Case: Medmeme, LLC and Ors Vs. Ihorse BPO Solutions Pvt. Ltd

respect of the dues which were payable by the Appellant-company to the Respondent-company for the services rendered by the Respondent to the Appellant-company. Because of the aforesaid disputes, the Appellant-company sent legal notice dated 20.06.2012 to the Respondent-company invoking the arbitration clause contained in the agreement dated 01.12.2010 and nominating Mr. Justice Mohan Ram, a retired Judge of the Madras High Court as Arbitrator and requested the Respondent to also accept the said Arbitrator for adjudication of disputes between the parties. In response to the said notice, the Respondent sent communication dated 18.07.2012 wherein the Respondent informed that it had already filed Criminal Complaint No. 142 of 2012 against the Appellants alleging that the Appellants had committed offence of cheating and misappropriation punishable Under Sections 420, 406, 409 read with 120(B) of the Indian Penal Code and in the said complaint, after recording the statement of the complainant, the learned Magistrate had issued summons dated 05.04.2012 to the Appellants finding that prima facie case under the aforesaid provisions was made out. 6. The Appellants challenged the aforesaid summoning orders by filing petition Under Section 482 of the Code of Criminal Procedure, 1973, in the High Court of Madras. This petition has been dismissed by the High Court vide impugned judgment dated 11.11.2014 and challenging this judgment, the instant petition has been preferred by the Appellants wherein leave has been granted hereinabove. 7. To record the events that have taken place thereafter and have a bearing on the present case, we may note that when the Respondent-company had refuted the allegations of the legal notice dated 20.06.2012 sent by the Appellants for appointment of the Arbitrator, the Appellant-company filed petition Under Section 11(6) of the Arbitration and Conciliation Act, 1996, for appointment of an Arbitrator in this Court in terms of the arbitration agreement. Though this application was contested by the Respondent, ultimately, on a consensus being arrived at between the parties, orders dated 08.10.2014 were passed in the said arbitration application of the Appellants, appointing Mr. Justice Doraiswamy Raju, a former Judge of this Court, as the sole arbitrator to adjudicate the claims and counter claims of both the parties. It is also a matter of record that arbitration proceedings are going on before the learned Arbitrator. We are informed that both the parties have filed claims against each other. Evidence of both the parties is substantially over and the proceedings are at an advanced stage. We were also informed that the arbitration award is expected in near future. 8. Coming to the case at hand, a perusal of the judgment of the High Court would show that the High Court formulated the following three questions for determination: (i) Whether the complaint is liable to be quashed on the ground that the allegations made in the complaint do not constitute any offence Under Section 420 Indian Penal Code? (ii) Whether the criminal law can be set in motion in this case, since the agreement comprises a provision for arbitration? (iii) Whether the Magistrate has conducted the enquiry Under Section 202 Code of Criminal Procedure, since the Petitioners are residing outside the jurisdiction of the Court? 9. The High Court was of the view that the allegations contained in the complaint filed by the Respondent, particularly in paragraph 7 thereto, satisfy the ingredients of the offences for which the Appellants are implicated. But the High Court further observed that merely because arbitration proceedings were pending between the parties, it would not preclude the Respondent from launching criminal prosecution when prima facie criminal case was also made out against the Appellants. In the three question formulated, the High Court took the view that the Magistrate had conducted a proper inquiry Under Section 202 of the Code of Criminal Procedure before proceeding against the Appellants. 10. The moot question before us revolves around Question No. 1 which was formulated by the High Court and it is to be seen as to whether dispute between the parties is essentially of a civil nature or any case is made out against the Appellants for launching criminal prosecution under the aforesaid Sections. 11. After going through the allegations contained in the complaint and the material on record, we are of firm conclusion that the matter entirely pertains to civil jurisdiction and not even a prima facie case is made out for offences Under Sections 420, 406, 409 read with Section 120B of Indian Penal Code even if the allegations contained in the complaint are to be taken on their face value. The complaint gives a clear impression that it was primarily a case where the Respondent had alleged breach of contract on the part of the Appellants in not making the entire payments for the services rendered to the Appellants. On the other hand, it is not in dispute that substantial amounts have been paid by the Appellants to the Respondent-company for the services rendered. 12. Reason for non-payment of the balance amount as given by the Appellants is that the services rendered by the Respondent-company were not in terms of the agreement entered into between the parties and were deficient in nature. For this reason, even the Appellants have filed claims against the Respondent-company alleging that Appellant suffered losses because of the defective services provided by the Respondent. 13. On the basis of it, we find that it cannot be said that at the time of entering into the agreement, either the first agreement or even the second agreement, there was any intention on the part of the Appellants to cheat the Respondent. No suspicion of any nature was shown or even alleged. It is also not the allegation of the Respondent in the complaint that the agreement was entered into with fraudulent or dishonest intention on the part of the Appellants in inducing the Respondent to enter into such a contract. At best, the dispute between the parties is of a civil nature, proceedings in respect of which are pending before the learned Arbitrator.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]We are informed that both the parties have filed claims against each other. Evidence of both the parties is substantially over and the proceedings are at an advanced stage. We were also informed that the arbitration award is expected in near future11. After going through the allegations contained in the complaint and the material on record, we are of firm conclusion that the matter entirely pertains to civil jurisdiction and not even a prima facie case is made out for offences Under Sections 420, 406, 409 read with Section 120B of Indian Penal Code even if the allegations contained in the complaint are to be taken on their face value. The complaint gives a clear impression that it was primarily a case where the Respondent had alleged breach of contract on the part of the Appellants in not making the entire payments for the services rendered to the Appellants. On the other hand, it is not in dispute that substantial amounts have been paid by the Appellants to the Respondent-company for the services rendered12. Reason for non-payment of the balance amount as given by the Appellants is that the services rendered by the Respondent-company were not in terms of the agreement entered into between the parties and were deficient in nature. For this reason, even the Appellants have filed claims against the Respondent-company alleging that Appellant suffered losses because of the defective services provided by the Respondent13. On the basis of it, we find that it cannot be said that at the time of entering into the agreement, either the first agreement or even the second agreement, there was any intention on the part of the Appellants to cheat the Respondent. No suspicion of any nature was shown or even alleged. It is also not the allegation of the Respondent in the complaint that the agreement was entered into with fraudulent or dishonest intention on the part of the Appellants in inducing the Respondent to enter into such a contract. At best, the dispute between the parties is of a civil nature, proceedings in respect of which are pending before the learned Arbitrator.