Madras High Court
Medmeme vs M/S.Ihorse Bpo Solutions Pvt Ltd on 11 November, 2014
Author: R.Subbiah
Bench: R.Subbiah
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 11.11.2014 CORAM: THE HON'BLE MR.JUSTICE R.SUBBIAH Crl.O.P.No.12676 of 2012 and M.P.Nos.1 & 2 of 2012 1.MedMeme, LLC, Represented by its Chairman Mr.Mahesh Naithani 224, West 35th Street, Suite 600 New Yark, NY 10001. 2.Mahesh Naithani Chairman and CEO MedMeme, LLC, 224 West 35th Street, Suite 600 New York, NY 10001. 3.Yan Barshay, Executive Vice President, MedMeme, LLC, 224 West 35th Street, Suite 600 New York, NY 10001. ... Petitioners Vs. M/s.iHorse BPO Solutions Pvt Ltd Represented by its Director Kauntheya Sivananthan No.37, Kamaraj Salai, V.V.P.Nagar, Thattanchavady, Puducherry-605 009. ... Respondent Prayer: Petition filed under Section 482 of the Criminal Procedure Code praying to call for the records in C.C.No.142 of 2012 on the file of the learned Judicial Magistrate No.II, Puducherry and quash the private complainant filed by the respondent. For Petitioners :Mr.Abudu Kumar Rajarathnam For Respondent :Mr.P.Puhazh Gandhi * * * * * ORDER
This petition has been filed seeking to call for the records in C.C.No.142 of 2012 on the file of the learned Judicial Magistrate No.II, Puducherry and to quash the same.
2.The petitioners herein are the accused 1 to 3 in the private complaint filed by the respondent herein in C.C.No.142 of 2012 pending on the file of the learned Judicial Magistrate No.II, Puducherry, for the alleged offences under Sections 420, 406, 409 r/w 120(b) IPC.
3(1)It is the case of the respondent herein/complainant that they are engaged in the business of database services, providing quality knowledge based back end works (KPO) and they are having business operations in Pudhucherry and Chennai. The 1st petitioner/A1 is a US based company. The 2nd petitioner/A2 viz., Mahesh Naithani is the Chairman & CEO of the 1st petitioner/company. The 3rd petitioner/A3 is the Executive Vice President of the 1st petitioner/company. During the course of business of the respondent, the 1st petitioner-company represented by the petitioners 2 & 3 approached the respondent and evinced their willingness to enter into a partnership with the respondent to utilize their service, software development capabilities in India. Believing the rapport on the 1st petitioner-company, the respondent entered into a Professional Master Service Agreement (first agreement) with the 1st petitioner/company on 01.05.2009 at Chennai.
3(2)As per the said agreement, the respondent has to provide databased services, for which the petitioners would make agreed payments as per the invoices raised by the respondent. Under the terms and conditions of the said agreement, the respondent is bound to provide service/manpower/development service as per the requirements of the 1st petitioner-company and the respondent is entitled for fees and service charges. The respondent had been meticulous in providing the services to the petitioners. The respondent raised various invoices totalling USD 316,513 as on November-2010. But, the 1st petitioner-company has paid only a sum of USD 207,558.05. The 1st petitioner-company failed to pay the balance amount of USD 108,954.95 and evaded to make the payment inspite of repeated reminders by the respondent/complainant to all the petitioners.
3(3)While so, after constant follow up by the respondent/complainant, the 1st petitioner-company entered into an agreement (second agreement) on 01.12.2010, whereby it was agreed by the 1st petitioner-company to settle the liability of USD 108,954.95 by way of six monthly installments between December 2010 and May 2011. But, by taking advantage of the subsequent agreement dated 01.12.2010 (second agreement), the petitioners placed further orders to the respondent. Accepting the same, the respondent has also provided services to the 1st petitioner-company for the subsequent orders without any demand. But, in contrary to the expectation and in total violation of the repeated assurances of the petitioners, they paid only USD 24,735 to the respondent during January-May 2011, as against USD 122,997, which was accepted by the petitioners as per the second agreement dated 01.12.2010. Thereafter, the petitioners evaded the payment inspite of repeated reminders. Pinching salt to the injury, the petitioners hatched conspiracy with the competitors of the respondent by giving the same work to them.
3(4)The petitioners with the ulterior motive to deceive the respondent, allured the respondent to provide service on credit basis. On believing the posture of the petitioners/accused, the respondent/complainant strained their nerve to provide service to the petitioners and invested huge sum to satisfy the requirements of the petitioners. Taking advantage of the trust posed, the petitioners clandestinely extracted the services of the respondent and dragged the payments in the pretext of one or the other. Ultimately, the petitioners/accused changed their colour, stopped all the transactions with the respondent and switch on to the competitors, so as to silent the voice of the respondent. Thus, the petitioners/accused have committed the criminal acts of cheating, misappropriation and breach of trust; as such, they are liable to be punished for the said offences. Hence, the respondent/complainant filed a private complaint before the learned Judicial Magistrate No.II, Puducherry as against the petitioners/accused and the same has been taken on file as C.C.No.142 of 2012 under Sections 420, 406, 409 r/w 120(b) IPC.
3(5)Now the present petition has been filed by the petitioners/accused before this Court seeking to quash the said private complaint.
4.It is the submission of the learned counsel for the petitioners that the entire allegations made in the complaint do not constitute offences under Sections 420, 406, 409 r/w 120(b) IPC. In this regard, the learned counsel for the petitioners invited the attention of this Court to the definitions for cheating & breach of trust given in Indian Penal Code and submitted that absolutely the allegations made in the complaint do not disclose the necessary ingredients to take cognizance of cheating and breach of trust. The transactions between the petitioners and the respondent is purely contractual in nature and the private complaint is motivated one and only in order to put pressure on the petitioners for illegal settlement of a civil dispute, the complaint has been filed against the petitioners. Further, the respondent/complainant failed to act as per the terms and conditions of the agreement, due to which the 1st petitioner-company suffered severe loss. In fact, the E-Mail correspondences exchanged between the parties would clearly prove that there was an enormous delay in providing the required service on the part of the respondent, even after signing of the second agreement. There are serious disputes with regard to the bills filed by the respondent/complainant. In fact, the agreement entered into between the parties contains a clause for arbitration. The respondent/company itself issued a notice dated 04.05.2011 for arbitration. When the 1st petitioner/company was about to invoke arbitration proceeding as per Article-8 of the Agreement dated 01.12.2010, the respondent/complainant has filed the present private complaint with false allegations, only to put pressure on the petitioners for illegal settlement. Since the respondent is not willing to arbitrate the dispute as per Article 8 of the Agreement dated 01.12.2010, now a petition under Section 11(6) read with 11(12) of Arbitration and Conciliation Act for appointment of Arbitrator has been filed on 17.04.2013 before the Hon'ble Supreme Court. It is further submitted by the learned counsel for the petitioners that the respondent failed to provide source code to the petitioners as per the terms and conditions of the agreement and the petitioners sustained a huge loss of more than 2 million dollars, due to the acts of commission and omission of the respondent company.
5.Thus, the learned counsel for the petitioners submitted that only in order to avoid civil liability, the respondent converted the civil dispute into the criminal case, which is purely abuse of process of law. In support of this contention, the learned counsel for the petitioners relied upon the judgment of the Hon'ble Supreme Court reported in 2013 (6) SCC 740 (Chandran Ratnaswami Vs. K.C.Palanisamy).
6.The learned counsel for the petitioners further submitted that the petitioners 2 & 3, who are the Chairman & CEO and Executive Vice President of the 1st petitioner-company, have been added as accused 2 & 3 in the complaint only in their official capacity. Further, in the complaint, except the general statement that the petitioners 2 & 3 are actively involved in the day-to-day affairs of the 1st petitioner-company, no other specific allegations were made against them. The dispute between the 1st petitioner-company and the respondent-company is purely of civil nature and hence, in the absence of specific allegation against the petitioners 2 & 3 in the complaint to the effect that the petitioners 2 & 3 / accused had induced the respondent to deliver any property or to render any service, the complaint is not maintainable against them and hence, the same is liable to be quashed. In this regard, the learned counsel for the petitioners relied upon the judgments of the Hon'ble Supreme Court reported in (2009)3 SCC 375 (Sharon Michael Vs. State of Tamil Nadu) and (2008)5 SCC 668 (Maksud Saiyed Vs. State of Gujarat and others).
7.The learned counsel for the petitioners further submitted that only if a person, who is entrusted with property or with any dominion over property, dishonestly misappropriates or converts to his own use of that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, then only the offence of criminal breach of trust, will get attracted. But, in the instant case, there is no allegation in the complaint made by the respondent to the effect that the property entrusted by the respondent was fraudulently and dishonestly misappropriated or converted to the own use of the petitioners or any other person.
8.Similarly, by inviting the attention of this Court to Section 420 IPC, the learned counsel for the petitioners submitted that only if a person cheats or dishonestly induces a person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, then only the offence under Section 402 IPC will get attracted. But, in the instant case, there is no such allegation in the complaint to the effect that the petitioners dishonestly induced the respondent to deliver any property to any person. Therefore, the allegation made in the complaint, on the fact of it, do not constitute any offence under Sections 406, 409, 420 r/w 120(b) IPC. Hence, the complaint is liable to be quashed.
9.It is further submitted by the learned counsel for the petitioners that the petitioners are having their office at United States of America and residing in America. While being so, the learned Magistrate ought to have postponed the issue of process against the petitioners and ought to have enquired the matter himself or directed investigation by a Police Officer for deciding as to whether there is sufficient ground for proceeding against the petitioners.
10.In this regard, the learned counsel for the petitioners, by inviting the attention of this Court to Section 202 of Cr.P.C., submitted that in a case where the accused is residing at a place beyond the area in which the Magistrate exercises the jurisdiction, the Magistrate has to inquire into the case by himself or direct an investigation to be made by a police officer or by such other person, as he thinks fit, for the purpose of deciding whether there is sufficient ground for proceeding or not. But, in the instant case, the learned Magistrate has not conducted any enquiry under Section 202 of Cr.P.C. Hence, the complaint is liable to be quashed. Thus, the learned counsel for the petitioners sought for quashing of the impugned criminal proceedings.
11.Per contra, the learned counsel for the respondent/complainant submitted that a reading of the allegations made in the complaint would clearly show that the petitioners, only with an ulterior motive to deceive the respondent, induced the respondent to execute the second agreement by admitting their liability and promising to pay the balance amount due under the first agreement. The learned counsel for the respondent/complainant further submitted that the averments made in the complaint prima facie satisfy the ingredients of the offences mentioned above. In the instant case, the petitioners induced the complainant to provide more service on credit basis by entering into second agreement on the assurance that they would pay the entire amount due in respect of the services rendered by the respondent under the first agreement dated 01.05.2009. Believing their words, the respondent/complainant provided more service to the petitioners and after availing the services of the respondent, the petitioners evaded the payment. Thus, the intention of the petitioners to cheat the respondent was established by the fact that the petitioners induced the respondent to provide more services on credit bases by promising and willfully misrepresenting that they will pay the admitted liability of USD 108,954.95 in six monthly installments; but subsequently not only failed to pay the admitted amount, but also disappeared from the scene without paying for the fresh services rendered by the respondent. Therefore, it is the contention of the learned counsel for the respondent/complainant that there is a clear intention of cheating on the part of the petitioners. In this regard, the learned counsel for the respondent/complainant relied upon the judgments reported in (2002) 1 SCC 241 [S.W.Palanitkar Vs. State of Bihar] and AIR 2006 SC 2780 [Indian Oil Corporation Vs. NEPC India Ltd].
12.With regard to the submission made by the learned counsel for the petitioners that in the instant case, there is no allegation in respect of inducement in the complaint, the learned counsel for the respondent submitted that the term ''property'' is not defined anywhere in any act and the term ''property has a wider application. The computer program/Software is defined in Section 2(ffc) of the Copy Right Act, 1957 and further Section 2(o) of the said Act defines literary work to include computer program. Section 14 of the Copy Right Act states that literary work computer program as a copy right. Thus, a computer program is a property in terms of any Act including Indian Penal Code. In the instant case, the computer program/software is involved in the transaction. Hence, section 420 IPC is attracted in this case.
13.With regard to the submission made by the learned counsel for the petitioners that the Court below has not conducted any enquiry under Section 202 of Cr.P.C., the learned counsel for the respondent submitted that as per the amendment to the Cr.P.C, by the Act 25 of 2005, the Magistrate by postponing the process, shall conduct an inquiry, when the accused is residing at a place beyond the area in which he exercises his jurisdiction. Conducting enquiry under Section 202 of Cr.P.C., by the Magistrate is only to ascertain whether or not there exists any sufficient ground to proceed against the accused. Under Section 202 of Cr.P.C., the Magistrate has to conduct only a cursory enquiry by looking into the materials produced by the complainant to ascertain whether there is sufficient ground to proceed. Under Section 202 of Cr.P.C., no detailed enquiry, as if a full trial, can be conducted. The learned counsel for the respondent/complainant submitted that in the instant case, the Magistrate called for the original documents and postponed the process almost six months, after perusing the documents and hearing arguments of the respondent/complainant only, the Magistrate has taken the complaint on file. Thus, the Magistrate has conducted the enquiry under Section 202 of Cr.P.C. In this regard, the learned counsel for the respondent/complainant relied upon the following judgments_
(i)AIR 1963 SC 1430 (Chandra Deo Singh Vs. Prakash Chandra Bose alias Chabi Bose and another)
(ii)AIR 1980 SC 1780 (Kewal Krishnan Vs. Suraj Bhan)
(iii)2008(3) KLT 869 (H.D.F.C vs. Jaleel)
(iv)AIR 1992 SC 1894 (Mohinder Singh Vs. Gulwat Singh)
(v)unreported judgment of the Hon'ble Supreme Court delivered in C.A.No.678-681 of 2014, dated 27.03.2014, in the case of Vijay Dhanuka Etc., Vs. Najima Mamtaj Etc.
14.With regard to the existence of arbitration clause in the agreement, it is the submission of the learned counsel for the respondent/complainant that the existence of the arbitration clause in the agreement is not a bar for criminal proceedings. In support of this contention, the learned counsel for the respondent/complainant relied upon the judgment of the Hon'ble Supreme Court in the case of Trisun Chemical Industry Vs. Rajesh Aggarwal [AIR 1999 SC 3499] and submitted that in the said case, the Hon'ble Supreme Court has held that Arbitrator cannot conduct trial for an act which amounts to an offence. Therefore, the prevailing of an arbitration clause in the agreement cannot act as a bar to file a criminal complaint when there is a clear intention of cheating and breach of trust on the part of the petitioners/accused. Further, the learned counsel for the respondent/complainant submitted that in order to bring the petitioners, face to face, out of goodwill gesture, the respondent caused a legal notice on 04.05.2011 suggesting to go for arbitration, so that at least the issue can be resolved amicably, as arbitration is nothing but a means of alternative dispute resolution method. But, the petitioners deliberately chose not to respond to the said notice. Later, on 20.06.2012 the petitioners issued a legal notice for invoking arbitration clause, but the same was strongly opposed by the respondent/complainant. Now, having admitted the liability under the first agreement, absolutely there is no dispute between the parties to refer the matter to the arbitration. When that being the position, by taking advantage of the arbitration clause, the petitioners cannot seek for quashing the proceedings. Further, the existence of arbitration clause in the agreement will not preclude the criminal Court in taking cognizance of any criminal offence. In this regard, the learned counsel for the respondent/complainant placed reliance on the judgment reported in 95(2002) DLT 290 [Maruthi Udyog Limited vs. Mahalaxmi Motors Ltd and anr]
15.In response to the argument made by the learned counsel for the petitioners that Pudhucherry Court cannot try the issue in this case as the petitioners/accused are residing in U.S.A., the learned counsel for the respondent/complainant submitted that Sections 178 & 179 of Cr.P.C., make it clear that the Court, under whose jurisdiction any part of the offence is committed, can take cognizance and try the case. In the instant case, both the Professional Services Agreements were signed by the parties only at Pudhucherry and the services were rendered by the respondent from their facility in Pudhucherry. Further, the accused have visited Pudhucherry several times and made the promise to pay and more so, all correspondences between the petitioners/accused and the respondent were through e-mails, the effect of which was felt in Pudhucherry itself. Hence, the Court in Pudhucherry is having jurisdiction to try this case.
16.In view of the submissions made on either sides, the following questions fall for consideration in this case_ (1)Whether the complaint is liable to be quashed on the ground that the allegations made in the complaint do not constitute any offence under Section 420 IPC?
(2)Whether the criminal law can be set in motion in this case, since the agreement comprised a provision for arbitration?
(3)Whether the Magistrate has conducted the enquiry under Section 202 of Cr.P.C., since the petitioners are residing outside the jurisdiction of the Court?
17(1) Question No.1:- It is stated in the complaint that the respondent is doing the business of database services, providing quality knowledge based back end works (KPO) and they are having business operations in Pudhucherry and Chennai. The 1st petitioner herein/A1 is a US based company and the petitioners 2 & 3 are the Chairman & CEO and Executive Vice President of the 1st petitioner/company. The respondent entered into a Professional Master Service Agreement with the 1st petitioner/company on 01.05.2009 at Chennai and as per the said agreement, the respondent has to provide databased services, for which the petitioners would make agreed payments as per the invoices raised by the respondent and the respondent is bound to produce service/manpower/development service as per the requirement of the 1st petitioner-company. After providing the services to the petitioners, the respondent raised various invoices totalling USD 316,513 as on November-2010. But, the 1st petitioner-company has paid only a sum of USD 207,558.05 and they failed to pay the balance amount of USD 108,954.95 and evaded to make the payment inspite of repeated reminders by the respondent.
17(2)While so, the petitioners with an intention to cheat the respondent, entered into another agreement on 01.12.2010, under which it was agreed by the petitioners to settle the liability of USD 108,954.95 due under the first agreement dated 01.05.2009, in six monthly installments between December 2010 and May 2011, and further asked the respondent to provide services as per the second agreement dated 01.12.2010. Believing their words, on the basis of the second agreement dated 01.12.2010 the respondent continued to provide more services to the petitioners on credit basis and invested huge sum and recruited more personnel to satisfy the requirements of the petitioners. Taking advantage of the trust posed, the petitioners clandestinely extracted the services of the respondent and dragged the payments in the pretext of one or the other. Ultimately, the petitioners changed their colour, stopped all the transaction with the respondent and switched on to their competitors so as to silence the voice of the respondent. Though the respondent tried to contact the petitioners through e-mails, the petitioners willfully evaded the respondent. Thus, it is the submission of the learned counsel for the respondent that the petitioners by admitting their liability to pay USD 108,954.95 with a promise to pay the same in six monthly installments, made the respondent to enter into the second agreement dated 01.12.2010 and allured the respondent to provide more services on credit basis under the second agreement. Taking advantage of the trust posed, the respondent clandestinely extracted the services of the respondent and after extracting the services, the petitioners stopped all the transactions with the respondent.
17(3)It is the specific case of the respondents that the petitioners, by admitting their liability to pay balance amount of USD 108,954.95 due under the earlier agreement dated 01.05.2009, and promising to pay the said amount in six monthly installments, induced the respondent to enter into the second agreement dated 01.12.2010 and extracted more services from the respondents on credit basis; thereafter, stopped all the transactions with the respondents, even without paying the admitted liability under the first agreement dated 01.05.2009. Therefore, there is a clear intention of cheating and breach of trust on the part of the petitioners. The relevant portion of the complaint made by the respondent reads as follows_ 7.It is submitted that the accused with ulterior motive to deceive the complainant allured the complainant to provide service on credit basis. On believing the posture of the accused, the complainant strained their nerve to provide service to the accused and invested huge sum to satisfy the requirement. Taking advantage of the trust posed, the accused extracted the service of the complainant and dragged the payments in the pretext of one or the other. Ultimately, the accused changed their colour stopped all their transactions with the complainant and switched on to the competitors so as to silent the voice of the complainant. Thus, the accused have committed a criminal act of cheating, misappropriation and breach of trust and liable to be punished under Sections 420, 406, 409 r/w 120(b) IPC. From the above allegation found in the complaint, it is clear that it is the case of the respondent that the petitioners by giving false assurance that they would pay the admitted amount due under the agreement dated 01.05.2009, extracted more service from the respondent and finally, changed their colour and stopped all their transactions with the respondent, without paying the admitted liability amount of USD 108,954.95. It is well settled legal principle that if the entire allegations are taken into consideration and at their face value and accepted in their entirety, and the same do not constitute the offences alleged, then only the complaint can be quashed. But, the above said averments in the para 7 of the complaint clearly satisfy the ingredients of the offences stated in the complaint.
17(4)In response to the submission of the learned counsel for the petitioners that there is no allegation in the complaint to the effect that the petitioners fraudulently or dishonestly induced the respondent to deliver any property to any person to cause damage or harm to him, the learned counsel for the respondent contended that by promising to pay their liability under the first agreement in six monthly installments, the petitioners entered into the second agreement and extracted more services from the respondent on credit basis; but, subsequently, the petitioners not only failed to pay the admitted liability, but also disappeared from the scene. Therefore, the allegations made in the complaint would satisfy the ingredients for the offences of cheating and breach of trust. In this regard, a reference could be placed in the judgment reported in (2002) 1 SCC 241 (S.W.Palanitkar Vs. State of Bihar), wherein the Hon'ble Supreme Court has held as follows_ The ingredients of an offence of cheating are : (i)there should be fraudulent or dishonest inducement of a person by deceiving him, (ii)(a)a person so deceived should be induced to deliver any property to any person, or to consent that any person shall retain any property; or (b)the person so deceived should be intentionally induced to do or omit to do anything which he would not do or omit if he were not so deceived; and (iii)in cases covered by (ii)(b), the act of omission should be one which causes or is likely to cause damage or harm to the person induced in body, mind, reputation or property. In AIR 2006 SC 2780 (Indian Oil Corporation Vs. NEPC India Ltd), it has been held by the Hon'ble Supreme Court as follows_ A careful reading of the section shows that a criminal breach of trust involves the following ingredients: (a) a person should have been entrusted with property, or entrusted with dominion over property; (b)that person should dishonestly misappropriate or convert to his own use that property, or dishonestly use or dispose of that property or willfully suffer any other person to do so; (c)that such misappropriation, conversion, use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of such trust. The petitioners, after availing the software service transmitted by the respondent, sold the services to the end customers, without paying the admitted amounts or even without paying the amount for the service rendered by the respondent. Thus, a prima facie case is established in the complaint that the petitioners willfully fraudulently and dishonestly misappropriated the services entrusted with them which amounts to criminal breach of trust.
17(5)For the submission made by the learned counsel for the petitioners that except the general statement that the petitioners 2 & 3 are actively involved in the day-to-day affairs of the 1st petitioner-company, there is no specific allegation as against the petitioners 2 & 3, it is the reply of the learned counsel for the respondent that the petitioners 2 & 3 are the decision making authorities of the 1st petitioner-company and they hatched the conspiracy to cheat and criminally misappropriate the services provided by the respondent. Further, all e-mail communications were done between the petitioners 2 & 3 and the respondent, and the petitioners 2 & 3 jointly misrepresented to the respondent that they would honour the payments; thus they induced the respondent to provide more services by way of the second agreement.
17(6)Though the learned counsel for the petitioners submitted that there is no necessary ingredient in the complaint to attract the offence under Section 120(b) IPC, the learned counsel for the respondent submitted that it is not necessary for the complainant to reproduce all the legal ingredients of all the offences in the complaint. In this regard, a useful reference could placed in the judgment relied upon by the learned counsel for the respondent, reported in (1999) 3 SCC 259 (Rajesh Bajaj Vs. State NCT of Delhi and others), wherein the Hon'ble Supreme Court has held as follows_ It is not necessary that a complainant should verbatim reproduce in the body of his complaint all the ingredients of the offence he is alleging. Nor is it necessary that the complainant should state in so many words that the intention of the accused was dishonest or fraudulent. Splitting up of the definition into different components of the offence to make a meticulous scrutiny, whether all the ingredients have been precisely spelled out in the complaint, is not the need at this stage. If factual foundation for the offence has been laid in the complaint the Court should not hasten to quash criminal proceedings during investigation stage merely on the premise that one or two ingredients have not been stated with details. For quashing an FIR (a step which is permitted only in extremely rare cases) the information in the complaint must be so bereft of even the basic facts which are absolutely necessary for making out the offence.
The crux of the postulate is the intention of the person who induces the victim of his representation and not the nature of the transaction which would become decisive in discerning whether there was commission of offence or not. The complainant has stated in the body of the complaint that he was induced to believe that respondent would honour payment on receipt of invoices, and that the complainant realised later that the intentions of the respondent were not clear. He also mentioned that respondent after receiving the goods have sold them to others and still he did not pay the money. Such averments would prima facie make out a case for investigation by the authorities..
In view of the dictum laid down in the above case, the averments made in para 7 of the complaint themselves would suffice to maintain the complaint for the offences under Section 406, 409, 420 r/w 120(b) IPC. The judgments relied upon by the learned counsel for the petitioners are all on different factual aspects and they cannot be made applicable to the present facts of this case. It is well settled legal principal that whether the complaint discloses an offence or not, depends upon the facts and circumstances of each and every case. Since this Court has come to the conclusion that the allegations made in para 7 of the complaint would suffice to maintain the complaint against the petitioners for the offences under Sections 406, 409, 420 r/w 120(b) IPC, it is not necessary to deal with the judgments relied upon by the learned counsel for the petitioners, as the dictum laid down in the said judgments are delivered on different factual aspects, which cannot be made applicable to the facts of this case.
18(1) Qusestion No.2 :- It is the next fold of submission of the learned counsel for the petitioners that the transactions between the petitioners and the respondent is purely contractual in nature and there is a clause for arbitration in the agreement. The respondent-company itself issued a notice dated 04.05.2012 for arbitration. Therefore, the criminal law cannot be set in motion in this case, since the agreement comprises the provisions for arbitration as it is a contractual dispute.
18(2)But, in the instant case, the allegations were made in the complaint to the effect that the petitioners had admitted their liability under the first agreement and agreed to pay the outstanding amount; thus, induced the respondent to provide further services. Believing the assurance given by the petitioners, the respondent has provided more services to the petitioners. But, subsequently, after extracting the services from the respondent, the petitioners without paying the admitted liability under the first agreement, disappeared from scene. Therefore, from the allegation made in the complaint it could be seen that in respect of the liability arisen out of the first agreement dated 01.05.2009, absolutely there is no dispute between the parties. To enforce the arbitration clause, there must be a dispute. In the instant case, if at all there is any dispute to be referred to arbitration, with regard to the payment of money, it is only in respect of the services provided by the respondent under the second agreement dated 01.12.2010. Therefore, the arbitration clause is not a bar for the criminal proceedings. In this regard, a useful reference could be placed in the judgment reported in AIR 1999 SC 3499 (Trisus Chemical Industry Vs. Rejesh Agarwal and others), wherein the Hon'ble Supreme Court has held as follows_ We are unable to appreciate the reasoning that the provision incorporated in the agreement for referring the disputes to arbitration is an effective substitute for a criminal prosecution when the disputed act is an offence. Arbitration is a remedy for affording reliefs to the party affected by breach of the agreement but the arbitrator cannot conduct a trial of any act which amounted to an offence albeit the same act may be connected with the discharge of any function under the agreement. Hence, those are not good reasons for the High Court to axe down the complaint at the threshold itself. The investigating agency should have had the freedom to go into the whole gamut of the allegations and to reach a conclusion of its own. From the dictum laid down in the above said judgment, it is clear that the existence of the arbitration clause in the agreement cannot be a bar to the criminal law being set in motion, if the act of a party in the transaction attracts the criminal offence. Further more, even according to the learned counsel for the petitioners, there is no dispute in respect of the agreement dated 01.05.2009. For enforcement of the arbitration clause, there must exist a dispute. In the instant case, the dispute is only in respect of the second agreement dated 01.12.2010. Therefore, in view of the factual aspects of this case, I am of the opinion that the presence of the arbitration clause in the agreement and pendency of the civil dispute between the parties, cannot be a bar for a criminal prosecution. Therefore, the submissions made by the learned counsel for the petitioners that since the agreement contains a provision for arbitration, the criminal law cannot be set in motion, cannot be accepted.
19(1) Question No.3:- It is the submission of the learned counsel for the petitioners that the petitioners are having office at USA and as per the amendment to the Cr.P.C., under Act 25 of 2005, conducting enquiry under Section 202 of Cr.P.C., for the purpose of deciding as to whether there is sufficient ground for proceeding by postponing the issue of process, is mandatory. But, in the instant case, according to the petitioners, no enquiry was conducted as required under Section 202 of Cr.P.C.
19(2)But, according to the learned counsel for the respondent, in the instant case, the complaint was filed before the Magistrate on 22.09.2011. The learned Magistrate questioning the maintainable of the complaint with respect to the jurisdiction, called for the original documents and the list of witnesses and then, he proceeded to record the sworn statement of the complainant/respondent on 25.09.2011. The Magistrate did not issue process immediately after 25.09.2011, nor he issued the process only on the basis of the sworn statement of the respondent. The Magistrate postponed the process for almost six months and perused all the case documents, including the complaint and all other documents produced by the complainant/respondent, heard the arguments of the complainant and thereafter only, the Magistrate issued process on 05.04.2012. Thus, the learned counsel for the respondent submitted that perusal of the case records would show that the enquiry was conducted by the Magistrate as contemplated under Section 202 of Cr.P.C.
19(3)Keeping the submissions made on either side, I have carefully gone through the entire materials available on record and I find that the complaint was received under Section 190 of Cr.P.C., by the learned Magistrate on 22.09.2011. After receiving the complaint under Section 190 of Cr.P.C., the Magistrate has two options_
(i)the Magistrate can take the sworn statement under Section 200 of Cr.P.C. and on the basis of the intrinsic quality of the sworn statement, if he is satisfied that there is a prima facie case against the accused, he can issue process under Section 204 of Cr.P.C., and if he is not satisfied with the sworn statement, then he has to dismiss the complaint under Section 203 of Cr.P.C.
(ii)the Magistrate has to conduct an inquiry under Section 202 of Cr.P.C., and if he is satisfied by the inquiry, he can issue process under Section 204 of Cr.P.C., and if he is not satisfied, then he can dismiss the complaint under Section 203 of Cr.P.C.
19(4)Now, according to the learned counsel for the petitioners, enquiry under Section 202 has not been conducted by the Magistrate. In this regard, it would be appropriate to extract Section 202 (1) of Cr.P.C., and the amended under Act 25 of 2005.
202. Postponement of issue of process.
(1) Any Magistrate, on receipt of a complaint of an offence which he is authorised to take cognizance or which has been made over to him under section 192, may, if he thinks fit, postpone the issue of process against the accused, and either inquire into the case himself or direct an investigation to be made by, a police officer or by such other person as he thinks fit, for the purpose of deciding whether or not there is sufficient ground for proceeding:.........
Amendment Act, 2005_ False complaints are filed against persons residing at far off places simply to harass them. In order to see that innocent persons are not harassed by unscrupulous persons, this clause seeks to amend sub-section (1) of Section 202 to make it obligatory upon the Magistrate that before summoning the accused residing beyond his jurisdiction he shall enquire into the case himself or direct investigation to be made by a police officer or by such other person as he thinks fit, for finding out whether or not there was sufficient ground for proceeding against the accused.
From a reading of the above provision under Section 202 of Cr.P.C., it is clear that the amendment to the Cr.P.C., by Act 25 of 2005, does not mandate an enquiry to be conducted by the Magistrate with respect to the jurisdiction of the case to be tried. But, on the other hand, it mandates that the Magistrate has to satisfy himself as to whether there exists sufficient ground for proceeding against the accused or not. The dictum laid down in various judgments would show that under Section 202 of Cr.P.C., the Magistrate can conduct only a cursory inquiry and he need not conduct a full trial. Under Section 202 of Cr.P.C., the Magistrate, on receipt of a complaint of an offence, which he is authorised to take cognizance or which has been made over to him under section 192, may, if he thinks fit, postpone the issue of process against the accused, and either inquire into the case himself or direct an investigation to be made by, a police officer or by such other person as he thinks fit, for the purpose of deciding whether or not there is sufficient ground for proceeding. Therefore, a cursory inquiry to find out as to whether there exists sufficient ground for proceeding or not, by the Magistrate, would suffice the requirement under Section 202 of Cr.P.C.
19(5)In this regard, it would be appropriate to place reference in some of the judgments relied upon by the learned counsel for the respondent. In 2013 (1) MWN (Cr.) 512 (SC) (National Bank of Oman Vs. Barakara Abdul) it has been held as follows_ The duty of a Magistrate receiving a complaint is set out in Section 202 of the Cr.P.C., and there is an obligation on the Magistrate to find out if there is any matter which calls for investigation by a criminal Court. The scope of enquiry under this Section is restricted only to find out the truth or otherwise of the allegations made in the complaint in order to determine whether process has to be issued or not. Investigation under Section 202 of the Cr.P.C., is different from the investigation contemplated in Section 156 as it is only for holding the Magistrate to decide whether or not there is sufficient ground for him to proceed further. The scope of inquiry under Section 202 of Cr.P.C. is, therefore, limited to the ascertainment of truth or falsehood of the allegations made in the complaint (i)on the materials placed by the complainant before the Court (ii)for the limited purpose of finding out whether a prima face case for issue of process has been made out; and (iii)for deciding the question purely from the point of view of the complainant without at all adverting to any defence that the accused may have. In AIR 1963 SC 1430 (Chandra Deo Singh Vs. Prakash Chandra Bose), it has been held as follows_ No doubt, one of the objects, behind the provisions of Section 202 Cr.P.C. is to enable the Magistrate to scrutinise carefully the allegations made in the complaint with a view to prevent a person named therein as accused from being called upon to face an obviously frivolous complaint. But there is also another object behind this provision and it is to find out what material there is to support the allegations made in the complaint. It is the bounden duty of the Magistrate while making an enquiry to elicit all facts not merely with a view to protect the interest of an absent accused person, but also with a view to bring to book a person or persons against whom grave allegations are made.
Whether the complaint is frivolous or not has, at that stage, necessarily to be determined on the basis of the material placed before him by the complainant. Whatever defence the accused may have can only be enquired into at the trial. An enquiry under Section 202 can in no sense be characterised as a trial for the simple reason that in law there can be but one trial for an offence. In AIR 1980 SC 1780 (Kewal Krishhan Vs. Suraj Bhan), it has been held as follows_ all that the Magistrate has to do is to see whether on a cursory perusal of the complaint and the evidence recorded during the preliminary inquiry under Sections 200 and 202, Cr.P.C., there is prima facie evidence in support of the charge leveled against the accused. All that he has to see is whether or not there is sufficient ground for proceeding against the accused. At this stage, the Magistrate is not to weigh the evidence meticulously as if he were the trial Court. The standard to be adopted by the Magistrate in scrutinising the evidence is not the same as the one which is to be kept in view at the stage of framing charges. In AIR 1976 SC 1947 (Nagawwa Vs. Veeranna Shivalingappa Konjalgi), it has been held as follows_ The scope of the inquiry under Section 202 Cr.P.C. is extremely limited to the ascertainment of the truth or falsehood of the allegations made in the complaint:(i)on the materials placed by the complainant before the Court; (ii)for the limited purpose of finding out whether a prima facie case for issue of process had been made out and (iii)for deciding the question purely from the point of view of the complainant without at all adverting to any defence that the accused may have. In proceedings under Section 202 the accused has got absolutely no locus standi and is not entitled to be heard on the question whether the process should be issued against him or not In AIR 1992 SC 1894 (Mohinder Singh Vs. Gulwat Singh), the Hon'ble Supreme Court has held as follows_ The scope of enquiry under Section 202 is extremely restricted only to finding out the truth or otherwise of the allegations made in the complaint in order to determine whether process should issue or not under Section 204 of the Code or whether the complaint should be dismissed by resorting to Section 203 of the Code on the footing that there is no sufficient ground for proceeding on the basis of the statements of the complainant and of his witnesses, if any. But, the enquiry at that stage does not partake the character of a full dress trial which can only take place after process is issued under Section 204 of the Code calling upon the proposed accused to answer the accusation made against him for adjudging the guilt or otherwise of the said accused person. Further, the question whether the evidence is adequate for supporting the conviction can be determined only at the trial and not at the stage of the enquiry contemplated under Section 202 of the Code. To say in other words, during the course of the enquiry under Section 202 of the Code, the enquiry officer has to satisfy himself simply on the evidence adduced by the prosecution whether prima facie case has been made out so as to put the proposed accused on a regular trial and that no detailed enquiry is called for during the course of such enquiry. In (2012) 11 SCC 465 (Nupur Talwar Vs. CBI), the Hon'ble Supreme Court held as follows_ No doubt, as stated in sub-section (1) of Section 202 itself, the object of the enquiry is to ascertain the truth or falsehood of the complaint, but the Magistrate making the enquiry has to do this only with reference to the intrinsic quality of the statements made before him at the enquiry which would naturally mean the complaint itself, the statement on oath made by the complainant and the statements made before him by persons examined at the instance of the complainant. In the unreported judgment in C.A.Nos.678-681 of 2014 @ SLP (Crl).5090-5093 of 2013, dated 27.03.2014, in the case of Vijay Dhanuka Vs. Najima Mamtaj, the Hon'ble Supreme Court has held as follows_ In view of our answer to the aforesaid question, the next question which falls for our determination is whether the learned Magistrate before issuing summons has held the inquiry as mandated under Section 202 of the Code. The word inquiry has been defined under Section 2(g) of the Code, the same reads as follows:
'2........
(g)inquiry'' means every inquiry, other than a trial, conducted under this Code by a Magistrate or Court;' ......
It is evident from the aforesaid provision, every inquiry other than a trial conducted by the Magistrate or Court is an inquiry. No specific mode or manner of inquiry is provided under Section 202 of the Code. In the inquiry envisaged under Section 202 of the Code, the witnesses are examined whereas under Section 200 of the Code, examination of the complainant only is necessary with the option of examining the witnesses present, if any. This exercise by the Magistrate, for the purpose of deciding whether or not there is sufficient ground for proceeding against the accused, is nothing but an inquiry envisaged under Section 202 of the Code. In the present case, as we have stated earlier, the Magistrate has examined the complainant on solemn affirmation and the two witnesses and only thereafter he had directed for issuance of process. From the reading of the dictum laid down in the above said judgments, I am of the opinion that there exist a boundary line between Section 200 and Section 202. If the Magistrate takes a decision solely on the basis of the sworn statement of the complainant/witness, then it is procedure under Section 200 of Cr.P.C., and in that case, there is no necessity for the Magistrate to look into any other document or any testamentary etc. If the Magistrate, in addition to the sworn statement, travels further by looking into the materials produced by the complainant to assess whether there exists sufficient ground to proceed, then it is nothing but the enquiry conducted under Section 202 of Cr.P.C. The decree of care to be taken in proceedings under Section 202 of Cr.P.C., is higher, when compared to Section 200 of Cr.P.C. Section 202 of Cr.P.C. does not mean that the Magistrate has to conduct a full dress trial under Section 202 of Cr.P.C. In the instant case, the Court records produced before this Court would show that after receiving the complaint on 22.09.2011, the Magistrate sought for explanation from the complainant/respondent with regard to the jurisdiction and called for original documents. After hearing the complainant/respondent and after perusing the documents produced by the complainant/respondent, the Magistrate issued process after six months. From the perusal of the Court records, it is clear that due enquiry was conducted by the Magistrate as contemplated under Section 202 of Cr.P.C, before issuance of process.
19(6)It is the submission of the learned counsel for the petitioners, by relying upon the unreported judgment of the Hon'ble Supreme Court in C.A.Nos.678-681 of 2014 @ SLP (Crl).5090-5093 of 2013, dated 27.03.2014, in the case of Vijay Dhanuka Vs. Najima Mamtaj, that for an enquiry under Section 200 of Cr.P.C. examination of the complainant alone is necessary, whereas if an enquiry is conducted under Section 202 of Cr.P.C., witnesses have to be examined. But, in the instant case, no witness was examined. Under such circumstances, the inquiry conducted by the Magistrate cannot be said to be an enquiry under Section 202 of Cr.P.C.
19(7)But, I find that in the instant case, the allegations have to be established through the correspondences exchanged between the complainant/respondent and the accused/petitioners. Hence, except the respondent no other witness was cited by the complainant/respondent. Further, the Magistrate, by going through the sworn statement of the complainant as well as by looking into the materials produced by the complainant, by postponing the process for six months, after hearing the complainant, has finally taken the complaint on file. Therefore, the nature of enquiry conducted by the Magistrate in this case would show that the Magistrate has conducted the inquiry as contemplated under Section 202 of Cr.P.C.
20.For the foregoing reasons, I do not find any valid ground to quash the impugned criminal proceedings. There is no merit in the criminal original petition. Hence, the same is liable to be dismissed.
In the result, the Criminal Original Petition is dismissed. Consequently, connected Miscellaneous Petitions are closed. No costs. The learned Judicial Magistrate No.II, Puducherry, is directed to complete the trial and to dispose of the case in C.C.No.142 of 2012, as early as possible, preferably within a period of six months.
11.11.2014 Index : Yes / No Internet : Yes / No ssv To,
1.The Judicial Magistrate No.II, Puducherry.
2.The Public Prosecutor, High Court, Madras.
R.SUBBIAH, J.
ssv Pre-delivery order in Crl.O.P.No.12676 of 2012 and M.P.Nos.1 & 2 of 2012 11.11.2014