IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF APRIL, 2019 BEFORE THE HON’BLE MR. JUSTICE P.S. DINESH KUMAR CRIMINAL PETITION No.7243 OF 2014 BETWEEN:
1. M/S. THRUPTHI MARKETING REP. BY ITS PROPRIETOR MRS. PADMA 2. TRUPTHI FORZEN FOODS REP. BY ITS PARTNER SRI.M.P.V. PRASAD RAO 3. M.P.V. PRASAD RAO S/O M.NARAYANA CHETTY AGED ABOUT 52 YEARS 4. MRS. PADMA W/O M.P.V. PRASAD RAO AGED ABOUT 45 YEARS, PETITIONERS NO.1 TO 4 ALL ARE HAVING THE ADDRESS AT THRUPATHI BAKERY MUNICIPAL STALL NO.6 KK STREET, PRODATTUR KADAPPA DISTRICT ANDHRA PRADESH-516 632 … PETITIONERS (BY SHRI. S.G. MUNISWAMY GOWDA, ADVOCATE) AND:
1. STATE OF KARNATAKA BY INDIRANAGAR POLICE BANGALORE-560 038 2. M/S.JOY ICE CREAMS (BANGALORE) PVT. LTD., HAVING ITS REGISTERED OFFICE AT MAIN ROAD, WHITEFIELD BANGALORE-560 066 HAVING ADMINISTRATION OFFICE AT NO.3156, 12TH MAIN INDIRANAGAR BANGALORE-560 038 REPRESENTED BY THE COMPANY’S GENERAL MANAGER ... RESPONDENTS (BY SHRI. NASRULLA KHAN, HCGP FOR R1;
SHRI. JACOB ALEXANDER, ADVOCATE FOR R2) THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF CR.P.C., PRAYING TO QUASH THE ENTIRE PROCEEDINGS IN C.C.NO.52255/2014 ON THE FILE OF THE X-ACMM COURT, AT BANGALORE.
THIS CRIMINAL PETITION COMING ON FOR FINAL HEARING THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER Heard Shri S.G. Muniswamy Gowda, learned advocate for the petitioners, Shri Nasrulla Khan, learned HCGP for the State and Shri Jacob Alexander, learned advocate for respondent No.2.
2. M/s.Joy Ice Creams Pvt. Ltd., Bengaluru, (Respondent No.2-Complainant) entered into an agreement with M/s. Thrupthi Marketing (First Petitioner) to supply the details of specifications of the Plant and Machinery and to train the technical staffs working with petitioner No.1. In consideration, petitioners paid a sum of Rs.2,00,000/- towards technical know-how fees. Petitioners had agreed to pay a royalty on Total Net Sale Consideration manufactured by them and sold them in the territories of Chittoor, Cuddapaha, Nellorre, Ananthapur, Vijaywada, Kurnool, Guntur and various other places. Complainant agreed to receive royalty at 2%. On August 28, 2007, complainant terminated the agreement with an immediate effect and called upon the petitioners to provide the Balance Sheets for the Financial Years of 2003-04 to 2006-07 and also stated that the petitioners shall be liable to pay difference in royalty with 18% interest along with the current dues.
3. On February 25, 2011, complainant filed a private complaint registered as PCR No.26/2011 before X ACMM, Bengaluru. Learned Magistrate referred the case for investigation under Section 156(3) of Cr.P.C. After investigation, police filed ‘B’ Report. Complainant filed a protest petition. After recording sworn statement, learned Magistrate took cognizance of offence under Section 420 of IPC and issued process by his order dated September 28, 2013. Feeling aggrieved, petitioners have filed this petition with a prayer to quash the proceedings against them in C.C.No.52255/2014 before the learned Magistrate.
4. Learned advocate for the petitioners contended that the entire case is purely civil in nature. Complainant has entered into an agreement with the petitioners to identify the machinery and to train its technical staffs. Complainant is entitled for payment of royalty. Complainant terminated the agreement in the year 2007. Petitioners have paid the royalty on the entire sales made by them. Learned advocate for the petitioners, referring to the complaint, submitted that it is specifically averred in Paragraph No.7 of the complaint that petitioners have breached the obligations under the Agreement and continued to make profit by manufacturing and selling Ice cream.
5. He further submitted that complainant has filed arbitration proceedings in A.A.No.777/2012 before the City Civil Court, Bengaluru, invoking Section 11 of Arbitration and Conciliation Act, 1996, seeking an order of injunction against the petitioners. In substance, he argued that the complainant has attempted to give the colour of a ‘criminal act’ to an alleged act of breach of contract entered into between the parties. Accordingly, he prays for allowing this petition.
6. Learned advocate for the complainant, adverting to the decision of the Hon’ble Supreme Court of India in Sau. Kamal Shivaji Pokarnekar Vs. The State of Maharashtra & Others1, submitted that the criminal complaint cannot be quashed on the ground that the allegations are civil in nature.
7. I have carefully considered the rival contentions and perused the records.
8. Relevant portion of the Agreement dated June 16, 2003, reads as follows:
“8. DISPUTES Any controversy, claim or dispute arising out of or in relation to this agreement, or any breach or alleged breach thereof, shall be settled finally by arbitration in accordance with the provisions of the arbitration and conciliation act, 1996 as may be amended from time to time. The arbitral tribunal shall consist of three arbitrators, one nominated jointly by the first 1 CRL.A.NO.255/2019 decided on February 12, 2019 party and third party, one nominated by the second party, and the two arbitrators so appointed shall then jointly nominate the third arbitrator, who shall be the chairman of the arbitral panel. The decision of the arbitrators so appointed shall be final and binding upon the parties. The law governing the arbitration proceedings shall be Indian law and the proceedings shall be held at Bangalore and conducted in English language.”
9. In the year 2007, complainant has terminated the agreement with an immediate effect and conveyed that the petitioners shall be responsible for paying the royalty with interest. Thereafter, criminal complaint has been filed. Relevant portion of the averments made in the criminal complaint reads as follows:
“7) The complainant states that relating to the agreement for the manufacture of ice cream mix also required the accused to ensure that the emulsifier and stabilizer which are required for the manufacture of the ice cream mix was to be purchased solely from the complainant. As the accused are aware this was so required to ensure that the ice cream so manufactured complied with the standards maintained by the complainant. However while accused are manufacturing and selling ice cream under the brand name “JOY ICE CREAMS” the accused have failed to purchase the said emulsifier and stabilizer from complainant is breach of accused obligations under the said agreement.
8) The complainant states that it is apparent that the accused have breached their obligations under the aforementioned agreements while accused have continued to profit from the manufacture and sale of ice creams under the brand “JOY ICE CREAMS” in fact it is also apparent from the very begining the accused had no intentions adhering to the said contract and that accused only intention was to dishonestly induce complainant to part with the proprietary information so as to cause wrongful loss to the complainant unlawful benefits to accused by breach of trust and by way of cheating.”
(Emphasis supplied) 10. In addition, complainant has also initiated proceedings under the Arbitration and Conciliation Act, 1996. In the authority relied upon by the learned advocate for the complainant (Sau. Kamal Shivaji Pokarnekar), allegation against the respondents therein was that they had created false documents and thus accused of forgery. Accordingly, prosecution was initiated under various provisions of IPC and the case was referred for investigation under Section 156(3) of Cr.P.C. Trial court had issued process. On a petition filed by the accused therein, the High Court set-aside the order of issuing process. Having examined the material on record, Hon’ble Supreme Court set-aside the order passed by the High Court. Thus, decision relied upon by the learned advocate for complainant is based on the facts of that case.
11. In contradistinction, there is no dispute with regard to the genuineness of the documents in this case. Specific case of complainant is that the parties have entered into a valid contract. Complainant has exercised its option to terminate the contract. Having terminated the contract in the year 2007, the complainant has filed the instant private complaint in the year 2011, after a lapse of four years.
12. Having carefully considered the material on record and the submissions of the learned advocates for the parties, in my considered view, this case is of breach of contract, which is sought to be given a colour of commission of offence punishable under Section 420 of IPC. Therefore, continuance of criminal proceedings against the petitioners amounts to abuse of process of law. Resultantly, this petition merits consideration and it is accordingly allowed. All proceedings in C.C.No.52255/2014 pending on the file of X ACMM, Bengaluru, are quashed.
No costs.
Sd/- JUDGE AV