SUSHIL SETHI Vs. STATE OF ARUNACHAL PRADESH
LAWS(SC)-2020-1-103
SUPREME COURT OF INDIA
Decided on January 31,2020

Sushil Sethi Appellant
VERSUS
STATE OF ARUNACHAL PRADESH Respondents





Cited Judgements :-

PULOK DEB VS. STATE OF ARUNACHAL PRADESH [LAWS(GAU)-2021-9-46] [REFERRED TO]
RAMAVTAR AGRAWAL VS. STATE OF CHHATTISGARH [LAWS(CHH)-2021-9-53] [REFERRED TO]
ANJU KHANNA VS. STATE OF NCT OF DELHI [LAWS(DLH)-2020-12-36] [REFERRED TO]
ARVIND KUMAR VS. STATE OF U.P. [LAWS(ALL)-2020-12-25] [REFERRED TO]
H.D.F.C. BANK VS. STATE OF BIHAR [LAWS(PAT)-2022-6-36] [REFERRED TO]
P. SRI RAM SIMHA TEJA VS. STATE OF TELANGANA [LAWS(TLNG)-2021-3-9] [REFERRED TO]
DIAMOND CABLES LIMITED VS. CENTRAL BUREAU OF INVESTIGATION [LAWS(J&K)-2021-9-50] [REFERRED TO]
K.DILEEPKUMAR VS. STATE OF KERALA [LAWS(KER)-2021-3-11] [REFERRED TO]
SABRE TRAVEL TECHNOLOGIES PRIVATE LIMITED VS. STATE OF KARNATAKA [LAWS(KAR)-2021-2-54] [REFERRED TO]
HILAL AHMAD MIR VS. ANTI-CORRUPTION BUREAU [LAWS(J&K)-2020-10-27] [REFERRED TO]
PRADEEP S.WODEYAR VS. STATE OF KARNATAKA [LAWS(SC)-2021-11-72] [REFERRED TO]
ATUL SAXENA VS. STATE OF U.P [LAWS(ALL)-2022-9-4] [REFERRED TO]
N. DHANRAJ KOCHAR VS. STATE [LAWS(MAD)-2020-2-570] [REFERRED TO]
SANDEEP SINGH VS. NISAR AHMAD DAR [LAWS(J&K)-2022-5-35] [REFERRED TO]
SAROVAR HOTELS PRIVATE LIMITED VS. STATE OF KERALA [LAWS(KER)-2022-1-214] [REFERRED TO]
HARI RAM VS. STATE OF UTTARAKHAND [LAWS(UTN)-2020-8-3] [REFERRED TO]
KAPIL AGARWAL VS. SANJAY SHARMA [LAWS(SC)-2021-3-6] [REFERRED TO]
M/S. FERTICO MARKETING AND INVESTMENT PVT , LTD , VS. CBI, ANTI CORRUPTION BRANCH, LUCKNOW [LAWS(ALL)-2021-3-71] [REFERRED TO]
SMART OWNER SERVICES INDIA PRIVATE LIMITED VS. STATE OF KARNATAKA [LAWS(KAR)-2022-6-1015] [REFERRED TO]
BILKISH BEGUM VS. STATE OF CHHATTISGARH [LAWS(CHH)-2021-11-78] [REFERRED TO]
APARNA PUROHIT VS. STATE OF U. P. [LAWS(ALL)-2021-2-100] [REFERRED TO]
GANESH BENZOPLAST LIMITED VS. MORGAN SECURITIES CREDITS PRIVATE LIMITED [LAWS(BOM)-2021-4-78] [REFERRED TO]
VIKAS CHAWLA VS. STATE OF NCT OF DELHI [LAWS(DLH)-2022-2-71] [REFERRED TO]


JUDGEMENT

M.R.SHAH,J. - (1.)Feeling aggrieved and dissatisfied with the impugned judgment and order dated 07.09.2018 passed by the High Court of Gauhati at Itanagar in Criminal Petition No. 36(AP) of 2017, by which the High Court has dismissed the said criminal petition preferred by the appellants herein to quash and set aside the criminal proceedings being G.R. Case No. 05/200/294, the original accused nos. 1 & 2 have preferred the present appeal.
(2.)That appellant no.1 is the Managing Director of M/s. SPML Infra Limited, previously known as M/s Subhas Project Marketing Limited, and appellant no.2 is the Director of the said firm M/s SPML 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 thereafter the respondents ­ original complainant lodged the complaint against the appellants and others being Jang PS Case No. 05/2000 for the offence under Section 420 of the IPC alleging inter alia that the appellants provided inferior quality materials in contravention with the provisions of the contract which stipulated specific percentages of nickel and chromium to be used. It was alleged in the complaint that the appellants were required to supply the equipments as per the terms of the contract. As per the complaint, in course of physical inspection of the plant, the DOP found that three runners turbines, viz, turbine nos. 1, 2 and 3 were cracked and damaged. Therefore, the damaged components were sent for testing and the National Test House, Calcutta submitted its report and it was found that the chemical composition of the broken runner was found containing 5.28% Nickel and 7.5% Chromium, which composition was contrary to the specification as per the agreement. Therefore, it was alleged that M/s SPML, Calcutta had supplied substandard turbines containing composition of materials not in accordance with the specification of MOU, resulted in frequent damage of runner turbine buckets. On the strength of written complaint, an FIR was lodged/registered. It appears that during the course of the investigation, the Investigating Officer found/discovered the illegalities/irregularities in awarding the contract at a higher price. Even during the course of investigation, the Investigating Officer found some officials responsible for the omission and neglect of duties and it was found that the officials named in the charge sheet were involved/connived with the firm M/s SPML Infra Limited with a view to cheat the Government of Arunachal Pradesh. After conclusion of the investigation, the Investigating Officer filed the final report/chargesheet 28.05.2004 against the appellants and others for the offences under Section 120B and 420 of the IPC.

2.2 According to the appellants, they were not aware about the filing of the FIR and the chargesheet against them till the year 2017 and on being aware of the FIR and the chargesheet against them, the appellants preferred a petition before the High Court for quashing the aforesaid criminal proceedings under Section 482 Cr.P.C. It was contended on behalf of the appellants that the 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 incharge 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 IPC 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 through out 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 Court has observed that there are allegations not only against the appellants, but also against the connected company executives and engineers of the Government of Arunachal Pradesh and there are allegations of criminal conspiracy amongst themselves in the supply of substandard runner turbines and receiving the substandard runner turbines which were not in conformity with the specified standard and the others coaccused persons have not come up with a similar petition under Section 482 Cr.P.C. and therefore at this stage it is not possible to segregate the case qua the appellants only.

2.4 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court in refusing to quash the criminal proceedings against the appellants in exercise of powers under Section 482 Cr.P.C., the original accused nos. 1 and 2 ­ Managing Director/Director of M/s. SPML Infra Limited have preferred the present appeal.

(3.)Shri Harin P. Raval, learned Senior Advocate appearing on behalf of the appellants has vehemently submitted that in the facts and circumstances of the case the High Court has committed a grave error in not exercising the power under Section 482 Cr.P.C and not quashing the criminal proceedings.
3.1 It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the appellants that the High Court has failed to appreciate and consider the fact that by the impugned criminal proceedings the complainant has tried to convert purely a civil dispute into a criminal case.

3.2 It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the appellants that the High Court has failed to consider and appreciate that the allegations as contained in the FIR even if taken on face value and assumed to be correct in entirety, do not disclose a prima facie commission of an offence, much less a cognizable offence.

3.3 It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the appellants that a bare perusal of the FIR would demonstrate that the allegations seem to be supply of inferior quality of raw materials as seen under test report of National Test House, Calcutta which purportedly does not match with the test certificate given by the company. It is submitted that there is nothing in the entire body of FIR to suggest 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, learned Senior Advocate appearing on behalf of the appellants that the High Court ought to have appreciated that the FIR was lodged on 26.06.2000 only after the appellants issued notice dated 9.3.2000 by which the complainant was called upon to take over the project before 31.03.2000 on account of nonpayment of the maintenance charges.

3.8 It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the appellants that the High Court has failed to appreciate and consider the fact that the disputes between the parties were pending before the arbitrators. It is submitted that in fact the company was required to initiate the arbitration proceedings on account of being denied the legitimate due payments.

3.9 It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the appellants that looking to the averments and the allegations in the complaint/FIR, it cannot be said that ingredients for committing the offence under Section 420 IPC has been made out. It is submitted that there are no allegations in the FIR that the appellants acted in dishonest and fraudulent intention from the very inception of the contract with the respondent ­ State.

3.10 It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the appellants that the allegations as contained in the FIR at best pointed towards the dispute, namely, relating to breach of the conditions of the contract and therefore at best could have given rise to civil liability.

3.11 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 no complaint has been filed against the company ­ M/s SPML Infra Limited and only the appellants being the Managing Director/Director of M/s SPML Infra Limited are joined as accused. It is submitted that as held by this Court in catena of decisions in the absence of the main company being joined as accused the criminal proceedings against the Directors of the company alone shall not be maintainable.

3.12 It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the appellants that even otherwise there are no averments and allegations in the complaint that the appellants were in charge of the administration of the company and therefore they were vicariously liable 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 submitted that the company relied upon the certificate issued by the manufacturer and simply used the said turbines in the project. It is submitted that therefore also the appellants cannot be saddled with the criminal liability for any manufacturing defect when the same was not even in the domain of the appellants and their company.

3.15 It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the appellants that even otherwise when the final report has been filed by the investigating officer, the chargesheet has gone much beyond the allegations and averments in the FIR.

3.16 It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the appellants that though there were no allegations in the complaint/FIR, the police authorities went into the commercial efficacy of the project through which M/s SPML Infra Limited was selected. It is submitted that merely because there was a margin difference between the purported manufacturing cost of the turbines and the rates quoted by the company, the appellants cannot be held guilty of a criminal offence of cheating. It is submitted that as such the company was the lowest bidder and was awarded the contract after due deliberations by the tendering committee.

3.17 It is further submitted by Shri Raval, learned Senior Advocate appearing on behalf of the appellants that the High Court has failed to exercise the powers under Section 482 Cr.P.C. and thus has not exercised the jurisdiction vested in it.

3.18 Making the above submissions and relying upon the decisions of this Court in the cases of State of Haryana v. Bhajan Lal 1992 Supp. (1) SCC 335; Hira Lal Hari Lal Bhagwati v. CBI, New Delhi (2003) 5 SCC 257; Indian Oil Corporation v. NEPC India Limited and others (2006) 6 SCC 736; V.V. Jose and another v. State of Gujarat and another (2009) 3 SCC 78; Vesa Holdings Private Limited v. State of Kerala and others (2015) 8 SCC 293; and Sharad Kumar Sanghi v. Sangita Rane (2015) 12 SCC 781, it is prayed to allow the present appeal and quash and set aside the impugned criminal proceedings so far as the appellants are concerned.

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