TaxTMI 
TaxTMI 
2020 (1) TMI 1445
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....Infra Limited. M/s. SPML Infra Limited is a public limited company incorporated under the Companies Act, 1956. A contract was entered into between M/s. SPML Infra Limited and the Government of Arunachal Pradesh on 18.03.1993 for construction, supply and commissioning of the Nurang Hydel Power Project including three power generating units for a consideration of Rs. 24.96 crores approximately. As per Clause 2(c) of the contract, the defect liability period for the works was to be for a period of 18 months. Project was commissioned in the month of July, 1996. That the defect liability period for the works of M/s. SPML Infra Limited expired in the month of January, 1998. That thereafter the project became operational and started generating electricity and according to the Appellants till 20.09.1998 the project had generated 90 lakhs KW units. According to the Appellants even the said project is also in operation today. There were some disputes with respect to the payment of maintenance by the Respondents. The Appellants issued notice to the Respondents to take over the project before 31.03.2000 on account of non-payment of maintenance, vide notice dated 09.03.2000. 2.1. That thereaft....
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.... matter pertains to the contract and therefore purely a civil and contractual dispute has been given the colour of criminality and that too with a mala fide intention as they served a notice upon the Respondents to pay the maintenance amount due and payable. It was also submitted on behalf of the Appellants that they are the Managing Director/Director of M/s. SPML Infra Limited - a company and that the company has not been arrayed as an Accused. It was submitted that there are no allegations that the Appellants were in-charge of the affairs of the company and therefore vicariously liable. Number of other submissions were also made on merits in support of their submission that the offence Under Section 420 Indian Penal Code has not been made out at all. It was also submitted that as soon as the company/Appellants were informed with respect to the defect, despite the defect liability period was over, they changed the turbines in the year 2000. It was also submitted that all throughout the project has run and even still running. 2.3. That by the impugned judgment and order, the High Court has refused to quash the criminal proceedings. While rejecting the quashing petition, the High C....
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....gest even remotely the element of existence of fraudulent and dishonest intention from the initiation of the transaction between the parties. 3.4. It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the Appellants that the High Court has not properly appreciated and considered the fact that the defect liability period expired much before the filing of the complaint/FIR. 3.5. It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the Appellants that even thereafter also the company continued the maintenance work and the project is running. It is submitted that in fact the project was commissioned in the year 1996 and the project had generated 90 lakhs KW units till 20.09.1998 even as per the certificate issued by the Department of Power. 3.6. It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the Appellants that the High Court has failed to appreciate the fact that the impugned FIR and the complaint subsequently filed has been filed with a mala fide intention and after the company demanded to pay the amount for regular maintenance work. 3.7. It is further submitted by Shri Raval, ....
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.... for the act of the company. 3.13. It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the Appellants that the High Court has failed to appreciate that apart from the fact that defect liability period had expired in the year 1998 and even thereafter the certificates were issued by the Chief Engineer certifying satisfaction over the execution of the project and its commissioning in July, 1996, the defects subsequently detected were cured even after the defect period was over and even the company changed the turbines. It is submitted that therefore if the intention of the company and/or the Appellants was to cheat, in that case, they would not have changed/replaced the runner buckets. 3.14. It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the Appellants that the High Court has not properly appreciated and considered the role of the Appellants and their company in the entire contract. It is submitted that the entire contract was not to manufacture the turbines and the runner buckets by the Appellants and the company, but to only procure the same from the manufacturer and supply the same to the Respondents. It is ....
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....- State and the counsel on behalf of the original complainant that having found a prima facie case for the offence Under Section 420 Indian Penal Code for delivering/supplying sub-standard materials and charging exorbitant rates for such materials with a criminal intent to dupe the Government with huge public money, the High Court has rightly refused to quash the criminal proceedings. 4.2. It is further submitted by the learned Counsel appearing on behalf of the Respondents that the Appellants are charged for the offences Under Section 420 read with 120B Indian Penal Code. It is submitted that as per the inspection carried out by the Department and even as revealed during the investigation the Appellants supplied the sub-standard runner turbines which are used by the Accused though they were not in conformity with the specified standards. It is submitted that therefore a prima facie case of criminal conspiracy between the Accused to cheat the government has been made out. 4.3. It is further submitted by the learned Counsel appearing on behalf of the Respondents that there being enough material/evidences against the Appellants and therefore this is a fit case wherein the Appellant....
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....ows that the Appellants had criminal intent to supply sub-standard quality material at a higher price to the DOP/Government of Arunachal Pradesh. It is submitted that therefore the Appellants are rightly chargesheeted for the offence Under Section 420 read with 120B Indian Penal Code. 4.9. It is further submitted by the learned Counsel appearing on behalf of the Respondents that Appellant No. 1 is the Managing Director and Appellant No. 2 is the Director of the company - M/s. SPML Infra Limited and therefore being Managing Director/Director of the company, naturally they were in charge of the administration and management of the company and therefore are vicariously liable. It is submitted that the aforesaid has been elaborately considered by the High Court in the impugned judgment and order. It is submitted that even otherwise as rightly observed by the High Court at this stage it is not possible to segregate only the Appellants case. 4.10. It is further submitted by the learned Counsel appearing on behalf of the Respondents that whatever submissions are made on behalf of the Appellants are their defences which are required to be considered at the time of the trial. It is submit....
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....ntention to cheat the government from the very beginning of the transaction. Even there are no specific allegations and averments in the FIR/chargesheet that the Appellants were in-charge 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 Indian Penal Code is required to be considered. 7. While considering the prayer of the Appellants to quash the impugned criminal proceedings against the Appellants for the offence Under Section 420 Indian Penal Code, few decisions of this Court on exercise of powers Under Section 482 Code of Criminal Procedure are required to be referred to. 7.1. In the case of Bhajan Lal (supra), in paragraph 102, this Court has categorised the cases by way of illustration wherein the powers Under Article 226 or the inherent powers Under Section 482 Code of Criminal Procedure could be exercised either to prevent the abuse of the process of any court or otherwise to secure the ends of justice. In paragraph 102, it is observed and held as under: 102. In the backdrop of the interpret....
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....aggrieved party. (7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the Accused and with a view to spite him due to private and personal grudge. The aforesaid decision of this Court has been followed subsequently by this Court in catena of decisions. 7.2. In the case of Vesa Holdings Private Limited (supra), it is observed and held by this Court that every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the very inception. It is further observed and held that for the purpose of constituting an offence of cheating, the complainant is required to show that the Accused had fraudulent or dishonest intention at the time of making promise or representation. It is further observed and held that even in a case where allegations are made in regard to failure on the part of the Accused to keep his promise, in the absence of a culpable intention at the time of making initial promise being absent, no offence Under Section 420 Indian Penal C....
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.... under any other law once the duty so demanded has been paid and the alleged offence has been compounded. It is also settled law that once a civil case has been compromised and the alleged offence has been compounded, to continue the criminal proceedings thereafter would be an abuse of the judicial process. 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 120B of the Indian Penal Code, 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. 7.4. In the case of V.Y. Jose (supra), it is observed and held by this Court that one of the ingredients of cheating is the existence of 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....
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....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 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 ....