IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated:- 30.04.2009 Coram:- The Hon'ble Mr. Justice R.REGUPATHI Crl.O.P. No.4389 of 2009 & M.P. No.1 of 2009 1. P.Sundaraparipooranan 2. M/s.Green Signal Bio Pharma Pvt. Ltd., Rep. by P.Sundaraparipooranan Old No.5, New No.13/A3, Circular Road, United India Colony, Kodambakkam, Chennai 600 024. ... Petitioners(Accused 2 & 3) vs. Union of India, by Additional Superintendent of Police, CBI / ACB / Chennai. ... Respondent(Complainant) Petition under Section 482 of the Code of Criminal Procedure to call for the records pertaining to R.C. No.47A of 2008 pending investigation on the file of the respondent police and quash the same. For Petitioners : Mr.B.Sriramulu, Senior Counsel for Mr.B.Ravi. For Respondent : Mr.N.Chandrasekaran, Special Public Prosecutor for CBI Cases. O R D E R The first petitioner is the Chairman of the second petitioner Firm and they are taken as accused Nos.2 and 3 in RC No.47A of 2008 pending investigation on the file of the respondent/CBI for offences punishable under Section 420 read with Sec.120B IPC. The respondent registered the case on the basis of Source Information Report as against the petitioners and A-1, who was functioning during the relevant period as Director, BCG Vaccine Laboratory, Chennai, and Pasteur Institute of India, Chennai. The allegation is that, during https://hcservices.ecourts.gov.in/hcservices/ 2006-2007, the first accused, pursuant to criminal conspiracy with the petitioners/A-2 and A-3 to cheat Government of India, without valid authorisation, entered into an agreement with the second accused for supply of Measles Seed (Edmonston's), Rubella Virus Seed (RA-27-WISTAR) and Human Diploid Cell Line and for manufacture of Measles and Rubella Vaccine; thereby, caused wrongful loss to the Government of India to the tune of Rs.3.25 crores and corresponding wrongful gain to themselves. By setting in motion the task of investigation, the respondent/CBI collected materials in the form of documents and communications between the parties and the Government and, while the investigation is at progress, the present petition has been preferred before this Court to quash the proceedings of the respondent/CBI. 2. Mr.B.Sriramulu, learned Senior Counsel elaborately argued the matter by referring to various transactions between the parties and background thereof from the inception till the culmination of the proceedings at the hands of the CBI, in his endeavour to demonstrate that it is a deserving case to grant the prayer sought for. At the outset, learned Senior Counsel submitted that even if the allegations as put forth in the First Information Report are presumed to be true, on the basis of the materials collected during the course of investigation, a prima facie case is not made out and it is an exceptional case warranting exercise of the inherent powers of this Court under Section 482 of the Code to quash the investigation at the threshold as otherwise, the petitioners, who all along acted in good faith and with bona fide intention and whose transparent transactions are borne out by records, would suffer great prejudice and damage. To substantiate such contention, it is submitted that the petitioners are engaged in pharmaceutical business and importing pharmaceutical raw materials with technical know-how for manufacture of vaccines. After acquiring technological expertise in the field, the petitioner firm entered into agreement with foreign companies for importing Measles and Rubella Vaccine Seeds. Substantive materials in this regard were produced by the petitioners during the course of investigation. For decades together, the Government purchased Measles Vaccine by spending approximately Rs.300 crore per annum from a private company viz., M/s.Serum Institute of India, Pune, (hereinafter referred to as 'Private Unit') for the purpose of Expanded Programme on Immunisation (EPI) of the Government of India. Even though Pasteur Institute of India (in short 'Institute') possesses requisite equipment, manpower and resources for manufacture of the vaccine, it does not have raw-materials and technical know-how to commence production. Since facilities and infrastructure are available with the Institute, the Government and the first accused negotiated with the Private Unit for supply of raw-materials and sharing technical expertise, but, such endeavour did not materialise; https://hcservices.ecourts.gov.in/hcservices/ with the result, the first accused was frequently asked by the Government to explore other possibilities to secure the raw materials and expertise from other sources, and particulars are available to substantiate the same. The first accused, only after obtaining due approval, placed orders with the petitioners, who, in order to comply with the request made, took immediate initiatives to import raw materials and technology from foreign countries. The petitioners were informed by the first accused that the Institute is an autonomous body and competent to enter into agreements with the petitioners. Consequently, an agreement dated 27.11.2006 was entered into between the petitioners and the Institute at Coonoor and immediately thereafter, supply of raw materials and technical expertise was effected. It was agreed that the Institute would pay a sum of Rs.3.25 crores and, after the commencement of commercial manufacturing, the profit would be divided between the petitioners and the Institute in the ratio of 70:30. The petitioners imported raw materials to the value of US $ 5,00,000 equivalent to Rs.2.50 cores. Raw materials along with necessary documents relevant for production of vaccines were supplied. Following such transaction, several letters, dated 28.11.2006, 29.11.2006, 14.12.2006, 15.12.2006 and 25.06.2007, were addressed to the first accused to apprise that the petitioners performed their part of the contract in accordance with the terms and conditions. Since the Institute had only paid Rs.2.05 crores as against Rs.3.25 cores, for recovery of the balance, the petitioner firm filed a money suit in C.S. No.43 of 2009 before the High Court and since the Institute threatened to annul the agreement, the same was challenged by filing a Suit in O.S. No.117 of 2008 on the file of Sub Court, Nilgiris at Coonoor and the proceedings are pending. A Notice was also addressed to the first accused and, in reply thereto, it was stated that the first accused did not obtain approval from the Finance Committee and the Governing council and further, a request was made to the petitioners to annul the agreement. It was represented by the petitioners that the Institute is an autonomous body and the contract was entered into between them in accordance with law and further, the document has been duly signed by the Director of the Institute. Thus, on the basis of the materials collected during investigation, there is nothing to suggest or substantiate any violation of terms by the petitioners, but, diametrically, the documentary materials, on the fact of it, give a strong suggestion that the complaint has been filed with mala fide intention to fasten criminal liability on the petitioners. Further, even if there is any violation, in view of the nature of agreement, it is abundantly clear that the dispute involved is purely of civil in nature particularly when there is not even an allegation of dishonest intention made against the petitioners. By virtue of Article-11(c) of the agreement, the first accused has got every power and authority to execute, deliver, perform the agreement and carry out the obligations https://hcservices.ecourts.gov.in/hcservices/ on behalf of the Institute. It is the object of the Government to commence manufacturing of vaccine by the Institute which possesses enough man power and infrastructure so as to break the monopoly of the Private Unit, to reduce the cost and to ensure safety. Since the Institute only required raw materials and technology, the continuous efforts taken by the Government culminated in the agreement between the first accused and the petitioners. The object of commencement of production by a Public Sector Undertaking is laudable and it is not known as to why, on flimsy reasons, a request for annulment did emerge from the first accused pursuant to the communications received by him from the authorities of the Government. A careful examination of the circumstances behind registration of the FIR having regard to the various aspects adverted to above would go to show that the FIR was registered at the instigation of the Private Unit since the said Unit lost the deal of Rs.300 crores as a consequence of the agreement arrived at between the first accused and the petitioners and thereby, the monopoly hitherto enjoyed by it was put to an end. Learned Senior Counsel, by pointing out that a sum of Rupees One Crore was deposited subsequent to the order passed in Crl.O.P. No.25762 of 2008 granting anticipatory bail to the first petitioner, on instructions, submits that the petitioners are willing to deposit the balance money with the Institute in the event of return of raw materials and the technology supplied to it and also to withdraw the civil litigation pending so that a quietus can be given to the whole dispute; therefore, in a case of this nature where every aspect is borne out by records, it is absolutely necessary that the FIR as well as the criminal proceedings are quashed. 3. Per contra, Mr.N.Chandrasekaran, learned Special Public Prosecutor for CBI Cases, submits that the case has been registered against the petitioners and the first accused viz., Director of the Institute at Coonoor, for offences punishable under Sections 120-B read with 420 IPC. and Section 13 (2) read with 13(1)(3) of the Prevention of Corruption Act and FIR of the case is pending before the Special Court for CBI Cases, Chennai. The total amount involved in the transaction is Rs.3.25 crores and it is provided in the agreement that profit would be shared at the ratio of 70:30 between the petitioners and the Institute respectively. Pursuant to the agreement, the Institute unauthorisedly paid Rs.2.05 crores to the petitioners, thereby, the petitioners were unduly favoured resulting in wrongful loss to the Government. A1 extended undue favour to A2 since the wife of A1 and that of A2 are Directors of the sister concern of the petitioner firm by name M/s.Vatsan Bio Pharma Pvt. Limited, Chennai. Also, one of the Directors of the petitioner-firm is closely associated with the wife of A1 and further, the petitioner firm has tie up with the sister concern and the contract was given because of the close association https://hcservices.ecourts.gov.in/hcservices/ and acquaintance between the aforesaid persons. The first accused, being a public servant, abused his official position and committed criminal misconduct and due to his act, the Institute suffered huge loss to the tune of Rs.3.25 crores. Since the source information disclosed that, prima facie, the offences aforementioned have been committed by the petitioners in collusion and conspiracy with A1, the case came to be registered and investigation is being pursued. Subsequent to registration of the case on 27.09.2008, the CBI conducted search at the residential and office premises of the first accused and the petitioners. Ultimately, about 30 documents came to be recovered from, (i) Pasteur India Limited, Coonoor; (ii) Ministry of Health the and Family Welfare, Government of India; (iii) NCG Vaccine Laboratory, Chennai; (iv) Drugs Controller of India, Delhi and Chennai; (v) Serum Institute of India, Pune; (vi) Registrar of Companies, Chennai, etc., and those documents are under scrutiny. Any commission or omission on the part of A-1 and the petitioners will not amount to civil dispute and the enquiry revealed commission of cognizable offences, justifying the investigation and there are sufficient grounds to proceed against the petitioners and A-1. To the above effect, a detailed counter affidavit has also been filed. According to the learned Special Public Prosecutor for CBI Cases, this is not a fit case to quash the proceedings. 4. I have meticulously examined the materials available on record in the light of the rival submissions made on either side to decide the question involved viz., as to whether, in the given case where the entire transaction is borne out by records, it is necessary to quash the proceedings pending before the respondent/CBI by invoking the inherent powers of this Court available under Section 482 of the Code of Criminal Procedure. Before proceeding further, it is pertinent to point out that this Court need not traverse into the allegation pertaining to the alleged offences committed under the provisions of Prevention of Corruption Act insofar as the petitioners herein are concerned, for, probably, it might be with reference to the first accused since he acted in his official capacity as Director of the Institute/Public Sector Undertaking. The Private Unit was supplying Measles Vaccine for decades and, in order to procure the vaccines from the said Unit, the Government of India was spending approximately Rs.300 crores per year. The Institute is a Government of India Undertaking in which the first accused was the Director. Since huge money was spent towards purchase of vaccines under the Expanded Programme on Immunization (EPI), Government of India addressed the first accused to explore the https://hcservices.ecourts.gov.in/hcservices/ possibilities for production of the vaccine with the facilities available at the Institute. Admittedly, only under such circumstances, steps were taken by the first accused to procure raw materials and technical expertise for production of Measles Vaccine at a lower cost. The transactions between the petitioners and the first accused and the communications between the first accused and the Government of India have been enclosed in the typed set of papers filed before this Court by the petitioners. Those documents are not controverted by the respondent and in fact, the same were collected from the accused during the course of investigation. 5. It is of much relevance to refer to the documents in order to better understand the actual state of affairs. a) With reference to transfer of technology pertaining to Measles Vaccine from the Private Unit to the Institute at Coonoor, by letter/representation dated, 02.06.2005, the first accused conveyed the following to the Chairman, Vaccine Production Board, Directorate General of Health Services, Nirmal Bhavan, New Delhi-11, " It would not be out of place to mention here that the production of Anti Rabies Vaccine (sheep brain) has been stopped at PII, Coonoor and the facilities set-up for the said purpose are at present lying idle and hence, the same can be used for production of Measles vaccine in the event of transfer of technology and seed strain from Serum Institute of India, Pune. Moreover, the scientific personnel at PII who were involved in the production of ARV (sheep brain) can be engaged in the production of Measles Vaccine. Hence, the transfer of Measles Vaccine seed strain along with the technology from SII to PII would ensure that the entire country demand for Measles Vaccine can be met. I, therefore, request that the possibility of transfer of Measles Vaccine seed strain and technology from SII to PII may kindly be examined at the earliest". b) A copy of the aforesaid letter was marked to the Managing Director of the Private Unit who, by reply dated 08.06.2005, addressed to the Chairman, Vaccine Production Board, New Delhi, expressed his views as follows:- " I was most surprised and annoyed to receive a copy of letter dated 2nd June addressed to your goodself by Dr.N.Elangeswaran, Director on "Addl. Charge", Pasteur Institute of India, Coonoor. In this connection, I would like to draw your attention to the following points:- First of all the letter is misleading for reasons best known to Dr.Elangeswaran. For example, he states that the entire country's need for Measles Vaccine can be met if he/Pasteur Institute is given the opportunity to https://hcservices.ecourts.gov.in/hcservices/ manufacture Measles Vaccine, whereas the factual position is that not only is India self-sufficient, but, because of the untiring efforts and pioneering work done by our Company, the world's demand for Measles Vaccine has been completely met with following accolades which have been recognized internationally: . . . . . " From the above, it is clear that the first accused, in his capacity as Director, suggested a via-media to slash the expenditure being incurred due to the monopolised business in the field by the Private Unit and when such suggestion fell to the adverse interest of the Private Unit, they raspingly reacted by posing numerous questions about the viability of the scheme suggested. c) By letter dated 30th January, 2006,the Government of India informed A-1 as follows:- " I am directed to refer to your letter No.A- 50011/21/2005-ADMN dated 5th September, 2005 on the above subject and to say that the possibility of getting the strain from other sources may be found out. It has been decided that the matter may be discussed on 6th February, 2006 in the chamber of Joint Secretary (KR)." d) The Government, in its efforts and endeavour to have production by the Institute at Coonoor, also addressed the representative to India, WHO (World Health Organisation), through letter dated 22nd February, 2006, by marking a copy to the first accused and the contents thereof are extracted below:- " In order to be self-sufficient in the field of vaccines required for Routine Immunization Programme, Government of India proposes to create facilities for production of Measles Vaccine at Pasteur Institute of India, Coonoor. Presently, Measles Vaccine is produced in India solely by the Serum Institute of India, Pune, which is in the private sector. However, the Serum Institute of India, Pune has declined to transfer the technology and seed strain to the Pasteur Institute of India, Coonoor. In view of the above, you are requested to kindly explore the possibility of arranging for transfer of technology for the production of Measles Vaccine and seed strains from other countries to the Pasteur Institute of India, Coonoor. " https://hcservices.ecourts.gov.in/hcservices/ e) Not able to get any positive outcome, again, the Government, through its letter dated 05.04.2006, addressed the first accused for submitting an alternate proposal and the body of the letter is extracted below:- "Measles Vaccine is included in the National Immunization Programme and availability of safe, effective and affordable measles vaccine is essential. At present this vaccine is being produced only in one institution in the private sector. You are requested to kindly explore the feasibility of production of measles vaccine in your Institution. A project proposal indicating timeliness and estimated budget requirements may please be submitted." On the basis of the above materials, it could be discerned that, as projected by the petitioners, the Government was communicating with the first accused to explore the possibilities which in a way alleviate the burden of its dependency on the Private Unit and simultaneously for production of vaccines by its own Unit viz., the Institute at Coonoor. 6. Ultimately, the first accused, in his official capacity, transacted with the petitioners, who, in order to fulfil the obligations on their part, contracted with WISTAR Institute of Anatomy and Biology based at United States for import of raw- materials and technology relating to manufacture of measles vaccines. Subsequently, both the petitioners and the Institute represented by its Director, the first accused, entered into the agreement on 27.11.2006 and the following clauses relating to 'financial details' and 'representations and warranties' are relevant to be mentioned, " 6.1.(a) Transfer Fee (Seeds, Cell Line and Technology):- The total costs for the Seed and Cell Line to be transferred to the Institute under this agreement is Rs.3.25 Crores (Rupees Three Crores and twenty five lakhs only). The Institute shall pay the above cost to the Sponsor in Eight Instalments within a period of 4 months as mentioned below: . . . . . The Institute has all necessary power and authority to execute, deliver, and perform this Agreement and to carry out its obligations under this Agreement, and the execution, delivery and the performance of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly authorized by all necessary action on the part of the Institute. " https://hcservices.ecourts.gov.in/hcservices/ While so, the petitioners received a letter dated 24.06.2008 from the first accused, to the following effect:- "This is to inform you that the Ministry of Health and Family Welfare vide its letter No.V.11012/7/2005-CC&V (pt) dated 5.6.2008 has requested the undersigned to initiate action to annul the agreement entered into by this Institute with your company for the purchase of seeds of Measles and Rubella Vaccines on the grounds that the said agreement has not been approved by the Ministry. The Ministry has further requested the undersigned to initiate action for recovery of Rs.1.2 Crores with interest from your company on the grounds that the payment was not authorized by the Ministry." Probably, the first accused forwarded the letter dated 24.06.2008 since he received the following communication, dated 05.06.2008, from the Government, " It is seen from the Statement of Expenditure, submitted by you for the financial year 2007-08 for PII, Connoor that you have incurred an expenditure of Rs.1.2 crores for the purchase of seeds of Measles and Rubella Vaccines. It is also seen that you have entered into an agreement with M/s.Green Signal Biopharma Ltd., for purchase of seeds of Measles and Rubella Vaccines and sharing of profit with the said Company as a result of production of these Vaccines in PIIC. Neither the agreement was approved by the Ministry of Health & Family Welfare nor the payment of Rs.1.2 crores was authorised by the Ministry. In view of these facts, you are requested to initiate necessary proceedings for annulling this agreement and recovery of Rs.1.2 crores with interest from M/s.Green Signal Biopharma Ltd." No reason has been assigned in the letter dated 24.06.2009 except stating that the agreement has not been approved by the Health Ministry. It is curious to note that an agreement that has been entered into by the Institute with the petitioners in the year 2006 was sought to be annulled in the middle of 2008. The alacrity and seriousness usually expected from the Governmental Authorities are totally absent in this case, suggesting something different about the events that had taken place. 7. Thus, assessing the issue involved with the materials available, it appears that the first accused, who was often addressed by the Government to identify an alternate mode for production of https://hcservices.ecourts.gov.in/hcservices/ measles vaccine by their own unit, ventured to procure materials and supply of technology only on the approval of the Government of India, for, even the communication addressed to the first accused on 05.06.2008 does not find fault with his action in entering into the agreement with the petitioners nor it states that the agreement was never placed before the competent authority but the only observation is that the agreement was not approved by the Ministry and payment made was not sanctioned. As regards the allegation that there is close nexus between the firm of the petitioners and the wife of the first accused, no valid materials have been collected to substantiate undue gain to the petitioner and wrongful loss to the Government. It must also be taken note of that the only Private Unit having monopoly in the field declined to supply the raw materials and their reply to the suggestion of the first accused must be viewed with all seriousness having regard to the sequence of events. Even the first line of the reply letter, dated 8th June, 2005, reflects the surprise and 'annoyance' expressed by the Private Unit for the alternate mode to commence production in the public sector. 8. Added to this, this court could fathom rather a strange attitude on the part of the Investigating Agency in dealing the case. It appears that, based on source information, preliminary investigation was conducted by the Investigating Officer without even approval by the competent authority. When approval was sought for, for registration of case, the Joint Director, CBI, SZ, Chennai, expressed his displeasure for submitting the verified source information report straightaway without obtaining approval of the competent authority for registration and verification of the Source Information Report. The Investigating Officer concerned was cautioned and the superior officer was instructed to ensure that the Investigating Officers do not resort to such practice in future. The conduct of the Investigating Officer in suo motu taking up preliminary enquiry without even approval from the authority concerned and proceeding further on his self-initiative and finally submitting a report for approval suggests that all was not well even from the inception. Contemporaneous materials gathered would go to