SRI.UPENDRAGIRI v. THE STATE INTELLIGENCE DEPARTMENT

and Software and develop the following applications as per Annexure-I

Hardware

Sl. Item Specification Nos.

No.

1 Front end Application Server Xeon based Server 2

2 Back end Database Servers Xeon based Server 1

3 Backup Server Xeon based Server 1

4 Antivirus and Firewall Server Xeon based Server 1

5 Network Switch 1

6 SAN 4 TB 1

7 Router 1

8 Other N/W equipments Software to be procured:

Sl. Item Specification Nos. No.

1 Server OS - Linux Ubuntu 3

2 Database Postgre 2

3 Antivirus Symentic 1

4 Document Mgmt System Alfresco Labs 1 Applications to be developed:

Sl. Item Specification Nos. No.

1 Control Room Automation IIMS - Module I 1

2 Intelligence Document/ IIMS - Module II 1 Information Management

System

3 Intelligence Reporting IIMS - Module III 1 System

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The timeframe for executing the respective components was stipulated under Annexure-II. However, the petitioner herein having failed to develop the software within the prescribed time limit, the respondent-State Intelligence Department terminated the agreement. The bank guarantee was invoked and the EMD paid by the petitioner was also forfeited and thus recovered a sum of Rs.32,70,000/- from the petitioner. Thereafter, respondent filed a complaint before the Ulsoor Gate P.S., alleging that with an intention to cheat the State Intelligence Department, the petitioner herein did not develop the Software. In this regard, the Technical Committee examined the matter on 04.11.2011 and observed in its proceedings that the concerned software has not been developed. As a result, it was decided that concerned contract would be cancelled and security deposit (EMD + performance guarantee + additional bank guarantee) was confiscated. It was further alleged that the petitioner was informed through a letter asking them

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to deposit a sum of Rs.21,80,000/- within fifteen days, failing which criminal case would be initiated against them. Meanwhile, the petitioner closed his business and shifted the company to different location. A complaint was lodged stating that with an intention to cheat and not to be available to the complainant, petitioner has committed an offence under Section 420 IPC.

2. Sri. Vivek S. Reddy, learned Senior Counsel appearing for petitioner would submit that dispute if any, has arisen out of written contract. In terms of the agreement, the parties are governed by the Arbitration Clause. The respondent-complainant have already invoked the bank guarantee and forfeited the EMD. If at all any amount is due for non-performance of the contract, the remedy was to take recourse to civil action rather than to take recourse to criminal action. The allegations made in the complaint do not attract any of the ingredients of an offence under Section 420 IPC, and

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breach of contract does not give raise to any criminal prosecution. Hence, initiation of criminal action against the petitioner is abuse of process of court and liable to be quashed in exercise of powers conferred under Section

482 Cr.P.C.

3. Refuting this submission, Sri. Vijayakumar Majage, learned Additional SPP appearing for the respondent would submit that during enquiry, it was ascertained that the petitioner has changed its nomenclature as M/s. Astro Wix ACOE Global Corporation and shifted its office with an intent to defeat the claim of the respondent arising out of the contract. Moreover, petitioner has failed to develop the software as agreed in the aforesaid agreement. The acts and conduct of the petitioner clearly reveal his dishonest intention and as the matter is under investigation, evidence is required to be collected and therefore, at this stage, the proceedings cannot be quashed.

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4. On considering the submission and on perusal of the records, it is not in dispute that the petitioner and the complainant have entered into a written agreement dated 08.04.2010, whereunder the petitioner has agreed to develop the software as per the requirements of the respondent-State Intelligence Department. For due performance of the said agreement, the petitioner has given Bank Guarantee and has also made deposits (EMD) and extended guarantee. The agreement contains an Arbitration Clause, which reads as under:

9.1 Arbitration If any dispute, difference or question shall at any time arise between the parties as to the implementation/execution of this project or concerning anything herein contained or arising out of this tender, the courts of Bangalore alone shall have jurisdiction. The said Clause does not specifically provide for the arbitration.

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5. A reading of the complaint indicates that the dispute between the parties has arisen on account of non-performance of terms of aforesaid agreement. The averments made in the complaint disclose that the respondent-State Intelligence Department has already invoked the bank guarantee and has forfeited EMD deposited by the petitioner. The grievance of the respondent pertains to non-payment of remaining amount of Rs.21,80,000/- which is evident from the penultimate para of the complaint, wherein it is stated that pursuant to the report of the technical committee, the concerned security deposit (EMD + performance guarantee + additional bank guarantee) was confiscated amounting to Rs.32,70,000/- and M/s. Astrowix India Project Solutions Pvt.Ltd., Noida were informed through a letter asking them to deposit remaining amount of Rs.21,80,000/- within fifteen days, failing which a criminal case would be initiated against them. This makes it evident the real grievance of the respondent was

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recovery of Rs.21,80,000/- and not the act of cheating or fraud by the petitioner. Though in the last para of the complaint it is stated that petitioner herein has closed and shifted the firm to a different location so that he could not be made available to the petitioner, the said allegation does not make out ingredients of an offence under Section 420 IPC. The facts narrated in the complaint do not indicate that that petitioner had any intention of committing fraud either at the time of entering into contract, or any time subsequent thereto. The act of closing down the business premises, or the nomenclature of the business cannot be considered as an act of cheating within the meaning of Section 420 IPC. A mere breach of contract cannot be given a colour of criminal offence. The dispute between the parties is purely civil in nature. Therefore, criminal prosecution initiated against the petitioner in the fact situation of the instant case being abuse of process of court is liable to be quashed.

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6. Accordingly, the petition is allowed. The proceedings initiated against the petitioner in Crime No.415/2012 for the offence punishable under Section

420 IPC, pending on the file of I ACMM Court, Bangalore is hereby quashed.

Sd/-

JUDGE

Np/-

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