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TaxTMI 
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TaxTMI 
2016 (3) TMI 32
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....ging that the appellants have represented that ARCI possessed of technology for manufacture of extruded ceramic honeycombs which is used in manufacturing of catalytic converters which are used in automobiles for controlling emission. On that representation, the respondent entered into an agreement dated 18.06.1999 with ARCI for transfer of technology for the manufacturing process of extruded ceramic honeycombs inclusive of transfer of extrusion die fabrication technology which is an integral part of the manufacturing process for a consideration of rupees ten lakhs in instalments exclusive of royalty amount on the sales which would have been generated on the basis of products manufactured and marketed by the respondent on the basis of technology. The respondent had alleged that in pursuance of the agreement, the respondent was permitted to establish its industrial unit within the campus of ARCI at Balapur, Hyderabad for the purpose of installing and commissioning production of preferred technology and for which respondent spent around rupees one crore thirty lakhs for purchasing and installing the comprehensive machinery. The respondent alleged that after having taken number of tria....
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....f the appellants is that when Technology Transfer Agreement dated 18.06.1999 was entered into, NIMRA was fully aware of ARCI's honeycomb technology and second and third appellants were involved in the process of developing the technology wholly in their capacity as Associate Director and Director of ARCI and there was no dishonest intention on their part to cheat the respondent. Taking us through various clauses in the technology transfer agreement, Mr. Raju Ramachandran, learned Senior Counsel submitted that the said technology transfer agreement provides for a contingency that if the targeted specifications are not achieved, then ARCI is liable to pay damages to the tune of twenty percent of the lump-sum technology transfer fee charged. It was contended that the case is purely of a civil nature and for the alleged breach of contract, arbitral proceedings have already commenced and the criminal prosecution is clear abuse of process of law. 5. Reiterating the above submissions, Mr. Manoj Sharma, learned counsel for the appellant No.2 contended that in the year 1999, second appellant was not in the ARCI campus and the second appellant was appointed as the Associate Director and ent....
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....ve application. Further Article 2.6 of the agreement provides that NIMRA had made some preliminary evaluation of ARCI honeycomb samples and found that the ceramic honeycombs may be suitable for manufacture of catalytic converters for automobile application. 10. Contention at the hands of respondent is that ARCI had already developed and possessed know-how for extruded ceramic honeycombs. Article 2.2 of technology transfer agreement suggests that ARCI has the intellectual property rights for the know-how of the ceramic honeycomb technology and the extrusion die fabrication technology. It was contended that the intellectual property rights could not have been given to ARCI unless the Centre developed the process hundred percent successfully and without such cent percent success appellants should not have entered into an agreement for transfer of the technology. Further contention of respondent is that believing the representation of the appellants, respondent established an industrial unit within the Balapur Campus of the Centre and in this regard spent an amount of rupees one crore and thirty lakhs for purchasing and installing comprehensive machinery. It is submitted that in the m....
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.... in criminal proceedings would depend upon facts and circumstances of each case. Vide State of Haryana & Ors. vs. Bhajan Lal & Ors., 1992 Supp.(1) SCC 335; State of T.N. vs. Thirukkural Perumal, (1995) 2 SCC 449; and Central Bureau of Investigation vs. Ravi Shankar Srivastava, IAS & Anr. (2006) 7 SCC 188. 13. In the light of the well-settled principles, it is to be seen whether the allegations in the complaint filed against ARCI and its officers for the alleged failure to develop extruded ceramic honeycomb as per specifications disclose offences punishable under Sections 419 and 420 IPC. It is to be seen that whether the averments in the complaint make out a case to constitute an offence of cheating. The essential ingredients to attract Section 420 IPC are: (i) cheating; (ii) dishonest inducement to deliver property or to make, alter or destroy any valuable security or anything which is sealed or signed or is capable of being converted into a valuable security and (iii) mens rea of the accused at the time of making the inducement. The making of a false representation is one of the essential ingredients to constitute the offence of cheating under Section 420 IPC. In order to bring ....
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....2.2 When all guarantee figures as set forth in Article 12.1 are achieved during the performance guarantee test, then ARCI shall be released thereafter from any liability for the performance guarantee of the know- how. 12.3 In the event of failure to achieve the performance as agreed in Article 12.1 in the first performance test, ARCI shall make necessary rectification and another performance test will be conducted. 12.4 In the event of failure to achieve the guarantee figures in the second performance test, ARCI may at its option either (I) make necessary rectification so that another performance test can be conducted or pay the liquidated damages equal to 20% of the lump-sum technology transfer fee charged. 12.5 When the liquidated damages are paid by ARCI as specified in Article 12.4, the performance guarantee shall be deemed to have been fulfilled as ARCI shall be relieved from any liability or the performance guarantee. 12.6 If for reasons not attributable to ARCI, the performance guarantee figures are not attained during the performance test, both parties shall discuss and agree upon measures to be taken." 16. By reading of the above clauses in the technology transfer....
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....er than jointly transfer to a third party as provided for in 1997 agreement. No dishonest intention could be attributed to the appellants as is apparent from the fact that NIMRA earlier had collaboration with ARCI and ARCI put in sufficient efforts by conducting repeated performance guarantee tests. 18. Respondent mainly relied upon the letter bearing No.ARCI/AD/2006-2007 dated 23.10.2006 to contend that what appellant No.2 conveyed was that the so-called perfect honeycomb technology which they asserted to be having, was in fact, an imperfect technology and thus act of the appellants amounted to cheating. By perusal of the letter bearing No.ARCI/AD/2005-2006 dated 05.04.2006, it is seen that the Centre was trying their best efforts to improve the wall thickness uniformity and they are expecting to accomplish all experimentation necessary for the purpose. In the letter bearing No.ARCI/AD/2006-2007 dated 23.10.2006 addressed to Technology Information, Forecasting & Assessment Council (TIFAC), copy of which was marked to NIMRA states that targeted specifications could not be achieved despite ARCI's best efforts. The said letter further states as under:- " ...ARCI has already convey....
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....ourt. 20. By analysis of terms and conditions of the agreement between the parties, the dispute between the parties appears to be purely of civil nature. It is settled legal proposition that criminal liability should not be imposed in disputes of civil nature. In Anil Mahajan vs. Bhor Industries Ltd. & Anr. (2005) 10 SCC 228, this Court held as under:- "6. ........A distinction has to be kept in mind between mere breach of contract and the offence of cheating. It depends upon the intention of the accused at the time of inducement. The subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent, dishonest intention is shown at the beginning of the transaction. 7. ..... 8. The substance of the complaint is to be seen. Mere use of the expression "cheating" in the complaint is of no consequence. Except mention of the words "deceive" and "cheat" in the complaint filed before the Magistrate and "cheating" in the complaint filed before the police, there is no averment about the deceit, cheating or fraudulent intention of the accused at the time of entering into MOU wherefrom it can be inferred that the acc....
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....y aware that the criminal proceedings are unwarranted and his remedy lies only in civil law, should himself be made accountable, at the end of such misconceived criminal proceedings, in accordance with law. One positive step that can be taken by the courts, to curb unnecessary prosecutions and harassment of innocent parties, is to exercise their power under Section 250 CrPC more frequently, where they discern malice or frivolousness or ulterior motives on the part of the complainant. Be that as it may." 22. Learned counsel for the respondent submitted that any defence to be taken by the appellants is to be raised only during the course of trial and is not to be raised in the initial stage of the prosecution. In support of his contention, the learned counsel placed reliance upon Trisuns Chemical Industry vs. Rajesh Agarwal & Ors. (1999) 8 SCC 686; Rajesh Bajaj vs. State NCT of Delhi and Ors. (1999) 3 SCC 259; P. Swaroopa Rani vs. M.Hari Narayana Alias Hari Babu (2008) 5 SCC 765 and Iridium India Telecom Ltd. vs. Motorola Incorporated & Ors. (2011) 1 SCC 74. Learned counsel for the respondent further submitted that when the Magistrate has taken cognizance of an offence and the power....