Full Judgment
-1-
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 11TH DAY OF JULY, 2025 BEFORE THE HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR CRIMINAL PETITION NO. 4785 OF 2024 BETWEEN: MS. RAKSHHA, AGED ABOUT 27 YEARS, DAUGHTER OF SRI. LALCHAND DAFTARI, PERMANENT RESIDENT OF NO. 25, MOSIKEERNAR STREET, ERODE, TAMIL NADU - 638 003. …PETITIONER (BY SRI. VENKATESH S. ARBATTI, ADVOCATE) AND:
1. THE STATE OF KARNATAKA REPRESENTED BY THE STATION HOUSE OFFICER, Digitally SUBRAMANYA NAGAR POLICE STATION, signed by
CHANDANA BANGALORE, REPRESENTED BY SPP, BM HIGH COURT BUILDING, Location: BENGALURU - 560 001.High Court of Karnataka 2. KUMUDA KUMAR PATI, AGED ABOUT 37 YEARS, BRIGADE ENTERPRISES LTD., ITS SENIOR MANAGER - SECURITY AND LIAISON, WTC 29TH FLOOR, BRIGADE G, MALLESHWARAM, BENGALURU CITY , KARNATAKA - 560 055. …RESPONDENTS -2- (BY SRI. B.N. JAGADEESHA, ADDL. SPP FOR R1; SRI. HARSH GUPTA, ADVOCATE FOR SRI. P. CHINNAPPA, ADVOCATE FOR R2) THIS CRL.P IS FILED U/S.482 OF CR.P.C PRAYING TO QUASH
THE COMPLAINT DATED 14.05.2024 (ANNEXURE A) AND QUASH THE FIR IN CR.NO.109/2024 DATED 14.05.2024 FOR THE OFFENCE P/US/ 66, 66-C OF INFORMATION TECHNOLOGY ACT 2000 AND U/S.420 OF IPC 1860 AGAINST THE PETITIONER/ACCUSED WHICH IS PENDING ON THE FILE OF THE LEARNED 32nd ACMM COURT, NRUPATUNGA ROAD, BENGALURU CITY (ANNEXURE B).
THIS PETITION, COMING ON FOR ORDERS, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR
ORAL ORDER
In this petition, petitioner seeks for the following reliefs:-
“ a) Quash the Complaint dated: 14.05.2024 (Annexure- ‘A’), and quash the FIR in Crime No.109/2024 dated: 14.05.2024 for the offences punishable Under Section 66 and 66(C) of the Information Technology Act, 2000 and under Section 420 of the Indian Penal Code, 1860, against he Petitioner/Accused which is pending on the file of the Learned 32nd Additional CMM Court, Nrupatunga Road, Bangalore City (Annexure ‘B’) and b) Grant such other and further reliefs including the costs of this petition which are just and necessary in the circumstances of the case in the interest of justice and equity.” -3-
2. Heard learned counsel for the petitioner and learned Addl.SPP for 1st respondent as well as learned counsel for 2nd respondent and perused the material on record.
3. A perusal of the material on record will indicate that the
petitioner was employed as Deputy Manager (Legal) in M/s.Brigade Enterprises Ltd., upto May, 2024. The 2nd respondent who is the Senior Manager - Security & Liason of M/s.Brigade Enterprises filed the impugned complaint against the petitioner dated 14.05.2024, which was registered as an FIR in Crime No.109/2024 against the petitioner - sole accused for alleged offences punishable under Section 66, 66-C of Information Technology Act, 2000 (for short ‘the said Act of 2000’) and Section 420 of IPC. Aggrieved by the impugned complaint and FIR, the petitioner is before this Court by way of the present petition. It is a matter of record and an undisputed fact that the personal laptop of the petitioner was seized by the 1st respondent - police authorities for the purpose of investigation, pursuant to the impugned complaint / FIR and the petitioner has sought for returns / release of the said laptop back to her. -4-
4. Before adverting to the rival contentions, it would be necessary to extract the impugned complaint, which is as under:- “ To, The Police Inspector Subramanyanagar Police Station Rajajinagar Bengaluru - 560 010.
Sub: Police complaint against Ms. Rakashha for indulging in Date theft, unauthorised transmitting and possessing company related sensitive information & documents pertaining to various projects to the personal G Mail account and Google Drive. Ref: We have filed a Police Complaint and registered NCR Vide No.63/2024 Dtd: 08.05.2024 Respected Sir,
I, Kumuda Kumar Patil, Senior Manager - Security & Liaison, Brigade Enterprises limited (Brigade), having its registered office at 29th Floor, World Trade Center, Brigade Gateway Campus, 26/1, Malleshwaram- Rajajinagar, Bangalore - 560 055, wish to inform that Ms. Rakshha, having employee No.2566, is working with us since February 2021 in various capacity Presently she is designated as Deputy Manager - Legal. I am writing to file a formal complaint regarding a case of date theft involving one of our employees, Rakshha, who has been working as the Deputy Manager Legal with Brigade Group for the past three years. Recently, it has come to out attention that Ms.Rakshha ahs committed a major breach of trust and confidentiality by illegally downloading and storing sensitive data related to several land dealing and other -5-
litigation maters. Upon questioning, Ms. Rakshha admitted to the unauthorized downloading and storage of company data on her personal electronic devices, which is in clear violation of both the company’s IT and employment policies as well attract various section of IPC and IT Act. We have found that Ms. Rakshha is indulged in transmitting official data to her personal email account and Google drive, being [email protected] in violation of Information Security Policy and Employment Contract of the Company. Ms. Rakshha when confronted, accepted the same and submitted an apology letter dated: 07.05.2024. official date so transmitted include substantial number of sensitive documents, including but not limited to land documents, sale deeds, approval documents, landowner agreement, litigation documents, mother deeds, and bank/ loan related documents of the Company. Given the high value and Sensitivity of the projects associated with these documents, we request your assistance in investing this matter thoroughly. We wish to bring to your kind notice that on internal verification by out IT team in the presence of M.s Rakshha, found over many compressed folders embedded with several files in each folder, in one of her personal laptop and few more such documents in her another personal laptop and pen drive. The data transferred by her is of high commercial and sensitive value to the Company and its promoters group. It is imperative to determine if there are any external parties, such as competitors, land sharks, litigants, or any -6-
other individuals involved in clandestinely obtaining the information through Ms.Rakshha. In view of the aforesaid, we humbly request you to investigate and initiate appropriate action against Ms. Rakshha, having mobile No.8695774810.”
5. The petitioner is alleged to have committed offences punishable under Sections 66 and 66-C of the Information Technology Act, 2000, which are as hereunder:-
“ 66. Computer related offences.-If any person, dishonestly or fraudulently, does any act referred to in section 43, he shall be punishable with imprisonment for a term which may extend to three years or with fine which may extend to five lakh rupees or with both Explanation.-For the purposes of this section,-
(a) the word ―dishonestlyǁ shall have the meaning assigned to it in section 24 of the Indian Penal Code (45 of 1860);
(b) the word ―fraudulentlyǁ shall have the meaning
assigned to it in section 25 of the Indian Penal Code (45 of 1860). 66C. Punishment for identity theft.-Whoever, fraudulently or dishonestly make use of the electronic signature, password or any other unique identification feature of any other person, shall be punished with imprisonment of either description for a term which may extend to three years and shall also be liable to fine which may extend to rupees one lakh.” -7-
6. If the impugned complaint is examined in the light of the
aforesaid provisions, it become clear that necessary ingredients constituting the aforesaid offences are conspicuously absent and missing from the impugned complaint, in particular, no material to indicate that the petitioner was guilty of dishonestly, fraudulently doing any act referred to Section 43 of the said Act of of 2000. Under identical circumstances, in the case of Rahul Pandya vs. State of Karnataka - Crl.P.No.6709/2024 dated 22.01.2025, this Court held as under:-
“ The petitioner/accused is knocking at the doors of this Court in the subject petition calling in question registration of a crime in Crime No.1145 of 2020 for offences punishable under Sections 419 and 420 of the IPC and Sections 66C, 66D and 72A of the Information Technology Act, 2000 (‘the Act’ for short).
2. Heard Sri C.S.Ravi, learned counsel appearing for
the petitioner, Sri B.N. Jagadeesha, learned Additional State Public Prosecutor appearing for respondent No.1 and Sri K. Raghavendra, learned counsel appearing for respondent No.2.
3. Facts, in brief, germane are as follows:-
The 2nd respondent/Samsung R & D Institute India- Bangalore Private Limited (‘the Company’ for short) is the complainant. The petitioner on completion of his Master’s -8-
in Engineering from Indian Institute of Technology, Kharagpur and securing first rank accepts offer of employment offered by the 2nd respondent/Company after an interview. He joins the Company as an Associate Director in the Commercial Modem Software Development Team. The petitioner works for about a year and on 27-04- 2020 tendered his resignation. After his resignation he sent documents from his official email id for reviewing his assigned responsibilities as an employee. When no response was received even on the last date of the notice period on 29-05-2020, he leaves the Company. After exit of the petitioner from the Company comes the impugned crime registered on 24-09-2020 which becomes a crime in Crime No.1145 of 2020 for the afore-quoted offences. The police conduct investigation and file a ‘B’ report before the concerned Court. The complainant files a protest petition. The ‘B’ report is rejected and cognizance is taken for the afore-quoted offences. Taking of cognizance on rejection of ‘B’ report is what has driven the petitioner to this Court in the subject petition.
4. The learned counsel appearing for the petitioner
would vehemently contend that the petitioner in the capacity of him being the Associate Director and in terms of employment agreement had access to confidentiality or confidential information. He is now alleged that he has sent confidential organizational information via 24 emails to his personal id in violation of the security policy of the complainant and the petitioner admits that he has sent all those mails. He voluntarily surrenders his laptop, and -9-
mobile phone prior to his last date of working in terms of the notice period. The learned counsel submits that the petitioner has never indulged in data thieving as is alleged and the issue which is purely a commercial dispute between the parties is sought to be dressed with a colour of crime. Therefore, the Police had rightly filed a ‘B’ report, as the issue being a dispute with regard to employment and the Court has erroneously taken cognizance of the offence. He would seek quashment of entire proceedings pending before the concerned Court.
5. Per-contra, the learned counsel appearing for the
2nd respondent/Company would contend that the Police did not conduct a proper investigation. On a shoddy investigation, they filed a ‘B’ report. The Court has rightly rejected the ‘B’ report on filing of protest petition and taken cognizance of the offence. The civil suit is instituted by the complainant to restrain the petitioner/accused from divulging any confidential information. Injunction is granted against the petitioner/accused. The petitioner also filed a counter claim which is rejected by the concerned Court. He would submit that in a given case both civil and criminal law can go hand in hand. He seeks dismissal of the petition.
6. I have given my anxious consideration to the submissions made by the respective learned counsel and have perused the material on record.
7. The afore-narrated facts are not in dispute. The employment of the petitioner with the 2nd - 10 -
respondent/Company is a matter of record. An employment agreement is entered into between the two and conditions of employment that are necessary to be noticed read as follows: “…… ….. …..
(2) STANDARD CONDITIONS OF EMPLOYMENT
(a) In addition to the terms of this Agreement, You
shall be subject to the standard terms of employment of the Company as stated in the Employee Handbook and any other policies or procedures communicated to You by the Company either orally or in writing (“Standard Employment Terms”). The Standard Employment Terms will be communicated to you from time to time or be accessible by you on the Company’s Intranet.
(b) The Standard Employment Terms will relate to
various matters relating to your working with the Company, including hours of work, holidays, leave, code of conduct, confidentiality policy, dress code, etc. (c ) The Standard Employment Terms are deemed to include other policies of the Company that may be created including the policy for prevention of harassment at the workplace, internet and network use policy, intellectual property policy, etc. The Standard Employment Terms may be changed by the Company from time to time at the sole discretion of the Company and such changed Standard Conditions of Employment shall become applicable to You forthwith, upon receipt of notice of the same. It is clarified that uploading of updated Standard Employment Terms in the Company’s intranet is deemed as notice of such changed Standard Conditions of Employment.” - 11 -
The petitioner, after a year, tenders his resignation and after the resignation at the end of notice period on communicates the following mail: “Rahul Bhasker
5. During the internal investigations, as is highlighted in the
KPMG Report, it was found out that even earlier, i.e. on 19 May 2020 Rahul Pandya sent 1 (one) email from his official Samsung e-mail ID [email protected] to a Gmail ID bearing [email protected], which contained details of modem project/group, which is confidential and commercially sensitive information belonging to SRI-B as it contained information about ongoing commercial projects and future roadmap.
6. It was also confirmed by KPMG that on 28 May 2020, one
day prior to his resignation, Rahul Pandya had indeed sent 24 (Twenty four) Emails from his official Samsung E-mail ID [email protected] to a Gmail ID [email protected], as was also found by Company’s internal IT team earlier. In the said batch of emails sent out on -13- 28 May 2020, 10 e-mails were confidential in nature and 12 emails contained proprietary information of SRI-B.”
10. Sir, the aforesaid actions were very obviously committed with an
evil intent and criminal mind to make an unlawful enrichment and deliberately causing unlawful loss to the Company, both monetarily and otherwise. Moreover, from the facts and circumstances deciphered by both SRI-B internal team and third party independent investigator KPMG, and the duration and repetitive nature of his malafide actions, it is crystal clear that the Ruhul Pandya was not just cheating the Company on almost a daily basis but possibly also had fraudulent intentions to steal valuable confidential Data/proprietary information of the Company from day one and possibly, even before joining the Company, and prima facie appears that he joined the Company only with the sole motive to commit the aforesaid offences of Criminal Breach of trust and cheating, in addition to offences committed under the Information Technology Act, 2000.”
The Police conduct investigation and file a ‘B’ report. The reason for filing ‘B’ report can be gathered in the following paragraphs:
ದಿನಾ೦ಕ:25/02/2023 ರಂದು ತನಿಖಾ ಸಮಯದಲ್ಲಿ ಆರೋಪಿಗೆ ನೋಟಸ್ ಚಾರಿ ಮಾಡಿದ ಮೇರೆಗೆ ಪೊಲೀಸ್ ಠಾಣೆಯಲ್ಲಿ ಹಾಜರಾಗಿರುತ್ತಾನೆ. ಆತನನ್ನು ಏಚಾರಣೆ ಮಾಡಿ ಹೇಳಿಕೆಯನ್ನು ದಾಖಲು ಮಾಡಿಕೊಂಡಿದ್ದು. ದಿನಾಂಕ. 29/05/2020 ರಂದು ಆರೋಪಿಯ ಕೆಲಸದ ಕೊನೆಯ ದಿನವಾಗಿದ್ದು, ದಿನಾ೦ಕ: 28/05/2020 ರಂದು ಕೆಲಸಕ್ಕೆ ಅನುಕೂಲವಾಗಬಹುದೆಂದು ಆರೋಪಿ ತನ್ನ ಕಂಪನಿಯ ಮೇಲ್ ಐಡಿ [email protected] ನಿಂದ ವೈಯಕ್ತಿಕ ಮೇಲ್ ಐಡಿ [email protected] ಗೆ ತರಬೇತಿಗೆ ಸಂಬಂಧಿಸಿದ ದತ್ತಾಂಶಗಳನ್ನು ವರ್ಗಾವಣೆ ಮಾಡಿಕೊಂ೦ಡಿರುತ್ತಾನೆ. ದಿನಾ೦ಕ: 29/05/2020 ರಂದು ಫಿರ್ಯಾದಿ/ಹೆಚ್ಆರ್ ರವರ ನಿರ್ದೇಶನದ ಮೇರೆಗೆ ಆರೋಪಿಯ ವೈಯಕ್ತಿಕ ಲ್ಯಾಪ್ಟಾಪ್, ಕಂಪನಿಯ ಲ್ಯಾಪ್ಟಾಪ್, ಮೊಬೈಲ್ ಫೋನ್ ಮತ್ತು ಆತನ ಜಿಮೇಲ್ ಆಕ್ಕೆಸ್ಗಳನ್ನು ಕಂಪನಿಗೆ-14-
ಕೊಟ್ಟು ಕಂಪನಿಯು ನಡೆಸಿದ ಆಂತರಿಕ ತನಿಖೆಗೆ ಸಹಕಾರವನ್ನು ನೀಡಿರುತ್ತಾನೆ. ತದನಂತರ ದಿನಾ೦ಕ: 08/06/2020 ರಂದು FROM ಕಂಪನಿಯವರು ಆರೊಪಿಯನ್ನು ಕಂಪನಿಗೆ ಬರಮಾಡಿಕೊ೦ಡು, ಎಲರ ಸಮಕಮ ವರ್ಗಾವಣೆ ಮಾಡಿಕೊಂಡಿದ ಎಲ್ಲಾ ದತ್ಸಾಂಶಗಳನುು ಡಿಲೀಟ್ ಮಾಡಿ ಲ್ಯಾ ಟಾಪ್ ಮತ್ತು ಮೊಬೈಲ್ಗಳನ್ನು ವಾಪಸು ಕೊಟಿರುತಾರೆ. ದಿನಾ೦ಕ:09/06/2020 ರಂದು ಕಂಪನಿಯ ಒಪಿಗೆಯ ಮೇರೆಗೆ ಆರೋಪಿ ತನ್ನ ಜಿಮೇಲ್ ಐಡಿಗೆ ಪಾಸ್ವರ್ಡ್ ಅನ್ನು ಬದಲಾವಣೆ ಮಾಡಿಕೊ೦ಡಿರುತ್ತಾನೆ. ಆದರೆ ಕಂಪನಿಯು ಆರೋಪಿಗೆ ಯಾವುದೇ ಕೀಯರೆನ್ಸ್ ನೀಡದೆ ಇದ್ದ ಕಾರಣ, ಆತನು ಪದೇ ಪದೇ ಮೇಲ್ ಮಾಡಿದ ಮೇರೆಗೆ ದಿನಾ೦ಕ: 18/06/2020 ರಂದು ಕಂಪನಿಯ ಮಧು ಮೋಹನ್ ಎಂಬುವರು ಇನ್ನೂ ತನಿಖೆ ನಡೆಯುತ್ತಿದ್ದು, ಪೂರ್ಣಗೊ೦ಡ ನಂತರ ಮಾಹಿತಿ ನೀಡುವುದಾಗಿ ಆರೋಪಿಗೆ ಮೇಲ್ ಮಾಡಿದ್ದು, ಅದರಲ್ಲಿ ಆರೋಪಿ ದತ್ತಾಂಶಗಳನ್ನು ಪಡೆದುಕೊ೦ಡು ಯರಿಗಾದರೂ ಶೇರ್ ಮಾಡಿರುವ ಬಗ್ಗೆ ಪರಿಶೀಲನೆ ಮಾಡುತ್ತಿರುವುದಾಗಿ ತೆಳಿಸಿರುತ್ತಾರೆ. ಆರೋಪಿಯು ಕಂಪನಿಯಲ್ಲಿ ಅಸೋಸಿಯೇಟ್ ಡೈರೆಕರ್ ಆಗಿದ್ದು ವರ್ಗಾವಣೆ ಮಾಡಿಕೊಂಡಿರುವ ಎಲ್ಲಾ ದತಾ೦ಶಗಳ ಅಕೆಸ್ ಆತನಿಗಿರುತದೆ. ಅವುಗಳನ್ನು ವರ್ಗಾವಣೆ ಮಾಡಿಕೊ೦ಡು ಯಾವುದೇ ಆರ್ಥಿಕ ಲಾಭ ಮಾಡಿಕೊ೦ಡಿರುವುದಿಲ, ಕಂಪನಿಗೆ ಆರ್ಥಿಕ ನಷ್ಟ ಉಂಟು ಮಾಡುವ ಉದ್ದೇಶ ಅಥವಾ ಕಂಪನಿಗೆ ಮೋಸ ಮಾಡುವ ಉದ್ದೇಶ ಇರುವುದಿಲ್ಲವೆಂದು ತನ್ನ ಮುಂದುವರೆದ ಹೇಳಿಕೆಯನ್ನು ನೀಡಿರುತ್ತಾನೆ... ಆತನ ಮೇಲ್ ಸಂವಹನ ಮತ್ತು ವಸ್ತುಗಳನ್ನು ಕಂಪನಿಗೆ ನೀಡಿರುವುದಕ್ಕೆ ಹಾಗೂ ಸಿವಿಲ್ ದಾವೆಗೆ ಸಂಬಂಧಿಸಿದ ದಾಖಲಾತಿಗಳನ್ನು ಕಲಂ.65(ಬಿ) ಪಮಾಣ ಪತದೊಂದಿಗೆ ಹಾಜರುಪಡಿಸಿರುತ್ತಾನೆ.”
On the ‘B’ report comes the protest petition by the complainant. The crux of the protest petition was misuse of
data. On the protest petition comes the impugned order
which rejects ‘B’ report and taking of cognizance. The
order insofar as it is germane reads as follows:
17. As rightly argued by the learned counsel for
accused, the breach of contract would amount to offence of cheating only if the intention to cheat was existing at the very inception. The investigation officer has stated in his report that, there is no evidence to show that, the accused was having such an intention since from joining the complainant company. Whereas, the complainant has clearly stated in paragraph No. 10 of the first information statement that, the act of transferring the data pertaining to the company from official e-mail ID of the
company to his personal e-mail ID were obviously committed - 15 -
with an evil intent and criminal mind to make an unlawful enrichment and deliberately causing unlawful loss to the company, both monetarily and otherwise. Further it is alleged that, moreover from the facts and circumstances deciphered by both SRI-B internal team and their party independent investigator KPMG and the duration and repetitive nature of his malafide actions, it is crystal clear that the accused was not just cheating the company on almost a daily basis, but possibly also had fraudulent intentions to steal valuable confidential data/proprietary information of the company from day one and possibly even before joining the company and prima-facie appears that he joined the company with a sole motive to commit the offences of criminal breach of trust and cheating and offences under Information Technology Act, 2000. Further, the complainant in the protest petition has asserted that, the complainant company is ready to provide evidence and produce necessary digital and documentary evidence to prove that the accused has committed the alleged offences.
18. Admittedly, the investigation officer has not submitted
the seized laptop and mobile phone for forensic examination and obtained expert report with regard to whether the alleged data of the company was transferred and deleted from the said devices. Further, the investigation officer has not collected necessary documents with regard to appointment and agreement entered by the accused with the complainant company in order to ascertain whether there is any violation of terms of the employment agreement and confidentiality agreement committed by the accused. On meticulously going through the contents of 'B' report filed by the investigation officer, it reveals that, the main ground or reason for filing 'B' report is that, there is lack of evidence to show that the accused has misused the - 16 -
stolen data or the accused has stolen the said data with an intention to cheat the complainant company or he has caused any financial loss to company. The said grounds are not sustainable, as it is not necessary for the complainant to prove that, the accused has stolen the said data with an intention to cheat the complainant company or he has caused any financial loss to company. Mere transferring the confidential data of another person or company without their permission, itself amounts to an offence under Information Technology Act, 2000. Hence, this Count is of the opinion that, at this stage there is a prima - facie material on record to take cognizance of offences punishable Sec.66, 66(C), 72(A) of Information Technology Act, 2000 and Sec.420 of I.P.C. The ratio laid down and the observations, made in the above cited decisions is not applicable to the facts and circumstances of the present case. Further, the protest petition filed by the complainant contains all the necessary ingredients of a complaint and it is signed by the authorised person of the complainant company. In such circumstances, taking into consideration the facts and circumstances of the case and the material placed on record by complainant, this Court is of the opinion that, an opportunity is to be given to complainant company to prove its case by examining its witnesses with all relevant documents with regard to violation of terms of the employment agreement and confidentiality agreement by the accused and commission of alleged offence under Sec.66, 66(C), 72(A) of Information Technology Act, 2000 and Sec.420 of I.P.C. Accordingly, holding that the complainant has made our reasonable grounds to reject the 'B’ report filed by the investigation officer and to take cognizance of alleged offences, I answer Point No. 1 in affirmative. - 17 -
19. Point No.2: In view of above conclusion arrived on Point No.1, I proceed to pass the following:
ORDER
The ‘B’ report filed by investigation officer is hereby rejected. Cognizance of offences punishable under Sec.66, 66(C), 72(A) of Information Technology act, 2000 and Sec.420 of I.P.C., is taken against the accused. For sworn statement of complainant, call on 20-07-2024.” The concerned Court observes that as rightly contended by the learned counsel for the accused, a breach of contract would not amount to an offence of cheating. But, then goes on to hold that it was not a breach of contract, but it was a transfer of data unauthorizedly.
8. The issue now would be, “whether further proceedings before the concerned Court should be permitted to be continued or otherwise?”
9. In the considered view of this Court, the
proceedings cannot be permitted to be continued, for the simple reason that the 2nd respondent/complainant has already filed a civil suit in O.S.No.5190 of 2020 to restrain the petitioner/accused from circulating any proprietary information. There is an order of injunction operating against the petitioner. A perusal at the contents of the complaint quoted hereinabove would indicate that for the same cause of action of preventing the petitioner from circulating confidential proprietary information suit is filed. - 18 -
Therefore, the ground on which the civil suit is preferred is the alleged breach of confidentiality clause in the agreement. The reason for registering the crime is again breach of confidentiality clause in the agreement. Therefore, it is a breach of agreement. Whether on such breach of agreement the proceedings before the concerned Court should be permitted to be continued or otherwise need not detain this Court for long and delve deep into the matter.
10. The Apex Court in the case of DELHI RACE CLUB (1940) LIMITED v. STATE OF UTTAR PRADESH1, has held as follows: “…. …. ….
41. The distinction between mere breach of contract
and the offence of criminal breach of trust and cheating is a fine one. In case of cheating, the intention of the accused at the time of inducement should be looked into which may be judged by a subsequent conduct, but for this, the subsequent conduct is not the sole test. Mere breach of contract cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right from the beginning of the transaction i.e. the time when the offence is said to have been committed. Therefore, it is this intention, which is the gist of the offence.
42. Whereas, for the criminal breach of trust, the property
must have been entrusted to the accused or he must have dominion over it. The property in respect of which the offence of breach of trust has been committed must be either the property of some person other than the accused or the beneficial interest in or ownership of it must be of some other person. The accused must hold that property on trust of such other person. Although the offence, i.e. the offence of breach of trust and cheating
2024 SCC OnLine SC 2248 - 19 - involve dishonest intention, yet they are mutually exclusive and different in basic concept.
43. There is a distinction between criminal breach of
trust and cheating. For cheating, criminal intention is necessary at the time of making a false or misleading representation i.e., since inception. In criminal breach of trust, mere proof of entrustment is sufficient. Thus, in case of criminal breach of trust, the offender is lawfully entrusted with the property, and he dishonestly misappropriated the same. Whereas, in case of cheating, the offender fraudulently or dishonestly induces a person by deceiving him to deliver any property. In such a situation, both the offences cannot co-exist simultaneously.”
(Emphasis supplied)
The Apex Court holds that in the case of cheating the intention of the accused at the time of inducement should be looked into which may be judged by a subsequent conduct, but for this, the subsequent conduct is not the sole test. Mere breach of contract cannot give rise to a criminal prosecution, unless fraudulent or dishonest intention is shown right from the beginning of the transaction. The beginning of the transaction between the two in the case at hand is an agreement. Therefore, no cheating arises in the case at hand, as ingredients of Section 415 of the IPC are hardly met as elucidated by the Apex Court in DELHI RACE CLUB’s case.
11. The Apex Court, a little earlier, in the case of SARABJIT KAUR v. STATE OF PUNJAB2, has held as follows: “…. …. ….
(2023) 5 SCC 360 - 20 -
13. A breach of contract does not give rise to
criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction. Merely on the allegation of failure to keep up promise will not be enough to initiate criminal proceedings. From the facts available on record, it is evident that Respondent 2 had improved his case ever since the first complaint was filed in which there were no allegations against the appellant rather it was only against the property dealers which was in subsequent complaints that the name of the appellant was mentioned. On the first complaint, the only request was for return of the amount paid by Respondent 2. When the offence was made out on the basis of the first complaint, the second complaint was filed with improved version making allegations against the appellant as well which was not there in the earlier complaint. The entire idea seems to be to convert a civil dispute into criminal and put pressure on the appellant for return of the amount allegedly paid. The criminal courts are not meant to be used for settling scores or pressurise parties to settle civil disputes. Wherever ingredients of criminal offences are made out, criminal courts have to take cognizance. The complaint in question on the basis of which FIR was registered was filed nearly three years after the last date fixed for registration of the sale deed. Allowing the proceedings to continue would be an abuse of process of the court.”
(Emphasis supplied)
The Apex Court holds that a breach of contract does not give rise to criminal prosecution. A civil dispute cannot be permitted to be continued as a crime. The criminal justice system must not be permitted to be misused to settle civil disputes. The dispute in the case at hand is civil in nature, which cannot be in dispute, as the complainant itself has filed the civil suit and it is pending consideration. In such circumstances, the Court exercising jurisdiction under Section 482 of the Cr.P.C. is also elucidated by the Apex Court in NARESH KUMAR v. STATE OF KARNATAKA3, wherein it is held as follows: “…. …. ….
2024 SCC OnLine SC 268 - 21 -
5. Under these circumstances, we are of the considered
view that this is a case where the inherent powers should have been exercised by the High Court under Section 482 of the Criminal Procedure Code as the powers are there to stop the abuse of the process and to secure the ends of justice.
6. In the case of Paramjeet Batra v. State of
Uttarakhand, (2013) 11 SCC 673, this Court recognized that although the inherent powers of a High Court under Section 482 of the Code of Criminal Procedure should be exercised sparingly, yet the High Court must not hesitate in quashing such criminal proceedings which are essentially of a civil nature. This is what was held: “12. While exercising its jurisdiction under Section 482 of the Code the High Court has to be cautious. This power is to be used sparingly and only for the purpose of preventing abuse of the process of any court or otherwise to secure ends of justice. Whether a complaint discloses a criminal offence or not depends upon the nature of facts alleged therein. Whether essential ingredients of criminal offence are present or not has to be judged by the High Court. A complaint disclosing civil transactions may also have a criminal texture. But the High Court must see whether a dispute which is essentially of a civil nature is given a cloak of criminal offence. In such a situation, if a civil remedy is available and is, in fact, adopted as has happened in this case, the High Court should not hesitate to quash the criminal proceedings to prevent abuse of process of the court.”
(emphasis supplied)
7. Relying upon the decision in Paramjeet
Batra (supra), this Court in Randheer Singh v. State of U.P., (2021) 14 SCC 626, observed that criminal proceedings cannot be taken recourse to as a weapon of harassment. In Usha Chakraborty v. State of West Bengal, 2023 SCC OnLine SC 90, relying upon Paramjeet Batra (supra) it was again held that where a dispute which is essentially of a civil nature, is given a cloak of a criminal offence, then such disputes can be quashed, by exercising the inherent powers under Section 482 of the Code of Criminal Procedure.”
(Emphasis supplied) If the facts obtaining in the case at hand are pitted to the law elucidated by the Apex Court, the unmistakable inference would be quashment of the entire proceedings. The Police had rightly filed a ‘B’ report. The concerned - 22 - Court has erred in rejecting the ‘B’ report and taking cognizance of the offence.
12. The other offences are under Section 66 of the
Act. The common ingredient between the offence of cheating under Section 420 of the IPC and Section 66 of the Act is dishonest or fraudulent intention. Therefore, the reasons rendered to hold Section 420 of the IPC as loosely laid, against the petitioner, would become applicable to Section 66 of the Act. The offence alleged under Section 66C which deals with dishonestly making use of electronic signature is not even the allegation in the case at hand. The allegation is sending emails from his official mail id to his personal mail id. The other offence is under Section 72A of the Act. The ingredients of the complaint would not become an offence under Section 72A even, as the petitioner has not accessed to anybody else’s personal information or disclosed the information for wrongful gain. Therefore, none of the ingredients find place in the offences laid. Hence, permitting further proceedings before the concerned Court would become an abuse of the process of law and result in miscarriage of justice.
13. For the aforesaid reasons, the following:
ORDER
(i) Criminal Petition is allowed.
(ii) FIR in Crime No.1145 of 2020 registered by Whitefield CEN Crime Police Station, Bangalore and - 23 - pending before 45th Additional Chief Metropolitan Magistrate, Bengaluru stands quashed.
(iii) It is made clear that the observations made in
the course of the order are only for the purpose of consideration of the case of petitioner under Section 482 of Cr.P.C. and the same shall not bind or influence the proceedings pending before any other fora.”
7. In the case of Arun Narayanan vs. State of Karnataka - W.P.No.11774/2021 dated 03.01.2023, this Court held as under:-
“ The petitioner is before this Court calling in question registration of crime in Crime No.56 of 2021 for offences punishable under Sections 419 and 420 of the IPC and Sections 65 and 66 of the Information Technology Act, 2008 (‘the Act’ for short), pending before the I Additional Chief Metropolitan Magistrate, Bangalore.
2. Heard Sri C.V.Nagesh, learned senior counsel appearing for the petitioner and Sri K.P.Yashodha, learned High Court Government Pleader appearing for respondent No.1.
3. Brief facts that lead the petitioner to this Court in the subject writ petition, as borne out from the pleadings, are as follows:-
The petitioner avers that he is a senior employee of US Technology International Private Limited (‘the Company’ for short), a company that is incorporated under the laws of India on 12th April, 2005. He claims to be working in the said - 24 -
Company since 2000 and has produced certain salary slips from April, 2014 to November, 2020, to demonstrate his relationship with the Company of being an employee. It appears that the name of the Company is changed from ‘U.S.Software Resources Private Limited’ to ‘U.S. Technology International Private Limited’ (‘the Company’ for short) in terms of the fresh certificate of incorporation dated 12.04.2005. The company was only one of the constituents of US Technology Group, which comprises of several other companies such as accused Nos.1 and 2 i.e., UST Global Incorporation and US Technology Resources Private Limited.
4. The 2nd respondent/TE Consulting (India) Private
Limited is the complainant and a part of Third Eye Inc. group of companies controlled and promoted by the 2nd respondent. Accused Nos.1 and 2 - companies enter into transactions for providing staffing services to, and from the Third Eye Incorporation - complainant, outside India and inside India respectively. Therefore, it is a transaction between accused Nos.1 and 2 and the complainant. Between the month of June, 2013 and end of 2018, Third Eye Incorporation appears to have defaulted in various payments for the services provided by accused No.1 outside India. Between August, 2015 and August, 2017 accused No.2 had deputed various employees in India to the complainant and it appears that on deputation of such human resources, it raised invoices upon the complainant totally amounting to Rs.10,28,41,345.67. It is contended that the complainant did not pay accused No.2 - company. Therefore, the complainant is, as allegedly defaulted in payment both to accused No.1 and accused - 25 -
No.2. Based upon the aforesaid contract between the parties and the claim, accused No.1 instituted arbitration proceedings on 18-09-2020 in California, a State in United States of America against Third Eye Incorporation for non-payment of invoice dues towards services rendered by accused No.1 to the complainant - Company outside India. In the same way accused No.2 filed a Pre-Institution Mediation Application in India in terms of Commercial Courts Act, 2015 against the complainant seeking recovery of monetary dues totally amounting to Rs.17 + crores towards providing human resource services in India. Third Eye Incorporation files its answering statement cum-counter claim before the Arbitrator in the U.S.A. and later, made belated allegations against accused No.1 along with accused Nos.4 to 13 alleging that they had diverted confidential information of customers and caused losses to Third Eye Inc. Between 12-11-2020 and 18-02-2021, multiple mediation sessions were held for several months between the complainant and accused No.2. During the pendency of these proceedings, the complainant registers a complaint on 11.02.2021 before the South CEN Crime Police Station, Bengaluru, alleging that the Third Eye’s confidential information was stolen by accused Nos.1 and 2 between 03.10.2014 and 05.10.2020. It is alleged that the petitioner got to know of it only shortly before the complaint came to be registered on 11-02-2021. This becomes a crime in Crime No.56 of 2021 for offences punishable under Sections 419 and 420 of the IPC read with Section 65 and 66 of the Act. The petitioner is made accused No.3. The - 26 -
registration of crime against the petitioner is what drives him to this Court in the subject petition.
5. The learned senior counsel Sri C.V.Nagesh,
appearing for the petitioner would contend with vehemence that if the complaint is perused in its entirety, there is not even a mention of the name of the petitioner in the entire complaint. Without there being any allegation against the petitioner in the complaint, he is dragged into these proceedings merely because he is the President of UST Global Inc. while the transaction is between accused Nos.1 and 2 and the complainant. He would contend that to avoid arbitration proceedings in which an arbitral award was to be passed, the complaint comes to be registered to arm twist accused Nos.1 and 2, who claim certain amounts from the complainant/Company. It is his emphatic submission that a contractual matter or a commercial dispute between the parties is sought to be given a colour of crime and seeks its quashment. He would seek to place reliance on the judgments rendered by the Apex Court in the case of WYETH LIMITED AND OTHERS v. STATE OF BIHAR AND ANOTHER - Criminal Appeal No.1224/2022 decided on 11.08.2022 (arising out of SLP.No.10730/2018).
6. The learned High Court Government Pleader would
seek to refute the submissions of the learned senior counsel for the petitioner to contend that the matter is at the stage of investigation and the complaint clearly makes out an offences under Sections 65 and 66 of the Act as the accused have taken away the information. Offences under Sections 419 and 420 IPC is also seen to be alleged in the complaint. - 27 -
Therefore, she would submit that the petitioner is not guilty of any act. The Police will necessarily file a report in his favour. It is not a stage at which this Court would interfere with the investigation. She would seek dismissal of the petition.
7. Notice issued to the 2nd respondent/complainant by this Court was returned with a shara as ‘unclaimed’ on 09-09-
2022. When the matter was listed before the Court on several
occasions thereafter i.e., 13-09-2022, 14-09-2022, 16-09- 2022, 19-09-2022, 20-09-2022, 21-09-2022 and 22-09-2022, there was no representation on behalf of the 2nd respondent, ostensibly so, as he did not claim the notice. Later, on 30-09- 2022, the matter was reserved for its orders upon hearing on behalf of the petitioner and the State.
8. This Court while entertaining the petition has granted an interim order of stay qua the petitioner on 21-12- 2021 and the same is in operation as on date.
9. I have given my anxious consideration to the submissions made by the respective learned counsel and have perused the material on record.
10. The 2nd respondent is the complainant. Who is the
2nd respondent is what is required to be noticed. His description bears presence in the complaint itself. Therefore, the complaint dated 11-02-2021 is quoted hereunder for the purpose of quick reference: “To February 11, 2021 The Inspector, CEN Bengaluru Police Station, Banashankari, Bengaluru-560 028. Respected Madam, - 28 -
1. My name is Somanna Chendira Mandanna and I
am an employee of TE Consulting (India) Pvt.Ltd.,(‘TE India), having its office at #15, 15th Cross Road, MG Layout, JP Nagar Phase-6, JP Nagar, Bengaluru-560 078. TE India is a subsidiary of the Third Eye, Inc. (“Third Eye”), a company registered in the United States of America.
2. I am authorized to file this complaint on behalf of the CEO of TE India, Mr.Shouvik Bhattacharya, who is resident of USA, and therefore, a Letter authorizing me is attached herewith as Annexure-1.
3. The accused persons listed in the Annexure-1
have together conspired against Third Eye and have stolen confidential information belonging to the Company. Subsequently, the Accused persons have been responsible to fraudulently maneuvering the Company into financial losses, and diverting in excess of Rs.18 crores to their accused Companies account with the help of individual accused persons.
4. UST Global, and US Technology Resources
Pvt.Ltd. have placed their key employee Siddharth Srivastava in Third Eye’s office in Bengaluru. Sidharth Srivastava gained the trust of Third Eye’s CEO Mr. Shouvik Bhattacharya, and became the de facto head of India operations of Third Eye India. Interestingly, Siddharth Srivastava was an employee of UST Global and US Technology Resources Pvt.Ltd. while all the three accused convinced Mr. Shouvik Bhattacharya to make him the de facto head of Third Eye’s India operations.
5. Siddharth Srivastava is a known criminal,
and other criminal cases have been registered against him, and this fact was concealed by UST Global and US Technology Resources Pvt.Ltd. with the Company while Siddharth Srivastava was working at Third Eye’s premises in India. I state that UST Global and US Technology Resources Pvt. Ltd., conspired with a known criminal to steal the proprietary information of Third Eye and divert money belonging to Third Eye to their own or their accomplices accounts.
6. That based on the facts stated in Annexure- 3, I hereby urge you to take cognizance of the fraud, - 29 -
cheating, criminal conspiracy, misappropriation and theft of confidential, proprietary information and trade secrets, theft of clients, tortuous interference in the business and stealing of clients and employees related offences committed by all the accused mentioned in the attached Annexure-1 (List of Accused).
7. I request you to register an FIR for offences
committed by the accused under Section 65 and Section 66 of the Information Technology Act, 2000 and Section 43 read with Section 120A and 120B (ii), Section 405, Section 408 and Section 420 of Indian Penal Code and register an FIR and arrest the accused persons and punish them according to the law. Sincerely, Sd/- (Somanna Chendira Mandanna), Near Banaswadi Police Station, Bangalore North, Bangalore Kalyananagar, Karnataka 560 043 For SHOUVUK BHATACHARYA CEO TE CONSULTING (India) Pvt.Ltd.”
The complainant describes himself to be an employee of TE Consulting (India) Pvt. Ltd., a subsidiary of Third Eye Incorporation, a company registered in USA.
11. For the complaint to be registered, a little walk in
the history is necessary to be taken. In the early 2000, the petitioner was an employee of one US Technology International Private Limited. There is no direct connection between the complainant and the petitioner. The petitioner is accused No.3. The 2nd respondent/complainant is a company and as described by it in the complaint, it is a part of Third Eye Group of Companies and it is the complainant’s case that he controls both the companies. Accused Nos.1 and 2 are in the business of supply of staffing services or human resources in India and outside India. Between June 2013 to the end of 2018, both the accused Nos.1 and 2 supplied - 30 -
manpower or staffing services to Third Eye Incorporation and the company of the complainant - TE Consulting (India) Pvt. Ltd. both outside India and inside India. Against the services so rendered by accused Nos.1 and 2, the complainant had defaulted in various payments. Both accused Nos.1 and 2 began registration of claims for their money, which the complainant was in default. Trouble appears to have been brewed at this juncture. Accused No.2 claims an amount of Rs.10,28,41,345.67 and accused No.1 claims close to Rs.17+ crores. For not paying the amount, accused No.1 institutes arbitration proceedings before the Arbitrator in the jurisdiction of the State of California, USA, against Third Eye Incorporation on 18-09-2020. Likewise, accused No.2 wanting to initiate arbitration proceedings institutes a Pre- Institution Mediation Application in terms of Commercial Courts Act, 2015 in India against the complainant for recovery of money, which by then had risen to mountainous proportion i.e., Rs.17 crores and odd.
12. The Third Eye Incorporation filed its counter-claim
before the Arbitrator in the USA alleging that accused Nos.4 to 13 had diverted confidential information of customers of Third Eye Inc. and caused huge loss to Third Eye Inc. This was concerning accused No.1. Accused No.2 in India had initiated a Pre-Institution Mediation Application in which several sessions were held between the complainant and accused No.2. In the teeth of pendency of the aforesaid proceedings, the afore-quoted complaint comes about by the complainant. This is the history of the complainant. - 31 -
13. The aftermath of the complaint is also required to
be noticed. On 18-02-2021, the Mediation Application so filed by accused No.2 against the complainant fails and accused No.2 institutes a commercial suit in O.S.No.176 of 2021 before the Commercial Court at Bangalore. The said suit is pending adjudication. In the USA on 08-04-2021, the Arbitral Tribunal constituted for the purpose of arbitration instituted by accused No.1 categorically ruled that the trade secret claims made by Third Eye Inc. were not even identified with reasonable particularity which would mean that the counter- claim filed by the Third Eye Inc. with regard to breach of confidentiality was not proved. Against the said interlocutory finding of the arbitral Tribunal, the Third Eye Inc. re- agitated the issue before the Arbitrator. The Arbitral Tribunal rejects the amended trade secret identification claims in terms of another order dated 06-06-2021. During the pendency of all these proceedings, the present writ petition comes to be filed by accused No.3/petitioner. During the pendency of this petition, a final award is passed by the Arbitral Tribunal in USA directing the Third Eye Inc. to pay moneys demanded by accused No.1 and has dismissed the counter-claim against accused No.1 on 13.09.2021.
14. In terms of Arbitration laws of USA, the award of
Arbitral Tribunal needs confirmation by a Superior Court. The Superior Court of California affirms the award passed by the Arbitral Tribunal in terms of its order dated 28-03-2022. The final award of the Arbitral Tribunal dated 13-09-2021, reads as follows: “I, the undersigned arbitrator, having been designated and duly appointed in accordance with - 32 -
Section 12.2 of the Master Services Agreement dated 3- 10-2014, by and between Claimant UST Global Inc. (“Claimant” or “UST”) and Respondent Third Eye, Inc. (“Respondent” or “Third Eye”), and having duly heard the proofs and allegations of the parties in and prior to the Final hearing, which closed on August 19, 2021, award as follows:
1. UST’s claim for Breach of Contract is hereby granted, for which UST shall be entitled to recover from Third Eye: a. Contractual damages of $481,991.00 b. Contractual pre-judgment interest of $515,296.60; and c. Post-judgment interest at 10% simple interest per annum.
2. With respect to Third Eye’s First Counterclaim
seeking a declaratory judgment “regarding the manner of payment required for the SOWs at issue in this case,” the undersigned determines that cash is the proper method of payment under the Statements of Work at issue in this case and, in addition, the specific declaratory relief sought by Third Eye, including the following declaratory judgments:
a. UST’s SOWs for Project IDs Th DE-002-01-00, THDE-002-02-00, THDE-0006-01-00, THDE-0006-02-00, THDE-0007-01-00, and THDE-0012-01-00 do not specifically provide for payment in cash; b. The MSA permits Third Eye to pay for UST’s services in Third Eye shares; c. Excluding interest, at $60.00 per share, issuance of 8,037 Third Eye common shares to UST constitutes payment in full for the SOWs; are hereby denied.
3. Third Eye’s Second Counterclaim, for Breach of Contract is hereby denied;
4. Third Eye’s Third Counterclaim, for Tortious Interference with contract, is hereby denied;
5. Third Eye’s Forth Counterclaim, for Tortious Interference with Prospective Economic Advantage, is hereby denied;
6. Third Eye’s Fifty Counterclaim, under the California
Uniform Trade Secrets Act, Cal.Civ. Code s 3426, et seq., including without limitation Respondent’s claim for attorney’s fees and expert witness fees pursuant to Cal.Civ.Code s 3426.4 is hereby denied. - 33 -
7. Third Eye’s claims that UST is vicariously liable for the alleged torts of its employees under the doctrine of respondent superior are hereby denied.
8. Third Eye shall take nothing against UST;
9.The compensation and expenses of the arbitrator shall be borne by the parties equally; therefore, because the parties have shared arbitral compensation and expenses equally to date, neither arbitral compensation nor expenses are due from each party to the other; and
10. The parties have stipulated that neither party continues to assert any claim for attorneys’ fees in this matter; therefore, the parties’ prior claims for attorneys’ fees are denied.
11. The undersigned awards damages to UST in the
following amounts, which total $997,287.60 through September 13, 2021, and continue to accrue as shown below: a. Contractual damages of $481,991.00 b. Contractual pre-judgment interest of $515,296.60; c. Post-judgment interest at 10% simple interest per annum. This Final award is in full settlement of all claims and counterclaims submitted to this arbitration.” and confirmation order dated 28-03-2022, passed by the Superior Court of California, County of Orange reads as follows: “Petition to Confirm Arbitration Award Before the Court in UST Global Inc.’s (“UST”) Petition to confirm the September 13, 2021 Arbitration Award and Third Eye,Inc.’s (“Third Eye”) Cross-Petition to vacate the award. The Court is inclined to confirm UST’s Petition to confirm the award and deny the Cross-Petition. … …. … Timeliness of UST’s Response … … … Merits
Moving to the merits, Claimant UST Global Inc. and Respondent Third Eye Inc. arbitrated UST’s claims in Aliso Viejo on August 17 - 34 - through 19, 2021 in person before arbitrator John DeGroote, DeGroote Partners (based in Texas), pursuant to AAA rules. On September 13, 2021, the arbitrator awarded UST $997.287.60 with 10% per year interest against Third Eye. Both petitions are timely.
The matter stemmed from a Master Services Agreement, effective 10-03-2014 where UST contracted with Third Eye to create trade secret software solutions for Third Eye. UST sued for breach of contract. Third Eye counterclaimed for declaratory relief, breach of contract, tortuous interference with contract, tortuous interference with prospective economic advantage, trade secret violations. UST was entirely successful. Third Eye obtained noting from the arbitration. UST filed a petition in this Court to confirm the award. Within days of the filing, Third Eye filed a “request for the trial de novo” and a Cross-Petition to vacate the award on the grounds that the arbitrator exceeded his authority and refused to hear evidence. (ROA 9. 10). Third Eye makes three general arguments as to why the court should not confirm the award, none of which the court find persuasive. … … … CCP s 1286.2(a)(6)
Third, and finally, following the close of evidence, but before rendering his Final Award, the Arbitrator was appointed to serve as mediator in a mater in which counsel for UST represented a party. Third Eye argues that this potential engagement was required to be disclosed pursuant to Section 7(d)(5) of the Ethics Standards for Neutral Arbitrators in Contractual Arbitration, as adopted by the California Judicial Council. No such disclosure was made, and thus Third Eye argues that it was not afforded the opportunity to disqualify the Arbitrator pursuant to Section 1281.9 of the California Code of Civil Procedure.
Section (a)(6) allows a court to vacate the arbitration award if an arbitrator making the award…: “(A) failed to disclose within the time required for disclosure a ground for disqualification of which the arbitrator was then aware.” Section 1281.9 provides, in turn: “the proposed neutral arbitrator shall disclose all matters that could cause a person aware of the - 35 -
facts to reasonably entertain a doubt that the proposed neutral
arbitrator would be impartial, including….[a]ny matters required to be disclosed by the ethics standards for neutral arbitrators adopted by the Judicial Council pursuant to t his chapter” (CCP s 1281.9(a)(2).)
The Ethics Standards for Neutral Arbitrators in Contractual Arbitrations require an arbitrator to disclose all matters in which “(t)he arbitrator is serving or has served as a dispute resolution neutral…. involving a party or lawyer for a party and the arbitrator received or expects to receive any form of compensation for serving in this capacity”. (Ethics standards For Neutral Arbitrators in Contractual Arbitrations s 7(d)(5).)
Evidence in the final hearing closed on August 19, 2021. The Arbitrator’s Final Award was due within thirty (30) days from the date. While the Arbitrator was evaluating the evidence and considering the Final Award, he was appointed to serve as mediator in Southwest Airlines Company v. Kiwi.com and Kiwi.com SRO, Case No.3:21-cv-0098-E, in the United States District Court for the Northern District of Texas (“Southwest Airlines”). The Arbitrator issued the Final Award on September 13, 2021. No party filed an application to correct the award with the arbitrator. (Gaudioso Decl., /3.)
Two days later, one of the attorneys representing UST entered an appearance as additional counsel for defendants in Southwest Airlines. (See Exhibit “N”).
Third Eye failed to establish that the Arbitrator began “serving” as the mediator in another case before the conclusion of the arbitration proceeding.” The suit in Commercial Court i.e., O.S.No.176 of 2021 is referred to arbitration, pursuant to an application filed by the complainant himself under Section 8 of the Arbitration and Conciliation Act, 1996. This has been challenged by accused No.2 before this Court in Writ Petition No.17934 of 2022. Therefore, Third Eye Inc. is now saddled with payment of huge moneys by the Arbitrator, which is confirmed by the Superior Court of California, County of Orange. Therefore, a sword of one proceeding is hanging on the head of the complainant. Insofar accused No.2 is concerned, on its - 36 -
seeking arbitration for the amounts that are to be paid to it, the matter is referred to arbitration and its challenge is pending before this Court.
15. That is all the afore-quoted link in the chain of events, its
dates and moneys that are directed to be paid by the competent Court against Third Eye Inc., which the complainant claims to be controlling and the criminal complaint comes to be registered. That several transactions between the parties which are purely commercial in nature, the crime comes to be registered. If it is for other acts to defend themselves, it is the defense that they have to put up. To continue or permitting continuance of investigation against the petitioner by the Police what is germane to be noticed is, whether the complaint would make out any offence against the petitioner. The complaint is quoted hereinabove. There is not even a whisper of any act of the petitioner. Therefore, it is a clear case where the petitioner is hauled into the web of crime without there being any rhyme or reason. Reference is being made to the judgment of the Apex Court in the case of STATE OF HARYANA v. BHAJAN LAL4, in the circumstances becomes apposite. In the said Judgment, the Apex Court holds as follows: “102. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extraordinary power under Article 226 or the inherent powers under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of 1992 Supp (1) SCC 335 - 37 -
justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised.
(1) Where the allegations made in the first information
report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused.
(2) Where the allegations in the first information report and
other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code.
(3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.
(4) Where, the allegations in the FIR do not constitute a
cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code.
(5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just
conclusion that there is sufficient ground for
proceeding against the accused.
(6) Where there is an express legal bar engrafted in any of
the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party.
(7) Where a criminal proceeding is manifestly attended
with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.” In the light of 1st clause in the BHAJAN LAL’S case (supra), even if the complaint is taken as true, it would not - 38 - make out any offence alleged against the petitioner. Therefore, if further investigation is permitted to be continued, it would unmistakably lead to proceedings becoming an abuse of the process of law.
16. Yet another factor that would weigh in favour of the
petitioner is the preceding analysis, they are purely commercial in nature. In a purely commercial transaction, the complainant seeks to dress those transactions with a robe of crime, which should not be permitted, in terms of the
judgment rendered by the Apex Court in the case of WYETH
LIMITED (supra), wherein it is held as follows: “14. A careful reading of the complaint, the gist of which we have extracted above would show that none of the ingredients of any of the offences complained against the appellants are made out. Even if all the averments contained in the complaint are taken to be true, they do not make out any of the offences alleged against the appellants. Therefore, we do not know how an FIR was registered and a charge sheet was also filed.
15. The contention of the learned senior counsel for
respondent No.2 that the Court has to take note of the final report filed by the police along with the statement of witnesses, could have been accepted by us, if the whole thing had emanated from a First Information lodged with the police. Respondent No.2 actually filed a private complaint under Section 200 Cr.P.C, which was referred by the Court under Section 156(3) to the police. When this complaint itself disclosed nothing more than a commercial relationship which broke, it is not possible for respondent No.2 to enlarge the scope of his complaint by merely adding the language used in the text of the Indian Penal Code.
16. Admittedly appellant No.1 had instituted a civil Suit on the file of the judicature at Bombay and also obtained an
order for the appointment of a Court Receiver to take
possession of the goods lying in the godown. The appellants - 39 - have also lodged a criminal complaint, which was refused to be quashed by the High Court of Patna. It is only after the appellants filed a civil suit and a criminal complaint that respondent No.2 chose to file his complaint.
17. The High Court was clearly in error in overlooking
the application for bringing on record the subsequent development of the filing of the chargesheet and the prayer for inclusion of the relief of quashing of the chargesheet in the original petition.
18. It is too late in the day to seek support from any precedents, for the proposition that if no offence is made out by a careful reading of the complaint, the complaint deserves to be quashed.”
The Apex Court, in the aforesaid judgment, clearly holds that the High Court fell in error in overlooking the fact that the criminal complaint is registered after the complainants had filed a civil suit and therefore, the matter was clearly civil in nature. In the case at hand, as narrated hereinabove, the issue cannot but be held to be arising out of commercial transactions between the parties. Therefore, the said commercial transaction or the suits that are filed are sought to be given a colour of crime, which is precisely held to be contrary to law by the Apex Court in plethora of judgments, apart from the one that is quoted hereinabove. Quoting all the judgments would only render this order to be bulky, as it is by now trite law that the Court exercising jurisdiction under Section 482 of the Cr.P.C. has to step in and obliterate such proceedings, which are civil/commercial in nature and are given a cloak of crime, except in circumstances as elucidated by the Apex Court in those very judgments which would depend upon the facts of each case. - 40 -
17. In the light of all the aforesaid reasons, permitting
further proceedings to continue particularly, against the petitioner would degenerate into harassment, become an abuse of the process of law and ultimately, result in miscarriage of justice.
18. Wherefore, the following:
ORDER
(i) The writ petition is allowed.
(ii) The FIR in Crime No.56 of 2021 registered by South CEN Crime Police Station, Bangalore and pending before the I Additional Chief Metropolitan Magistrate, Bangalore, stands quashed qua the petitioner.
(iii) It is made clear that any observations made in the course of the order, will not bind or influence any other civil proceedings pending between the other parties. “
8. If the impugned complaint and FIR are scrutinized bearing
in mind the principles enunciated in the aforesaid judgments, it is clear that necessary ingredients constituting the alleged offences have not been made out nor disclosed by the respondents particularly when the details of the alleged documents constituting alleged data theft by the petitioner were undisputedly being used by her for the purpose of her employment and consequently, I am of the view that continuation of impugned proceedings qua the - 41 - petitioner would amount to an abuse of process of law warranting interference by this Court in the present petition.
9. In the result, I pass the following:-
ORDER
(i) Petition is hereby allowed.
(ii) The impugned complaint and FIR in Crime No.109/2024
both dated 14.05.2024 registered by the 1st respondent - Police, pending on the file of 32nd ACMM, Bangalore, insofar as the petitioner is concerned are hereby quashed.
(iii) The respondents are directed to return back the personal laptop of the petitioner within a period of two weeks from the date of receipt of a copy of this order. Sd/- (S.R.KRISHNA KUMAR) JUDGE SS/SRL