Madras High Court
Emc Limited (A-4) vs State Represented By on 8 August, 2022
Author: G.Ilangovan
Bench: G.Ilangovan
Crl.O.P.(MD)Nos.3443 and 3499 of 2020
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 08/08/2022
CORAM:
THE HON'BLE MR JUSTICE G.ILANGOVAN
Crl.O.P.(MD)Nos.3443 and 3499 of 2020
and
Crl.MP(MD)Nos.1877 and 1839 of 2022
(1)Crl.OP(MD)No.3443 of 2020:-
EMC Limited (A-4),
Constantia Office Complex,
11, Dr.U.N.Brahamachari Street,
South Block, 8th Floor,
Kolkata-700 017,
rep. By its Authorised Representative
Mr.Sumanta Bhattacharya : Petitioner/A4
Vs.
State represented by
Inspector of Police,
CBI ACB,
Madurai.
(Ref.Crime No.RC MA1 2015 A 0013) : Respondent/
Complainant
Prayer: Criminal Original Petition is filed under
Section 482 Cr.P.C., to call for the records pertaining to
the case in CC No.1 of 2020 pending on the file of the II
Additional District Judge for CBI cases, Madurai and quash
the same.
1/38
https://www.mhc.tn.gov.in/judis
Crl.O.P.(MD)Nos.3443 and 3499 of 2020
(2)Crl.OP(MD)No.3499 of 2020:-
Mr.Manoj Toshniwal : Petitioner/Accused
Vs.
State represented by
Inspector of Police,
CBI-ACB,
Madurai.
(Ref.Crime No.RC MA1 2015 A 0013) : Respondent/
Complainant
Prayer: Criminal Original Petition is filed under
Section 482 Cr.P.C., to call for the records pertaining to
the case in CC No.1 of 2020 pending on the file of the II
Additional District Judge for CBI cases, Madurai and quash
the same.
For Petitioners : Mr.A.Ramesh
Senior Counsel
for Mr.C.Deepak &
Mr.R.Baskar
For Respondent : Mrs.L.Victoria Gowri
Additional Solicitor
General of India
COMMON ORDER
These criminal original petitions are filed seeking quashment of the case in CC No.1 of 2020 on the file of the II Additional District Judge for CBI Cases, Madurai. 2/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020
2.The facts in brief:-
M/s.Power Grid Corporation of India Limited, which is a Government Company entered into an agreement with M/s.EMC Limited. The contract was for execution of the 765 KV D/C Power Transmission Line between Tuticorin Pooling Station to Salem Tuticorin Pooling Station. The project was in two parts. The first part viz., Service Contract was at Rs.104,31,28,485/- and supply contract was at Rs.214,69,56,011/-. The second part contains service contract of Rs.144,19,98,659/- and supply contracts to the tune of Rs.254,81,19,332/-. The time limit was fixed 30 months for the completion of the project.
3.Against the general condition of the contract, M/s.EMC Limited issued job orders in favour of M/s.AAR Foundation to execute the 765 KV D/C Power Transmission Line between Tuticorin Pooling Station to Salem-Tuticorin Pooling Station Project. That is in violation of the above said terms and conditions. The above said sub-contract was entered for much lower rate than which was agreed and further M/s.EMC Limited instructed M/s.AAR Foundation that they would not make any direct contract with M/s.Power Grid Corporation of India Limited. In the meantime, FIR came to be registered, on 31/03/2015 at about 17 hours by the CBI, 3/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 Chennai on the ground that reliable information was received that Accused 1 to 3 and some other public servants of the Power Grid Corporation of India entered into a criminal conspiracy with A4 to A7 to cheat the Government. The value of the above contract order was fixed at 96.52 crores.
4.The FIR reads that the work order was issued for Part I and II for the above said project, on 21/02/2010. Total project is estimated at Rs.6 Crores. In violation of the above said condition in Part II, A1 to A3 gave sub contract work to M/s.AAR Foundation for erection and construction, etc for lower rate. The above said Foundation did not complete the work as per the specification drawn by the Power Grid Corporation of India Limited. They have not followed the standard fit for erecting the plant and fabricated and forged the document to cheat the Power Grid Corporation of India Limited. By that process, they have caused wrongful loss of about Rs.96.52 crores to the Government and corresponding wrongful gain to all the accused. On the basis of the above said information, the case was registered against A1 to A7 at the initial stage under sections 120(B), 420, 468, 477 IPC r/w section 13(2), 13(1)(d) of the Prevention of Corruption Act. Now the investigation was going on.
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5.Before registration of the FIR, as stated above, the sub contract was given to M/s.AAR Foundation, on 18/6/2012.
6.Before registration of FIR, the following events took place with reference to the enforcement of the contract obligations and liabilities at the instance of the Power Grid Corporation of India Limited. On 30/09/2014, M/s.EMC Limited executed a corporate guarantee agreement stating for the above said purpose, guarantee has been executed against the defect or damage, which may arise due to any defect, failure or insufficiency in the material supplied or workmanship, for which, the company is responsible. As per the terms of the contract, it was stated to be valid for 10 years. It was also agreed that if for any reason, violation was committed, then the Power Grid Corporation of India Limited can complete the rectification work and the company will repay the contractor. So this the corporate guarantee executed by M/s.EMC Limited.
7.Subsequent to that, on 14/10/2014 a show cause notice was issued by the Power Grid Corporation of India Limited stating that during investigation various irregularities and malpractices were noticed by the 5/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 Corporation. They have detailed the malpractices as well as the defects. The above said corporation was directed to take immediate corrective action as per the communication reference No.PGC-SRTS-II.cont.2014/187. It was also alleged that the company has engaged in unethical business practise and un-execution of the contracts without prejudice to the criminal liability and civil action, the corporation can cancel the contract and subsequent contract will not also be granted and the company will be put on the black list. So this was a show cause notice to cancel the contract.
8.In response to the above said letter, dated 11/11/2014, the company namely M/s.EMC Limited wrote a reply stating the process of investigating the matter. They sought four weeks time to complete the investigation and file a report, which is followed by the communication, on 01/12/2014 by the Power Grid Corporation of India Limited stating that reply must be given within seven days. On 04/12/2014, M/s.EMC Limited sent a reply and explanation stating that the above said defects, malpractices and mistaken works were committed at the level of the Senior representative of the Power Grid Corporation of India Limited, EMC Limited and labour contract. The joint agreement certificate was also finalised by the above said 6/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 staff. This was brought to the notice of the Senior Manager of Power Grid Corporation of India Limited and M/s.EMC Limited and the company went on to justify the work. Everything was undertaken under the direct supervision of the representative of the Power Grid Corporation of India Limited. But however, it was made clear that M/s.EMC Limited has fully agreed to carry out the modification work at their own expenses, even though, they disowns their fault. M/s.EMC Limited has taken responsibility to rectify such defects at their own costs. Similarly, for the violation, that has been committed by the sub-contractor also, the company takes responsibility to do the rectification work to the satisfaction of the Power Grid Corporation of India Limited, as advised in the letter, dated 10/08/2014 in reference No.PGC-SRTS-II.cont.2014/187.
9.Regarding the allegation of unethical practises, it has been replied that the defects were found out only by way of a special check up. That was brought to the notice of the higher officials of the Power Grid Corporation of India Limited as well as M/s.EMC Limited. So the company went on to say that on coming to know about defects, necessary steps were taken to correct the same. They also listed the above action that was taken by the M/s.EMC 7/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 Limited in the reply. By the above said, they have undertaken the work with AAR foundation. Legal proceedings were initiated against the above said AAR Foundation and all the supervisory staff and store keepers were removed from the service. They were also undertaken to rectify the defects to the satisfaction of Power Grid Corporation of India Limited. As stated above, all the defect works will be undertaken at their costs and full cooperation will be extended to the Power Grid Corporation of India Limited for the execution of the work by extending manpower and financial expenditure. The company also went a further step stating that necessary help will be rendered for further investigation to say that no other defective work was undertaken. To fulfil their above said obligation, M/s.EMC Limited was also provided additional bank guarantee as stated above. In the concluded portion, the company has stated that they have taken all possible steps to stand by the contractual obligation and this letter is, dated 04/12/2014. Now the damage rectification measures were undertaken by M/s.EMC Limited and that went on the expected line of the Power Grid Corporation of India Limited. So, on the basis of the above said work, test report was prepared, on 15/02/2022 by the Anna University High Level Committee. The said Committee meeting was held in the Power 8/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 Grid Corporation of India office, on 10/03/2015. During that meeting, a CBWC business norms were listed. On the basis of the above said CBWC norms, the report was prepared and the report has been submitted by the Anna University team on various dates with reference to the various specification work, etc., as detailed in the documents submitted along with the final report.
10.On going through the above said documents shows that rectifications were undertaken by M/s.EMC Limited. Some of them accepted and some of them were not accepted and further process was also going on. Subsequent to the above said report of the Anna University, as stated above, FIR came to be registered, on 13/05/2015 stating that cheating activity has been undertaken by M/s.EMC Limited in collusion with the officials of the Power Grid Corporation of India Limited, in which AAR Foundation was also shown as accused, who was a sub contractor and responsible for the whole issue.
11.Now the investigation on the basis of the above said FIR was undertaken. Simultaneous rectification work and completion work was also undertaken by M/s.EMC Limited. In the meantime, the Power Grid Corporation of India 9/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 Limited has also started giving contract work to M/s.EMC Limited. As it is found from the typed set of papers, on 21/08/2014 and 18/09/2015, 18/02/2016 and 08/07/2016 etc., which means that a black list, which was threatened to be made was removed by the Power Grid Corporation of India Limited. This is the major point, that was advanced by the learned Senior counsel appearing for the petitioners to show that there was no intention, either at inception of the contract and subsequent, to cheat.
12.Now after completing the defects and mistakes, it was fully completed, on 11/11/2016. The final taking over certificate was also issued by the Power Grid Corporation of India Limited, on 21/08/2017. So all the works started functioning. Now simultaneously, as mentioned earlier, the investigation was undertaken and statement of the witnesses were recorded and finally, the final report was filed, on 25/05/2019. Now stating that the accused persons 1 to 20 in collusion with the co-accused and in pursuance of the above conspiracy, they failed to supervise the work of the 4th accused namely M/s.EMC Limited, represented by A21 and the sub contractor/A5 in order to cheat the Power Grid Corporation India Limited in the matter of construction of tower foundation. They certified that the tower foundation 10/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 work was carried on properly. In order to gain, M/s.EMC Limited by A5-S.Ayyadurai Pandian and corresponding wrongful loss to the Power Grid Corporation of India Limited, they have committed the offences punishable under sections 120(B), 420 IPC and section 13(2), 13(1)(d) of the Prevention of Corruption Act. A21 was charged stating that in collusion with A5-Sri Ayyadurai Pandian, sub contract was given to AAR Foundation without the approval of the Power Grid Corporation of India Limited and dishonestly constructed substandard power foundation to gain wrongful gain and corresponding wrongful loss to the Power Grid Corporation of India Limited. Now this is the factual and chronological events, so that we can have a better understanding for better appreciation.
13.Now seeking quashment of the criminal proceedings, which was also taken cognizance in CC No.1 of 2022 on the file of the II Additional District Judge, CBI Court, Madurai, A21 and A4 represented by the authorised representative namely Manoj Toshniwal and Sumanta Bhattacharya filed these petitions.
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14.Heard both sides and elaborate submission has been made by both sides and voluminous authorities in the form of typed set of papers were filed on both sides. But the whole issue revolves around a single and simple point.
15.The Power Grid Corporation of India Limited says that by engaging a sub contractor, A5-Ayyadurai Pandian entered into criminal conspiracy to execute the contract at the low level and sub-standard, thereby M/s.EMC Limited and Ayyadurai Pandian have benefited from the conduct of engaging the sub contract in violation of the terms and conditions of the contract.
16.According to the respondent, as an indication of the criminal intention on the part of the accused persons to cheat the Power Grid Corporation of India Limited, in the above said process, the officials of both the companies namely Power Grid Corporation of India Limited and more officials of the M/s.EMC Limited has been also responsible. The sanction was obtained from the higher official attached to the Power Grid Corporation of India Limited, since it is a company owned by the Government of India. In respect of A21, A4 and A5, since they are private individuals, no sanction was obtained for prosecuting them under the 12/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 provisions of the Prevention of Corruption Act.
17.In response to the charge, a simple answer has been given by the petitioners to the effect that even there was a violation of the terms and condition of the contract not to engage the sub contract, they did not intend to cheat the Power Grid Corporation of India Limited, right from the beginning. Everything went on without the knowledge of the top officials of M/s.EMC Limited and when that was brought to their notice, they started doing the repair work and successfully completed the same at their own costs.
18.According to the learned Senior counsel, because of the above said substandard work alleged to have been undertaken by M/s.AAR Foundation, which was made out by M/s.EMC Limited at their own costs. So according to the learned Senior counsel for the petitioners, in the contract engaged, the loser is the company financially and if really the company intended to cheat the Power Grid Corporation of India Limited, they would have been black listed out. Further, the contract would not have been issued in their favour. This, according to the learned Senior counsel, is sufficient enough to discharge the burden to show that their real intention was not to cheat. Had it been so, they 13/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 would not have rectified the defects.
19.Per contra, a simple argument was advanced by the learned Additional Solicitor General to the effect that had the defects were not found out by the inspecting team, then the work would not have been rectified and would have been continued, despite defects and in that process, not only the above said Ayyadurai Pandian, but also M/s.EMC Limited would have gained wrongful gain. So the issue boils down to a single legal point. Whether the conduct on the part of the petitioners in rectifying the defects will absolve them on their criminal liability. As stated in the preamble portion, a warning has been given by the Power Grid Corporation of India Limited. Explanation has been sought for without prejudice to the criminal and other contractual liabilities.
20.As mentioned in the preamble portion, all the defects were rectified to the satisfaction of the Power Grid Corporation of India and all the installations started working properly. Even at the time of argument, it was not stated that even after rectification of the defects, still the work is substandard one. So the substandard contract was also taken into account, while determining the initial 14/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 intention.
21.The next argument that was advanced by the learned Additional Solicitor General is that if the petition is allowed on the basis of the above said rectification of the work, the whole case will fall.
22.I am afraid that such a circumstance will ensue. These two petitioners were the officials of M/s.EMC Limited itself. Even though the company states that without their knowledge, the above said defects took place, but they have not side away from their responsibility and even completed the same to the full satisfaction of the Power Grid Corporation of India Limited. But the case of the petitioners are standing on different footing that the officials, who are attached to the Power Grid Corporation of India Limited and A5 and M/s.AAR Foundation also. There is a allegation to the effect that they failed to discharge their duty in connivance with the petitioners as well as AAR Foundation. So that cannot be equated with that of the point that has been raised by the petitioners and the petitioners cannot argue that since all the rectification work undertaken by M/s.EMC Limited, they can be also absolved of their criminal liability. Because there is a 15/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 specific allegation to the effect that they not only failed to supervise the work properly, but also went to the extent of issuing certificate stating that the works were undertaken as per the norms. So fear that has been expressed by the Additional Advocate General is well founded.
23.Now coming back to the issue, let us go to the terms and conditions of the contract. The learned Additional Advocate General would straightaway go to the clause in 1.1(cc). When it has been specifically stipulated that a sub contract can be made only with the consent of the employer in writing and who can be employed as sub contractor has also been mentioned in the contract document. The sub contract of relevant portion is extracted hereunder:-
“Sub Contracting:
The corresponding Appendix (List of
Approved Subcontractors) to the Contract
Agreement specifies major items of supply or service and a list of approved Subcontracts against each item, including vendors. Insofar as no Subcontractors are 16/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 listed against any such item, the Contractors shall prepare a list of subcontracts for such item for inclusion in such list. The contractor may from time to time propose any addition to or deletion from any such list. The Contractor shall submit any such list or any modification thereto th the Employer for its approval in sufficient time so as not to implede the progress of work on the Facilities. Such approval by the Employer for any of the Subcontractors shall not relieve the Contractor from any of its obligations, duties or responsibilities under the Contract.”
24.So reading of the above said clause would show that the Power Grid Corporation of India Limited itself has specified the sub contract to whom sub contract was to be assigned in case the particular sub contractor is listed, then the contractor namely M/s.EMC Limited must address the Power Grid Corporation of India Limited to include the company in the name.
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25.So this shows the manner in which, the contract document has been taken. The Power Grid Corporation of India Limited was very strict in carrying out the contract work to the achieving the standard. At no point of time, sub contract can be made without the permission of the Power Grid Corporation of India Limited. So according to the learned Additional Solicitor General, the very fact of employing the sub contractor for the work will show the real intention that too the criminal intention on the part of the company to have an unlawful gain.
26.But when this argument was advanced by the learned Additional Solicitor General, the learned Senior counsel appearing for the petitioners would say that the Power Grid Corporation of India Limited was very much particular about the completion of work in time. But the work was slowing down and continued in slow pace. So that is why, the company engaged the sub contractor for speed up the work only and that too with the knowledge of the Power Grid Corporation of India Limited.
27.So the question, which arises for consideration is whether this aspect or conduct on the part of the 18/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 petitioners will show their criminal intend.
28.A simple answer given by the petitioners that they engaged the sub-contractor is not at all answering the logical question. Because they have not even produced the copy of the sub contract work, that was assigned to M/s.AAR Foundation.
29.Such sort of the sub contract work would not have been undertaken without consent or approval of the company or his higher officials. Why such a document has been suppressed or hidden from the court was not answered. There was an allegation to the effect that M/s.EMC Limited instructed AAR Foundation not to have any contact with the Power Grid Corporation of India Limited.
30.The learned Senior counsel for the petitioners would rely upon the statement of the witnesses Nos.10, 11 and 14 to show that M/s.AAR Foundation was engaged in previous occasion by the Power Grid Corporation of India Limited and that was recommended for doing sub contract work, which was also known to the officials of the Power Grid Corporation of India Limited. But this argument was also cannot be advanced by the petitioners for the simple 19/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 reason that the officials attached to the Power Grid Corporation of India Limited are also accused now.
31.But if we go through the statement of these persons, which of course, cannot be taken into account in the jurisdiction under section 482 Cr.P.C. still it does not support the case of petitioners.
32.But the learned Additional Solicitor General would rely upon the statement equally for substantiating the argument that the defects were found only during the vigilance inspection. Similarly A21 was also fully engaged in the above said finalisation of the sub contract with the M/s.AAR Foundation.
33.Now whether the contention on the part of the petitioners because of slowing down of the work with the knowledge of the above said officials, the sub contract was assigned to M/s.AAR Foundation is the point, which can be taken into consideration, on the basis of the available records.
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34.As mentioned above, the contract agreement was entered, on 18/11/2021 as per the list of the events furnished by the petitioners. The preliminary work was undertaken between 19/11/2021 and January 2022. Between 2012 and June 2012, M/s.AAR Foundation was recommended for carrying out the work, since the work was carried on in a slow pace. But if we go through the statement of witness No.11, who is working in the above said project of the company, during 2011 November itself, M/s.AAR Foundation submitted the document to include them in the approved list of the company. After 4 or 5 months, the President informed him that the work was not going on as per the schedule and on the basis of the above said, he recommended the AAR Foundation. Nowhere it has been stated that in the above said process of sub contract, the officials of the Power Grid Corporation of India Limited were also included. So the contention that only because of the pressure made by the Power Grid Corporation of India Limited, the petitioners were forced to engage the sub contract even on the basis of the records now submitted by the petitioners cannot be taken to be as correct.
35.As rightly pointed by the learned Advocate Solicitor General that the above said defects and 21/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 malpractices were found out during the vigilance inspection by LW5 during December and during that time, he found that even cements were not routed to M/s.EMC Limited to store. But it has been directly supplied to the sub contractor and if found that most of works were undertaken in substandard way. In the meantime, teams were also made by M/s.EMC Limited. Thereafter only, the above said damage, rectification and repairing works were undertaken by M/s.EMC Limited as detailed earlier.
36.So the chronological events and the facts and circumstances shows that A21 was well aware of the above said violations of substandard work on the side of AAR Foundation. Till the vigilance inspection was undertaken in December 2012, it appears that no proper inspection was undertaken by A21, who is the Managing Director of the company to see whether work was undertaken as per the specification. So, this conduct creates some doubt and cloud over his contention.
37.Corporate criminal liability and functioning of the criminal law on a company or corporation, as the case may be has been evolved through ages.
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38.Now we will look into the point, in view of the Hon'ble Supreme Court in the case STANDARD CHARTERED BANK AND OTHERS vs. DIRECTORATE OF ENFORCEMENT AND OTHERS [2005(4) SCC 530 and subsequently, in IRIDIUM INDIA TELECOM LTD. Vs. MOTOROLA INCORPORATED & ORS. AIR 2011 SC 20, the position has been made very clear to the effect that a corporation is virtually in the same position as any individual and may be convicted of common law as well as statutory offences including those requiring mens rea. The criminal liability of a corporation would arise when an offence is committed in relation to the business of the corporation by a person or body of persons in control of its affairs. The company or corporation can no longer claim immunity from the criminal proceedings on the ground they are incapable of possessing necessary mens rea. So we need not trouble this judgment much on the position of law, which is now clarified and reached a point that offences which require mens rea is one of the main ingredients, the company cannot escape from the criminal prosecution.
39.Even though, large number of judgments were cited on either side, again we need not trouble those judgments, by reproducing the judgments of those cited by other side, since to cite two judgments on this point. 23/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020
40.With regard to the vicarious liability, now the position has been clarified by the Hon'ble Supreme Court in the case of SUNIL BHARTI MITTAL Vs.| CENTRAL BUREAU OF INVESTIGATION (AIR 2015 SC 923. The principles of alter ego has also been explained in the above said judgment. It has been held that by citing the judgment of Aneeta Hada Vs. M/s Godfather Travels & Tours Pvt.Ltd. AIR 2012 SC 2795, the Hon'ble Supreme Court explained the principles of alter ego further, wherein it has been held that if a group of a persons guided the business of the company have the criminal intention, that was intended to the body corporation , but vice versa is not permissible for making the Director of a company liable. There must be a specific act to the effect that such a person was responsible for the acts committed by him or on behalf of the company. So even the Director of the company can be prosecuted, provided that a specific act has been attributed against him. So now the position is very clear to the effect that not only the company, but also the contractor can be prosecuted provided the requirement of the above said jobs are not satisfied. So with this legal principles in mind, let us proceed to the discuss the point.
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41.Now coming back to the argument advanced by the learned Senior counsel appearing for the petitioners only for the purpose of meeting out the time schedule, they happened to engage M/s.AAR Foundation for completing the work and that too within the specific knowledge of the Power Grid Corporation of India Limited. For that purpose, he would rely upon the clause 15.3 of the contract, wherein it has been mentioned that for items or parts of the facilities not specified in the corresponding Appendix (List of Approved Subcontractors) to the Contract Agreement, the Contractor may employ such Subcontractors as it may select, at its own discretion.
42.The learned Senior counsel appearing for the petitioners went on further and by referring clause 18.1.3 of the contract, wherein it has been specifically stated that the contractor shall employ skilled and semi-skilled labour for the purpose of execution of the contract. The contractor is encouraged to use the local labour with his necessary service. By pointing out this terms, it has been contended that what was done by the company is only for the advancement of fulfilment of the obligation and absolutely, there was no criminal intend. But this argument on the other factual aspects cannot be gone into deep. It is a 25/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 factual aspect, which cannot be gone into at this stage for which, items and parts of the facilities were not provided is a matter for consideration by the trial court on the basis of the evidence. But specific formula has been also been given in the Appendix for mentioning approved contractors. It is also made specific that prior approval must be obtained from the corporation. That was not done. So the petitioners cannot take advantage of this two clauses to sustain their argument that they did not travel beyond, what was not provided under the terms and conditions of the contract.
43.But from the perusal of the entire records, it is seen that large scale malpractice has been committed by M/s.AAR Foundation with the connivance of the officials attached to the Power Grid Corporation of India Limited, for which the officials of the petitioners company also played a vital part. Only during the course of evidence, the petitioners can substantiate that without their knowledge, the above said occurrence has happened. But as mentioned earlier, till the vigilance inspection was undertaken by the Power Grid Corporation of India Limited, no proper step has been taken by the Company to verify whether the prescribed standard have been complied by the 26/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 M/s.AAR Foundation sub contractor. But without even verifying the quality of the work, payments have been made by creating bills. So now the petitioners cannot argue at this stage to say that everything went without their knowledge.
44.Whether knowledge can be attributed in the the factual background of the case, is also a matter for evidence.
45.Now let us survey the judgments cited by the parties on different aspects.
46.With regard to section 120-B IPC, the learned Senior counsel appearing for the petitioners would submit that dishonest intention must show to exist even at the time of entering into the contract and there must be clear material to show that there is a meeting of mind. For that purpose, he would rely upon the judgment of the Hon'ble Supreme Court in the case of Sushil Sethi and another Vs. State of Arunachal Pradesh and another [(2020)3 SCC 240] (cited supra). He would further rely upon the very same judgment for the purpose of argument that in the absence of any material and allegation in the FIR and charge to the 27/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 effect, the Managing Director and the Director in charge of the administration and the management of the company, the proceedings against them is bad in law. He would rely upon the following paragraphs in the above said judgment, which would run thus:-
“6.Considering the averments and the allegations in the FIR and even the chargesheet the main allegations are that the company, namely, M/s SPML Infra Limited supplied sub standard materials – runner bucket turbines and the supplied runner bucket turbines were not as per the technical specifications. It is also required to be noted that there is no FIR/complaint/chargesheet against the company – M/s SPML Infra Limited and the appellants are arrayed as an accused as Managing Director and Director of M/s SPML Infra Limited respectively. From a bare reading of the FIR and even the chargesheet, there are no allegations that there was a fraudulent and dishonest 28/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 intention to cheat the government from the very beginning of the transaction. Even there are no specific allegations and averments in the FIR/charge sheet that the appellants were incharge of administration and management of the company and thereby vicariously liable. In light of the aforesaid, the prayer of the appellants to quash the criminal proceedings against the appellants for the offence under Section 420 IPC is required to be considered.
...
It is further observed and held by this Court in the aforesaid decision that to bring home the charge of conspiracy within the ambit of Section 120-B IPC, it is necessary to establish that there was an agreement between the parties for doing an unlawful act. It is further observed and held that it is difficult to establish conspiracy by direct evidence.
29/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 7.4In Y.V.Jose V. State of Gujara [(2009)3 SCC 78 ; (2009)1 SCC (Cri) 996], it is observed and held by this Court that one of the ingredients of cheating is the existence or fraudulent or dishonest intention of making initial promise or existence thereof, from the very beginning of formation of contract. It is further observed and held that it is one thing to say that a case has been made out for trial and as such criminal proceedings should not be quashed, but it is another thing to say that a person should undergo a criminal trial despite the fact that no case has been made out at all.”
46.He would further rely upon the following paragraph of the above said judgment for the purpose of argument that since the project of the company was commenced and started working, then the offence under section 420 IPC cannot be attracted. The relevant para is as follows:-
“8.1. As observed hereinabove, the chargesheet has been filed against the 30/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 appellants for the offences under Section 420 read with Section 120B of the IPC.
However, it is required to be noted that
there are no specific allegations and
averments in the FIR and/or even in the
chargesheet that fraudulent and dishonest intention of the accused was from the very beginning of the transaction. It is also required to be noted that contract between M/s SPML Infra Limited and the Government was for supply and commissioning of the Nurang Hydel Power Project including three power generating units. The appellants purchased the turbines for the project from another manufacturer. The company used the said turbines in the power project. The contract was in the year 1993. Thereafter in the year 1996 the project was commissioned. In the year 1997, the Department of Power issued a certificate certifying satisfaction over the execution of the project. Even the defect liability period ended/expired in January, 1998. In 31/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 the year 2000, there was some defect found with respect to three turbines.
Immediately, the turbines were replaced. The power project started functioning right from the very beginning – 1996 onwards. If the intention of the company/appellants was to cheat the Government of Arunachal Pradesh, they would not have replaced the turbines which were found to be defective.
In any case, there are no specific allegations and averments in the complaint that the accused had fraudulent or dishonest intention at the time of entering into the contract. Therefore, applying the law laid down by this Court in the aforesaid decisions, it cannot be said that even a prima facie case for the offence under Section 420 IPC has been made out.”
47.Further the learned Senior counsel appearing for the petitioners by relying of the judgment in the case of State of Himachal Padesh Vs. Sri Pirthi Chand and another [1005 Supp (6) SCR 29 and the judgment of the Dr.Saleen Ur 32/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 Rehman Vs. State of J & K and others [2018 SCC On Line J & K 1068) would contend that even as per section 120-B IPC the word employed 'whoever'. He would rely upon the para 4 of the above said judgment, wherein it has been held that only the person, who took part in the alleged conspiracy alone can be proceeded and not the persons, who are sitting in the Director's chair.
48.Per contra, the learned Additional Advocate General appearing for the respondent would submit that as per the judgment of the Hon'ble Supreme Court in the case of Central Bureau of Investigation Vs. Maninder Singh [(2006)1 SCC 389], merely because of the amount that was involved in the mater has been settled, the prosecution will not become unnecessary and would submit that simply because of the defects, which have been pointed out by the Power Grid Corporation of India Limited has been rectified, that will not absolve them of their liability.
49.In the light of the above said judgments, the main point which got to be answered in the concluding portion of the judgment is that whether any material has been collected or available on record to connect the petitioners with the above said conspiracy, cheating, etc. 33/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020
50.As rightly pointed by the learned Additional Solicitor General, a meeting was arranged between M/s.AAR Foundation Chairman as well as A8 and A21, who are representing the company and they sorted out the issue. When such a material has been collected in the form of statement of witnesses, it requires trial process to see whether there was any criminal intention on the part of the petitioners, even at the inception to defraud and cheat the Power Grid Corporation of India.
51.It is also the another argument that the Power Grid Corporation of India Limited has not lodged any complaint. But as stated above, a suo motu FIR has been registered on the basis of the information. The officials of the Power Grid Corporation of India Limited has also involved in the offence. So naturally non-filing of the complaint by the Power Grid Corporation of India Limited will not give any benefit to the petitioners. So this ground is also not available to petitioners at this stage.
52.Even though, the learned Senior counsel appearing for the petitioners would heavily rely upon the judgment of the Hon'ble Supreme Court in Sushil Sethi's case, I am of the considered view that the analogy that was decided in 34/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 the matter cannot be drawn to the factual aspect. That was the case, in which the items were supplied by the sub contractor, that was found to be defective in nature and that was also replaced. But here against the contractual terms, the petitioners entered into a sub contract with AAR Foundation and even during the process of working, no proper care was taken by the company as mentioned above. More-over, as mentioned earlier, money was also paid to AAR Foundation on the basis of the work that was undertaken. So, it appears that large scale not only the criminal conspiracy, but also a cheat existed, when we go through the entire records. When prima facie materials are available to proceed against the petitioners, I am of the considered view that the discretionary jurisdiction should not be exercised in favour of the petitioners.
53.As mentioned in the opening paragraph of the discussion, it is a clear case of corporate criminal liability, which involves more than 96 Crores and if the offence of this nature committed by the company and its employees is quashed at the threshold itself, the casualty will the national infrastructure development. This is not a ordinary contract of laying road, etc. But a high risk transmission line and if this sort of line is being made in 35/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 a substandard way then the causality will be the public safety endangering human and other life.
54.In view of the above said discussion and looking from any angle, this court is of the considered view that this is not a fittest case to quash the proceedings against the petitioners.
55.In the result, all the criminal original petitions are dismissed. But however considering the fact that the petitioners are the officials attached to the company, their personal appearance is dispensed with on condition that within 15 days from the date of receipt of a copy of this order, the petitioners must appear before the trial court and file an undertaking affidavit that they will appear as and when required by the court, the attested photograph must be attached in the affidavit and they must ensure that they are properly represented by Advocates. Consequently, connected Miscellaneous Petitions are closed.
08.08.2022 Internet:Yes/No Index:Yes/No er 36/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 Note: In view of the present lock down owing to COVID-19 pandemic, a web copy of the order may be utilized for official purposes, but, ensuring that the copy of the order that is presented is the correct copy, shall be the responsibility of the advocate/litigant concerned.
To,
1.The II Additional District Judge for CBI cases, Madurai.
2.The Additional Public Prosecutor, Madurai Bench of Madras High Court, Madurai.
37/38 https://www.mhc.tn.gov.in/judis Crl.O.P.(MD)Nos.3443 and 3499 of 2020 G.ILANGOVAN,J., er Crl.O.P.(MD)Nos.3443 and 3499 of 2019 08/08/2022 38/38 https://www.mhc.tn.gov.in/judis