2016 (3) TMI 32 - SC - Indian Laws

Supreme Court quashes criminal proceedings, emphasizes rare quashing, deems dispute civil, requires prior sanction.

International Advanced Research Centre for Powder Metallurgy and New Materials (ARCI) & Ors. Versus Nimra Cerglass Technics (P) Ltd. & Anr.

The Supreme Court quashed criminal proceedings against the appellants under Sections 419 and 420 IPC, emphasizing that quashing should be rare and based ... Criminal proceedings initiated against the appellants under Sections 419 and 420 IPC - cheating - whether alleged acts of the appellants No. 2 and 3 were committed while acting in discharge of their official duties? - Held that:- As per the terms of the technology transfer agreement, ARCI has to conduct performance guarantee tests and in those tests when ARCI was unsuccessful in achieving the targeted specifications, ARCI cannot be said to have acted with dishonest intention to cheat the respondent. Appellants- ARCI is a structure of Scientists, Team Leader and Associate Director and it is the team leader who actually executes the project, the job of Associate Director and Director is to monitor/review progress of the project. Appellants No.2 and 3 who were the Associate Director and Director of ARCI respectively were only monitoring the progress of the project cannot be said to have committed the offence of cheating. In the facts of the present case, in our view, the allegations in the complaint do not constitute the offence alleged and continuation of the criminal proceeding is not just and proper and in the interest of the justice, the same is liable to be quashed. In the result, the impugned order is set aside and this appeal is allowed. The criminal proceedings against appellants No.1 to 3 in CC No. 840 of 2008 on the file of II Metropolitan Magistrate at Cyberabad, is quashed. Issues Involved:1. Whether the criminal proceedings initiated against the appellants under Sections 419 and 420 IPC should be quashed.2. Whether there was a dishonest intention to cheat the respondent at the time of entering into the Technology Transfer Agreement.3. Whether the dispute between the parties is of a civil nature or involves criminal liability.4. Whether the appellants acted in their official capacity and if prior sanction under Section 197 Cr.P.C. was required before initiating criminal proceedings against them.Issue-wise Detailed Analysis:1. Quashing of Criminal Proceedings:The appellants challenged the High Court's decision to dismiss their petition under Section 482 Cr.P.C., which sought to quash the criminal proceedings initiated under Sections 419 and 420 IPC. The Supreme Court emphasized that the inherent jurisdiction of the High Court under Section 482 Cr.P.C. should be used sparingly and only in rare cases to prevent abuse of process or to secure the ends of justice. The court reiterated that quashing of criminal proceedings depends on the facts and circumstances of each case.2. Dishonest Intention to Cheat:The court examined whether the appellants had a dishonest intention to cheat the respondent when entering into the Technology Transfer Agreement. The essential ingredients to attract Section 420 IPC include cheating, dishonest inducement to deliver property, and mens rea at the time of making the inducement. The court noted that the technology transfer agreement was experimental in nature, and ARCI was to conduct performance tests to achieve the product quality/specifications. The agreement provided for liquidated damages in case of failure to meet specifications, indicating no dishonest intention on ARCI's part.3. Civil Nature of Dispute:The Supreme Court analyzed the terms of the agreement and found that the dispute appeared to be purely of a civil nature. The court emphasized that criminal liability should not be imposed in disputes of civil nature unless fraudulent or dishonest intention is shown at the beginning of the transaction. The court referred to previous judgments, highlighting that mere breach of contract cannot give rise to criminal prosecution for cheating unless there is evidence of fraudulent or dishonest intention at the inception of the transaction.4. Official Capacity and Prior Sanction:The court noted that appellants No. 2 and 3 were acting in their official capacity as Associate Director and Director of ARCI, a grants-in-aid research and development institute under the Ministry of Science and Technology, Government of India. The court observed that prior sanction under Section 197 Cr.P.C. was required before initiating criminal proceedings against them, as their actions were in discharge of their official duties. The court referred to a communication from the Ministry of Science and Technology indicating that permission was required for initiating criminal proceedings against the appellants.Conclusion:The Supreme Court concluded that the allegations in the complaint did not constitute the offence of cheating under Sections 419 and 420 IPC. The court found that the appellants acted without dishonest intention and that the dispute was of a civil nature. The court also noted the absence of prior sanction under Section 197 Cr.P.C. for initiating criminal proceedings against the appellants in their official capacity. Consequently, the Supreme Court set aside the High Court's order and quashed the criminal proceedings against the appellants.