Bush Hog LLC vs State

N. Ananda, J.—This petition under section 482 Cr.P.C., is filed by M/s. Bush Hog LLC (a company registered in the State of Alabama, USA), represented by Mr. John J. Sobota, (wrongly mentioned as Mel Cohen in cause title). It is averred in the complaint that petitioner and accused No. 2 are the companies incorporated under the Companies Act in the State of Alabama, USA. Accused 3 to 11 are the officials of accused Nos. 1 and 2 working in the said companies in various capacities. Further, accused 3 to 11 are in-charge and responsible for day-to-day affairs of sales and marketing of above products exported by II-respondent/complainant. The petitioner, accused No. 2 and aforestated officials of companies are arrayed as accused 1 to 15 in C.C. No. 5133/2010, registered for offences punishable under sections 406, 418 and 420 r/w 34 IPC. In the final report, petitioner is arrayed as accused No. 1. M/s. C.C. Industries is arrayed as accused No. 2. The other directors and officials of aforestated company are arrayed as accused 3 to 15 in C.C. No. 5133/2010 registered for offences punishable under sections 406, 418 and 420 r/w 34 IPC. This petition is filed to quash the complaint and final report filed in C.C. No. 5133/2010.

I have heard Sri S.Vijay Shankar, learned senior counsel for petitioner, Sri Murthy Dayananda Naik, learned counsel for II-respondent and Sri Vijayakumar Majage, learned HCGP for I-respondent.

The allegations of complaint/first information and the contents of final report filed by I-respondent, are stated thus:-

"Accused No. 1 is Bush Hog ("A1") and Accused No. 2 is CC Industries ("A2"), which owns A1.

Accused No. 3 ("A3") is President and Managing Director of A1.

Accused No. 4 ("A4") is vice-president of engineer of A1. A-5 is the Project Engineer, A-6 is the Purchase Manger, A-7 is the UTV and Flex Assembly Chief while A-8 is the Purchase Director of A-1 Company.

A-2 is M/s. CC Industries where A-12 is its Chairman, Accused Nos. 9, 13, 14 and 15 are its Vice Presidents, A-10 is its Vice President Finance and A-11 is its Project Manger. A-1 and A-2 belong to Henry Crown''s family and A-12 to A-15 are the family members of Henry Crown''s family.

CW-1, who is mentioned in Column No. 1 is the Managing Director of ANZ Company which is situated at No. 2011, 100 Feet Road, Indiranagar, Bangalore, while CW2 is its Chairman. All the business affairs of the Company is being carried out from this office. The plant factory of ANZ Company is situated at Yedehalli Industrial Area, 1st Block, Stage-1, Bangalore - 561111. The Directors of this Company have passed resolution on March 10, 2009 authorising CW1 to file this complaint.

Since 1998 CW1 and CW2 were supplying ancillary automobile parts to A1 and A2 Company. Later, they contacted CW1 and CW2 requesting them to manufacture various Utility Vehicles used for the purpose of agriculture and supply them and also they had given letter of guarantee to the Canara Bank for the purpose of sanctioning of loan.

As per the directions of Accused, Accused Nos. A-3, A-9, A-12 to A-15. A-4 to A-8 and A-10 and A-11 during 21.10.2006 and 23.04.2007 had visited CW1''s office at Indiranagar, Bangalore and had executed an agreement where all of them had signed the agreement.

In view of the Agreement for the purposes of supplying various agriculture utility vehicles to A1 and A2 Company, CW1 after obtaining permission from Government of India, had secured loans for the year 2011 from Canara Bank, Overseas Branch, situated at MG Road, Bangalore. Further, for the year 2011, they, as per the Agreement, supplied manufactured vehicles and engineering spare parts and laminated tires. The accused, on 05.09.2007 had made CW1 and CW2 to believe that they will not cancel the agreement at any cost. Based on the promise made by the accused on 23.04.2007, CW1 signed strategic accord agreement. For this purpose CW1 and CW2 have invested about 55 crores in the ANZ Company and the balance is borne by Canara Bank, Overseas Branch, MG Road. The accused unilaterally vide letter dated 17.07.2008 have terminated the Agreement of 05.09.2007.

As per the directions of the other accused, from April, 2007 to April 2008, A-3 and A-9 and A-12 to A-15 had visited the factory of CW1 and have made CW1 to make huge investment for the Company''s design and various models of UTV Vehicles. Further, as a part of this conspiracy during May 2008, A-8 had cheated them by stating that they should enter into an agreement to supply for a period of 3 years.

Thereafter, as a part of conspiracy of the Accused, A4 invited CW1 to discuss about the manufacturing of the new generation UTV and other spare parts and also with regard to costing. In this meeting, they forcefully persuaded CW1 to cancel the agreement.

During August, 2008, the accused having given the order for purchase of certain equipment (UTV trans-axel) and pictures and also assuring of a long term business relationship, have cheated. Now, A1 and A2 and its officials and A3 to A15 conspiring with each other, have persuaded CW1, even though they did not have any intention of making any purchases but only to increase the value and the profile of A1 Company.

Thereafter, A2 Company has sold A1 Company for several lakhs of dollars and have not made the payments to CW1 and have cheated them by showing unnecessary expenses and false accounts.

In spite of several requests from CW1, the accused did not enter into any agreement and they called CW1 to visit their Chicago office during December 2008 and there they assured of entering into an agreement. During January 2009, the accused gave a draft agreement and at the very same time A-4 asked CW1 to stop all the supplies.

Thereafter, even though CW1 requested the accused several times, the accused did not arrive at any settlement or settle the matter but on 02.04.2009 invited him for discussion at Eastman and Smith Ltd., Attorneys at Law, 24th Floor, Toledo, Ohio, USA. They did not finalise the issue and asked CW1 to take legal course. Accordingly, CW1 filed a suit for damages for US$180 Million in the Courts of Alabama.

With an intention to destroy the CW1''s Company at any cost, entering into a criminal conspiracy, the accused have abruptly terminated the agreement and have cheated and caused losses to the Company. CW1 had entered into agreements with the accused for the supply of UTV Vehicles from India till 2011. As per the agreement, CW1 investing crores of rupees had made all the prior preparations to supply 10,000 vehicles and spare parts every year for which purpose had procured raw materials to its factory. When this being the fact the accused, right from the beginning acted as though they are cordial with CW1 and by way of abruptly canceling the agreement on 17.07.2008 have committed breach of trust.

Though the accused as per the agreement were required to safeguard the interest of complainant''s company and were aware that if they abruptly terminate the agreement, it will cause harm and loss to the complainant, illegally the accused have terminated the agreement and have cheated.

ANZ company as per the agreement had entered into with the accused had made arrangements to supply 1776 vehicles to the accused company out of which they supplied 1056 vehicles to A1 and A2 company while the spare parts of the 720 vehicles which were manufactured remained in CW1''s factory. A1 and A2 have not made the balance payment in respect of 456 vehicles that they have supplied and also that of the spare parts of the vehicles that in the factory of CW1, engineering spare parts, laminated tires totaling to 50.82 Crores and without paying the same they have unilaterally cancelled the agreement and the accused in order to enrich themselves unlawfully have cheated CW1 and CW2.

The accused without making payment of 50.82 Crores to the CW1 Company toward the supply of vehicles, spare parts, engineering spare parts and UTV Vehicles and with the dishonest intention of making unlawful gains, they have informed CW1 that they have terminated the agreement. Even though CW1 had communicated requesting for the payments and even though CW15 had issued police notice to accused on 16.07.2009 and 22.08.2009, with an intention to cheat, the accused have not considered the same. Thus, proving that the accused with an intention to cheat have entered into conspiracy causing unlawful losses. Hence, the Chargesheet."

During the year 2006 (the relevant period), petitioner was engaged in manufacture and distribution of farm equipments, which has its Corporate Office at Alabama in USA. The complainant/II-respondent viz ANZ International Manufacturing Private Limited, is a manufacturing industry of utility vehicles and spare parts, since 1998. The petitioner is one of the customers of II-respondent. The petitioner through its authorised signatories and II-respondent, through its authorised signatories entered into various agreements for sale and purchase of utility vehicles and spare parts for the period between 1998 and 2006. On 21.10.2006, petitioner, represented by one of its directors and II-respondent represented by its Director entered into an agreement. A second agreement was entered into between parties on 23.04.2007. The agreement dated 23.04.207 pertains to supply of utility vehicles and spare parts by the II-respondent to petitioner. The clauses relevant for the present case are clauses 13.0, 13.1.2, 13.1.2, 13.1.3, 13.1.4, 14.2 and 14.5.

Clause 13.1.2 reads thus:-

"13.1.2 Other than for Cause: Should either party wish to terminate this Agreement (in its entirety or as to any Product model) at any time, it shall have the option of doing so on 180 days notice to the other party. Such a termination shall be a "Non-Cause Termination." 5. The petitioner invoking clause 13.1.2, terminated the agreement dated 23.04.2007 in terms of notice dated 17.07.2008, notwithstanding issuance of notice, petitioner continued to fulfill its business obligations till 25.02.2009.

As per the computerised statement of accounts maintained and furnished by II-respondent, petitioner had purchased utility vehicles and spare parts manufactured and supplied by II-respondent during period between 06.08.2007 and 29.11.2008.

It is alleged by II-respondent that petitioner discontinued business activities and did not pay the price of utility vehicles and spare parts supplied by II-respondent to the petitioner during the period between 29.11.2008 and 12.01.2009. As per the computerised statement of accounts, as on 12.01.2009, petitioner was due in $ 41,90,694/- (Dollars Forty One Lakhs Ninety Thousand Six Hundred and Ninety Four only) to II-respondent. The II-respondent on the assurances given by petitioner and letters submitted by petitioner to the banker of II-respondent namely Canara Bank, Overseas Branch at Bangalore, had set up an industry to manufacture and supply utility vehicles and spare parts to petitioner. Thus the petitioner had assured II-respondent to continue business transactions with II-respondent till the year 2010. The II-respondent on such inducement had set up a plant and installed machineries to supply utility vehicles and spare parts to petitioner. The petitioner by unilateral termination of agreement in terms of notice dated 17.07.2008, by withdrawing from its assurances given to banker of II-respondent on 05.09.2007 has cheated the II-respondent. The petitioner committed breach of trust by not adhering to the terms of agreement and discontinued business with II-respondent, with a view to destroy the industry of II-respondent and cause loss to II-respondent.

At the first instance, II-respondent filed a complaint under section 200 Cr.P.C., making these allegations, which was referred to jurisdictional Police (Jeevanbhimanagar Police Station) under section 156(3) Cr.P.C. The Investigating Officer after recording the statements of Directors of II-respondent company and after collecting various documents from II-respondent, filed final report against petitioner and its directors for offences punishable under sections 406, 418 and 420 r/w 34 IPC.

In the final report, there is reference to civil action (No.09-00228-KD-N) initiated by II-respondent against petitioner in the United States District Court for the Southern District of Alabama Division.

The petitioner entered appearance. Upon motion made by petitioner, the court directed II-respondent to submit certain documents and information in the form of electronically stored information (ESI). The II-respondent failed to comply with orders passed by the court.

On 03.03.2011, in Civil Action No. 09-00228-KD-N, the United States District Court for the Southern District of Alabama Division, made the following order:-

"After due and proper consideration of all portions of this file deemed relevant to the issue raised, and there having been no objections filed, the Report and Recommendation of the Magistrate Judge, made under 28 U.S.C. and 636(b)(1)(B), that the claims asserted in this case by both ANZ International and ANZ USA be dismissed with prejudice pursuant to Fed. R. Civ. P. 37(b)(2)(A), is ADOPTED as the opinion of this Court with the following addition to the conclusion:

It is further ORDERED that the counterclaim filed by defendants shall remain pending before this Court.

DONE this 3rd day of March, 2011."

Incidentally, it is necessary to state that as per copy of complaint, civil action No. 09-00228-KD-N was initiated under the following counts:-

"I. Intentional and/or reckless mis-representation

II. Innocent mis-representation

III. Wilful and wanton misrepresentation

IV. Deceit

V. Suppression

VI. Negligence and wantoness

VII. Breach of Contract

VIII. Piercing the Corporate Veil

IX. Vicarious Liability or respondent superior

X. Monies due and owing

XI. Monies due and owing

XII. Civil Conspiracy

XIII. Unjust enrichment

XIV. Quantum meruit."

The above narrated facts are extracted from the contents of final report and also from the judicial records which are not disputed by either parties.

Sri S.Vijay Shankar, learned senior counsel for petitioner has made the following submissions:-

"I. The contents of complaint/first information and final report accepted on their face value do not constitute offences punishable under sections 406, 418 and 420 r/w 34 IPC.

II. The II-respondent having lost hopes and having failed in civil action, deliberately set criminal law into motion by filing complaint and got complaint referred to Jeevanbhimanagar Police. The I-respondent after recording statement of directors of II-respondent and collecting copies of certain documents filed by II-respondent, filed final report, alleging petitioner and its directors have committed aforestated offences.

III. From the facts and circumstances of the case and as per the contents of investigation report, even if it is assumed that petitioner and its directors have committed offences, none of the offences was committed within the jurisdiction of Jeevanbhimanagar Police Station or within the jurisdiction of court below.

IV. The II-respondent has made deliberate attempts to convert civil action into criminal action.

V. In terms of clause 14.2 of agreement dated 23.04.2007 entered into between parties, all the disputes arising between parties, consequent to breach of agreement dated 23.04.2007 shall be litigated in the State and Federal Courts located in the State of Alabama, USA. The II-respondent treating the termination of agreement and alleged breach of contract as a civil transaction had initiated Civil Action No. 09-00228-KD-N in the United States District Court for the Southern District of Alabama Division.

VI. The II-respondent by filing a complaint under section 200 Cr.P.C., before the court below has deliberately invoked the jurisdiction of court below in anticipation of seeking a reference of complaint for investigation to I-respondent police, who in all probability, had assured to file a final report against petitioner and its directors.

VII. The continuation of proceedings before the court below is an abuse of process of law.

VIII. The II-respondent has set criminal law into motion as a arm twisting method."

Sri Murthy Dayanand Naik, learned counsel for II-respondent has made following submissions:-

"I. The II-respondent having trusted petitioner, acted upon documents, in particular, letter addressed by petitioner to Canara Bank, Overseas Branch at Bangalore and II-respondent from time to time has set up manufacturing unit to manufacture utility vehicles and spare parts to meet the requirements of petitioner.

II. The petitioner with dishonest intention has unilaterally terminated the agreement entered into between parties by invoking clause 13.1.2 of the agreement.

III. The petitioner having received utility vehicles and spare parts during period between 29.11.2008 and 12.01.2009 has failed to pay price of utility vehicles and spare parts. The petitioner was due in a sum of $ 41,96,941/- as on 12.01.2009.

IV. This court while exercising its jurisdiction under section 482 Cr.P.C., cannot go into merits of the case. This court has limited jurisdiction. This court cannot resolve disputed facts.

V. An action may give raise to civil action and also criminal action, merely because II-respondent had initiated civil action and failed in civil action. The II-respondent is not precluded from initiating criminal action against petitioner and its directors for the aforestated offences committed by them."

This court while exercising its jurisdiction under section 482 Cr.P.C., has to accept the averments of complaint and final report on their face value as also documents annexed to final report.

In the discussion made supra, I have extracted the facts as narrated in the complaint and final report and I have also accepted the documents annexed to final report on their face value.

It is the contention of II-respondent that petitioner has committed criminal breach of trust by unilateral termination of agreement dated 23.04.2007 by invoking clause 13.1.2.

At this stage, it is relevant to refer to Section 405 IPC, which reads thus:-

"405. Criminal breach of Trust:-

whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits "criminal breach of trust"."

In the case on hand, parties had entered into aforestated agreements. In furtherance of aforestated agreements, petitioner had purchased utility vehicles and spare parts from II-respondent during period between 06.08.2007 and 29.11.2008. It is not a case where petitioner had committed breach of agreement at the inception of agreement or induced II-respondent to deliver property. On the other hand, petitioner had deposited $ 2 millions with II-respondent. The II-respondent from time to time had supplied utility vehicles and spare parts to petitioner. After termination of agreement in terms of notice dated 17.07.2008, petitioner had honoured business commitment till a period of 180 days from the date of termination notice in order to fulfill the terms of clause 13.1.2 of agreement dated 23.04.2007. Therefore, it is not possible to hold that petitioner had committed criminal breach of trust, much less breach of trust.

The II-respondent had shown several supplies to petitioner in the computerised statement of accounts filed by II-respondent. The II-respondent has not furnished documents to substantiate that II-respondent had consigned utility vehicles and spare parts during period between 29.11.2008 and 12.01.2009. The Civil Action No. 09-00228-KD-N, initiated by II-respondent against petitioner to recover the amount allegedly due in relation to aforestated consignments was dismissed by the United States District Court for the Southern District of Alabama Division. When II-respondent has failed to establish civil liability, it is hardly possible to fasten criminal liability as the allegations narrated and reliefs sought for in Civil Action No. 09-00228-KD-N, initiated before the United States District Court for the Southern District of Alabama Division, as also the facts narrated in the complaint and the final report are identical.

The learned counsel for II-respondent would submit that final report was filed on 03.02.2010 and Civil Action No. 09-00228-KD-N filed by II-respondent against petitioner in the United States District Court for the Southern District of Alabama Division was dismissed on 03.03.2011. Therefore, the prosecution in terms of final report has to continue, notwithstanding the dismissal of civil action initiated by II-respondent against petitioner, which I am not persuaded to accept for the following reasons:-

"It is seen from the contents of final report and the documents relied upon by II-respondent that II-respondent had deliberately converted civil action into criminal action. The facts and the documents relied upon by II-respondent in Civil Action No. 09-00228-KD-N before the United States District Court for the Southern District of Alabama Division and the facts narrated in the complaint and final report are decisive on this point. The termination of Civil Action No. 09-00228-KD-N during pendency of investigation cannot be a ground to continue prosecution when petitioner has established that II-respondent had converted civil action into criminal action with the assistance of I-respondent (Investigating Agency)." 18. The II-respondent has contended that petitioner has committed criminal breach of trust by unilateral termination of agreement. It has also contended that petitioner has cheated II-respondent and induced II-respondent to deliver property to petitioner with dishonest intention of deceiving II-respondent.

In the discussion made supra, I have referred to the agreements entered into between parties and business transactions between the parties during period between 29.11.2008 and 12.01.2009.

Sri S.Vijay Shankar, learned senior counsel for petitioner has referred to illustration (g) of section 415 IPC to contend that in the absence of dishonest intention at the inception of contract, a person cannot be held to have committed an offence under section 420 IPC. On the other hand, such a person is liable to civil action for breach of contract.

Illustration (g) of section 415 reads thus:-

"(g) A intentionally deceives Z into a belief that A means to deliver to Z a certain quantity of indigo plant which he does not intend to deliver, and thereby dishonestly induces Z to advance money upon the faith of such delivery. A cheats; but if A, at the time of obtaining the money, intends to deliver the indigo plant, and afterwards breaks his contract and does not deliver it, he does not cheat, but is liable only to a civil action for breach of contract." The essential ingredients of section 420 IPC are:-(i) cheating, (ii) dishonest inducement to deliver property or to make, alter or destroy any valuable security or anything which is sealed or signed or is capable of being converted into a valuable security, and (iii) mens rea of accused at the time of making the inducement.

In the case on hand, the entire averments of complaint, final report and the documents annexed to final report accepted on their face value do not reveal that there was dishonest intention on the part of II-respondent at the inception of agreement. The statement of accounts relied upon by II-respondent would reveal that total amount of sale price paid by petitioner to II-respondent during aforestated period towards price of utility vehicles and spare parts purchased by petitioner from II-respondent was $ 1,58,75,855 (Dollars One Crore Fifty Eight Lakhs Seventy Five Thousand Eight Hundred and Fifty Five only). According to II-respondent, petitioner was due to II-respondent in $ 41,96,941/- (Dollars Forty One Lakhs Ninety Six Thousand Nine Hundred and Forty One only) as on 12.01.2009. The final report and the documents annexed to final report do not indicate that II-respondent had sold (consigned) utility vehicles and spare parts to petitioner during period between 29.11.2008 and 12.01.2009. Civil Action No. 09-00228-KD-N initiated by II-respondent against petitioner for recovery of aforestated sum was dismissed by the United States District Court for the Southern District of Alabama Division on 03.03.2011. Therefore, it is hardly possible to hold that petitioner had dishonestly induced II-respondent to deliver property and failed to repay the amount or return property. The facts narrated in the final report and documents annexed thereto accepted on their face value do not reveal mens rea on the part of petitioner.

In a decision reported in Binod Kumar Vs. State of Bihar, , the Supreme Court has held that a person cannot be permitted to convert a civil litigation into a criminal litigation to abuse process of court. Before issuing process, a criminal court has to exercise a great deal of caution. This court has to exercise its jurisdiction under section 482 Cr.P.C., to prevent abuse of process of court or otherwise to secure the ends of justice.

In the discussion made supra, I have assigned reasons with reference to facts to arrive at a conclusion that II-respondent has converted a civil liability into a criminal liability. The II-respondent has failed in civil action to recover damages or unpaid sale price from II-respondent in the United States District Court for the Southern District of Alabama Division. The facts narrated in the complaint and the final report and the facts narrated in civil action and the documents relied upon by II-respondent are one and the same. The jurisdictional police officer, (Police Officer of Jeevanbhimanagar Police Station) by recording the statements of some of the directors of II-respondent and collecting the copies of documents from II-respondent has filed final report to make it appear that petitioner and its directors have committed offences punishable under sections 406, 418 and 420 r/w 34 IPC.

The Investigating Officer and the learned trial Judge have not shown their awareness to the provisions of Chapter VII-A of Cr.P.C. The learned trial Judge without noticing that the directors of petitioner viz accused 3 to 15 are the citizens of USA and residing in various cities of USA has issued non-bailable warrants to accused No. 1 to 15 as if they are absconders. This would also betray lack of application of mind by the learned trial Judge.

In view of the above discussion, I hold that continuation of proceedings before court below would be abuse of process of court and the impugned proceedings cannot be sustained.

The learned counsel for II-respondent/complainant would submit that accused 2 to 15 have not challenged the impugned proceedings, therefore, proceedings against them cannot be quashed.

In the final report, petitioner is shown as accused No. 1. M/s. C.C. Industries is shown as accused No. 2. The officials and directors of aforestated companies are shown as accused 3 to 15. When the proceedings are liable to be quashed against companies, proceedings cannot be allowed to continue against its directors.

In the result, I pass the following:-

ORDER

"The petition is accepted. The Proceedings in C.C. No. 5133/2010, registered for offences punishable under sections 406, 418 and 420 r/w 34 IPC against petitioner (accused No. 1) and accused No. 2 to 15, on the file of IV ACMM at Bangalore are quashed."