Page 1

REPORTABLE

IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 2128  OF 2011

INTERNATIONAL ADVANCED RESEARCH  CENTRE FOR POWDER METALLURGY  AND NEW MATERIALS (ARCI) & ORS.                    ...Appellants

Versus

NIMRA CERGLASS TECHNICS (P) LTD.              & ANR.                 ...Respondents

J U D G M E N T

R. BANUMATHI, J  .    

This appeal has been preferred assailing the judgment

dated 17.03.2009 passed by the High Court of Andhra Pradesh in

Criminal Petition No.7901 of 2008 dismissing the petition filed by

the  appellants  under  Section 482 Cr.P.C.,  thereby declining to

quash the criminal proceedings initiated against the appellants in

CC No. 840/2008 under Sections 419 and 420 IPC.  

2. Brief facts which led to the filing of this case are as

under:-The respondent-complainant is a private limited company

engaged in the manufacturing and marketing of scientific devices

and  equipments.  The  respondent  filed  complaint  against

appellant-International  Advanced  Research  Centre  for  Powder 1

Page 2

Metallurgy and New Materials (for short ‘ARCI’) and its officers i.e.

appellant  No.2-S.V.Joshi,  Associate  Director  and  appellant

No.3-G.Sunderarajan, Director alleging 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

2

Page 3

respondent alleged that after having taken number of trial runs

for testing the efficacy of the extruded ceramic honeycombs in the

function  organized  by  ARCI  in  May  2003,  attended  by  higher

officials, the technology was handed over to the respondent and

accordingly the respondent was induced into remitting the third

instalment of rupees two lakhs in addition to the amount already

paid.  Respondent states that he was informed that the initial trial

runs  conducted  by  the  Scientists  of  ARCI  succeeded  and  the

appellants thus, handed over a few samples of the final product

which  were  subsequently  displayed  at  a  joint  programme

launched at Hyderabad.  As a result, respondent spent an amount

of rupees fifteen lakhs for procuring raw materials in anticipation

of commencing commercial production in the belief that the final

perfected  technology  is  in  its  hands.  The  respondent  further

alleged that after three years, the respondent was informed vide

letter  bearing  No.ARCI/AD/2006-2007  dated  23.10.2006

addressed  to  Technology  Information,  Forecasting  and

Assessment Council (TIFAC) that the targeted specification of the

end product could not be achieved.  The respondent alleged that

scientists  working  in  ARCI  had not  perfected  the  honeycomb

technology sufficient for commencing commercial production and

3

Page 4

by their  false representations induced the respondent to spend

huge amount and thus appellants have committed an offence of

cheating.  

3. The  respondent  lodged  a  criminal  complaint  on

06.11.2007  before  the  court  of  the  II  Metropolitan  Magistrate

Cyberabad seeking prosecution of the appellants for the offences

punishable  under  Sections  405,  415,  418,  420  IPC  read  with

Sections 34 and 120B IPC.  After investigation, the investigating

officer submitted final report dated 28.01.2008 stating that the

dispute is purely of civil nature and that no offence was made out

against the appellants and the same may be accepted and the

case  be  treated  as  closed.  On  protest  petition  filed  by  the

respondent,  the  Magistrate  took  cognizance  of  the  case  for

offences under Sections 419 and 420 IPC read with Section 34

IPC vide order dated 11.11.2008.  Aggrieved by the summoning

order  issued by the II  Metropolitan Magistrate,  Cyberabad,  the

appellants filed petition under Section 482 Cr.P.C. before the High

Court to quash the proceedings in CC No. 840 of 2008 and the

same was dismissed, which is under challenge in this appeal.

4. Contention at the hands of the appellants is that when

Technology  Transfer  Agreement  dated  18.06.1999  was  entered

4

Page 5

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

entrusted  the  responsibility  of  heading  the  technology  transfer

activities of ARCI only in April 2005 and no dishonest intention

5

Page 6

could  be  ascribed  to  the  second  appellant  in  his  individual

capacity.   

6. Mr. Mushtaq Ahmad, learned counsel for respondent

No.1 submitted that the appellants made false representation to

the  respondent  that  ARCI  was  possessed  of  proved  ceramic

honeycomb technology and the appellants conspired and induced

the  respondent  to  enter  into  agreement  and  based  on  the

assurance  of  the  appellants,  respondent  spent  huge  money  in

purchasing  and  installing  comprehensive  machinery  in  its

industrial unit set up in ARCI campus and only in the year 2006,

by the letter dated 23.10.2006, second appellant intimated that

ceramic  honeycomb  technology  has  failed  and  the  facts  and

circumstances  clearly  show  that  the  representation  was  a

fraudulent right from inception.

7. We have carefully considered the rival contentions and

perused the impugned order and the material on record.   

8. ARCI,  a  grants-in-aid  research  and  development

institute  under  the  Ministry  of  Science  and  Technology,

Government  of  India,  carries  out  research  work  for  the

development  of  a  number  of  scientific  products  to  be  used  in

various  fields.   As  a  part  of  its  scientific  development,  ARCI

6

Page 7

developed a process for extruded ceramic honeycombs.  The said

extruded  ceramic  honeycombs  were  found  suitable  for

manufacture of catalytic converters which are used in vehicles for

controlling the pollution in the emission of vehicles and extruded

gases.  ARCI is said to have held the intellectual property rights

for  the  know-how  i.e.  the  process  for  extruded  ceramic

honeycombs and extrusion die fabrication technology.   

9. ARCI entered into a technology transfer agreement on

18.06.1999 with respondent to transfer the know-how related to

the  process  for  extruded  ceramic  honeycombs  as  per  the

specifications indicated thereon in the annexure to the agreement.

The agreement details the modalities of the terms and conditions

for the grant of licence by ARCI and NIMRA for utilizing the said

know-how and the rights and obligations of the parties and the

financial arrangements between them. As per Article 2.5 of  the

agreement,  NIMRA  has  seen  ceramic  honeycombs  as  per

specifications  indicated  thereon  and  felt  that  they  could  be  a

substitute for imported honeycombs for manufacture of catalytic

converter  automotive  application.  Further  Article  2.6  of  the

agreement  provides  that  NIMRA  had  made  some  preliminary

evaluation  of  ARCI  honeycomb  samples  and  found  that  the

7

Page 8

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  month  of  May  2003  officials  of  ARCI

convened  a  convention  for  trial  run  and  they  assured  the

respondent that the technology was a proved one and was fully

developed  and  believing  their  assurances,  respondent  spent

8

Page 9

rupees fifteen lakhs for procuring raw materials and three years

thereafter,  second  appellant  informed  the  respondent  that  the

targeted specification of the end project could not be achieved and

the second appellant marked a copy of the letter dated 23.10.2006

addressed to TIFAC that the ceramic honeycombs technology has

failed and act of the appellants made out a case of cheating and

rightly Magistrate has taken cognizance of the matter.

11. Learned counsel for the respondent further submitted

that in the letter addressed to TIFAC dated 23.10.2006, appellant

No. 2 stated that targeted specification of the end product could

not  be  achieved implying that  the  so-called perfect  honeycomb

technology which the appellants asserted to be having was in fact,

an imperfect  technology.   Drawing our attention to the official

website of  ARCI,  it  was submitted that the ARCI submitted an

application for patent registration only on 03.07.2001 and patent

was granted on 13.01.2006 and while so, Article 2.2 of transfer

technology agreement mentioning that ARCI has the intellectual

property rights for the know-how and the extrusion die fabrication

technology is false and the appellants made a false representation

to  the  respondent  that  ARCI  was  having  intellectual  property

rights for extruded ceramic honeycombs and the Magistrate has

9

Page 10

rightly taken cognizance of the matter for the offence punishable

under Sections 419 and 420 IPC.  

12. The  legal  position  is  well-settled  that  when  a

prosecution at the initial stage is asked to be quashed, the test to

be  applied  by  the  court  is,  as  to  whether  uncontroverted

allegations as made in the complaint establish the offence.   The

High Court being superior court of the State should refrain from

analyzing the materials which are yet to be adduced and seen in

their true perspective.  The inherent jurisdiction of the High Court

under  Section  482  Cr.P.C.  should  not  be  exercised  to  stifle  a

legitimate prosecution. Power under Section 482 Cr.P.C. is to be

used sparingly only in rare cases.  In a catena of cases, this Court

reiterated  that  the  powers  of  quashing  criminal  proceedings

should be exercised very sparingly and quashing a complaint 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

1

Page 11

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  a  case  for  the  offence  of  cheating,  it  is  not  merely

sufficient to prove that a false representation had been made, but,

it is further necessary to prove that the representation was false

to the knowledge of the accused and was made in order to deceive

the complainant.

14. Distinction between mere breach of contract and the

cheating would depend upon the intention of the accused at the

time of alleged inducement.  If it is established that the intention

of the accused was dishonest at the very time when he made a

1

Page 12

promise and entered into a transaction with the complainant to

part with his property or money, then the liability is criminal and

the accused is  guilty  of  the offence of  cheating.   On the other

hand, if all that is established that a representation made by the

accused has subsequently not been kept, criminal liability cannot

be  foisted  on  the  accused  and  the  only  right  which  the

complainant acquires is the remedy for breach of contract in a

civil court.  Mere breach of contract cannot give rise to criminal

prosecution for cheating unless fraudulent or dishonest intention

is shown at the beginning of the transaction.  In S.W. Palanitkar &

Ors. vs. State of Bihar & Anr. (2002) 1 SCC 241, this Court held as

under:

“21  ……In  order  to  constitute  an  offence  of  cheating,  the intention to deceive should be in existence at the time when the  inducement  was  made.  It  is  necessary  to  show  that  a person had fraudulent  or dishonest  intention at  the time of making  the  promise,  to  say  that  he  committed  an  act  of cheating.  A  mere  failure  to  keep  up  promise  subsequently cannot be presumed as an act leading to cheating.”

The above view in Palanitkar’s case was referred to and followed in

Rashmi Jain vs. State of Uttar Pradesh & Anr. (2014) 13 SCC 553.

15. Various  clauses  in  the  agreement  indicate  that

technology  transfer  agreement  1999  was  only  experimental  in

nature and ARCI shall endeavour to achieve the performance as

per  the  specifications.  In  the  agreement,  there  was  no

1

Page 13

commitment  on  the  part  of  ARCI  to  provide  extruded  ceramic

honeycombs  as  per  expected  specifications.   Article  12  which

deals  with  performance  guarantee  suggests  that  ARCI  is  to

conduct performance test and shall endeavour to achieve product

quality/specification  as  mentioned  in  annexure  I  of  the

agreement.  We may usefully refer to Article 12.2 to 12.6 of the

agreement which read as under:

“12.2  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 agreement, it is seen that the development of technology

ceramic  honeycombs  by  ARCI  was  experimental.  Terms  and

conditions of technology transfer agreement clearly suggest that 1

Page 14

the Centre is to conduct performance guarantee to achieve the

product quality/specification of extruded ceramic honeycombs as

mentioned  in  annexure-1  of  the  technology  transfer  agreement

and  make  necessary  rectification,  if  required.   The  agreement

provides  that  in  the  event  of  failure  to  achieve  the  guarantee

figures as per specification even after second performance test,

option given to ARCI either to conduct another performance test

or  pay the  liquidated  damages equal  to  twenty  percent  on the

lump-sum technology transfer fee charged.  As per the terms and

conditions  of  the  agreement,  ARCI  had  the  option  to  conduct

performance test to achieve the quality/specifications and when it

could not achieve these specifications, it cannot be said that ARCI

acted with dishonest intention to cheat the respondent attracting

the essential ingredients of Section 420 IPC.

17. Two important aspects are relevant to be noted to hold

that criminal liability cannot be foisted on the appellants.  Firstly,

satisfaction of NIMRA as to suitability of ceramic honeycombs.  As

per Article 2.5 of the technology transfer agreement, NIMRA felt

that  ARCI’s  honeycombs  could  be  a  substitute  for  imported

honeycombs for  manufacture  of  catalytic  converters automotive

application.  Further, as seen from Article 2.6, NIMRA made some

1

Page 15

preliminary evaluation of the honeycomb samples and found that

the  ceramic  honeycombs  may  be  suitable  for  manufacture  of

catalytic converters for automobile application. Secondly, as seen

from Article 2.8 of  technology transfer agreement 1999, NIMRA

had earlier entered into an agreement with ARCI on 28.05.1997 to

optimize the wash coat and catalyst coating by NIMRA on ARCI’s

substrate to achieve conversion efficiency on two samples for two

vehicles  Maruti  800cc  and  Ceilo  1500cc.  As  per  the  said

agreement,  ARCI  paid  rupees  six  lakhs  fifty  thousand  to

respondent  for  optimization  process  to  achieve  conversion

efficiency  and  the  said  agreement  was  further  extended  vide

amendment  dated  06.05.1999.  It  is  seen  that  NIMRA  first

approached ARCI for co-operation and received money from ARCI

for developing part of the technology and finally NIMRA opted for

developing  part  of  the  technology  by  itself  rather  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.  

1

Page 16

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 conveyed to NIMRA that ARCI may not be able to meet  the specifications as presently targeted.  ARCI had further  indicated  to  NIMRA very  clearly  that  it  would  write  to TIFAC  requesting  short-closure  of  the  project  for  the  above reasons.  However,  Mr.  Khaja  has  dissuaded  ARCI  from  taking such a step, indicating that he does not want the project to be termed as a failure and carry the image of not fully repaying the loan amount received from TIFAC. Mr. Khaja has also indicated to ARCI that Nimra Cerglass would, therefore, like to make one final effort to commercialize the product despite the existing departure from the specifications. For the purpose, Mr. Khaja has proposed to modify the canning process, involving a flexible mat suitable for canning  honeycomb  substrates  with  warpage,  to  explore  the possibility  of  utilizing  the  currently  developed  honeycomb structures….”

1

Page 17

Thus, it is clear that before the said letter was sent to TIFAC, all

the  details  were  discussed  and  well  within  the  knowledge  of

NIMRA  and  NIMRA  proposed  for  modification  of  the  canning

process and evidently  there was no dishonest  intention on the

part of the appellants and no criminal liability could be attributed

to the appellants.

19. It is also pertinent to note that Article 21 of technology

transfer agreement dated 18.06.1999 contains arbitration clause.

On 30.12.2007, the respondent invoked arbitration as provided in

Article  21.1  of  the  technology  transfer  agreement  and  Dr.  T.

Ramasamy  (sole  arbitrator)  was  appointed.  On  06.02.2008,

respondent  filed  an  Arbitration  Petition  No.42/2008  under

sub-section (2) of Section 14 of the Arbitration    and  Conciliation

Act  before   the   High  Court   of   Andhra  Pradesh  praying  to

substitute  Dr.  T.  Ramasamy  alleging  that  he  is  known  to

appellant No.3.  In view of objection raised by the respondent, Dr.

T.  Ramasamy  recused  himself  from  hearing  the  matter.

Subsequently,  ARCI  filed  an  Arbitration  Petition  No.78/2008

before the High Court of Delhi for appointment of an independent

arbitrator to resolve the existing disputes between ARCI and the

respondent.  The  said  arbitration  petition  was  dismissed  as

1

Page 18

withdrawn by an order dated 08.07.2008.  It was submitted at the

Bar  that  an  independent  arbitrator  was  in  fact  appointed  to

resolve disputes between ARCI and the respondent and arbitrator

has  passed  the  award  which  again  is  the  subject  matter  of

challenge before the High Court.

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 accused had the intention to deceive the complainant to pay…. We need not  go into the question of  the difference of  the amounts mentioned in  the complaint  which is  much more than what is mentioned in the notice and also the defence of the accused and the stand taken in reply to notice because the complainant’s own case is that over rupees three crores was paid and for balance, the accused  was  giving  reasons  as  above-noticed.  The  additional

1

Page 19

reason  for  not  going  into  these  aspects  is  that  a  civil  suit  is pending inter se the parties for the amounts in question.”

21. In  M/s Indian Oil  Corporation vs.  NEPC India Ltd.  &

Ors., (2006)  6  SCC 736,  this  court  observed  that  civil  liability

cannot be converted into criminal liability and held as under:-

“13. While on this issue, it is necessary to take notice of a growing tendency in business circles to convert purely civil disputes into criminal  cases.  This  is  obviously  on  account  of  a  prevalent impression that civil law remedies are time consuming and do not adequately  protect  the  interests  of  lenders/creditors.  Such  a tendency  is  seen  in  several  family  disputes  also,  leading  to irretrievable  breakdown of  marriages/families.  There  is  also  an impression  that  if  a  person  could  somehow be  entangled  in  a criminal prosecution, there is a likelihood of imminent settlement. Any effort to settle civil disputes and claims, which do not involve any  criminal  offence,  by  applying  pressure  through  criminal prosecution should be deprecated and discouraged. In  G. Sagar Suri v. State of U.P. (2000) 2 SCC 636 this Court observed: (SCC p. 643, para 8)

“It is to be seen if a matter, which is essentially of a civil nature, has been given a cloak of criminal offence. Criminal  proceedings  are  not  a  short  cut  of  other remedies  available  in  law.  Before  issuing  process  a criminal court has to exercise a great deal of caution. For the accused it is a serious matter. This Court has laid certain principles on the basis of which the High Court is to exercise its jurisdiction under Section 482 of the  Code.  Jurisdiction  under  this  section  has  to  be exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice.”

14. While no one with a legitimate cause or grievance should be prevented  from  seeking  remedies  available  in  criminal  law,  a complainant who initiates  or persists with a prosecution,  being fully 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.”

1

Page 20

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 of the High Court to interfere is only to a limited extent, the

High Court cannot substitute its view for the summoning order

passed by the Magistrate. In support of this contention, learned

counsel placed reliance upon the decisions of this Court in Fiona

Shrikhande vs. State of Maharashtra & Anr. (2013) 14 SCC 44;

Bhushan Kumar & Anr. vs. State (NCT) of Delhi & Anr.  (2012) 5

SCC 424 and Smt. Nagawwa vs. Veeranna Shivalingappa Konjalgi

& Ors. (1976) 3 SCC 736.

2

Page 21

23. The above decisions reiterate the well-settled principles

that  while  exercising  inherent  jurisdiction  under  Section  482

Cr.P.C., it is not for the High Court to appreciate the evidence and

its truthfulness or sufficiency inasmuch as it is the function of the

trial court.  High Court’s inherent powers, be it, civil or criminal

matters, is designed to achieve a salutary public purpose and that

a court proceeding ought not to be permitted to degenerate into a

weapon of  harassment  or  persecution.  If  the  averments  in  the

complaint  do  not  constitute  an  offence,  the  court  would  be

justified in quashing the proceedings in the interest of justice.  

24. Second  appellant-Dr.  S.V.  Joshi  was  the  Associate

Director.  Third appellant Dr. G. Sunderarajan was the Director of

ARCI  and  both  of  them  were  acting  in  their  official  capacity.

Appellants No. 2 and 3 neither acted in their personal capacity

nor  stood  to  receive  any  personal  monetary  benefits  from  the

transfer  of  said  technology.  Appellants  No.2  and  3  were

representatives  of  ARCI  which  is  a  grant-in-aid  research  and

development  institute  under  the  Ministry  of  Science  and

Technology, Government of India and hence previous sanction as

mandated under Section 197 Cr.P.C.  must have been obtained

before proceeding against them as their act was only in discharge

2

Page 22

of their official duties.  In this regard, our attention was drawn to

a  communication  from  Ministry  of  Science  and  Technology

indicating  that  for  initiating  criminal  proceeding  against

appellants  No.  2  and  3,  permission  is  required  and  the  said

communication reads as under:

“ ….. They have both been appointed by the Government of India and are governed by all rules and regulations of the Government of India….

It is further stated that we have examined all the actions taken by Dr. G. Sundararajan and S.V. Joshi in relation to the activities pertaining  to  the  Technology  Transfer  Agreement  dated 18/06/1999 between ARCI and M/s Nimra Cerglass, Hyderabad and are of firm view that these actions were taken by the above officers while discharging their official duty in good faith and in the best interest of ARCI.

Therefore,  for  initiating  criminal  proceeding  against  Dr.  G. Sundararajan and Dr. S.V.Joshi, Government of India permission is required.”

The alleged acts of the appellants No. 2 and 3 were committed

while acting in discharge of their official duties, sanction from the

competent authority was necessary before initiating the criminal

prosecution  against  them.   Since  we  have  held  that  from the

averments in the complaint, the essential ingredients of dishonest

intention is not made out, we are not inclined to further elaborate

upon this point.

25. As per the terms of the technology transfer agreement,

ARCI has to conduct performance guarantee tests and in those

2

Page 23

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.

26. 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.  

………………………J.              (J.S. KHEHAR)

………………………J.            (R. BANUMATHI)

New Delhi; September 22, 2015  

2

Page 24

2