjan Roy vs The State Of Karnataka on 16 September, 2022
Author: M. Nagaprasanna
Bench: M. Nagaprasanna
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF SEPTEMBER, 2022
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
CRIMINAL PETITION No.2029 OF 2022
C/W
CRIMINAL PETITION No.2041 OF 2022
CRIMINAL PETITION No.2045 OF 2022
IN CRIMINAL PETITION No.2029 OF 2022
BETWEEN:
1 . MR. ANJAN ROY
S/O LATE M.P.RAY
AGED ABOUT 69 YEARS.
2 . MRS. SUMITRA ROY
W/O MR.ANJAN ROY
AGED ABOUT 65 YEARS.
3 . MRS.TANUSHREE ROY
W/O GAURAV KUNDU
AGED ABOUT 34 YEARS
PETITIONERS 1 TO 3
R/A NO.335, 14TH CROSS,
4TH MAIN, BENGALURU - 560 080.
4 . MRS.TRISHNA ROY
W/O MR. DURGA PRASAD SOM
AGED ABOUT 39 YEARS,
R/A B1207, BRIGADE GATEWAY,
2
RAJAJINAGAR, BENGALURU.
5 . TROY LIFE SCIENCES
HAVING ITS REGISTERED OFFICE AT
YELAHANKA NEW TOWN,
BENGALURU CITY, BENGALURU
REP. BY ITS PROPRIETOR
MRS TRISHNA ROY.
... PETITIONERS
(BY SRI UDAYA HOLLA, SR.ADVOCATE A/W
SRI MAHESH S., ADVOCATE)
AND:
1. THE STATE OF KARNATAKA
BY YELAHANKA NEW TOWN POLICE
BENGALURU
REPRESENTED BY PUBLIC PROSECUTOR,
CITY CIVIL COURT, BENGALURU.
2. MR.PASHUPATI P.V.,
MAJOR
RL FINE CHEM PVT. LTD.,
REP. BY ITS CEO
HAVING OFFICE AT RLFC HOUSE,
C-10, 1ST CROSS, KSSIDC INDUSTRIES
YELAHANKA NEW TOWN, BENGALURU.
... RESPONDENTS
(BY SRI K.S.ABHIJITH, HCGP FOR R1;
SRI C.V.NAGESH, SR.ADVOCATE FOR
SRI ARCHISHMAN CHAUDHURY, ADVOCATE FOR R2)
3
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF
CR.P.C., PRAYING TO QUASH THE ENTIRE CRIMINAL PROCEEDINGS
AS AGAINST THE PETITIONERS IN FIR REGISTERED BY THE
RESPONDENT YELAHANKA NEW TOWN POLICE IN CR.NO.49/2022
ON 18.02.2022 FOR THE OFFENCE P/U/S 120(B), 406, 420, 417
R/W 34 OF IPC, PENDING ON THE FILE OF IV ADDL.C.M.M.,
BENGALURU.
IN CRIMINAL PETITION No.2041 OF 2022
BETWEEN:
1 . DR.A.R.RAMESHA
S/O RAMAKRISHNA ADIGA
AGED ABOUT 58 YEARS
R/O 378/1, 12TH 'A' MAIN ROAD
A SECTOR, YELAHANKA NEW TOWN
BENGALURU - 560 064.
2 . MR.K.B.RAJESH
S/O LATE PNB MARAR
AGED ABOUT 49 YEARS
R/O 106, SIHGD
7TH BLOCK, 5TH PHASE
NEW TOWN, YELAHANKA
BENGALURU - 560 064.
3 . MR.P.K.BELIAPPA
S/O LATE P.D.KUTAPPA
AGED ABOUT 58 YEARS
R/O 87, 3RD 'A' MAIN
5TH CROSS
SOMESHWARA NAGAR
NEW TOWN, YELAHANKA
BENGALURU - 560 064.
4 . MR.BISWAJIT CHAKRABORTY
S/O LATE SHANTI RANJAN
4
AGED ABOUT 58 YEARS
R/O 28/2, S-HIG-B
5TH PHASE
YELAHANKA NEW TOWN
BENGALURU - 560 064.
5 . DR.CHANDRASHEKAR HOLLA
S/O DS HOLLA
AGED ABOUT 70 YEARS
NO. 10A, SUPRABHAT
6TH CROSS, 60 FEET ROAD
OPP. COSMOS LEATHER WORKS
NS PALYA EXTENSION
B.G.ROAD
BENGALURU - 560 076.
... PETITIONERS
(BY SRI UDAYA HOLLA, SR.ADVOCATE FOR
SRI NAGARAJA R., ADVOCATE)
AND:
1. THE STATE OF KARNATAKA
BY YELAHANKA NEW TOWN POLICE
BENGALURU
REPRESENTED BY PUBLIC PROSECUTOR,
HIGH COURT OF KARNATAKA,
BENGALURU.
2. MR.PASHUPATI P.V.,
MAJOR
RL FINE CHEM PVT. LTD.,
REP. BY ITS CEO
HAVING OFFICE AT RLFC HOUSE,
C-10, 1ST CROSS, KSSIDC INDUSTRIES
YELAHANKA NEW TOWN, BENGALURU - 64.
... RESPONDENTS
5
(BY SRI K.S.ABHIJITH, HCGP FOR R1;
SRI C.V.NAGESH, SR.ADVOCATE FOR
SRI ARCHISHMAN CHAUDHURY, ADVOCATE FOR R2)
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF
CR.P.C., PRAYING TO QUASH THE ENTIRE PROCEEDINGS AGAINST
THE PETITIONERS IN FIR REGISTERED BY THE RESPONDENT
YELAHANKA NEW TOWN POLICE IN CR.NO.49/2022 ON 18.02.2022
FOR THE OFFENCE P/U/S 120B, 406, 420, 417 OF IPC, PENDING
ON THE FILE OF IV ADDL.C.M.M., BENGALURU.
IN CRIMINAL PETITION No.2045 OF 2022
BETWEEN:
1. M/S. FLOWCHEM PHARMA
AT B2-404, RAMKEY ONE NORTH
AVALAHALLI, SINGANAYAKA
YELAHANKA NEW TOWN
BENGALURU CITY KARNATAKA
REP BY ITS DIRECTOR
MRINMOY ROY
S/O SANJIB KUMAR ROY.
2. MRINMOY ROY
S/O SANJIB KUMAR ROY
AGED ABOUT 32 YEARS,
AT B2-404, RAMKEY ONE NORTH
AVALAHALLI,
SINGANAYAKA
YELAHANKA NEW TOWN
BENGLAURU CITY
KARNATAKA.
3. RUMA CHAUDHARY
W/O DIPAK KUMAR CHAUDHARY,
6
AGED ABOUT 69 YEARS,
R/O A-206, RENNAISSANCE PROSPERO
BELLARY ROAD,
BY AMRUTHA HALLI
BENGALURU CITY KARNATAKA.
4. MR.DIPAK KUMAR CHAUDHARY
S/O B.G.CHAUDARY
AGED ABOUT 71 YEARS,
R/O A-206,
RENNAISSANCE PROSPERO
BELLARY ROAD,
BY AMTURHA HALLI
BENGALURU CITY
KARNATAKA.
5. RAVINDRA VASANTRAO KULKARNI
S/O VASANTRAO KULKARNI
AGED ABOUT 53 YEARS,
R/O H 3604, WELWORTH CITY,
DODDABALLAPURA MAIN ROAD,
HESARGHATTA, MARASANDRA
BENGALURU - 561 203.
6. SHEKAR N.,
S/O NALLATHAMBI
AGED ABOUT 38 YEARS,
P/R/A-5/295, MANNIVAKAM,
KANCHEEPURAM
TAMIL NADU - 500 345.
7. KRISHNA S.,
S/O V.S.REDDY
AGED ABOUT 45 YEARS,
PERMANENT R/AT NO.58/2,
2ND MAIN, 5TH CROSS, KOGILU
YELAHANKA OLD TOWN,
BENGALURU - 560 064.
7
8. VENUGOPAL S.,
S/O SRINIVAS M.K.,
AGED ABOUT 30 YEARS,
PERMANENT R/AT KODALAHATTI
HOSAHALLI,
HUNASAMARANAHALLI,
BENGALURU - 562 157.
9. MAHENDRA REDDY Y.,
S/O YEDDULA SUBBAREDDY
AGED ABOUT 34 YEARS,
PERMANENT R/O 12,
THOTLI VAMPALI,
CHINNARAMANNAGANAPALLE,
ANANTPUR
ANDRA PRADESH - 515 571.
10 . TRISHNA ALU
D/O AMAR KUMAR ALU
AGED ABOUT 28 YEARS,
PERMANENT R/AT
AHYAMBATI, DHULEPUR,
GOGHAT, HOOGLY
WEST BENGAL - 712 616.
11 . GIRISH H.,
S/O HANUMANTHU.K.,
AGED ABOUT 28 YEARS,
NO.U16, 3RD CROSS, GANESH BLOCK,
NEAR MUNESHWARA TEMPLE
SHESHADRIPURAM,
BENGALURU - 560 020.
12 . SHASHENDRA KUMARA K.N.,
S/O NAREPPA K.,
AGED ABOUT 29 YEARS,
R/O 17TH WARD,
DASARA STREET ROAD,
8
17TH WARD, DEVANAHALLI,
BENGALURU - 562 110.
... PETITIONERS
(BY SRI UDAYA HOLLA, SR.ADVOCATE FOR
SRI MADHU MATHI., ADVOCATE)
AND:
1. THE STATE OF KARNATAKA
BY YELAHANKA NEW TOWN POLICE
BENGALURU
REPRESENTED BY PUBLIC PROSECUTOR,
HIGH COURT OF KARNATAKA,
BENGALURU - 560 001.
2. MR.PASHUPATI P.V.,
MAJOR
RL FINE CHEM PVT. LTD.,
REP. BY ITS CEO
HAVING OFFICE AT RLFC HOUSE,
C-10, 1ST CROSS, KSSIDC INDUSTRIES
YELAHANKA NEW TOWN, BENGALURU.
... RESPONDENTS
(BY SRI K.S.ABHIJITH, HCGP FOR R1;
SRI C.V.NAGESH, SR.ADVOCATE FOR
SRI ARCHISHMAN CHAUDHURY, ADVOCATE FOR R2)
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF
CR.P.C., PRAYING TO QUASH THE ENTIRE PROCEEDINGS AGAINST
THE PETITIONERS IN FIR REGISTERED BY THE RESPONDENT
YELAHANKA NEW TOWN POLICE IN CR.NO.49/2022 ON 18.02.2022
FOR THE OFFENCE P/U/S 120B, 406, 420, 417 OF IPC, PENDING
ON THE FILE OF IV ADDL.C.M.M., BENGALURU.
9
THESE CRIMINAL PETITIONS HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 08.09.2022, COMING ON FOR
PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER
Batch of these criminal petitions arise out of the same crime that is registered by the complainant against all these accused in Crime No.49 of 2022 on 18-02-2022 for offences punishable under Sections 120B, 406, 417, 420 read with Section 34 of the Indian Penal Code. Though the matters were listed in orders, with consent of parties, they were taken up for final hearing.
2. Brief facts leading to the filing of the present petitions, as borne out from the records, are as follows:-
The 2nd respondent/RL Fine Chem Private Limited ('the Company' for short) is the complainant. The Complainant/ Company was one of those first companies to develop and manufacture psychotropic substances in the country and is currently an industry leading in manufacturing of Active Pharmaceutical Ingredients in psychotropic substances and other therapeutic segments.10
3. The petitioners in Criminal Petition No.2029 of 2022 are all members of the same family i.e., 'Ray Family' and were all share holders of the Complainant/Company. The entire 100% share holding of the Complainant/Company which was originally held by Mr. Anjan K. Roy, Mrs. Sumitra Roy, Ms. Trishna Roy and Ms. Tanushree Roy is alleged to be on the false representation and warranties extended by Ray family in which the investors were fraudulently induced into investing in the Complainant/Company and in pursuance of such investment had executed securities subscription and shareholders agreement on 27-07-2016. Under the said agreement, the Ray family and its affiliates as defined in the agreement were prohibited for a period of 60 months from 30-08-2016 up to 30-08-2021 either directly or indirectly operating a similar or identical business as that of the Complainant/Company. One Mr. Mrinmoy Roy along with other accused who were employees of the Complainant/Company during the course of their employment in the Complainant/ Company and by virtue of their key senior designations in the Company are alleged to have become privy to all the confidential information of the Complainant/Company.
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4. In the month of April, 2021 the Complainant/Company claims to have come to know through one of its customers that Flowchem Pharma Private Limited was selling products similar to the products manufactured by the Complainant/Company and was actively approaching the customers of the Complainant/Company owing to the specialized nature of product developed by the Complainant/Company. The crux of the allegation was that the technical knowhow of the Complainant/Company was taken by the accused and have used them, contrary to the agreement that they had entered into for not directly operating similar or identical business of the Complainant/Company.
5. The Directors of Flowchem Pharma Private Limited and the remaining accused were long term employees of the Complainant/Company. Based upon these allegations the complaint came to be filed before the jurisdictional Police by the Complainant/Company- RL Fine Chem Private Limited for punishment for theft, punishment for criminal breach of trust, dishonestly receiving stolen property, habitually dealing in stolen property, punishment for cheating, cheating with knowledge that 12 wrongful loss may ensue to the person whose interest offender is bound to protect, cheating and dishonestly inducing delivery of property coupled with punishment for criminal conspiracy, but the crime is registered for the offences punishable under Sections 120B, 406, 417, 420 r/w Section 34 of the IPC.
6. On registration of crime, during the process of investigation, all these petitions are filed by the shareholders of the Complainant/Company and its employees calling in question the very registration of crime. This Court, having entertained the petitions, had interjected the proceedings on the basis of the averments made in the petitions and the submissions made thereon. The respondents having entered appearance have filed an application seeking vacation of the interim order and, therefore, the matters were heard for their disposal.
7. Heard Sri Udaya Holla, learned senior counsel appearing for the petitioners, Sri K.S.Abhijith, learned High Court Government Pleader appearing for respondent No.1 and Sri C.V.Nagesh, learned senior counsel appearing for respondent No.2-Complainant. 13
8. The learned senior counsel Sri Udaya Holla taking this Court through the documents appended to the petition would seek to demonstrate that the matter arises out of a breach of contract as it was the agreement, as aforesaid, that is alleged to have been breached. The agreement was entered into on 27.07.2016. The agreement also envisages resolution of a dispute by way of arbitration. Admittedly, the present dispute which arises from an agreement is arbitrable and once the issue is arbitrable the criminality that is alleged to be attached to the said agreement gets vanished and in a matter which is purely civil in nature, criminal law is set into motion without any rhyme or reason or criminality that can be attached and would submit that, if at all the Complainant/Company is aggrieved, they ought to have instituted a civil suit or sought for appointment of an Arbitrator.
8.1 He would further contend that the agreement was entered into on 27-07-2016 and the period of five years as alleged is already over. There can be no impediment for manufacture of products that are in conflict even if it is construed that the 14 petitioners have indulged in competition and would seek quashment of the very registration of crime against the petitioners in all these petitions.
9. Per-contra, the learned senior counsel Sri C.V.Nagesh while taking this court through the documents appended to the petition and the contents of the application seeking vacation of the interim order would seek to demonstrate that the Complainant/Company has lost more than 100 crores for the acts of the petitioners. The covenants in the agreement that is entered into between the parties clearly indicate that for a period of 60 months there could be no competition with the Complainant/ Company. It is not after the period of 60 months the petitioners have indulged in such competition. It is in the year 2018 when the bar under the agreement was still operating there is competition from the petitioners and this fact is not in dispute. Therefore, he would contend that it is a matter of investigation as the investigation is yet to conclude and the petitioners would have all the opportunity later in law, in the event the final report is filed, at the hands of the Investigating Officer. He would place reliance upon the judgments 15 in the caseS of DINESHBHAI CHANDUBHAI PATEL v. STATE OF GUJARAT - (2018) 3 SCC 104; SKODA AUTO VOLKSWAGEN (INDIA) PRIVATE LIMITED v. STATE OF UTTAR PRADESH AND OTHERS - (2021) 5 SCC 795 and B.V.S.N.SASTRY v. STATE OF KARNATAKA - Criminal Petition No.6567 of 2020 decided on 25th February, 2021.
10. In reply to the submissions made by the learned senior counsel (supra), the learned senior counsel representing the petitioners would seek to place reliance upon the judgments rendered by the Apex Court in the case of VIJAY KUMAR GHAI AND OTHERS v. THE STATE OF WEST BENGAL AND OTHERS - 2022 SCC OnLine 344; M.N.G.BHARATEESH REDDY v. RAMESH RANGANATHAN AND OTHERS - 2022 SCC OnLine SC 1061 and VILAS DEORE v. STATE OF KARNATAKA AND OTHERS -
Criminal Petition No.4346 of 2022 decided on 15.07.2022 to contend that when the matter is purely civil in nature, criminal law must not be continued in motion.
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11. I have given my anxious consideration to the submissions made by the respective learned counsel and perused the material on record.
12. The afore-narrated facts with regard to relationship between the parties though not in dispute would need a little detail. All the petitioners herein were all employees of RL Fine Chem Private Limited, a company which is incorporated under the Companies Act, 1956 and one of its objective was to develop and manufacture psychotropic substance in the country. The 100% share holding of the Complainant/Company, is not in dispute, that it was with the petitioners and securities subscription and shareholders agreement was entered between four protagonists viz., (i) MAPE PHARMASCIENCE LLP. (ii) KATHLEKHAN ESTATES PRIVATE LIMITED; (iii) (a) Mr. Anjan K.Roy, (b) Mrs. Sumitra Roy,
(c) Ms. Trishna Roy Ms. Tanushree Roy and (iv) RL FINE CHEM PRIVATE LIMITED. The covenants of the agreement are germane to be noticed for a resolution of the lis at this juncture. In the agreement it is recorded that the investors were to subscribe to the 17 subscription securities in the proportion that was indicated at Clause 2.2 and it reads as follows:
"2.2. The investors shall scribe to the Subscription Securities in the following proportion:
Mape shall subscribe to (i) 11,419 (Eleven Thousand Four Hundred Nineteen only) Equity Shares of the Company at a price of Rs.9,375/- (Rupees Nine Thousand Three Hundred and Seventy five only) per Equity Share for a total sum of Rs.10,70,53,125 (Rupees Ten Crores Seventy Lakhs Fifty Three Thousand One Hundred and Twenty Five) constituting 18.2% (Eighteen point two per cent) of the paid up share capital of the Company (the Mape Equity Shares), and (ii) 16,314 (Sixteen Thousand Three Hundred and Fourteen only) compulsorily convertible debentures of the Company at a price of Rs.9,375 (Rupees Nine Thousand Three Hundred Seventy Five only; the Mape CCDs) each, for a total sum of Rs.15,29,433,750 (Rupees Fifteen Crores Twenty Nine Lakh Forty Three Thousand Seven Hundred and Fifty only) and convertible into 16,314 (Sixteen Thousand Three Hundred and Fourteen only) Equity Shares of the Company, which when aggregated with the Mape Equity Shares, would constitute 26% (Twenty six percent) of the Company's paid-up share capital (such percentage to be adjusted based on the prevailing share capital at the time of conversion); and KK Estates shall subscribe to (1) 19,326 (Nineteen Thousand Three Hundred and Twenty Six only) Equity Shares of the Company at a price of Rs.9,375 (Rupees Nine Thousand Three Hundred and Seventy five only) per Equity Share for a total sum of Rs.18,11,81,250 (Rupee3s Eighteen Crore Eleven Lakhs Eighty One Thousand Two Hundred and Fifty) constituting 30.8% (Thirty point eight per cent) of the paid-up share capital of the Company (the KK Equity Shares), and (ii) 27,608 (Twenty Seven Thousand Six Hundred and Eight only) compulsorily convertible debentures of the Company at a price of Rs.9,375 (Rupees Nine Thousand Three Hundred and Seventy five only); the KK CCDs), for a total sum of Rs.25,88,25,000 (Rupees Twenty Five Crores Eighty Eight 18 Lakhs and Twenty Five Thousand) and convertible into such number of Equity Shares of the Company, which when aggregated with the KK Equity Shares, would constitute 44% (Forty four percent) of the Company's paid-up share capital (such percentage to be adjusted based on the prevailing share capital at the time of conversion.
The Mape Equity Shares and the KK Equity shares are hereafter collectively referred to as the Investor Equity Shares. The Mape CCDs and the KK CCDs are hereafter collectively referred to as the Investor CCDs.
The terms of the Investor CCDs are set out at Schedule-5 hereto.
The Investor Equity Shares and the Investor CCDs are hereafter collectively referred to as the Subscription Securities. The aggregate consideration of the subscription to the Subscription Securities is hereinafter referred to as the Investment Amount."
Clause 7 of the said agreement which was placing an embargo upon the petitioners herein which is akin to a competition clause reads as follows:
"7. Ray Family's Non-Compete Covenants In order to induce the investors to enter into this Agreement and to subscribe to the Subscription Securities as provided herein, each of the Ray Family members agree that for a period of sixty (60) month from the Closing Date, they shall not and shall procure that their affiliates shall not (subject to Clause 7.5), without the prior written consent of the Investors, directly or indirectly;
7.1.1 be concerned in, engage in, consult with, or own, control, manage, or otherwise participate in the ownership, control or management of a business 19 identical or similar to the Business in the Republic of India;
7.1.2 do anything which may lead a Person who has dealt with the Business at any time during the twelve (12) months prior to the date of this Agreement to cease to deal with the Business on substantially equivalent terms to those previously offered or at all;
7.1.3 on its own account or in conjunction with or on behalf of any other Person in respect of the products or services of the Business either to seek or obtain orders from, or do business with, a Person who has been a customer of the Business at any time during the twelve (12) months prior to the date of this Agreement for the products or services of the Business in its territory of operation;
7.1.4 directly or indirectly solicit, engage or employ a director, officer, employee or manager of the Investor engaged in carrying on the Business or a Person who was a director, officer, employee or manager of the Ray Family engaged in carrying on the Business at any time during the twelve (12) months prior to the date of this Agreement; or 7.1.5 seek to contract with or engage (in such a way as to affect adversely the Business as carried on at the date of this Agreement) a Person who has been contracted with or engaged to manufacture, assemble, supply or deliver goods or services to the Business at any time during the twelve (12) months prior to the date of this Agreement.
7.2 For the purpose of Section 7.1.1, each of the Ray Family is deemed to be concerned in a business if:
7.2.1. he carries on such business as principal or agent either alone or jointly with another Person; or 20 7.2.2 he is a partner, director, employee, secondee, consultant, adviser, manager or agent in, of or to any Person who carried on such business; or 7.2.3. he has any financial interest (as shareholder or otherwise) in (a) a company listed on a recognized stock exchange in India in excess of 10% (tenm percent) or (b) a private limited company in excess of 5% (five percent) provided such listed company or private limited company carries on such business; or 7.3 Each covenant contained in each section or paragraph above shall be, and is, a separate covenant by each of the members of the Ray Family and shall be enforceable separately against each of the members of the Ray Family and independently of each of the other covenants and its validity shall not be affected if any of the others is invalid; an if any of the covenants is void (including by reason of such covenants being held to be against public interest or unlawful or in any way an unreasonable restraint of trade) but would be valid if some part of the covenant were deleted the covenant in question shall apply with such modification as may be necessary to make it valid.
7.4. The Parties acknowledge that the aforesaid covenants are essential for the Investors an the Company to carry out the Business.
7.5. The Parties further agree and confirm that Troy Life Sciences shall be bound by the restrictions under and the provisions of this Clause 7 except insofar as it relates to carrying on the Business for and on behalf of the Company."
(Emphasis added) Clause 7 indicates that in order to induce the investors into this agreement and to subscribe to subscription securities as provided 21 herein, each of the petitioners have agreed for a period of 60 months from the closing date that they shall not and shall procure their affiliates, which would mean that neither the petitioners nor their affiliates without the prior written permission or consent of investors directly or indirectly engage in any kind of competition as noted in the covenant. Clauses 7.1.1 to 7.1.5 (supra) are those covenants which would bind the petitioners. Clauses 7.4 and 7.5 observes that the parties to the agreement acknowledge the aforesaid covenants which are essential for the investors and the Company to carry out the business. Clause 21 deals with dispute resolution and reads as follows:
"21. DISPUTE RESOLUTION 21.1 In the event of any dispute, controversy or claim arising out of, relating to, or in connection with this Agreement, or the breach, termination or validity hereof, the Parties shall endeavour to resolve the same through mutual discussion. In the event that such disputes and differences cannot be resolved within 30 (thirty) days from the date on which the discussion began, the dispute shall be finally settled exclusively by arbitration. The arbitration shall be conducted in accordance with the Arbitration and Conciliation Act, 1996 (the "Arbitration Act") in effect at the time of the arbitration, except as they may be modified by mutual agreement of the Parties. The seat of the arbitration shall be Bangalore, provided that the arbitrators may hold hearings in such other locations as the arbitrators 22 determine to be most convenient and efficient for all of the parties to such arbitration under the circumstances. The arbitration shall be conducted in the English language.
21.2 The arbitration shall be conducted by 3 (three) arbitrators. The claimant and the respondent shall appoint one arbitrator each, and the 2 (two) arbitrators appointed by the parties (or by the chairman pursuant to the Arbitration Act as the case may be) shall, within 30 (thirty) days of the appointment of the second arbitrator, agree upon a third arbitrator who shall act as the presiding arbitrator. If the third arbitrator has not been agreed within this time period, the third arbitrator shall be appointed by the Chairman.
21.3 Notwithstanding this Clause 21 or any other provision to the contrary in this Agreement, no Party shall be obligated to follow the foregoing arbitration procedures where such Party intends to apply to any court of competent jurisdiction for an interim injunction or similar equitable relief against any other Party, provided there is no unreasonable delay in the prosecution of that application.
21.4 The provisions of this Clause 21 shall survive any termination of this Agreement."
On a coalesce of the aforesaid clauses of the agreement what would emerge is that the petitioners in the said petitions who are all shareholders of the Complainant/Company or employees of the Complainant/Company would not indulge in any kind of competitive business as is observed in Clause 7 (supra).
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13. The allegation now is that the petitioners have indulged, during the subsistence of this embargo, into making drugs that are directly in conflict with the Complainant/Company, contrary to the agreement. It appears that the Complainant/Company owes some amount to the petitioners and also it transpires that they had approached the National Company Tribunal on the subject matter against the Complainant/Company and have withdrawn the said claim before the NCLT, but continued to operate the business in competition with the Complainant/Company. The issue is not with regard to what happened after 30-08-2021, but what has happened within those dates i.e., the date of agreement and 30-08-2021.
14. On Complainant/Company coming to know of the activities of the petitioners, a complaint comes to be registered on 18-02-2022. The references in the complaint which are germane to the lis are extracted hereunder for the purpose of quick reference:
"2. The entire 100% shareholding of the Complainant Company was originally held by Mr. Anjan Roy, Mrs. Sumitra Roy, Ms. Trishna Roy and Ms. Tanushree Roy (hereinafter referred to as the "Ray Family". Solely based on the false representation and warranties extended by the Ray Family, the Investors, were fraudulently induced into investing in the Complainant 24 Company and executed a Securities Subscription and Shareholders Agreement dated 27.07.2016 (hereinafter referred to as the "SSSHA") (Annexure-C1/pg.9). Under the SSSHA, the Ray Family and its "Affiliates", as defined in the SSSHA, were prohibited, for a period of 60 months from 30-08-2016 i.e., up to 30-08-2021, from directly or indirectly operating a similar and/or identical business as that of the Complainant Company.
3. Mr.Mrinmoy Roy, along with the other Accused, were employees of the Complainant Company and during the course of their employment with the Complainant Company and by virtue of their key senior designations in the Complainant Company, the said Accused were also privy to all the confidential information of the Complainant Company.
4. In April, 2021, the Complainant Company, through one of its customers, became aware that Flowchem Pharma Pvt.Ltd. was selling products similar to the products manufactured by the Complainant Company and was actively approaching the customers of the Complainant Company. Owing to the niche specialized nature of the products developed, manufactured and sold by the Complainant Company, the only mechanism, by which Flowchem Pharma Pvt.Ltd. would be able to supply such products would be only if Flowchem Pharma Pvt.Ltd. had received stolen proprietary confidential information of the Complainant Company from the other Accused and had utilized such stolen information (Annexure C2/Pg.77) and (Annexure-C3/pg.79).
... ... ... ...
6. Mr. Mrinmoy Roy, while being employed with the Complainant Company, incorporated Flowchem Pharma Pvt.Ltd. on 12-11-2018 (Annexure- C7/pg.88). The registered address of Flowchem Pharma Pvt.Ltd. is the same as the residential address of Mr. Mrinmoy Roy.
7. The current Directors of Flowchem Pharma Pvt.Ltd.
include Mr. Mrinm,oy Roy and Mr. Dipak Kumar 25 Chaudhary. The remaining accused, especially Mr. Mrinmoy Roy, Dr. A. R.Ramesha, Mr. K.B.Rajesh, Mr.Ravindra Kulkarni and Mr. N.Sekhar, were long term employees of the Complainant Company, holding key positions owing to which the above-mentioned Accused were privy to confidential and proprietary information of the Complainant Company. (Annexure-C6/pg.88). The shareholders of Flowchem Pharma Pvt.Ltd. include Mr. Mrinmoy Roy, Mrs. Ruma Chaudhary and Mr. Dipak Kumar Chaudhary.
... ... ... ...
The facts and circumstances narrated hereinabove clearly establish that the Accused have, since the inception of the present transaction, carefully conspired together, in breach of the trust reposed by the Complainant Company in the Accused to induce the Complainant Company into entering into the SSSHA, developing the proprietary and confidential information and consequently stealing the said information from the Complainant Company and utilizing the same to illegally enrich themselves. The Accused have defrauded and cheated the Complainant Company into expending money and resources for the development of the confidential and proprietary information in order to ultimately steal such information for their benefits.
In view of the above, it is clearly established that the Accused are therefore guilty of various Offences the Indian Penal Code, 1860 it is humbly requested that your goodself kindly immediately direct the registration of an FIR against all the Accused for the grave criminal offences committed by them under Section 379 (Punishment for Theft), 406 (Punishment for Criminal Breach of Trust), 411 (Dishonestly Receiving Stolen Property), 413 (Habitually Dealing in stolen property), 417 (Punishment for Cheating), 418 (Cheating with knowledge that wrongful loss may ensure to the person whose interest offender is bound to protect), 420 (Cheating and dishonestly inducing delivery of property) read with Sections 34 (Acts done by several persons in furtherance of common intention) and 120B (Punishment for Criminal Conspiracy) of the Indian Penal Code, 1860 and conduct a thorough investigation into the matter."
(Emphasis added) 26 Therefore, the gravamen of the allegations against the petitioners, is that the petitioners, who were the erstwhile employees or shareholders of the Complainant/Company came in access of all the confidential information of the Complainant/Company, used them contrary to the shareholders agreement and have caused huge loss to the Complainant/Company on luring the customers and inducing them into investment, again contrary to the covenants in the agreement. It is, therefore, the allegation is for the offences punishable under Sections 417, 418 and 420 of the IPC.
15. The contention that registration of crime should be obliterated on account of contention of the petitioners that the issue is purely civil in nature sans substance. The learned senior counsel for the petitioners has placed reliance upon the judgment of the Apex Court in the case of VIJAY KUMAR GHAI (supra). The said judgment is distinguishable without much ado. The said case arose on account of a breach of Joint Development Agreement. The Apex Court holds that offence of cheating and fraudulent or dishonest inducement is an essential ingredient for the offence. Since the agreement was mutually entered into between the parties and 27 there was no dishonest inducement the Apex Court quashed the proceedings thereon. In the case at hand, the very covenant bars inducement of investors for a period of 60 months directly coming into the competition. Therefore, the said judgment is inapplicable to the facts of the case on hand.
16. The judgment in the case of M.N.G.BHARATEESH REDDY (supra) also follows suit, where the Apex Court holds mere breach of agreement or contract cannot give rise to cheating, unless dishonest intention is shown right from the beginning of the transaction. It is following the concepts evolved by the Apex Court in the aforesaid judgment in the case of VIJAY KUMAR GHAI this Court had rendered its judgment in the case of VILAS DEORE. Therefore, the said judgment also would be inapplicable to the facts of the case. The facts of the case are peculiar enough, to permit further investigation to be carried on.
17. The submission of the learned senior counsel for the petitioners that in the teeth of existence of an arbitration clause, the further proceedings should not be permitted to continue is also 28 unacceptable, as the Apex Court in plethora of judgments has held that mere existence of an arbitration clause, de hors the facts, in a given case should not lead to quashment of proceedings when a crime is registered. Therefore, the case at hand, in terms of the facts narrated hereinabove, would require an investigation at least, as there are disputed questions of facts with regard to the petitioners manufacturing certain drugs, which are in direct conflict with the agreement. Those are what is narrated in the petition. The contention is that those drugs are manufactured by several companies in India. The drugs that are indicated are as follows:
(i) Telmisartan,
(ii) Haloperidol,
(iii) Chlordiazepoxide,
(iv) Olmesartan,
(v) Minoxidil,
(vi) Melitracen HCL,
(vii) Fluphenazine-HCL,
(viii) Cinnarizine,
(ix) Sulfadoxine,
(x) Flupentixol Di HCL,
(xi) Diazepam,
(xii) Clomipramine HCL,
(xiii) Alprazolam.
18. The contention of the petitioners is that the aforesaid drugs are manufactured by every company, while it is not, is the 29 contention of the learned senior counsel appearing for the Complainant/Company, that it is the only company that is manufacturing the scheduled drugs. The technical knowhow of the drugs that are manufactured by the petitioners are purely on the basis of technical knowhow of the Complainant/Company. Therefore, it is in the realm of seriously disputed questions of fact, which this Court would not at this juncture entertain in a petition under Section 482 of the Cr.P.C.
19. Reference being made to the judgments of the Apex Court in the cases of KAPTAN SINGH and PRATIMA MOHANTY in the circumstances becomes apposite. The Apex Court in the case of KAPTAN SINGH v. STATE OF UTTAR PRADESH1 has held as follows:
"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 CrPC has quashed the criminal proceedings for the offences under Sections 147, 148, 149, 406, 329 and 386 IPC. It is required to be noted that when the High Court in exercise of powers under Section 482 CrPC 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 1 (2021) 9 SCC 35 30 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 IPC and even the learned Magistrate also took the cognizance. From the impugned judgment and order [Radhey Shyam Gupta v. State of U.P., 2020 SCC OnLine All 914] 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 CrPC 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 a 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 Dineshbhai Chandubhai Patel [Dineshbhai Chandubhai Patel v. State of Gujarat, (2018) 3 SCC 104 : (2018) 1 SCC (Cri) 683] 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 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.
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9.2. In Dhruvaram Murlidhar Sonar [Dhruvaram Murlidhar Sonar v. State of Maharashtra, (2019) 18 SCC 191 :
(2020) 3 SCC (Cri) 672] after considering the decisions of this Court in Bhajan Lal [State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335 : 1992 SCC (Cri) 426] , it is held by this Court that exercise of powers under Section 482 CrPC to quash the proceedings is an exception and not a rule. It is further observed that inherent jurisdiction under Section 482 CrPC though wide is to be exercised sparingly, carefully and with caution, only when such exercise is justified by tests specifically laid down in the 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 CrPC. Similar view has been expressed by this Court in Arvind Khanna [CBI v. Arvind Khanna, (2019) 10 SCC 686 :
(2020) 1 SCC (Cri) 94] , Managipet [State of Telangana v. Managipet, (2019) 19 SCC 87 : (2020) 3 SCC (Cri) 702] and in XYZ [XYZ v. State of Gujarat, (2019) 10 SCC 337 : (2020) 1 SCC (Cri) 173] , referred to hereinabove.
9.3. Applying the law laid down by this Court in the aforesaid decisions to the facts of the case on hand, we are of the opinion that the High Court has exceeded its jurisdiction in quashing the criminal proceedings in exercise of powers under Section 482 CrPC.
10. The High Court has failed to appreciate and consider the fact that there are very serious triable issues/allegations which are required to be gone into and considered at the time of trial. The High Court has lost sight of crucial aspects which have emerged during the course of the investigation. The High Court has failed to appreciate and consider the fact that the document i.e. a joint notarised affidavit of Mamta Gupta Accused 2 and Munni Devi under which according to Accused 2 Ms Mamta Gupta, Rs 25 lakhs was paid and the possession was transferred to her itself is seriously disputed. It is required to be noted that in the registered agreement to sell dated 27- 10-2010, the sale consideration is stated to be Rs 25 lakhs and with no reference to payment of Rs 25 lakhs to Ms Munni Devi and no reference to handing over the possession. However, in the joint notarised affidavit of the same date i.e. 32 27-10-2010 sale consideration is stated to be Rs 35 lakhs out of which Rs 25 lakhs is alleged to have been paid and there is a reference to transfer of possession to Accused 2. Whether Rs 25 lakhs has been paid or not the accused have to establish during the trial, because the accused are relying upon the said document and payment of Rs 25 lakhs as mentioned in the joint notarised affidavit dated 27-10-2010. It is also required to be considered that the first agreement to sell in which Rs 25 lakhs is stated to be sale consideration and there is reference to the payment of Rs 10 lakhs by cheques. It is a registered document. The aforesaid are all triable issues/allegations which are required to be considered at the time of trial. The High Court has failed to notice and/or consider the material collected during the investigation.
11. Now so far as the finding recorded by the High Court that no case is made out for the offence under Section 406 IPC is concerned, it is to be noted that the High Court itself has noted that the joint notarised affidavit dated 27-10-2010 is seriously disputed, however as per the High Court the same is required to be considered in the civil proceedings. There the High Court has committed an error. Even the High Court has failed to notice that another FIR has been lodged against the accused for the offences under Sections 467, 468, 471 IPC with respect to the said alleged joint notarised affidavit. Even according to the accused the possession was handed over to them. However, when the payment of Rs 25 lakhs as mentioned in the joint notarised affidavit is seriously disputed and even one of the cheques out of 5 cheques each of Rs 2 lakhs was dishonoured and according to the accused they were handed over the possession (which is seriously disputed) it can be said to be entrustment of property. Therefore, at this stage to opine that no case is made out for the offence under Section 406 IPC is premature and the aforesaid aspect is to be considered during trial. It is also required to be noted that the first suit was filed by Munni Devi and thereafter subsequent suit came to be filed by the accused and that too for permanent injunction only. Nothing is on record that any suit for specific performance has been filed. Be that as it may, all the aforesaid aspects are required to be considered at the time of trial only.
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12. Therefore, the High Court has grossly erred in quashing the criminal proceedings by entering into the merits of the allegations as if the High Court was exercising the appellate jurisdiction and/or conducting the trial. The High Court has exceeded its jurisdiction in quashing the criminal proceedings in exercise of powers under Section 482 CrPC.
13. Even the High Court has erred in observing that original complaint has no locus. The aforesaid observation is made on the premise that the complainant has not placed on record the power of attorney along with the counter filed before the High Court. However, when it is specifically stated in the FIR that Munni Devi has executed the power of attorney and thereafter the investigating officer has conducted the investigation and has recorded the statement of the complainant, accused and the independent witnesses, thereafter whether the complainant is having the power of attorney or not is to be considered during trial.
14. In view of the above and for the reasons stated above, the impugned judgment and order [Radhey Shyam Gupta v. State of U.P., 2020 SCC OnLine All 914] passed by the High Court quashing the criminal proceedings in exercise of powers under Section 482 CrPC is unsustainable and the same deserves to be quashed and set aside and is accordingly quashed and set aside. Now, the trial is to be conducted and proceeded further in accordance with law and on its own merits. It is made clear that the observations made by this Court in the present proceedings are to be treated to be confined to the proceedings under Section 482 CrPC only and the trial court to decide the case in accordance with law and on its own merits and on the basis of the evidence to be laid and without being influenced by any of the observations made by us hereinabove. The present appeal is accordingly allowed."
(Emphasis supplied) 34 Later, the Apex Court in the case of STATE OF ODISHA v. PRATIMA MOHANTY2 has held as follows:
"14. At the outset, it is required to be noted that by the impugned judgment and order the High Court in exercise of its powers under Section 482 Cr.P.C. has quashed the criminal proceedings for the offences under Section 13(2) read with Section 13(1)(d) of the Act and Section 420 read with Section 120B IPC. From the impugned judgment and order passed by the High Court, it appears that the High Court has entered into the merits of the allegations and has conducted the mini-trial by weighing the evidence in detail which, as such, as observed and held by this Court in a catena of decisions is wholly impermissible. As held by this Court in the case of State of Haryana v. Ch. Bhajan Lal, 1992 Supp (1) SCC 335 : AIR 1992 SC 604, the powers under Section 482 Cr.P.C. could be exercised either to prevent an abuse of process of any court and/or otherwise to secure the ends of justice. In the said decision this Court had carved out the exceptions to the general rule that normally in exercise of powers under Section 482 Cr.P.C. the criminal proceedings/ FIR should not be quashed. Exceptions to the above general rule are carved out in para 102 in Bhajan Lal (supra) which reads 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 the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelized and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised.2
2021 SCC OnLine SC 1222 35 (1) Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused.
(2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code.
(3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.
(4) Where, the allegations in the FIR do not constitute a cognizable offence but constitute only a non-
cognizable 42 PART E offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code.
(5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused.
(6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party.
36(7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge."
15. Looking to the allegations in the present case against the respondents - accused and considering the fact that charge-sheet has been filed by the Vigilance Cell after a thorough investigation, it cannot be said that the case falls within any of the exceptions as carved out by this Court in para 102 in the case of Bhajan Lal (supra). It cannot be said that the criminal proceedings initiated against the respondents - accused are an abuse of process of any court. On the contrary, the allegations are an instance of abuse of the powers with a mala fide intention and allotment of the plots to the family members by hatching a criminal conspiracy and to allot the plots to the family members at throw away price causing loss to the B.D.A. and the public exchequer.
16. It is trite that the power of quashing should be exercised sparingly and with circumspection and in rare cases. As per settled proposition of law while examining an FIR/complaint quashing of which is sought, the court cannot embark upon any enquiry as to the reliability or genuineness of allegations made in the FIR/complaint. Quashing of a complaint/FIR should be an exception rather than any ordinary rule. Normally the criminal proceedings should not be quashed in exercise of powers under Section 482 Cr.P.C. when after a thorough investigation the charge-sheet has been filed. At the stage of discharge and/or considering the application under Section 482 Cr.P.C. the courts are not required to go into the merits of the allegations and/or evidence in detail as if conducing the mini-trial. As held by this Court the powers under Section 482 Cr.P.C. is very wide, but conferment of wide power requires the court to be more cautious. It casts an onerous and more diligent duty on the Court."
(Emphasis supplied) 37 The Apex Court has clearly held that a case before the Court hearing a petition under Section 482 of the Cr.P.C is shrouded with disputed questions of fact the same may not be entertained.
20. In the light of seriously disputed questions of fact existing in the case at hand and the judgments rendered by the Apex Court, I do not find any merit to entertain the petitions at this juncture. Therefore, they meet their dismissal.
Accordingly, the petitions stand dismissed. Consequently, pending applications, if any, stands disposed.
Sd/-
JUDGE bkp CT:MJ