HON’BLE Dr. JUSTICE K.G.SHANKAR Criminal Petition No.15544 of 2013 Date: 24-7-2014 Between Suresh Chand Jain and 3 others … Petitioners/ Accused 2 to 5 and The State of A.P., Rep. by Public Prosecutor, High Court of A.P.
… Respondent A.N.Vijay Raghvan … Respondent/
De facto Complainant
HON’BLE Dr. JUSTICE K.G.SHANKAR Criminal Petition No.15544 of 2013 Order:
The petitioners seek for the quashment of the First Information Report (FIR) in Crime No.135 of 2013 on the file of Central Crime Station, Hyderabad. They figured as accused 2 to 5 in the said FIR. They allegedly committed offences under Sections 406, 417, 419, 420 and 506 read with Section 120-B, IPC.
2. The 2nd respondent is a Director of M/s. PPS Enviro Power Private Limited (PPS). The petitioners are Directors of M/s. Shri Mahavir Ferro Alloys Pvt. Ltd., (SMFA) and M/s. Pantime Finance Company Pvt. Ltd., (Pantime). Delta Energy Systems India Pvt. Ltd., (Delta) had contacts with PPS. PPS erects up renewable energy power plants and has been in the business since about 2002. SMFA and Pantime were introduced to PPS by Delta as SMFA and Pantime intended to set up 1 MW solar photovoltaic power plant at Tankajoda, Sundargarh District, Odisha and 1 MW solar photovoltaic power plant at Bental, Nayagarh District. PPS entered into contract with SMFA and Pantime as Delta expressed its inability to take up the proposed projects. Shri Vicky Jain (accused No.1) as well as accused 2 to 5 described themselves as the Directors of SMFA and Pantime.
3. The 2nd respondent claimed:
(a) Contracts for works at a value of Rs.10.6 Crores each (for Tankajoda and Bental Villages) were executed between the 2nd respondent on the one side and SMFA/ Pantime on the other side on 10-9-2011. The 2nd respondent placed 3 purchase orders on 05-11-2011 with SMFA and Pantime separately. Advance bank guarantees dated 22-11-2011 for a sum of Rs.4.24 Crores were issued by PPS in favour of SMFA and Pantime. However, SMFA and Pantime failed to release the equal amount towards mobilization fund in terms of the contract. Subsequently, an amount of Rs.3.97 Crores was released piecemeal by SMFA and Pantime, albeit during the contractual period.
(b) After the completion of the project, when PPS demanded payment of entire dues and for the return of the advance bank guarantee, only Rs.One Crore of advance bank guarantee constituting two advance bank guarantees of Rs.50 lakhs each was returned by accused No.1 on behalf of SMFA to the banker of PPS.
The balance of Rs.3.24 Crores of advance bank guarantee remained with SMFA and Pantime. The withholding of the advance bank guarantees till August 2013 by SMFA is a clear violation of contractual terms.
(c) SMFA and Pantime grossly violated the promise to perform their obligation under the contract and negotiated with PPS through false assurances with an intention to cheat and defraud PPS. When PPS verified with the Registrar of Companies, Mumbai, PPS came to know that SMFA and Pantime were in deep debts to various persons. It also came to know that accused No.1 ceased to be a Director of Pantime and that accused No.1, however, deliberately issued a cheque to PPS in his capacity as Director of Pantime. Thus, accused No.1 cheated PPS and also committed misappropriation and criminal breach of trust. Accused 2 to 5, who are the petitioners herein, entered into a criminal conspiracy to use Delta as a medium to reach PPS and entered into contract with PPS with the dishonest intention to cheat it through false assurances. The petitioners consequently are guilty of offences levelled against them.
4. The petitioners agree that they are Directors of SMFA and Pantime and also admitted that the 2nd respondent was the Director of PPS. Sri T.Niranjan Reddy, learned Senior Counsel for the petitioners, submitted that on 08-11-2011, EPC (Engineering, Procurement and Construction) Agreements were entered into between PPS on the one side and SMFA and Pantime on the other side. He pointed out that the total value of the work was Rs.28.60 Crores. An irrevocable foreign letter of credit for Rs.14 Crores was allegedly issued by the Companies of the petitioners to the Company of the 2nd respondent. That apart, an Indian letter of credit for Rs.5.5 Crores was also issued in favour of PPS.
5. The learned Senior Counsel for the petitioners denied the claim of the 2nd respondent that mobilization advance had not been released by the Companies of the petitioners. He claimed that an amount of Rs.6.5 Crores was released by the Companies of the petitioners towards mobilization advance.
6. The learned Senior Counsel for the petitioners admitted that the Company of the 2nd respondent executed bank guarantee for Rs.4.2 Crores on 22-11-2011 and that the projects at Tankajoda and Bental Villages were completed on 15-3-2012 and 16-3-2012 respectively. He pointed out about the non-performance clause in the agreement which envisaged that 1.66 Million Units of power should be produced annually by PPS during the first phase of 5 years. It is his contention that in view of the non-performance clause, the bank guarantee was continued.
7. The learned Senior Counsel for the petitioners submitted that PPS committed default by producing 1.10 Millions of Units only during the first year from 01-4-2012 to 31-3-2013. He conceded that advance bank guarantee to a tune of Rs.One Crore was returned to PPS as claimed by PPS. He however claimed that the bank guarantee for Rs.3.24 Crores was invoked for the non-performance and had been encashed on 08-8-2013. Questioning the same, a suit was laid by the 2nd respondent on 13-8-2013 at Bhuvaneswar. The suit was valued at Rs.5.5 Crores. The Registrar of the Court would appear to have returned the same for payment of Deficit Court Fee. Instead of paying the Deficit Court Fee, the 2nd respondent filed O.P.No.1979 of 2013 and O.P.No.1962 of 2013 on the file of the II Additional Chief Judge, City Civil Court, Hyderabad under Section 9 of the Arbitration and Conciliation Act, 1996. The amount involved in O.P.No.1979 of 2013 is Rs.16,49,57,441/-, whereas the amount involved in O.P.No.1962 of 2013 is Rs.10,33,66,810/-.
8. The learned Senior Counsel for the petitioners also pointed out that the 2nd respondent obtained
ex parte ad interim injunction on 20-9-2013 directing the
garnishee not to pay the amounts covered by the original petitions to SMFA and Pantime. After all this, the 2nd respondent sent a complaint to the Commissioner of Police, Hyderabad on 23-9-2013, which, in turn, was made over to Central Crime Station, Hyderabad for registration of the case as FIR and for investigation.
9. The leaned Senior Counsel for the petitioners contended that the complaint is against Directors of the Companies, but the Companies have not been made as parties. He submitted that there is no vicarious liability under the Penal Law against the Directors of the Company for the overt acts of the Company and that the Directors of the Company cannot be prosecuted for the alleged activity of the Company. He further submitted that the alleged breaches on the part of the petitioners are purely contractual in nature and that there may at best be a case for breach of contract but not a case for Police to investigate. The learned Senior Counsel for the petitioners submitted that prima facie case is not made out against the petitioners in any manner.
10. The learned Senior Counsel for the petitioners contended that the alleged misconduct is by the Companies. He also pointed out that barring for the contention that the petitioners are the Directors of the erring Companies, no allegations are made against the petitioners albeit allegations are made against accused No.1 specifically. A dispute between the two Companies does not constitute an offence and that the conflict may be tantamount to breach of contract. He also referred to Clause 14.6 of the Agreement between PPS and SMFA/Pantime. Clause 14.6 envisages that any dispute regarding the performance tests shall be referred to an independent expert mutually agreed upon by the parties. It may however be noticed that the dispute here is not with reference to the performance test, so much so, Clause 14.6 of the Agreement has no relevance.
The learned Senior Counsel for the petitioners, however, submitted that the agreement not only contains an arbitration clause but also provides other remedies in the event of violation of the terms and conditions of the agreement and that PPS cannot file a criminal complaint for the violation of the terms and conditions. The learned Senior Counsel for the petitioners referred to a series of decisions to establish that there is no vicarious liability for the Directors of the Company for the activity of the Company under the Criminal Law.
11. Sri Ch.Dhanunjaya, learned counsel for the 2nd respondent, on the other hand, submitted that the petitioners are trying to kill an unborn child as they are trying to scuttle the investigation of an FIR at the threshold. He submitted that if the dispute is a civil dispute and that it was a case of breach of contract, the petitioners may produce evidence before the Investigating Officer instead of asking the quashing of the FIR.
12. It may be noticed that when a complaint is at the stage of investigation, it would be appropriate to permit Police to proceed with the investigation.
The interest of the accused, however, could be protected through an order not to arrest the accused during the pendency of the investigation and similar circumstances. However, in the present case, an entire reading of the complaint would show that no overt act whatsoever was attributed against accused 2 to 5. Their complicity was on the ground that they were the Directors of SMFA and Pantime Companies.
13. The learned Senior Counsel for the petitioners submitted that where there were no overt acts against the petitioners, conducting investigation against the petitioners is unjust and improper. He also submitted that where the Companies themselves are not parties to the complaint, proceeding against the Directors of the Companies is illegal, unjust and uncalled for.
14. The reading of the complaint does not reveal any overt acts on the part of the petitioners. Nevertheless, the petitioners may be considered to be guilty as Directors of the Companies if there is an allegation that the petitioners have been actively participating in the management of the Companies. The 2nd respondent himself stated in the complaint that it is accused No.1, who alone has been looking after the affairs of the SMFA and Pantime Companies. Added to it, the complaint was lodged against the Companies. In view of these circumstances, I consider that no case is made out against the petitioners. The FIR is liable to be quashed so far as the petitioners are concerned.
15. Consequently, this criminal petition is allowed. The FIR in Crime No.135 of 2013 on the file of Central Crime Station, Hyderabad against accused 2 to 5 is hereby quashed. The miscellaneous petitions, if any, pending in this petition shall stand closed.
Dr. K.G.SHANKAR, J.
24th July, 2014. Ak HON’BLE Dr. JUSTICE K.G.SHANKAR Criminal Petition No.15544 of 2013 24th July, 2014. (Ak)