Vivo Communication Device Pvt. vs The State of West Bengal & Anr on 6 January, 2023

Vivo Communication Device Pvt. vs The State of West Bengal & Anr on 6 January, 2023

FACTS OF THE CASE 

Vivo Communication Device Pvt. Ltd. (the petitioner) has filed a revision petition seeking the  quashing of criminal proceedings in Complaint Case No. C-4119 of 2018 pending before the  Learned Additional Chief Magistrate at Bidhannagar. The complaint was filed by the  complainant/opposite party no. 2, alleging offenses under Sections 405, 406, 420, 425, and 34  of the Indian Penal Code, 1860 (IPC). 

According to the complaint, the complainant had entered into an agreement with the petitioner  company to promote retail excellence under the brand name “VIVO” and sell their products at  a specific location since 2007. Subsequently, disputes arose between the parties concerning  various issues, including rent, allegedly fabricated sales figures, non-refund of security deposit,  staff shortages, changes in policy structures and target achievement plans, infiltration of stock,  and arbitrary business stoppage, resulting in significant losses for the complainant. The  complainant accused the petitioner of cheating and criminal breach of trust in connection with  these matters. 

The petitioner’s counsel argued that the petitioners had diligently responded to the  complainant’s notices, demonstrating their clear and honest intentions. They contended that  criminal liability cannot arise from a commercial transaction or obligation when the sum was  not promised to be paid, and mens rea (criminal intent) is entirely missing in this case. The  petitioner claimed that the dispute is civil in nature and has been given a criminal color only to  tarnish the brand reputation of the petitioners. They asserted that there is no evidence to suggest  that the alleged offenses were committed by them. 

The petitioner cited the written distributor agreement between the parties, executed on 30th  March 2017, which clearly mentioned the terms and conditions of the agreement. The  agreement did not include any arbitration clause. The petitioner argued that they have diligently  performed their part of the contract, and the ingredients required to constitute the alleged  offenses are entirely absent. 

The court noted that despite the intimation being served, the opposite party no. 2 did not present  any representation. 

Based on the nature of the dispute, which revolves around a distributor agreement, the court  considered a judgment of the Supreme Court as guidance, which may be applicable to the  present case to arrive at a just decision.

ISSUES 

The primary issue in this case is whether the allegations made in the criminal complaint  constitute a prima facie case for criminal liability. Additionally, the court must determine if the  dispute is genuinely a civil matter, thereby making criminal prosecution inappropriate. 

ARGUMENTS 

The petitioner relies on a distributor agreement between the parties and contends that the  dispute arises solely from the breach of contractual terms. They emphasize that commercial  disputes should not be converted into criminal offenses, and the appropriate forum to resolve  such issues is the civil court. 

The core question revolves around whether there is ‘entrustment’ of property in a hypothecation  agreement. Hypothecation is a mode of creating security without delivering title or possession.  In this arrangement, the ownership and possession of the movable property remain with the  debtor, while the creditor holds an equitable charge over the property. The petitioner argues  that there is no ‘entrustment of property’ by the creditor to the debtor in hypothecation, as  possession remains with the debtor, and the creditor does not have ownership or beneficial  interest in the property. 

To support their case, the petitioner cites the Supreme Court’s ruling in Central Bureau of  Investigation v. Duncans Agro Industries Ltd., where the court clarified that hypothecation does  not involve ‘entrustment’ of property, and thus, criminal breach of trust is not applicable.  Additionally, the petitioner maintains that the elements of cheating under Section 420 IPC and  mischief under Section 425 IPC are also not present in the case.

JUDGMENT AND ANALYSIS 

The court begins its analysis by referring to various judgments that highlight the circumstances  under which criminal proceedings can be quashed. Quashing the complaint at the initial stage  should be done sparingly and cautiously. The court should not interfere with criminal  proceedings solely based on claims of mala fides or ulterior motives; instead, the allegations  must be examined during the trial. 

The court also examines the inherent powers under Section 482 of the Code of Criminal  Procedure (CrPC). The Supreme Court, in Umesh Kumar v. State of Andhra Pradesh, clarified  that the inherent powers can be used to prevent abuse of the court process and secure justice.  The High Court can exercise this power to quash a charge sheet even before charges are framed  or during the pendency of a discharge application. However, the court cannot evaluate the  evidence or examine untested documents, as that is a matter for trial. 

The court emphasizes that the inherent power should not be used to stifle legitimate prosecution  but can be employed to save the accused from unnecessary criminal trial. It further cites  precedents like Pepsi Foods Ltd. v. Judicial Magistrate, Ashok Chaturvedi v. Shitul H.  Chanchani, G. Sagar Suri v. State of U.P., and Padal Venkata Rama Reddy v. Kovvuri  Satyanarayana Reddy to support this stance. 

In Rajiv Thapar v. Madan Lal Kapoor, the Supreme Court delineated four steps to determine  the veracity of a prayer for quashing raised by an accused under Section 482 of the CrPC: 

• Step One: Assess the quality of material relied upon by the accused to ensure its  soundness and reasonableness. 

• Step Two: Determine if the material is sufficient to reject the factual assertions made in  the charges against the accused. 

• Step Three: Check if the material has not been refuted by the prosecution and if it cannot  be justifiably refuted. 

• Step Four: Consider whether proceeding with the trial would lead to an abuse of the court  process and fail to serve the ends of justice. 

Moving on, the court refers to the judgment in State of Bihar v. P.P. Sharma, where the Supreme  Court held that entertaining an application under Section 482 of CrPC to quash a charge sheet  before the criminal court takes cognizance amounts to pre-trial of a criminal trial. The charge  sheet and the evidence provided form the basis for the court to decide whether to take  cognizance of the offense, and it does not mean that no offense has been made out in the charge  sheet or the first information report. While there may be exceptional circumstances where a  writ petition could be entertained, it is generally not appropriate to do so before the criminal  court takes cognizance.

The court also outlines the scheme for inquiry and trial provided under CrPC. After  investigation, a report is submitted to the Magistrate, who may take cognizance and frame  charges. At this stage, the accused can seek discharge under Section 227 CrPC if charged. If  charges are framed, the trial proceeds, and charges can be added or altered as per Section 216  CrPC. 

The court reiterates that criminal proceedings, including the FIR, can be quashed if the  allegations do not establish a prima facie case or if the claims are highly improbable. However,  the power to quash should be exercised sparingly and cautiously, only in rare and exceptional  circumstances. The judiciary and police have complementary roles, and the court must be  diligent in its exercise of the wide powers under Section 482 CrPC. It should consider the  established parameters for quashing, as laid down in previous judgments like R.P. Kapur and  Bhajan Lal cases. 

CONCLUSION: 

The court finds that the case is a civil dispute and lacks sufficient evidence to support criminal  liability. The criminal revisional application (CRR 298 of 2019) is allowed, and the proceedings  in complaint Case No. C-4119 of 2018 are quashed. No costs are awarded, and all connected  applications are disposed of. A certified copy of this judgment will be sent to the Trial Court  promptly. 

REFERENCES 

https://indiankanoon.org

https://www.casemine.com/

https://www.the-laws.com/

https://www.courtkutchehry.com/

This Article is written by Zoya Hashmi student of Integral University Lucknow, 6^th Semester, Intern at Legal Vidhiya.

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