IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 26TH DAY OF AUGUST 2019 BEFORE THE HON’BLE MR. JUSTICE JOHN MICHAEL CUNHA CRIMINAL PETITION No.7616/2015 BETWEEN:
1. SASI KUMAR ARUMUGHAM, S/O S K ARUMUGHAN, AGED ABOUT 35 YEARS, RESIDING AT NO.2/279, ISHWARYA NAGAR, RANGA SAMUDHRAM, SUNEESULEESWARANPATTI, POLLACHI – 642006.
2. MR. ANTONY, S/O JOHN BOSCO GANDHI, AGED ABOUT 49 YEARS, RESIDING AT FLAT NO.308, GEETHANJALI PRIDE II 5TH MAIN, 6TH CROSS, MALLESHPALYA, BANGALORE – 560075.
AND:
... PETITIONERS (BY SRI PRAMOD NAIR, ADVOCATE) 1. STATE OF KARNATAKA, REPRESENTED BY THE INSPECTOR, HIGH GROUNDS POLICE STATION-560 051.
2. CERT INFOTRACK TELEMATICS PVT. LTD., (NOW INFOTRACK TELEMATICS PVT. LTD.) (A UNIT OF ZENRIN DATACOM CO. LTD., JAPAN) REGISTERED OFFICE AT NITON, BLOCK-E, FIRST FLOOR, 11, PALACE ROAD, BANGALORE – 560045.
REPRESENTED BY ITS MANAGING DIRECTOR MR C K RAMAKANTH.
... RESPONDENTS (BY SRI VIJAYAKUMAR MAJAGE, ADDL. SPP FOR R1, SRI C.R. SUNDARESH, ADVOCATE FOR R2) THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 CR.P.C PRAYING TO QUASH THE ORDER DATED 21.09.2015 AND 01.10.2015 VIDE ANNEXURE-'A' PASSED BY THE COURT OF IV A.C.M.M. BENGALURU TAKING COGNIZANCE OF AN OFFENCE U/S. 406 AND 408 R/W SEC.34 OF THE I.P.C.; QUASH THE ENTIRE PROCEEDINGS IN C.C.No.24121/2015 FILED BEFORE THE COURT OF COURT OF IV A.C.M.M. AT BENGALURU.
THIS CRIMINAL PETITION COMING ON FOR ADMISSION THIS DAY, THE COURT MADE THE FOLLOWING:
O R D E R Petitioners are charge-sheeted for the offences punishable under Sections 406 and 408 read with Section 34 of IPC. Petitioners have sought to quash the charge- sheet and the proceedings initiated against them in C.C.No.24121/2015 on the file of IV Additional Chief Metropolitan Magistrate, Bengaluru.
2. Heard learned counsel for petitioners, learned counsel for respondent No.2 and learned Additional State Public Prosecutor for respondent No.1. Perused the records.
3. Facts reflected in the charge-sheet disclose that petitioners herein were employed by Cert Infotrack Telematics Private Limited (respondent No.2) as Marketing Directors. According to the prosecution, accused No.1 resigned from the Company on 10.9.2013 as Director – Solutions and accused No.2 resigned on 25.9.2013 as Director – Sales and Marketing. The accusations against petitioners are that during their term of employment under respondent No.2, they floated a Company by name, M/s. Sun Telematics Private Limited, contrary to the terms of employment and thereby committed the above offences.
4. Learned counsel appearing for petitioners would submit that the allegations made in the complaint do not attract the ingredients of the offences under Sections 406 and 408 read with Section 34 of IPC. There is no material to show that respondent No.2 had entrusted any properties to petitioners within the meaning of Section 405 of IPC. There is neither any allegations nor any material to show that the alleged properties entrusted to petitioners have been converted or misappropriated by them for their use. The accusations leveled against the petitioners are wholly baseless. The learned counsel further submitted that though petitioners incorporated the Company when they were in the services of respondent No.2, no business was transacted by the petitioners during the said period. Sales tax registration as well as the certificate of establishment were obtained subsequent to resignation and the operation was commenced only after resignation of petitioners, as such the petitioners have not violated the terms of employment.
5. Further, learned counsel pointed out that even though in the complaint it was alleged that petitioners herein had committed the theft of software belonging to respondent No.2, yet, the material on record clearly indicate that exclusive right over the alleged software was with Smartcomm. The prosecution itself has relied on the certificate issued by Smartcomm, which reveals that Smartcomm was the sole and exclusive distributor for the product MDT 730 to India and other countries. Smartcomm alone owned the IP rights for the product including product design, specifications, software development kit (SDK) and such other characteristics and the Smartcomm appointed CERT Infotrack as exclusive distributor. Under the said circumstance, the allegations of theft of the alleged software is also baseless and could not have been made as the basis for the prosecution of petitioners. Further, learned counsel emphasized that no complaints were lodged against petitioners when they were in the services of respondent No.2. Instead, while relieving them from the services, respondent No.2 has certified good conduct of petitioners indicating that respondent No.2 has no grouse whatsoever against petitioners. It is only after establishment of rival business by petitioners, respondent No.2 has come up with false and baseless allegations out of business rivalry. Thus contending that the prosecution launched against the petitioners is malafide, vexatious and ulteriorly motivated, the petitioners have sought to quash the impugned proceedings.
6. Further, the learned counsel highlighted that the alleged dispute between the parties is arising out of an employment contract in respect of which respondent No.2 has already filed a suit for damages in O.S.No.3459/2014 and the same is pending adjudication before the civil court. Under the said circumstance, respondent No.2 was not entitled to resort to criminal process against the petitioners.
7. In support of his arguments, learned counsel has placed reliance on the following decisions:
(i) Criminal Appeal No.2327/2014 – Binod Kumar and others v. State of Bihar and another.
(ii) MANU/SC/1129/2011 – Thermax Ltd. and others v. K.M. Johny and others.
(iii) MANU/DE/4768/2012 – Wolfgang Reim and others v. State and another.
8. Repelling the contentions, learned counsel appearing for respondent No.2 as well as learned Additional State Public Prosecutor appearing for respondent No.1 argued in support of the impugned action and contended that the material on record clearly disclose that petitioners herein incorporated a Company during the subsistence of the employment agreement. As per the conditions of the employment, petitioners had undertaken not to disclose or divulge confidential information to any outsiders and not to join any competitive customers or similar industry. Contrary to the said undertaking, petitioners have floated a Company and have acted in violation of the terms of the employment. The material produced on record indicate that petitioners made use of the very same software used by respondent No.2 and thereby a clear case of breach of trust punishable under Sections 406 and 408 of Indian Penal Code is made out.
9. Considered the submissions and perused the records. There is no dispute with regard to the fact that petitioners were employed by respondent No.2 and as on the date of tendering their resignation, accused No.1 was holding the position of Director – Solution and accused No.2 was holding the position of Director – Sales and Marketing. There is also no dispute that petitioners were bound by the undertaking given by them to respondent No.2. The terms read as under:
1. Undertaking by the Employee In consideration of my employment/contract by CERT InfoTrack Telematics Private Limited, I hereby agree as follows:
1.1. I will make full and prompt disclosure to CIT of all inventions, developments, improvement, modifications, discoveries and methods (all of which are called collectively termed ‘developments’ hereinafter), whether patentable or not, made or conceived by me or under my direction during my employment, whether or not made or conceived during normal working hours or on the premises of CIT or using the Infrastructure supplied by CIT.
1.2. Upon request by CIT, I agree to assign CIT all developments covered by paragraph 1.1 and any patents or patent applications covering such developments and to execute and deliver such assignments, patents and applications and other documents as CIT may direct and to fully cooperate with CIT to enable CIT to secure and patent or otherwise protect such developments in any and all countries.
1.3. I hereby represent that, to the best of my knowledge, I have no present obligation to assign to any former employer or any other person, corporation or firm, any developments covered by paragraph 1.2.
1.4. I will also assign to CIT any and all copyrights and reproduction rights to any material prepared by me in connection with my employment.
1.5. During the term of my employment by CIT, will not become employed by or act on behalf of any other person, corporation or firm either in the place of employment or in any country, which is engaged with any business or activity either similar, competitive or non competitive of that of CIT, unless such assignment has been approved by CIT in writing and signed by CEO of CIT.
1.6. I will at all times obey and comply with all orders and directions given to me by CIT and faithfully observe all the rules, regulations, policies, procedures, practices, arrangements, and circulars at CIT for the time being in force for the management of CIT’s business or for the control and good conduct of CIT’s employees.
1.7. I will at all times make best effort to achieve maximum customer satisfaction enough either direct interaction, supporting them or the issues or providing customized solutions as per the CIT’s directions.
1.8. I will not disclose any marketing or customer information, cost information, business dealings, business strategy and product management information to any non CIT employees/directors during my tenure.”
10. The accusation against petitioners is that in violation of the aforesaid terms and conditions, they floated a Company by name M/s. Sun Telematics Private Limited and thereby committed breach of trust. The records produced along with charge-sheet indicate that the said Company was incorporated on 28.5.2013. But there is no material to show that during their service under respondent No.2, petitioners had commenced any operations in the name of the Company floated by them. The documents produced before this Court indicate that Form ‘C’ – Registration Certificate of Establishment was obtained on 26.2.2014 and Value Added Tax Registration Certificate was issued on 19.9.2013 indicating that the actual operations had commenced only after the resignation of petitioners from respondent No.2–Company. Under the said circumstance, whether the act of petitioners in incorporating the Company during their tenure of service under respondent No.2 make out the offences under Sections 405, 406 and 408 of IPC is the moot question that requires to be considered in this case.
11. In order to attract the ingredients of offence under Section 405 of IPC, (a) a person should have been entrusted with property, or entrusted with dominion over property; (b) that person should dishonestly misappropriate or convert to his own use that property, or dishonestly use or dispose of that property or willfully suffer any other person to do so; (c) that such misappropriation, conversion, use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of trust.
12. In view of this section, it is only when a property entrusted to accused has been dishonestly misappropriated or converted to his own use, the accused can be held culpable for the offence under Section 405 of IPC. In the instant case, there are no allegations whatsoever that either at the time of employment or at the time of resignation, any property was entrusted to petitioners. Though in the complaint it was alleged that the software belonging to respondent No.2 was stolen and the same was made use of to procure rival business, but the material referred above clearly indicates that even the title or right to the said software vested with the Smartcomm and not with respondent No.2. That apart, there is no allegation whatsoever in the charge-sheet that petitioners herein have committed any theft of such a software. Under the said circumstance and in the absence of any material to show that either during the employment or any time subsequent thereto, any properties which has been entrusted to petitioners have been converted to their own use, provisions of Section 405 of IPC do not get attracted to the facts of this case.
13. The allegations made in the complaint even if accepted uncontroverted, in my view, would at the most go to show that there was a serious breach of terms of employment by petitioners and not an intentional conversion of the properties entrusted to their use as contended by the prosecution. In this regard, respondent No.2 has already resorted to civil remedy by seeking damages from petitioners. In this context, it may be relevant to refer to the observations made by the Hon’ble Supreme Court in the case of ALPIC FINANCE LTD. v.
P. SADASIVAN AND ANOTHER reported in (2001) 3 SCC 513:
"7. In a few cases, the question arose whether a criminal prosecution could be permitted when the dispute between the parties is of predominantly civil nature and the appropriate remedy would be a civil suit. In one case reported in Madhavrao Jiwajirao Scindia v. Sambhajirao Chandrojirao Angre this Court held that if the allegations in the complaint are both of a civil wrong and a criminal offence, there would be certain situations where it would predominantly be a civil wrong and may or may not amount to a criminal offence. That was a case relating to a trust. There were three trustees including the settlor. A large house constituted part of the trust property. The respondent and the complainant were acting as Secretary and Manager of the Trust and the house owned by the Trust was in the possession of a tenant. The tenant vacated the building and the allegation in the complaint was that two officers of the Trust, in conspiracy with one of the trustees and his wife, created documents showing tenancy in respect of that house in favour of the wife of the trustee. Another trustee filed a criminal complaint alleging that there was commission of the offence under Sections 406, 467 read with Sections 34 and 120- B of the IPC. The accused persons challenged the proceedings before the High Court under Section 482 of the Code of Criminal Procedure and the High Court quashed the proceedings in respect of two of the accused persons. It was under those circumstances that this Court observed: (SCC Headnote) "Though a case of breach of trust may be both a civil wrong and a criminal offence but there would be certain situations where it would predominantly be a civil wrong and may or may not amount to a criminal offence. The present case is one of that type where, if at all, the facts may constitute a civil wrong and the ingredients of the criminal offences are wanting. Having regard to the relevant documents including the trust deed as also the correspondence following the creation of the tenancy, the submissions advanced on behalf of the parties, the natural relationship between the settlor and the trustee as mother and son and the fall out in their relationship and the fact that the wife of the co- trustee was no more interested in the tenancy, it must be held that the criminal case should not be continued."
14. Since the facts of the case do not make out the ingredients of the offences under Sections 406 and 408 of IPC, in my view, the prosecution of petitioners for the alleged offence is illegal and cannot be sustained. For the said reasons, the petition is allowed. The proceedings initiated against the petitioners in C.C.No.24121/2015 are quashed.
15. Any observations made in this order shall not affect the rights of the parties in the pending civil trial and the learned Magistrate shall deal with the said suit uninfluenced by the observations made in this order, which are confined only to the issues raised in this petition.
Sd/- JUDGE MD