whether the case of the appellant is a fit case for exercising the discretion in directing the sentence of imprisonment to run concurrently with the sentence of imprisonment imposed in the earlier case ? Since the appellant was already undergoing imprisonment in FIR No.64/2011, in terms of Section 427 Crl.P.C., subsequent sentences shall run consecutively until and unless the court specifically directs that they shall run concurrently. The appellant has already undergone 10 years of imprisonment for conviction in FIR No.64/2011. The appellant is currently undergoing imprisonment for conviction in FIR No.67/2011 out of which he has already undergone 01 year 06 months and 16 days as of 29.01.2020 . If the appellant is to undergo the sentences consecutively, the appellant has to undergo another about five years plus four years of imprisonment for the conviction in FIR No.263/2009. Pursuant to the order dated 13.12.2019, the Probation Officer, Department of Social Welfare, Govt. of NCT of Delhi had sent the report dated 10.01.2020 stating the family background and also that there is ample scope of improvement in the behaviour of the appellant and that he may be given a chance for reformation and reintegration with the family and the society. As per the report filed by the Probation officer dated 10.01.2020, on visiting the residential address of the appellant, it was found that his family is very poor and residing in a 50 yard house for the last 20 years. The father of the appellant is 11 58 years old, having ill health and the only bread winner in the family, was working as carpenter. The mother of the appellant was suffering from cancer and was not able to take treatment due to the poor economic condition. The father of the appellant submitted that the appellant was helping in his work before conviction. The elder sister of the appellant is married, but since the last one and a half year, she has been living in her maternal house due to domestic violence in her in-laws’ house. On enquiring from neighbours, they reported in favour of the appellant and his family. The family of the appellant expressed positive attitude to be reunited with the appellant and desired to live a normal social life. The appellant has full acceptance of his family and the appellant has also shown keen interest and willingness to re-unite with them. Considering the report of the Probation Officer, illness of the mother of the appellant, his family background, facts and circumstances of the case and in the interest of justice, in our view, this is a fit case for exercising discretion in directing the sentence of imprisonment to run concurrently. Since the appellant has a poor economic background, fine amount of Rs.10,000/- imposed on him each in FIR No.67/2011 and FIR No.263/2009 are set aside and therefore, the appellant need not to undergo default sentence of 12 imprisonment. This order to run the sentence of imprisonment concurrently has been made in the peculiar facts and circumstances of the case and the illness of the appellant’s mother and hence, the same may not be quoted as precedent in other cases

 whether the case of the appellant is a fit case for exercising the discretion in directing the sentence of imprisonment to run concurrently with the sentence of imprisonment imposed in the earlier case ?

Since the appellant was already undergoing imprisonment in FIR No.64/2011, in terms of Section 427 Crl.P.C., subsequent sentences shall run consecutively until and unless the court specifically directs that they shall run concurrently.
The appellant has already undergone 10 years of imprisonment for conviction in FIR No.64/2011. The appellant is currently undergoing imprisonment for conviction in FIR No.67/2011 out of which he has already undergone 01 year 06 months and 16 days as of 29.01.2020 .
If the appellant is to undergo the sentences consecutively, the appellant has to undergo another about five years plus four years of imprisonment for the conviction in FIR No.263/2009.
Pursuant to the order dated 13.12.2019, the Probation Officer, Department of Social Welfare, Govt. of NCT of Delhi had sent the report dated 10.01.2020 stating the family background and also that there is ample scope of improvement in the behaviour of the appellant and that he may be given a chance for reformation and reintegration with the family and the society. As per the report filed by the Probation officer dated 10.01.2020, on visiting the residential address of the appellant, it was found that his family is very poor and residing in a 50 yard house for the last 20 years. The father of the appellant is 11 58 years old, having ill health and the only bread winner in the family, was working as carpenter. The mother of the appellant was suffering from cancer and was not able to take treatment due to the poor economic condition. The father of the appellant submitted that the appellant was helping in his work before conviction. The elder sister of the appellant is married, but since the last one and a half year, she has been living in her maternal house due to domestic violence in her in-laws’ house. On enquiring from neighbours, they reported in favour of the appellant and his family. The family of the appellant expressed positive attitude to be reunited with the appellant and desired to live a normal social life. The appellant has full acceptance of his family and the appellant has also shown keen interest and willingness to re-unite with them.
Considering the report of the Probation Officer, illness of the mother of the appellant, his family background, facts and circumstances of the case and in the interest of justice, in our view, this is a fit case for exercising discretion in directing the sentence of imprisonment to run concurrently. Since the appellant has a poor economic background, fine amount of Rs.10,000/- imposed on him each in FIR No.67/2011 and FIR No.263/2009 are set aside and therefore, the appellant need not to undergo default sentence of 12 imprisonment. This order to run the sentence of imprisonment concurrently has been made in the peculiar facts and circumstances of the case and the illness of the appellant’s mother and hence, the same may not be quoted as precedent in other cases

NON-REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 208 OF 2020
(Arising out of SLP(Crl.) No.4201 of 2019)
VICKY @ VIKAS ...Appellant
VERSUS
STATE (GOVT. OF NCT OF DELHI) …Respondent
J U D G M E N T
R. BANUMATHI, J.
Leave granted.
2. This appeal has been filed by the appellant against the
impugned judgment dated 20.05.2016 passed by the High Court of
Judicature at Delhi in Criminal Appeal No.1496 of 2013, whereby
while dismissing the appeal filed by the appellant, the High Court also
dismissed his application to direct sentences awarded to him to run
concurrently.
3. Case of the prosecution in brief is that on 28.04.2011, at about
10:25 PM, the appellant along with co-accused Yamin @ Sohail
committed robbery upon the complainant Israr and took away
Rs.2700/- and the complainant’s mobile phone by inflicting injuries on
him with a knife. FIR No.67/2011 was registered against the accused
1
for the occurrence on 28.04.2011 at 10.25 PM. After completion of
investigation, charge-sheet was filed against the accused. In the trial,
charges were framed against the appellant and the co-accused under
Sections 392, 394, 397 IPC read with Section 34 IPC. The appellant
pleaded not guilty and claimed trial.
4. Based on the evidence adduced by the prosecution, the trial
court convicted the appellant under Sections 392 and 394 IPC while
acquitting him of the charge under Section 397 IPC. The trial court
sentenced the appellant to rigorous imprisonment for a period of
seven years and a fine of Rs.10,000/- with default sentence of one
month in case of non-payment of fine and clarified that this sentence
will run consecutively to the sentence imposed on the appellant in FIR
No.64/2011 under Sections 392, 397, 411 IPC read with Section 34
IPC.
5. In appeal, vide the impugned judgment, the High Court opined
that the conviction recorded by the trial court is based upon fair
appraisal of evidence and warrants no interference. As to the prayer
of the appellant directing sentences to run concurrently, the High
Court observed that the appellant is involved in sixteen criminal
cases, he is a habitual hard core criminal and in the instant case, not
only was the victim robbed of valuable articles but also inflicted with
2
grievous injuries on his body. The High Court thus rejected the prayer
that both the sentences in FIR No.64/2011 and FIR No.67/2011 to run
concurrently.
6. By order dated 26.04.2019, we had already held that we are not
inclined to interfere with the verdict of conviction of the appellant and
also the quantum of sentence imposed upon him. The instant appeal
is confined to the appellant’s prayer seeking concurrent running of
sentences imposed upon him.
7. The appellant faced trial in various cases and has been
convicted in number of cases. Mr. Anish Kumar Gupta, learned
counsel appearing for the appellant-accused has collected the details
from the Assistant Superintendent, Central Jail-13, Mandoli. By order
dated 13.12.2019, we have called for details of the cases pertaining
to the appellant from the Director General (Prison). Accordingly, the
Superintendent, Central Jail No.13 has sent the status report
containing the details of the cases in which the appellant is convicted
and the sentence of imprisonment imposed upon him and the period
of sentence undergone by him.
3
Case No. Details of Court
Date of
Conviction
Conviction and
Sentence
Sentence
undergone as
well as pending
and in which
cases
FIR No.64/2011
PS – Bhalswa
Dairy
ASJ, Rohini
Courts, Delhi
Date of conviction
- 02.06.2012
Section 394/397 IPC
Sentenced to R.I. for 10
years + Rs.10,000/- fine
Sentence
completed
(Sentence in
default of fine is
remaining)
FIR No.67/2011
SC No.58/2011
ASJ, Rohini
Courts, Delhi
Date of conviction
– 28.07.2012
Section 392/394 IPC
Sentence to R.I. for 7
years + Rs.10,000/- fine
in default for one month
Currently serving
sentence.
As of 11.12.2019,
he has undergone
01 year 04
months and 28
days.
During trial, he was
inside for 01 year
02 months and 17
days from
10.05.2011 to
27.07.2012.
FIR No.263/2009
PS – Janakpuri
CMM, Tis Hazari
Courts, Delhi
Date of conviction
– 09.09.2013
Section 394 IPC
Sentenced to R.I. for 4
years
Sentence will
commence after
completion of
sentence in case
FIR No.67/2011
FIR No.601/2007
PS – Model
Town
MM, Rohini
Courts, Delhi
Section 353/365/506
IPC
Sentence to the period
already undergone
Convict was inside
from 04.12.2013 to
16.09.2014.
FIR No.234/2012
PS – Subzi
Mandi
MM, Tis Hazari
Courts, Delhi
Section 20/61/85 of
NDPS Act
Sentence to the period
already undergone
Convict was inside
from 04.12.2013 to
15.09.2015.
8. As per the Status Report filed by the DGP on 16.01.2020, the
appellant is presently undergoing rigorous imprisonment for seven
years awarded to him in the case in FIR No.67/2011. As seen from
the above, as on 11.12.2019, the appellant has undergone actual
sentence of 01 year 04 months and 28 days and has earned
remission of 6 days. During trial of the case in FIR No.67/2011, the
4
appellant was in custody for 01 year 02 months and 17 days from
10.05.2011 to 27.07.2012. It has been stated that the sentence in the
case in FIR No.67/2011 started w.e.f. 02.10.2019 after expiry of
previous sentence of 10 years’ rigorous imprisonment in the case in
FIR No.64/2011. This sentence of imprisonment of ten years in the
case in FIR No.64/2011 was completed on 01.10.2019. In the case in
FIR No.263/2009, the appellant is also convicted and sentenced to 4
years’ rigorous imprisonment under Section 394 IPC vide order dated
09.09.2013 in the case in FIR No. 263/2019. This sentence would
commence after completion of sentence running in the case in FIR
No. 67/2011. Further on 16.09.2014, the appellant was convicted in
the case in FIR No.601/2007 under Sections 353, 365 and 506 IPC.
On 15.09.2015, he was convicted under Sections 20, 61 and 85 of
NDPS Act in the case in FIR No. 234/2012. However as noted above,
in both these cases – FIR No.601/2007 and FIR No.234/2012, he was
sentenced to the period already undergone, i.e. judicial custody from
04.12.2013 till the date of decision in these cases.
9. The point falling for consideration is whether the sentence of
imprisonment in the cases in FIR No.64/2011, FIR No.67/2011 and
FIR No.263/2009 are to be ordered to run concurrently. We are
conscious that the case in FIR No.263/2009 is not before us.
5
However, considering the facts and circumstances of the case and
the family background of the appellant and with a view to give quietus
to the matter, we have considered the case in FIR No.263/2009 also.
10. Section 427 Crl.P.C. deals with the situations where an offender
who is already undergoing a sentence of imprisonment is sentenced
to imprisonment on a subsequent conviction or imprisonment for life.
Section 427 Crl.P.C. provides that such imprisonment or
imprisonment for life shall commence at the expiration of the
imprisonment to which he has been previously sentenced unless the
Court directs that the subsequent sentence shall run concurrently with
such previous sentence. Section 427 Crl.P.C. reads as under:-
“427. Sentence on offender already sentenced for another offence.-
(1) When a person already undergoing a sentence of imprisonment is
sentenced on a subsequent conviction to imprisonment or imprisonment
for life, such imprisonment or imprisonment for life shall commence at the
expiration of the imprisonment to which he has been previously sentenced,
unless the Court directs that the subsequent sentence shall run
concurrently with such previous sentence:
 Provided that where a person who has been sentenced to
imprisonment by an order under section 122 in default of furnishing
security is, whilst undergoing such sentence, sentenced to imprisonment
for an offence committed prior to the making of such order, the latter
sentence shall commence immediately.
(2) When a person already undergoing a sentence of imprisonment for life
is sentenced on a subsequent conviction to imprisonment for a term or
6
imprisonment for life, the subsequent sentence shall run concurrently with
such previous sentence.”
11. We may refer to the decision of the Supreme Court in Mohd.
Akhtar Hussain alias Ibrahim Ahmed Bhatti v. Assistant Collector of
Customs (Prevention), Ahmedabad and Another (1988) 4 SCC 183,
wherein the Supreme Court recognised the basic rule of convictions
arising out of a single transaction justifying concurrent running of the
sentences. In Mohd. Akhtar Hussain, it was held as under:-
“10. The basic rule of thumb over the years has 7been the so-called single
transaction rule for concurrent sentences. If a given transaction constitutes
two offences under two enactments generally, it is wrong to have
consecutive sentences. It is proper and legitimate to have concurrent
sentences. But this rule has no application if the transaction relating to
offences is not the same or the facts constituting the two offences are quite
different.
……….
12. The submission, in our opinion, appears to be misconceived. The
material produced by the State unmistakably indicates that the two
offences for which the appellant was prosecuted are quite distinct and
different. The case under the Customs Act may, to some extent, overlap
the case under the Gold (Control) Act, but it is evidently on different
transactions. The complaint under the Gold (Control) Act relates to
possession of 7000 tolas of primary gold prohibited under Section 8 of the
said Act. The complaint under the Customs Act is with regard to smuggling
of gold worth Rs 12.5 crores and export of silver worth Rs 11.5 crores. On
these facts, the courts are not unjustified in directing that the sentences
should be consecutive and not concurrent.”
7
12. After referring to Mohd. Akhtar Hussain and other cases, in V.K.
Bansal v. State of Haryana and Another (2013) 7 SCC 211, the
Supreme Court held that the legal position favours exercise of
discretion to the benefit of the prisoner in cases where the
prosecution is based on a single transaction no matter different
complaints may have been filed. In V.K. Bansal, it was held as under:-
“14. We may at this stage refer to the decision of this Court in Mohd.
Akhtar Hussain v. Collector of Customs (1988) 4 SCC 183 in which this
Court recognised the basic rule of convictions arising out of a single
transaction justifying concurrent running of the sentences. ….”
15. In Madan Lal case (2009) 5 SCC 238 this Court relied upon the
decision in Akhtar Hussain case (1988) 4 SCC 183 and affirmed the
direction of the High Court for the sentences to run concurrently. That too
was a case under Section 138 of the Negotiable Instruments Act. The
State was aggrieved of the direction that the sentences shall run
concurrently and had appealed to this Court against the same. This Court,
however, declined interference with the order passed by the High Court
and upheld the direction issued by the High Court.
16. In conclusion, we may say that the legal position favours exercise of
discretion to the benefit of the prisoner in cases where the prosecution is
based on a single transaction no matter different complaints in relation
thereto may have been filed as is the position in cases involving dishonour
of cheques issued by the borrower towards repayment of a loan to the
creditor.”
13. In V.K. Bansal, the appellant-accused was facing fifteen cases
and the Supreme Court has grouped fifteen cases into three different
groups:- (i) the first having twelve cases relating to advancement of
8
loan/banking facility to M/s Arawali Tubes Ltd. acting through the
appellant thereon as Director; (ii) the second having two cases
relating to advancement of loan to the appellant M/s Arawali Alloys
Ltd. acting through the appellant as its Director; and (iii) the third
having a single case qua the criminal complaint by the State Bank of
Patiala. The Court directed that the substantive sentences within first
two groups would run inter-se concurrently. The Supreme Court
directed that the substantive sentences in first two groups and that in
respect of the case in the third group would run consecutively.
14. Following the decision in V.K. Bansal, in Benson v. State of
Kerala (2016) 10 SCC 307, the Supreme Court directed that the
sentences imposed in each of the cases shall run concurrently with
the sentence imposed in Crime No.8 which was then currently
operative. However, the Court held that the benefit of “concurrent
running of sentences” is granted only with respect of substantive
sentences; but the sentences of fine and default sentences shall not
be affected by the direction. The Supreme Court observed that the
provisions of Section 427 Crl.P.C. do not permit a direction for the
concurrent running of the default sentence for non-payment of fine.
15. Further, in the case of Anil Kumar v. State of Punjab (2017) 5
SCC 53, it was held by this court that “in terms of sub-section (1) of
9
Section 427, if a person already undergoing a sentence of
imprisonment is sentenced on a subsequent conviction to
imprisonment, such subsequent term of imprisonment would normally
commence at the expiration of the imprisonment to which he was
previously sentenced. Only in appropriate cases, considering the
facts of the case, the court can make the sentence run concurrently
with an earlier sentence imposed. The investiture of such discretion,
presupposes that such discretion be exercised by the court on sound
judicial principles and not in a mechanical manner. Whether or not the
discretion is to be exercised in directing sentences to run concurrently
would depend upon the nature of the offence/offences and the facts
and circumstances of each case.”
16. The point falling for consideration is whether the case of the
appellant is a fit case for exercising the discretion in directing the
sentence of imprisonment to run concurrently with the sentence of
imprisonment imposed in the earlier case in FIR No.64/2011. Of
course, FIR No.64/2011, FIR No.67/2011 and FIR No.263/2009 relate
to different transactions. Since the appellant was already undergoing
imprisonment in FIR No.64/2011, in terms of Section 427 Crl.P.C.,
subsequent sentences shall run consecutively until and unless the
court specifically directs that they shall run concurrently.
10
17. Coming to the facts of the instant case, we find that the
appellant is a young man with roots in his family. The appellant has
already undergone 10 years of imprisonment for conviction in FIR
No.64/2011. The appellant is currently undergoing imprisonment for
conviction in FIR No.67/2011 out of which he has already
undergone 01 year 06 months and 16 days as of 29.01.2020. As
per status report of the DGP (Prison), during the trial in FIR
No.67/2011, the appellant was in custody for 01 year 02 months and
17 days i.e. with effect from 10.05.2011 to 27.07.2012. If the
appellant is to undergo the sentences consecutively, the appellant
has to undergo another about five years plus four years of
imprisonment for the conviction in FIR No.263/2009.
18. Pursuant to the order dated 13.12.2019, the Probation Officer,
Department of Social Welfare, Govt. of NCT of Delhi had sent the
report dated 10.01.2020 stating the family background and also that
there is ample scope of improvement in the behaviour of the appellant
and that he may be given a chance for reformation and reintegration
with the family and the society. As per the report filed by the
Probation officer dated 10.01.2020, on visiting the residential address
of the appellant, it was found that his family is very poor and residing
in a 50 yard house for the last 20 years. The father of the appellant is
11
58 years old, having ill health and the only bread winner in the family,
was working as carpenter. The mother of the appellant was suffering
from cancer and was not able to take treatment due to the poor
economic condition. The father of the appellant submitted that the
appellant was helping in his work before conviction. The elder sister
of the appellant is married, but since the last one and a half year, she
has been living in her maternal house due to domestic violence in her
in-laws’ house. On enquiring from neighbours, they reported in favour
of the appellant and his family. The family of the appellant expressed
positive attitude to be reunited with the appellant and desired to live a
normal social life. The appellant has full acceptance of his family and
the appellant has also shown keen interest and willingness to re-unite
with them.
19. Considering the report of the Probation Officer, illness of the
mother of the appellant, his family background, facts and
circumstances of the case and in the interest of justice, in our view,
this is a fit case for exercising discretion in directing the sentence of
imprisonment to run concurrently. Since the appellant has a poor
economic background, fine amount of Rs.10,000/- imposed on him
each in FIR No.67/2011 and FIR No.263/2009 are set aside and
therefore, the appellant need not to undergo default sentence of
12
imprisonment. This order to run the sentence of imprisonment
concurrently has been made in the peculiar facts and circumstances
of the case and the illness of the appellant’s mother and hence, the
same may not be quoted as precedent in other cases.
20. In the result, the sentence of imprisonment imposed upon the
appellant in FIR No.64/2011, FIR No.67/2011 and FIR No.263/2009
are ordered to run concurrently. The fine amount of Rs.10,000/-
imposed on the appellant each in FIR No.67/2011 and FIR
No.263/2009 are set aside and therefore, the appellant need not to
undergo default sentence of imprisonment. The appellant has
already undergone rigorous imprisonment for ten years in FIR
No.64/2011 which is ordered to run concurrently with sentence of
imprisonment in FIR No.67/2011 and also the sentence of
imprisonment in FIR No.263/2009. The appellant is ordered to be
released forthwith. The appeal is, accordingly, disposed of.
………………………..J.
 [R. BANUMATHI]
………………………..J.
 [A.S. BOPANNA]
New Delhi;
January 31, 2020.
13

Quashing of Criminal Proceedings - Section 420 read with Section 120B of the IPC - At this stage, it is required to be noted that though the FIR was filed in the year 2000 and the chargesheet was submitted/filed as far back as on 28.5.2004, the appellants were served with the summons only in the year 2017, i.e., after a period of approximately 13 years from the date of filing the chargesheet. Under the circumstances, the High Court has committed a grave error in not quashing and setting aside the impugned criminal proceedings and has erred in not exercising the jurisdiction vested in it under Section 482 Cr.P.C.- there are no specific allegations and averments in the FIR and/or even in the chargesheet that fraudulent and dishonest intention of the accused was from the very beginning of the transaction. It is also required to be noted that contract between M/s SPML Infra Limited and the Government was for supply and commissioning of the Nurang Hydel Power Project including three power generating units. The appellants purchased the turbines for the project from another manufacturer. The company used the said turbines in the power project. The contract was in the year 1993. Thereafter in the year 1996 the project was commissioned. In the year 1997, the Department of Power issued a certificate certifying satisfaction over the execution of the project. Even the defect liability period ended/expired in January, 1998. In the year 2000, there was some defect found with respect to three turbines. Immediately, the turbines were replaced. If the intention of the company/appellants was to cheat the Government of Arunachal Pradesh, they would not have replaced the turbines which were found to be defective. In any case, there are no specific allegations and averments in the complaint that the accused had fraudulent or dishonest intention at the time of entering into the contract. Therefore, applying the law laid down by this Court in the aforesaid decisions, it cannot be said that even a prima facie case for the offence under Section 420 IPC has been made out. It is also required to be noted that the main allegations can be said to be against the company. The company has not been made a party. The allegations are restricted to the Managing Director and the Director of the company respectively. There are no specific allegations against the Managing Director or even the Director. There are no allegations to constitute the vicarious liability. In the case of Maksud Saiyed v. State of Gujarat (2008) 5 SCC 668, it is observed and held by this Court that the penal code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the company when the accused is the company. It is further observed and held that the vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. It is further observed that statute indisputably must contain provision fixing such vicarious liabilities. It is further observed that even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability. In the present case, there are no such specific allegations against the appellants being Managing Director or the Director of the company respectively. Under the circumstances also, the impugned criminal proceedings are required to be quashed and set aside.

Quashing of Criminal Proceedings - Section 420 read with Section 120B of the IPC -   At this stage, it is required to be noted that though the FIR was   filed   in   the   year   2000   and   the   chargesheet   was submitted/filed  as far back as on 28.5.2004, the appellants were served with the summons only in the year 2017, i.e., after a period   of   approximately   13   years   from   the   date   of   filing   the
chargesheet.     Under   the   circumstances,   the   High   Court   has committed a grave error in not quashing and setting aside the impugned criminal proceedings and has erred in not exercising the jurisdiction vested in it under Section 482 Cr.P.C.- there are no specific allegations and averments in the FIR and/or even in the chargesheet that fraudulent and dishonest intention  of   the   accused   was  from  the   very   beginning  of   the transaction.  It is also required to be noted that contract between M/s SPML Infra Limited and the Government was for supply and commissioning of the Nurang Hydel Power Project including three power generating units.  The appellants purchased the turbines for the project from another manufacturer.  The company used the said turbines in the power project.  The contract was in the year   1993.     Thereafter   in   the   year   1996   the   project   was
commissioned.    
In   the   year   1997,   the   Department   of   Power issued a certificate certifying satisfaction over the execution of the project.   Even the defect liability period ended/expired in January, 1998. 
 In the year 2000, there was some defect found with respect to three turbines.   Immediately, the turbines were replaced.   If   the   intention   of   the company/appellants was to cheat the Government of Arunachal Pradesh, they would not have replaced the turbines which were found   to   be   defective.     In   any   case,   there   are   no   specific allegations and averments in the complaint that the accused had fraudulent or dishonest intention at the time of entering into the contract.  
Therefore, applying the law laid down by this Court in the aforesaid decisions, it cannot be said that even a prima facie case for the offence under Section 420 IPC has been made out.
It is also required to be noted that the main allegations can be said to be against the company.  The company has not been made a party.   
The allegations are restricted to the Managing Director and the Director of the company respectively.  There are no specific allegations against the Managing Director or even the Director.   There are no allegations to constitute the vicarious liability.  
In the case of Maksud Saiyed v. State of Gujarat (2008) 5 SCC 668, it is observed and held by this Court that the penal code   does   not   contain   any   provision   for   attaching   vicarious
liability on the part of the Managing Director or the Directors of the company when the accused is the company.   It is further observed and held that the vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute.   It is further observed that statute indisputably   must   contain   provision   fixing   such   vicarious liabilities.  It is further observed that even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations   which   would   attract   the   provisions   constituting vicarious liability.  In the present case, there are no such specific allegations against the appellants being Managing Director or the Director of the company respectively.  Under the circumstances also,   the   impugned   criminal  proceedings   are   required   to   be quashed and set aside.


REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 125   OF 2020
(Arising from SLP(Crl.) No. 590 of 2019)
Sushil Sethi and another ..Appellants
Versus
The State of Arunachal Pradesh and others ..Respondents
J U D G M E N T
M.R. SHAH, J.
Feeling   aggrieved   and   dissatisfied   with   the   impugned
judgment and order dated 07.09.2018 passed by the High Court
of Gauhati at Itanagar in Criminal Petition No. 36(AP) of 2017, by
which the High Court has dismissed the said criminal petition
preferred by the appellants herein to quash and set aside the
1
criminal   proceedings   being   G.R.   Case   No.   05/200/294,   the
original accused nos. 1 & 2 have preferred the present appeal.
2. That appellant no.1 is the Managing Director of M/s. SPML
Infra   Limited,   previously   known   as   M/s   Subhas   Project
Marketing Limited, and appellant no.2 is the Director of the said
firm M/s SPML Infra Limited.   M/s SPML Infra Limited is a
public limited company incorporated under the Companies Act,
1956.   A contract was entered into between M/s SPML Infra
Limited   and   the   Government   of   Arunachal   Pradesh   on
18.03.1993 for construction, supply and commissioning of the
Nurang Hydel Power Project including three power generating
units for a consideration of Rs.24.96 crores approximately.   As
per clause 2(c) of the contract, the defect liability period for the
works   was   to   be   for   a   period   of   18   months.     Project   was
commissioned   in   the   month   of   July,   1996.     That   the   defect
liability period for the works of M/s SPML Infra Limited expired
in   the   month   of   January,   1998.     That   thereafter   the   project
became   operational   and   started   generating   electricity   and
according   to   the   appellants   till   20.09.1998   the   project   had
generated 90 lakhs KW units.  According to the appellants even
the said project is also in operation today.   There were some
2
disputes  with  respect  to  the   payment  of  maintenance  by  the
respondents.  The appellants issued notice to the respondents to
take   over   the   project   before   31.03.2000   on   account   of   nonpayment of maintenance, vide notice dated 09.03.2000. 
2.1 That   thereafter   the   respondents   –   original   complainant
lodged the complaint against the appellants and others being
Jang PS Case No. 05/2000 for the offence under Section 420 of
the IPC alleging inter alia that the appellants provided inferior
quality   materials   in   contravention   with   the   provisions   of   the
contract   which   stipulated   specific   percentages   of   nickel   and
chromium to be used.  It was alleged in the complaint that the
appellants were required to supply the equipments as per the
terms of the contract.  As per the complaint, in course of physical
inspection   of   the   plant,   the   DOP   found   that   three   runners
turbines, viz, turbine nos. 1, 2 and 3 were cracked and damaged.
Therefore, the damaged components were sent for testing and the
National Test House, Calcutta submitted its report and it was
found that the chemical composition of the broken runner was
found   containing   5.28%   Nickel   and   7.5%   Chromium,   which
composition   was   contrary   to   the   specification   as   per   the
agreement.   Therefore, it was alleged that M/s SPML, Calcutta
3
had supplied sub­standard turbines containing composition of
materials   not   in   accordance   with   the   specification   of   MOU,
resulted in frequent damage of runner turbine buckets.  On the
strength of written complaint, an FIR was lodged/registered.  It
appears   that   during   the   course   of   the   investigation,   the
Investigating   Officer   found/discovered   the
illegalities/irregularities   in   awarding   the   contract   at   a   higher
price.  Even during the course of investigation, the Investigating
Officer   found   some   officials   responsible   for   the   omission   and
neglect of duties and it was found that the officials named in the
charge sheet were involved/connived with the firm M/s SPML
Infra Limited with a view to cheat the Government of Arunachal
Pradesh. After conclusion of the investigation, the Investigating
Officer filed the final report/chargesheet 28.05.2004 against the
appellants and others for the offences under Section 120­B and
420 of the IPC.  2.2 According to the appellants, they were not
aware about the filing of the FIR and the chargesheet against
them till the year 2017 and on being aware of the FIR and the
chargesheet   against   them,   the   appellants   preferred   a   petition
before   the   High   Court   for   quashing   the   aforesaid   criminal
proceedings under Section 482 Cr.P.C.   It was contended on
4
behalf of the appellants that the matter pertains to the contract
and therefore purely a civil and contractual dispute has been
given the colour of criminality and that too with a mala fide
intention as they served a notice upon the respondents to pay the
maintenance amount due and payable.  It was also submitted on
behalf   of   the   appellants   that   they   are   the   Managing
Director/Director of M/s SPML Infra Limited – a company and
that the company has not been arrayed as an accused.  It was
submitted that there are no allegations that the appellants were
in­charge of the affairs of the company and therefore vicariously
liable.  Number of other submissions were also made on merits in
support of their submission that the offence under Section 420
IPC has not been made out at all.  It was also submitted that as
soon as the company/appellants were informed with respect to
the   defect,   despite   the   defect   liability   period   was   over,   they
changed the turbines in the year 2000.   It was also submitted
that all through out the project has run and even still running. 
2.3 That by the impugned judgment and order, the High Court
has refused to quash the criminal proceedings.  While rejecting
the quashing petition, the High Court has observed that there are
allegations not only against the appellants, but also against the
5
connected company executives and engineers of the Government
of   Arunachal   Pradesh   and   there   are   allegations   of   criminal
conspiracy amongst themselves in the supply of sub­standard
runner turbines and receiving the sub­standard runner turbines
which were not in conformity with the specified standard and the
others   co­accused   persons   have   not   come   up   with   a   similar
petition under Section 482 Cr.P.C. and therefore at this stage it is
not possible to segregate the case qua the appellants only. 
2.4 Feeling   aggrieved   and   dissatisfied   with   the   impugned
judgment and order passed by the High Court in refusing to
quash the criminal proceedings against the appellants in exercise
of powers under Section 482 Cr.P.C., the original accused nos. 1
& 2 – Managing Director/Director of M/s. SPML Infra Limited
have preferred the present appeal.
3. Shri Harin P. Raval, learned Senior Advocate appearing on
behalf of the appellants has vehemently submitted that in the
facts   and   circumstances   of   the   case   the   High   Court   has
committed   a   grave   error   in   not   exercising   the   power   under
Section 482 Cr.P.C and not quashing the criminal proceedings.
3.1 It   is   further   submitted   by   Shri   Raval,   learned   Senior
Advocate appearing on behalf of the appellants that the High
6
Court has failed to appreciate and consider the fact that by the
impugned   criminal   proceedings   the   complainant   has   tried   to
convert purely a civil dispute into a criminal case.
3.2 It   is   further   submitted   by   Shri   Raval,   learned   Senior
Advocate appearing on behalf of the appellants that the High
Court has failed to consider and appreciate that the allegations
as contained in the FIR even if taken on face value and assumed
to   be   correct   in   entirety,     do   not   disclose   a   prima   facie
commission of an offence, much less a cognizable offence.
3.3 It   is   further   submitted   by   Shri   Raval,   learned   Senior
Advocate   appearing   on   behalf   of   the   appellants   that   a   bare
perusal of the FIR would demonstrate that the allegations seem
to be supply of inferior quality of raw materials as seen under
test report of National Test House, Calcutta which purportedly
does not match with the test certificate given by the company.  It
is submitted that there is nothing in the entire body of FIR to
suggest even remotely the element of existence of fraudulent and
dishonest intention from the initiation of the transaction between
the parties.
3.4 It   is   further   submitted   by   Shri   Raval,   learned   Senior
Advocate appearing on behalf of the appellants that the High
7
Court has not properly appreciated and considered the fact that
the defect liability period expired much before the filing of the
complaint/FIR.
3.5 It   is   further   submitted   by   Shri   Raval,   learned   Senior
Advocate   appearing   on   behalf   of   the   appellants   that   even
thereafter also the company continued the maintenance work
and the project is running.  It is submitted that in fact the project
was   commissioned   in   the   year   1996   and   the   project   had
generated 90 lakhs KW units till 20.09.1998 even as per the
certificate issued by the Department of Power.
3.6 It   is   further   submitted   by   Shri   Raval,   learned   Senior
Advocate appearing on behalf of the appellants that the High
Court has failed to appreciate the fact that the impugned FIR and
the complaint subsequently filed  has been filed with a mala fide
intention and after the company demanded to pay the amount for
regular maintenance work.
3.7 It   is   further   submitted   by   Shri   Raval,   learned   Senior
Advocate appearing on behalf of the appellants that the High
Court ought to have appreciated that the FIR was lodged on
26.06.2000   only   after   the   appellants   issued   notice   dated
9.3.2000 by which the complainant was called upon to take over
8
the project before 31.03.2000 on account of non­payment of the
maintenance charges.
3.8 It   is   further   submitted   by   Shri   Raval,   learned   Senior
Advocate appearing on behalf of the appellants that the High
Court has failed to appreciate and consider the fact that the
disputes between the parties were pending before the arbitrators.
It is submitted that in fact the company was required to initiate
the   arbitration   proceedings   on   account   of   being   denied   the
legitimate due payments.
3.9 It   is   further   submitted   by   Shri   Raval,   learned   Senior
Advocate appearing on behalf of the appellants that looking to the
averments and the allegations in the complaint/FIR, it cannot be
said that ingredients for committing the offence under Section
420 IPC has been made out.  It is submitted that there are no
allegations in the FIR that the appellants acted in dishonest and
fraudulent intention from the very inception of the contract with
the respondent – State.
3.10 It   is   further   submitted   by   Shri   Raval,   learned   Senior
Advocate   appearing   on   behalf   of   the   appellants   that   the
allegations as contained in the FIR at best pointed towards the
dispute,   namely,   relating   to   breach   of   the   conditions   of   the
9
contract   and   therefore   at   best   could   have   given   rise   to   civil
liability.
3.11 It   is   further   submitted   by   Shri   Raval,   learned   Senior
Advocate appearing on behalf of the appellants that the High
Court has failed to appreciate that no complaint has been filed
against the company – M/s SPML Infra Limited and only the
appellants being the Managing Director/Director of M/s SPML
Infra Limited are joined as accused.  It is submitted that as held
by this Court in catena of decisions in the absence of the main
company   being   joined   as   accused   the   criminal   proceedings
against   the   Directors   of   the   company   alone   shall   not   be
maintainable.
3.12 It   is   further   submitted   by   Shri   Raval,   learned   Senior
Advocate   appearing   on   behalf   of   the   appellants   that   even
otherwise   there   are   no   averments   and   allegations   in   the
complaint   that   the   appellants   were   in   charge   of   the
administration   of   the   company   and   therefore   they   were
vicariously liable for the act of the company.
3.13 It   is   further   submitted   by   Shri   Raval,   learned   Senior
Advocate appearing on behalf of the appellants that the High
Court has failed to appreciate that apart from the fact that defect
10
liability period had expired in the year 1998 and even thereafter
the   certificates   were   issued   by   the   Chief   Engineer   certifying
satisfaction   over   the   execution   of   the   project   and   its
commissioning in July, 1996, the defects subsequently detected
were cured even after the defect period was over and even the
company changed the turbines.  It is submitted that therefore if
the intention of the company and/or the appellants was to cheat,
in that case, they would not have changed/replaced the runner
buckets.
3.14 It   is   further   submitted   by   Shri   Raval,   learned   Senior
Advocate appearing on behalf of the appellants that the High
Court has not properly appreciated and considered the role of the
appellants   and   their   company   in   the   entire   contract.     It   is
submitted that the entire contract was not to manufacture the
turbines   and   the   runner   buckets   by   the   appellants   and   the
company, but to only procure the same from the manufacturer
and supply the same to the respondents.  It is submitted that the
company relied upon the certificate issued by the manufacturer
and simply used the said turbines in the project.  It is submitted
that therefore also the appellants cannot be saddled with the
11
criminal liability for any manufacturing defect when the same
was not even in the domain of the appellants and their company.
3.15 It   is   further   submitted   by   Shri   Raval,   learned   Senior
Advocate   appearing   on   behalf   of   the   appellants   that   even
otherwise   when   the   final   report   has   been   filed   by   the
investigating officer, the chargesheet has gone much beyond the
allegations and averments in the FIR.
3.16 It   is   further   submitted   by   Shri   Raval,   learned   Senior
Advocate appearing on behalf of the appellants that though there
were no allegations in the complaint/FIR, the police authorities
went into the commercial efficacy of the project through which
M/s SPML Infra Limited was selected.  It is submitted that merely
because there was a margin difference between the purported
manufacturing cost of the turbines and the rates quoted by the
company,   the   appellants   cannot   be   held   guilty   of   a   criminal
offence of cheating.   It is submitted that as such the company
was the lowest bidder and was awarded the contract after due
deliberations by the tendering committee.
3.17 It   is   further   submitted   by   Shri   Raval,   learned   Senior
Advocate appearing on behalf of the appellants that the High
12
Court has failed to exercise the powers under Section 482 Cr.P.C.
and thus has not exercised the jurisdiction vested in it.
3.18 Making   the   above   submissions   and   relying   upon   the
decisions of this Court in the cases of State of Haryana v. Bhajan
Lal 1992 Supp. (1) SCC 335; Hira Lal Hari Lal Bhagwati v. CBI,
New Delhi (2003) 5 SCC 257; Indian Oil Corporation v. NEPC India
Limited and others (2006) 6 SCC 736; V.V. Jose and another v.
State of Gujarat and another (2009) 3 SCC 78; Vesa Holdings
Private Limited v. State of Kerala and others (2015) 8 SCC 293;
and Sharad Kumar Sanghi v. Sangita Rane (2015) 12 SCC 781, it
is prayed to allow the present appeal and quash and set aside the
impugned   criminal   proceedings   so   far   as   the   appellants   are
concerned.
4. The present appeal is vehemently opposed by the learned
counsel   appearing   on   behalf   of   the   respondents   –   State   of
Arunachal Pradesh.
4.1 It is vehemently submitted by the learned counsel appearing
on behalf of the respondent – State and the counsel on behalf of
the original complainant that having found a prima facie case for
the offence under Section 420 IPC for delivering/supplying sub13
standard   materials   and   charging   exorbitant   rates   for   such
materials with a criminal intent to dupe the Government with
huge public money, the High Court has rightly refused to quash
the criminal proceedings.
4.2 It is further submitted by the learned counsel appearing on
behalf of the respondents that the appellants are charged for the
offences under Section 420 read with 120B IPC.  It is submitted
that as per the inspection carried out by the Department and
even as revealed during the investigation the appellants supplied
the sub­standard runner turbines which are used by the accused
though they were not in conformity with the specified standards.
It   is   submitted   that   therefore   a   prima   facie   case   of   criminal
conspiracy between the accused to cheat the government has
been made out.
4.3 It is further submitted by the learned counsel appearing on
behalf   of   the   respondents   that   there   being   enough
material/evidences against the appellants and therefore this is a
fit case wherein the appellants are liable to be prosecuted for the
commission of an offence under Section 420, 120B IPC.
4.4 It is further submitted by the learned counsel appearing on
behalf   of   the   respondents   that   the   arbitration   proceedings
14
initiated by the appellants/company has nothing to do with the
criminal dispute.  It is submitted that therefore it cannot be said
that the civil dispute is tried to be converted into a criminal
dispute.
4.5 It is further submitted by the learned counsel appearing on
behalf of the respondents that even otherwise as held by this
Court in catena of decisions just because a proceeding has a civil
nature does not mean that no criminality exists in the same.
4.6 It is further submitted by the learned counsel appearing on
behalf of the respondents that during the course of investigation
it has been found that one Kartik Steel Limited, Chennai tested
the components supplied by M/s SPML Infra Limited and the
report   suggests   that   the   materials   were   sub­standard.     It   is
submitted that therefore it is a clear cut case that the appellants
had prior knowledge of the low quality of the materials which
they supplied to the department.
4.7 It is further submitted by the learned counsel appearing on
behalf of the respondents that during the course of investigation,
it is found that the appellants have not only cheated the DOP by
supplying   sub­standard   materials   but   they   also   charged
exorbitant rates for the three runner buckets turbines in spite of
15
their  knowledge that the said runner buckets were not up to the
satisfaction.  It is submitted that during the investigation it has
come on record that the turbines were manufactured by M/s
Beacon Neyrpic, Chennai and the rates quoted by the appellants
and the manufacturing company were compared.  It is submitted
that   it   has   been   found   that   cost   as   per   the   manufacturing
company   was   Rs.1,61,04,000/­,   however,   M/s   SPML   Infra
Limited charged Rs.5,18,50,049/­. Thus, there was a difference
in the rate to the tune of Rs.3,57,46,049/­.  It is submitted that
therefore there was a fraudulent and dishonest intention from
the initiation of the transaction between the parties.
4.8 It is further submitted by the learned counsel appearing on
behalf of the respondents that thus the supply of sub­standard
material at three times higher rates and the prior knowledge of
the   sub­standard   quality   of   the   material   shows   that   the
appellants had criminal intent to supply sub­standard quality
material at a higher price to the DOP/Government of Arunachal
Pradesh.  It is submitted that therefore the appellants are rightly
chargesheeted for the offence under Section 420 read with 120B
IPC.
16
4.9 It is further submitted by the learned counsel appearing on
behalf of the respondents that appellant no.1 is the Managing
Director and appellant no.2 is the Director of the company – M/s
SPML   Infra   Limited   and   therefore   being   Managing
Director/Director of the company, naturally they were in charge
of   the   administration   and   management   of   the   company   and
therefore are vicariously liable.  It is submitted that the aforesaid
has   been   elaborately   considered   by   the   High   Court   in   the
impugned   judgment   and   order.     It   is   submitted   that   even
otherwise as rightly observed by the High Court at this stage it is
not possible to segregate only the appellants case.
4.10 It is further submitted by the learned counsel appearing on
behalf of the respondents that whatever submissions are made
on behalf of the appellants are their defences which are required
to be considered at the time of the trial.  It is submitted that after
thorough   investigation,   the   investigating   agency   has   filed   the
chargesheet against the appellants and other accused for the
offences   under   Section   420   read   with   120B   IPC   and   more
particularly with respect to criminal conspiracy, the High Court
has rightly refused to quash the criminal proceedings in exercise
of powers under Section 482 Cr.P.C., which powers are required
17
to be exercised sparingly and in exceptional cases, as observed by
this Court in catena of decisions.
4.11 Making   the   above   submissions   and   relying   upon   the
decision   of   this   Court   in   the   case   of     Sau.   Kamal   Shivaji
Pokarnekar v. The State of Maharashtra and others, reported in
2019   SCC   Online   SC   182   (Criminal   Appeal   No.255   of   2019
decided   on   12.02.2019),   it   is   prayed   to   dismiss   the   present
appeal.
5. We have heard the learned counsel for the respective parties
at length.  We   have   also   gone   through   and   considered   the
averments and allegations in the FIR as well as the charge sheet
filed by the investigating agency. 
5.1 At the outset, it is required to be noted that the chargesheet
has   been   filed   against   the   appellants   for   the   offences   under
Section 420 read with Section 120B of the IPC.  By the impugned
judgment and order, the High Court has refused to quash the FIR
and the chargesheet against the appellants in exercise of powers
under Section 482 Cr.P.C..  Therefore, the short question which
is posed for the consideration of this Court is, whether a case has
been made out to quash the FIR and the chargesheet against the
18
appellants for the offences under Section 420 read with Section
120B of the IPC, in exercise of powers under Section 482 Cr.P.C?
6. Considering the averments and the allegations in the FIR
and   even   the   chargesheet   the   main   allegations   are   that   the
company,   namely,   M/s   SPML   Infra   Limited   supplied   substandard materials – runner bucket turbines and the supplied
runner   bucket   turbines   were   not   as   per   the   technical
specifications.   It is also required to be noted that there is no
FIR/complaint/chargesheet against the company – M/s SPML
Infra Limited and the appellants are arrayed as an accused as
Managing   Director   and   Director   of   M/s   SPML   Infra   Limited
respectively.     From   a   bare   reading   of   the   FIR   and   even   the
chargesheet, there are no allegations that there was a fraudulent
and dishonest intention to cheat the government from the very
beginning   of   the   transaction.     Even   there   are   no   specific
allegations   and   averments   in   the   FIR/chargesheet   that   the
appellants were in­charge of administration and management of
the   company   and   thereby   vicariously   liable.     In   light   of   the
aforesaid, the prayer of the appellants to quash the criminal
proceedings against the appellants for the offence under Section
420 IPC is required to be considered.
19
7. While considering the prayer of the appellants to quash the
impugned criminal proceedings against the appellants for the
offence under Section 420 IPC, few decisions of this Court on
exercise of powers under Section 482 Cr.P.C. are required to be
referred to.
7.1 In the case of Bhajan Lal (supra), in paragraph 102, this
Court has categorised the cases by way of illustration wherein
the   powers   under   Article   226   or   the   inherent   powers   under
Section   482   Cr.P.C.   could   be   exercised   either   to   prevent   the
abuse of the process of any court or otherwise to secure the ends
of justice.  In paragraph 102, it is observed and held as under:
“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
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)
20
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   noncognizable 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.”
The   aforesaid   decision   of   this   Court   has   been   followed
subsequently by this Court in catena of decisions.
7.2 In the case of Vesa Holdings Private Limited (supra), it is
observed and held by this Court that every breach of contract
would not give rise to an offence of cheating and only in those
cases breach of contract would amount to cheating where there
was any deception played at the very inception.   It is further
21
observed and held that for the purpose of constituting an offence
of cheating, the complainant is required to show that the accused
had   fraudulent   or  dishonest   intention   at   the   time  of   making
promise or representation.  It is further observed and held that
even in a case where allegations are made in regard to failure on
the part of the accused to keep his promise, in the absence of a
culpable intention at the time of making initial promise being
absent, no offence under Section 420 IPC can be said to have
been made out.  It is further observed and held that the real test
is whether the allegations in the complaint disclose the criminal
offence of cheating or not.
7.3 In   the   case   of   Hira   Lal   Hari   Lal   Bhagwati   (supra),   in
paragraph 40, this Court has observed and held as under:
“40. It is settled law, by a catena of decisions, that for
establishing the offence of cheating, the complainant is required
to show that the accused had fraudulent or dishonest intention
at   the   time   of   making   promise   or   representation.   From   his
making failure to keep promise subsequently, such a culpable
intention right at the beginning that is at the time when the
promise was made cannot be presumed. It is seen from the
records   that   the   exemption   certificate   contained   necessary
conditions   which   were   required   to   be   complied   with   after
importation of the machine. Since the GCS could not comply
with it ,   therefore,   it   rightly   paid   the   necessary   duties
without   taking   advantage   of   the   exemption   certificate.   The
conduct   of   the   GCS   clearly   indicates   that   there   was   no
fraudulent   or   dishonest   intention   of   either   the   GCS   or   the
appellants in their capacities as office­bearers right at the time
of making application for exemption. As there was absence of
dishonest and fraudulent intention, the question of committing
22
offence under Section 420 of the Penal Code, 1860 does not
arise. We have read the charge­sheet as a whole. There is no
allegation in the first information report or the charge­sheet
indicating expressly or impliedly any intentional deception or
fraudulent/dishonest intention on the part of the appellants
right from the time of making the promise or misrepresentation.
Nothing has been said on what those misrepresentations were
and how the Ministry of Health was duped and what were the
roles   played   by   the   appellants   in   the   alleged   offence.   The
appellants, in our view, could not be attributed any mens rea of
evasion of customs duty or cheating the Government of India as
the Cancer Society is a non­profit organisation and, therefore,
the   allegations   against   the   appellants   levelled   by   the
prosecution   are   unsustainable.   The   Kar   Vivad   Samadhan
Scheme certificate along with Duncan [(1996) 5 SCC 591 : 1996
SCC (Cri) 1045] and Sushila Rani [(2002) 2 SCC 697 : (2002) 2
Apex Decisions] judgments clearly absolve the appellants herein
from all charges and allegations under any other law once the
duty so demanded has been paid and the alleged offence has
been compounded. It is also settled law that once a civil case
has   been   compromised   and   the   alleged   offence   has   been
compounded, to continue the criminal proceedings thereafter
would be an abuse of the judicial process.”
It is further observed and held by this Court in the aforesaid
decision that to bring home the charge of conspiracy within the
ambit of Section 120B of the IPC, it is necessary to establish that
there   was   an   agreement   between   the   parties   for   doing   an
unlawful act.  It is further observed and held that it is difficult to
establish conspiracy by direct evidence.
7.4 In the case of V.Y Jose (supra), it is observed and held by
this Court that one of the ingredients of cheating is the existence
of fraudulent or dishonest intention of making initial promise or
existence   thereof,   from   the   very   beginning   of   formation   of
23
contract.  It is further observed and held that it is one thing to
say that a case has been made out for trial and as such criminal
proceedings should not be quashed, but it is another thing to say
that a person should undergo a criminal trial despite the fact
that no case has been made out at all.
7.5 In the case of Sharad Kumar Sanghi (supra), this Court had
an occasion to consider the initiation of criminal proceedings
against the Managing Director or any officer of a company where
company had not been arrayed as a party to the complaint.  In
the aforesaid decision, it is observed and held by this Court that
in   the   absence   of   specific   allegation   against   the   Managing
Director of vicarious liability, in the absence of company being
arrayed as a party, no proceedings can be initiated against such
Managing   Director   or   any   officer   of   a   company.   It   is   further
observed and held that when a complainant intends to rope in a
Managing Director or any officer of a company, it is essential to
make requisite allegation to constitute the vicarious liability.
7.6 In the case of Joseph Salvaraja A v. State of Gujarat (2011)
7 SCC 59, it  is observed and  held by this  Court that when
dispute between the parties constitute only a civil wrong and not
a criminal wrong, the courts would not permit a person to be
24
harassed although no case for taking cognizance of the offence
has been made out.
7.7 In the case of Inder Mohan Goswami v. State of Uttaranchal,
(2007) 12 SCC 1, it is observed and held by this Court that the
Court must ensure that criminal prosecution is not used as an
instrument of harassment or for seeking private vendetta or with
an   ulterior   motive   to   pressurise   the   accused.     It   is   further
observed and held by this Court that it is neither possible nor
desirable to law down an inflexible rule that would govern the
exercise of inherent jurisdiction.  It is further observed and held
that inherent jurisdiction of the High Courts under Section 482
Cr.P.C. though wide has to be exercised sparingly, carefully and
with caution and only when it is justified by the tests specifically
laid down in the statute itself.
8. Applying the law laid down by this Court in the aforesaid
decisions to the facts of the case on hand, we are of the opinion
that   this   is   a   fit   case   to   exercise   powers   under   Section   482
Cr.P.C. and to quash the impugned criminal proceedings.
8.1. As observed hereinabove, the chargesheet has been filed
against the appellants for the offences under Section 420 read
with Section 120B of the IPC.  However, it is required to be noted
25
that there are no specific allegations and averments in the FIR
and/or even in the chargesheet that fraudulent and dishonest
intention  of   the   accused   was  from  the   very   beginning  of   the
transaction.  It is also required to be noted that contract between
M/s SPML Infra Limited and the Government was for supply and
commissioning of the Nurang Hydel Power Project including three
power generating units.  The appellants purchased the turbines
for the project from another manufacturer.  The company used
the said turbines in the power project.  The contract was in the
year   1993.     Thereafter   in   the   year   1996   the   project   was
commissioned.     In   the   year   1997,   the   Department   of   Power
issued a certificate certifying satisfaction over the execution of
the project.   Even the defect liability period ended/expired in
January, 1998.  In the year 2000, there was some defect found
with respect to three turbines.   Immediately, the turbines were
replaced.   The power project started functioning right from the
very   beginning   –   1996   onwards.     If   the   intention   of   the
company/appellants was to cheat the Government of Arunachal
Pradesh, they would not have replaced the turbines which were
found   to   be   defective.     In   any   case,   there   are   no   specific
allegations and averments in the complaint that the accused had
26
fraudulent or dishonest intention at the time of entering into the
contract.  Therefore, applying the law laid down by this Court in
the aforesaid decisions, it cannot be said that even a prima facie
case for the offence under Section 420 IPC has been made out.
8.2. It is also required to be noted that the main allegations can
be said to be against the company.  The company has not been
made a party.   The allegations are restricted to the Managing
Director and the Director of the company respectively.  There are
no specific allegations against the Managing Director or even the
Director.   There are no allegations to constitute the vicarious
liability.  In the case of Maksud Saiyed v. State of Gujarat (2008)
5 SCC 668, it is observed and held by this Court that the penal
code   does   not   contain   any   provision   for   attaching   vicarious
liability on the part of the Managing Director or the Directors of
the company when the accused is the company.   It is further
observed and held that the vicarious liability of the Managing
Director and Director would arise provided any provision exists in
that behalf in the statute.   It is further observed that statute
indisputably   must   contain   provision   fixing   such   vicarious
liabilities.  It is further observed that even for the said purpose, it
is obligatory on the part of the complainant to make requisite
27
allegations   which   would   attract   the   provisions   constituting
vicarious liability.  In the present case, there are no such specific
allegations against the appellants being Managing Director or the
Director of the company respectively.  Under the circumstances
also,   the   impugned   criminal   proceedings   are   required   to   be
quashed and set aside.
8.3 At this stage, it is required to be noted that though the FIR
was   filed   in   the   year   2000   and   the   chargesheet   was
submitted/filed  as far back as on 28.5.2004, the appellants were
served with the summons only in the year 2017, i.e., after a
period   of   approximately   13   years   from   the   date   of   filing   the
chargesheet.     Under   the   circumstances,   the   High   Court   has
committed a grave error in not quashing and setting aside the
impugned criminal proceedings and has erred in not exercising
the jurisdiction vested in it under Section 482 Cr.P.C.
9. In view of the above and for the reasons stated above, we
are of the firm opinion that this is a fit case to exercise the
powers under Section 482 Cr.P.C. and to quash the criminal
proceedings against the appellants for the offence under Section
420 read with Section 120B of the IPC.  To continue the criminal
proceedings against the appellants would be undue harassment
28
to them. As observed hereinabove, no prima facie case for the
offence under Section 420 of the IPC is made out.
10. The instant appeal is accordingly allowed.   The impugned
judgment and order passed by the High Court is set aside.  The
impugned FIR and the chargesheet filed against the appellants
for   the   offence   under   Section   420   IPC   are   hereby   quashed.
However,   it   is   specifically   observed   and   made   clear   that   the
impugned criminal proceedings are quashed and set aside only
against the appellants and not against any other accused against
whom the charge sheet had been filed and the proceedings shall
continue against the other accused, in accordance with law.
……………………………….J.
[ASHOK BHUSHAN]
NEW DELHI; ……………………………….J.
JANUARY 31, 2020. [M.R. SHAH]
29

Whether the ‘Kaun Banega Crorepati’ (“KBC”) programe was unfair Trade Practice ? No Star India (P) Ltd., the Appellant in C.A. No. 6597/2008 (hereinafter “Star India”) used to broadcast the programme ‘Kaun Banega Crorepati’ (“KBC”) between 22.1.2007 and 19.4.2007. The programme was sponsored by Bharti Airtel Limited, the Appellant in C.A. No. 6645/2008 (hereinafter “Airtel”), amongst others. During the telecast of this programme, a contest called ‘Har Seat Hot Seat’ (“HSHS contest”) was conducted, in which the viewers of KBC were invited to participate. An objective­type question with four possible answers was displayed on the screen during each episode, and viewers who wished to participate were required to send in the correct answer, inter alia through SMS services, offered by Airtel, MTNL and BSNL, to a specified number. The winner for each episode was randomly selected out of the persons who had sent in the correct answers, and awarded a prize money of Rs. 2 lakhs. There was no entry fee for the HSHS contest. However, it is not disputed that participants in the HSHS contest were required to pay Rs. 2.40 per SMS message to Airtel, which was higher than the normal rate for SMSes. Hence, Respondent No. 1, which is a consumer society (hereinafter “the complainant”), filed a complaint before the National Commission against Star India and Airtel (but not against BSNL and MTNL), contending that they were committing an ‘unfair trade practice’ within the meaning of Section 2(1)(r)(3)(a) of the Consumer Protection Act, 1986 (“the 1986 Act”). It was alleged that the Appellants had created a false impression in viewers’ minds that participation in the HSHS contest was free of cost, whereas the cost of organizing the contest as well the prize money was being reimbursed from the increased rate of SMS charges, and the profits from these charges were being shared by Airtel with Star India. Further, it was alleged that an unfair trade practice had also been committed inasmuch as the contest was essentially a lottery as the questions were simple, and the winners were finally picked by random selection. The purpose of this contest was to promote the business interests of the Appellants by increasing the viewership and Television Rating Points (TRP’s) of the KBC programme, and thus to command higher advertising charges, and also by increasing the revenue earned from SMS messages. Hence the Appellants were culpable for conducting a lottery­like contest to promote their business interests under Section 2(1)(r)(3)(b) of the 1986 Act. Apex court held that we find that the complainant has clearly failed to discharge the burden to prove that the prize money was paid out of SMS revenue, and its averments on this aspect appear to be based on pure conjecture and surmise. We are of the view that there is no basis to conclude that the prize money for the HSHS contest was paid directly out of the SMS revenue earned by Airtel, or that Airtel and Star India had colluded to increase the SMS rates so as to finance the prize money and share the SMS revenue, and the finding of the commission of an “unfair trade practice” rendered by the National Commission on this basis is liable to be set aside.

Whether the ‘Kaun Banega Crorepati’ (“KBC”) programe was unfair Trade Practice ? No

Star   India   (P)   Ltd.,   the   Appellant   in   C.A.   No.   6597/2008 (hereinafter “Star India”) used to broadcast the programme ‘Kaun Banega Crorepati’ (“KBC”) between 22.1.2007 and 19.4.2007. The programme was sponsored by Bharti Airtel Limited, the Appellant in C.A. No. 6645/2008 (hereinafter “Airtel”), amongst others. During the telecast of this programme, a contest called ‘Har Seat Hot Seat’ (“HSHS contest”) was conducted, in which the viewers of KBC were invited to participate. An objective­type question with four possible answers was displayed on the screen during each episode, and viewers who wished to participate were required to send in the correct answer,  inter alia  through SMS services, offered by Airtel, MTNL and BSNL, to a specified number.
The winner for each episode was randomly selected out of the persons who had sent in the correct answers, and awarded a prize money of Rs. 2 lakhs. There was no entry fee for the HSHS contest. 
However, it is not disputed that participants in the HSHS contest were required to pay Rs. 2.40 per SMS message to Airtel, which was higher than the normal rate for SMSes. Hence, Respondent No. 1, which is a consumer society (hereinafter “the complainant”), filed a
complaint before the National Commission against Star India and Airtel (but not against BSNL and MTNL), contending that they were committing an ‘unfair trade practice’ within the meaning of Section 2(1)(r)(3)(a) of the Consumer Protection Act, 1986 (“the 1986 Act”). It
was alleged that the Appellants had created a false impression in viewers’ minds that participation in the HSHS contest was free of cost, whereas the cost of organizing the contest as well the prize money   was   being   reimbursed   from   the   increased   rate   of   SMS
charges, and the profits from these charges were being shared by Airtel with Star India. 
 Further, it was alleged that an unfair trade practice had also been committed inasmuch as the contest was essentially a lottery as the questions were simple, and the winners were finally picked by random selection. The purpose of this contest was to promote the   business   interests   of   the   Appellants   by   increasing   the viewership   and   Television   Rating   Points   (TRP’s)   of   the   KBC programme, and thus to command higher advertising charges, and also by increasing the revenue earned from SMS messages. Hence the Appellants were culpable for conducting a lottery­like contest to promote their business interests under Section 2(1)(r)(3)(b) of the 1986 Act. 
Apex court held that 
we   find   that   the   complainant   has   clearly   failed   to discharge the burden to prove that the prize money was paid out of SMS revenue, and its averments on this aspect appear to be based on pure conjecture and surmise. We are of the view that there is no basis to conclude that the prize money for the HSHS contest was paid directly out of the SMS revenue earned by Airtel, or that Airtel and Star India had colluded to increase the SMS rates so as to finance   the   prize   money   and   share   the   SMS   revenue,   and   the finding of the commission of an “unfair trade practice” rendered by the National Commission on this basis is liable to be set aside.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6597 OF 2008
Star India (P) Ltd.                              Appellant(s)
VERSUS
 Society of Catalysts & Anr.                                  Respondent(s)
 WITH
CIVIL APPEAL NO. 6645 OF 2008
J  U  D  G  M  E  N  T
MOHAN M. SHANTANAGOUDAR, J.
    These appeals arise out of the judgment dated 11.9.2008 of
the National Consumer Disputes Redressal Commission (“National
Commission”) allowing the consumer complaint filed by Respondent
No. 1 in both these appeals against the Appellants.
1
2.  The brief facts giving rise to these appeals are as follows:
2.1  Star   India   (P)   Ltd.,   the   Appellant   in   C.A.   No.   6597/2008
(hereinafter “Star India”) used to broadcast the programme ‘Kaun
Banega Crorepati’ (“KBC”) between 22.1.2007 and 19.4.2007. The
programme was sponsored by Bharti Airtel Limited, the Appellant in
C.A. No. 6645/2008 (hereinafter “Airtel”), amongst others. During
the telecast of this programme, a contest called ‘Har Seat Hot Seat’
(“HSHS contest”) was conducted, in which the viewers of KBC were
invited to participate. An objective­type question with four possible
answers was displayed on the screen during each episode, and
viewers who wished to participate were required to send in the
correct answer,  inter alia  through SMS services, offered by Airtel,
MTNL and BSNL, to a specified number.
2.2  The winner for each episode was randomly selected out of the
persons who had sent in the correct answers, and awarded a prize
money of Rs. 2 lakhs. There was no entry fee for the HSHS contest.
However, it is not disputed that participants in the HSHS contest
were required to pay Rs. 2.40 per SMS message to Airtel, which was
higher than the normal rate for SMSes. Hence, Respondent No. 1,
2
which is a consumer society (hereinafter “the complainant”), filed a
complaint before the National Commission against Star India and
Airtel (but not against BSNL and MTNL), contending that they were
committing an ‘unfair trade practice’ within the meaning of Section
2(1)(r)(3)(a) of the Consumer Protection Act, 1986 (“the 1986 Act”). It
was alleged that the Appellants had created a false impression in
viewers’ minds that participation in the HSHS contest was free of
cost, whereas the cost of organizing the contest as well the prize
money   was   being   reimbursed   from   the   increased   rate   of   SMS
charges, and the profits from these charges were being shared by
Airtel with Star India. 
2.3 Further, it was alleged that an unfair trade practice had also
been committed inasmuch as the contest was essentially a lottery
as the questions were simple, and the winners were finally picked
by random selection. The purpose of this contest was to promote
the   business   interests   of   the   Appellants   by   increasing   the
viewership   and   Television   Rating   Points   (TRP’s)   of   the   KBC
programme, and thus to command higher advertising charges, and
also by increasing the revenue earned from SMS messages. Hence
3
the Appellants were culpable for conducting a lottery­like contest to
promote their business interests under Section 2(1)(r)(3)(b) of the
1986 Act. 
2.4 It is relevant to note that the complainant is only a voluntary
consumer organization which has filed this complaint as part of its
objective of furthering the consumer protection movement. It is not
their case that they have participated in the HSHS contest and
incurred any loss on account thereof. It is further relevant to note
that   the   complainant’s   assertions   are   solely   based   on   a   survey
which it had carried out, in  which the  majority of participants
apparently   stated   that   they   were   under   the   impression   that
participation in the HSHS contest was free and the SMS charges
were retained only by the service provider, i.e. Airtel and most of the
viewers   felt   that   the   contest   was   carried   out   to   increase   the
popularity of the KBC programme. The conclusions of this survey
were apparently confirmed by a newspaper report dated 15.7.2007
published by the Hindustan Times. As per this newspaper report,
Airtel received 58 million SMS messages, and the revenue earned
from the SMSes was shared by Star India and Airtel.
4
3. The National Commission in the impugned judgment observed
that though the Appellants had not disclosed the revenue earned
from the HSHS contest on grounds of confidentiality of proprietary
information, it was apparent that they had created an impression
that the prize money was being given free of charge, even though
they had not disputed that the prize money for the HSHS contest
was paid out of the money collected through SMS charges. The
Commission relied upon the figures stated in the newspaper article
dated 15.7.2007 (supra), and found that since the Appellants had
not denied that they had received 58 million SMSes, they would
have collected Rs. 13.92 crore from the participants of the HSHS
contest for such messages, whereas a total sum of only Rs. 1.04
crores was paid as prize money. Thus, the gross earnings of the
Appellants were disproportionate to the cost of the prizes offered.
3.1 The Commission further found that no viewer could discern
from the on­screen advertisements that the costs of the contest
were being met through the SMS charges, and the Appellants had
clearly not notified viewers about the same. It found a contradiction
between the Appellants’ stances as to whether the HSHS contest
was   advertised   as   ‘free’   or   not.   It   was   also   observed   that   the
5
Appellants had not brought any evidence on record to show that the
transmission of SMS messages for the HSHS contest was a value
added service such that the higher SMS cost was justified, and
hence the same could not be construed as a value added service. It
was   presumed   by   the   National   Commission   that   the   special
business relationship between Star India and Airtel included an
undisclosed revenue sharing agreement.
3.2 Hence, it was held that since the prize money for the HSHS
contest was fully or partly covered by the revenue earned from
increased SMS charges, the Appellants had committed an unfair
trade practice under Section 2(1)(r)(3)(a) of the 1986 Act. In light of
this finding, the National Commission found it unnecessary to deal
with   the   complainant’s   contention   regarding   commission   of   an
unfair trade practice under Section 2(1)(r)(3)(b).
3.3 The National Commission additionally held that the complaint
was maintainable under the 1986 Act and need not have been
preferred before the  Telecom Disputes Settlement  and  Appellate
Tribunal (“TDSAT”) under the Telecom Regulatory Authority of India
Act, 1997 (“TRAI Act”). Further, it was held that the complaint was
6
not bad for non­joinder of parties as there was nothing on record to
suggest that BSNL and MTNL had also recovered large amounts
from the SMS charges for the HSHS contest and that the amount so
recovered by them was used for sharing the cost of the prize money.
3.4 Hence, the complaint was accordingly allowed by the National
Commission.   Since   the   complainant   is   only   a   consumer
organization, the National Commission observed that there were no
grounds for granting compensation. However, it awarded punitive
damages of Rs. 1 crore under the Proviso to Section 14(1)(d) of the
1986 Act, for which both Appellants were held jointly and severally
liable. The National Commission also directed them to pay litigation
costs of Rs. 50,000 to the complainant. Hence these appeals before
us.
4. Learned   senior   counsel   for   Star   India,   Shri   Gaurav
Pachnanda,   submitted   that   the   entire   finding   of   ‘unfair   trade
practice’ was based on inferences and speculation, and on reliance
on a newspaper report without corroboration of its contents, which
was   impermissible.   He   disputed   the   finding   of   the   National
Commission that the Appellant had admitted that the prize money
7
was paid out of the revenue earned from increased SMS rates. It
was stressed that the National Commission had omitted to inquire
into the source of the prize money. It was also stressed that Airtel
had not shared the revenue earned from the increased SMS rates
with Star India at all. The only monetary flow between them was a
fixed periodic lumpsum to be paid by Airtel under the services­cumsponsorship agreement between them, which bore no relation to the
revenue received from the SMSes, and that there was no evidence to
suggest that the SMS revenue was used to pay the prize money. The
learned counsel emphatically argued that the expression “covered
by   the   amount   charged   in   the   transaction   as   a   whole”   under
Section 2(1)(r)(3)(a) of the 1986 Act only meant direct recovery from
the price paid for the transaction, and not from advertisements or
sponsorship,   citing   the   decision   of   this   Court   in  HMM   Ltd.  v.
Director   General,   Monopolies   &   Restrictive   Trade   Practices
Commission, (1998) 6 SCC 485.
4.1 It was further submitted that Airtel was entitled to charge a
higher rate for the SMSes sent in pursuance of the HSHS contest,
since the transmission of SMSes to register options in a multiple
8
choice question game required a special software, the use of which
constituted a value­added service; and that Star India had complied
with the relevant TRAI regulations mandating that such increased
tariff be displayed on the television screen as well as on the KBC
programme website. Therefore, though the participants bore the
cost of sending the SMS messages, they were duly informed of the
same,   while   participation   in   the   contest   itself   remained   free   of
charge. In such circumstances, the National Commission could not
have attributed recovery of prize money to the increased tariff rate
of the SMSes without even inquiring into the breakup of cost, value
addition and profit in the tariff.
4.2 The learned counsel also challenged the award of damages, for
lack of proof of loss or legal injury to the participants in the contest,
which he submitted was required as per Section 14(1)(d) of the
1986 Act. Lastly, he argued that “punitive damages” could not have
been   awarded   without   a   specific   prayer   for   the   same   in   the
complaint.
5. Learned counsel for Airtel, Shri Aditya Narain, urged that as
far as the commission of an unfair trade practice was concerned,
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the   only   finding   rendered   by   the   National   Commission   was
regarding the creation of a wrongful impression that the contest
was conducted free of charge, which is covered under the second
part of Section 2(1)(r)(3)(a) of the 1986 Act, and that the same was
not attracted in the present case. He took us through the TRAI
direction   regarding   advertisement   of   premium   rate   services,
pleading compliance with the same. Finally, he submitted that the
jurisdiction of the consumer fora was ousted by Section 14(a)(iii)
read   with   Section   15   of   the   TRAI   Act,   which   provide   that   any
dispute   between   telecom   service   providers   and   “a   group   of
consumers”   have   to   be   referred   to   the   TDSAT,   and   that   the
complainant organisation was essentially nothing but a group of
consumers   since   it   was   purporting   to   represent   the   interest   of
consumers at large.
6.  Learned   Counsel   for   the   complainant,   Ms.   Madhumita
Bhattacharjee, on the other hand, argued in favour of the decision
of the National Commission, submitting that the Appellants had
given the wrongful impression to consumers that the HSHS contest
prize   money   was   not   paid   out   of   the   revenue   generated   from
10
increased SMS tariff rates. She also averred that the complaint
contained a prayer as to punitive damages, and thus the National
Commission had not erred in awarding punitive damages. Finally,
she submitted that the complaint was maintainable under the 1986
Act since the complainant had filed an individual complaint under
the Act, and not acted on behalf of a group of consumers, thus
attracting the exemption available to individual consumers under
proviso (B) to Section 14 (a)(iii) of the TRAI Act.
7. We have heard all the parties and given due consideration to
the material on record.
8. It is apparent that the crucial question to be determined in the
instant   case   is   whether   an   unfair   trade   practice   has   been
committed by the Appellants in the conduct of the HSHS contest, in
terms of Section 2(1)(r)(3) of the 1986 Act. We hasten to emphasize
at this juncture itself that though the complainant had also pleaded
violation of Section 2(1)(r)(3)(b) of the 1986 Act in their complaint,
there was no express finding rendered on this issue by the National
Commission, and subsequently, no contentions were made before
us in this respect. Thus, the limited question before us is whether
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an   unfair   trade   practice   has   been   committed   only   within   the
meaning of Clause (a) of Section 2(1)(r)(3). It would be useful to
begin by referring to the relevant portion of the definition of “unfair
trade practice” under Section 2(1)(r)(3):
“(r) “unfair   trade   practice”   means   a   trade   practice
which,  for  the  purpose  of   promoting  the   sale,   use  or
supply of any goods or for the provision of any service,
adopts any unfair method or unfair or deceptive practice
including any of the following practices, namely;—
…
(3) permits—
(a) the offering of gifts, prizes or other items with the
intention of not providing them as offered or creating
impression that something is being given or offered free
of charge when it is fully or partly covered by the amount
charged in the transaction as a whole;…”
8.1  Evidently, the mischief that the clause seeks to address may
be in two forms:  firstly, the offering of gifts, prizes or other items
with the intention of not providing them as offered, and secondly,
the creation of the impression that something (i.e. a gift, prize or
other item) is being given or offered free of charge in spite of the
cost of the item actually being covered either fully or partly by the
amount charged in the relevant transaction, as a whole. This would
be, for example, where the vendor of a good or service deceptively
increases the price of the good or service being sold, and covers the
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cost of a prize or gift offered for ‘free’ along with the good or service
through such increased price.
8.2 In   the   instant   matter,   the   controversy   regarding   the
commission of an unfair trade practice pertains to the second part
of the clause. This is because the Appellants are questioning the
conclusion of the National Commission that the amount of prize
money paid in the HSHS contest was in fact at least partly covered
by   the   increased   SMS   tariff   rate   charged   to   participate   in   the
contest, and that the Appellants had created a false impression to
the contrary, i.e., that participation in the HSHS contest was free of
charge. Thus, the primary bone of contention between the parties is
the source of the funds out of which the prize money has been paid
by Star India.
9. At the outset, after going through the written submissions of
the Appellants before the National Commission, we are compelled to
conclude that the National Commission had no basis to hold that
the Appellants had admitted that the prize money for the HSHS
contest was distributed out of the revenue collected from the SMSes
sent in pursuance of the contest. It is true that the Appellants had
13
not specifically denied that the prize money was paid out of the
increased   SMS   charges.   However,   they   had   clarified   in   their
submissions   that   Airtel   was   merely  a  sponsor/advertiser   of  the
program, and the commercial arrangement between the parties was
that   Airtel   would   pay   sponsorship   charges,   whereas   Star   India
would be independently liable for paying the prize money out of its
pocket regardless of the revenue earned by Airtel.
10. Importantly,   we   further   find   that   apart   from   the
aforementioned facts, there is no other cogent material on record
upon which the National Commission could have placed reliance to
render the finding of ‘unfair trade practice’ under Section 2(1)(r)(3)
(a) of the 1986 Act. The National Commission had sought to rely on
the newspaper report dated 15.7.2007 published in the Hindustan
Times (supra) regarding the amount of revenue and profit earned by
the appellants from the HSHS contest. We are of the considered
opinion that such reliance was unwarranted, inasmuch as there
was absolutely no corroboration for the allegations therein with
respect   to   the   number   of   SMSes   received,   and   the   breakup   of
revenue earned into cost, value addition from service, and profit.
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Moreover, the survey report on the basis of which these allegations
were made was not even produced before the National Commission
or before us.
11. It is further relevant to note that there exists a services­cumsponsorship agreement between the Appellants, which contains the
specific details of the commercial arrangement between them. They
did not produce the same before the National Commission, claiming
that  the said agreement  contained a  confidentiality  clause,  and
could only be produced in accordance with law if required. The
Appellants’ case is that they would have offered to produce the
agreement if the National Commission had given a specific direction
to that effect. However, no such direction was rendered at any point
during the proceedings before the National Commission. Even the
complainant did not, throughout the course of the proceedings,
seek a direction to the Appellants to produce the services­cumsponsorship agreement. Be that as it may, to establish whether
there was any substance in the National Commission’s conclusion
that the prize money was paid out of the revenue earned from
15
Airtel’s SMS services during the HSHS contest, we deemed it fit to
examine the agreement ourselves.
11.1   Our perusal of the services­cum­sponsorship agreement
reveals that Airtel had the sole and exclusive right to charge fees or
charges   towards   the   services   rendered   by   it   to   facilitate
participation in the HSHS contest, through SMS, telecalling, etc.,
and thus, Star India had no role in determining the same. Further,
Airtel was liable to pay a monthly lumpsum as fees to Star India,
irrespective   of   whether   such   amount   was   realized   from   its
subscribers   or   not.   There   is   no   provision   in   the   agreement   for
revenue­sharing between the parties, or requiring Airtel to finance
any part of the prize money paid by Star India towards the HSHS
contest.
11.2 Thus, it is evident that Star India was liable to pay the
prize   money   irrespective   of   the   profits   earned   by   Airtel.   It   is
needless to say that the sponsorship money paid by Airtel would
come from various sources of revenue, which includes the money
earned from the tariff rates for the HSHS contest. Similarly, Star
India may have had many sources of revenue from which the prize
16
money could  have  been  paid. This is a  part and  parcel of  the
ordinary business dealings of the Appellants, and the complainant
has failed to establish any direct linkage between the increased
SMS tariff rates and the prize money so as to show that the prize
money was deceptively recovered in the guise of increased SMS
rates charged to the participants.
12.  Further, since the National Commission failed to conduct any
inquiry whatsoever into the breakup of the price of Rs. 2.40 per
SMS fixed for the purpose of participation in the HSHS contest, we
are of the view that the finding of the National Commission that the
SMS   service   offered   by   Airtel   under   the   HSHS   contest   did   not
constitute a value­added service is liable to be set aside. Indeed, the
services­cum­sponsorship agreement reveals that Airtel was liable
to set up the hardware and software required for the HSHS contest
at its own cost, which suggests that the services regarding the
participation in the HSHS contest through SMSes offered by Airtel
constituted a value­added services separate from its ordinary SMS
service. It is reasonable to assume that such cost would have been
recovered by Airtel, at least in part, through the increased cost of
SMSes sent by subscribers participating in the HSHS contest. The
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direction  on  ‘Premium  Rate Services’ dated 3.5.2005, issued by
TRAI, which was referred to by the Appellants, also states that
televoting   and   participating   in   quizzes,   etc.   through   SMS
constitutes a value added service, and that in most of these cases,
the charges for these services are more than the normal tariff rate.
The notification is reproduced below:
“F. No. 305­8/2004­QOS
TELECOM REGULATORY AUTHORITY OF INDIA
A­2/14, Safdarjung Enclave, New Delhi­110029
Dated : 3rd May, 2005
To,
All Cellular Mobile Service Providers
All Unified Access Service Providers
         Subject   :  Direction   on   Premium   Rate
    Services.
1. The Authority has observed that in the last few
months, a number of operators and also some
independent   agencies   have   started   providing
value   added   services   like   quiz,   ringtones,
televoting etc. through SMS.   In most of these
cases, the charges for these services are more
than   the   normal   published   tariffs.   The
customers are informed about these value added
premium   rate   services   through   SMS,
advertisements in newspaper or T.V.  But in this
communication,   the   cost   implication   of   the
service   is   not   intimated.     Sometimes   the
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messages are only followed by wordings “T&C
Apply”.
2. In   the   present   multi­operator   multi   service
scenario,   such   premium   rate   services   have
increased considerably.  The service provider is
aware   of   the   pulse   rate   for   these   services   as
either   the   service   provider   is   providing   such
services or it has an agreement with the provider
of such premium services. However, the cost for
such premium services is generally known to the
customer only after the service has been utilized
and the bill is received. This practice of service
providers   is   against   the   interest   of   the
consumers.
3. In view of the above,  in the consumer’s interest,
the Authority in exercise of its power conferred
upon it under Section 13 read with Section 11(1)
(b)(i) and (v) of the Telecom Regulatory Authority
of India Act, 1997 and clause 9 and 11 of the
Telecommunication   Tariff   Order   1999   hereby
directs all the Cellular Mobile Service Providers
and Unified Access Service Providers to publish
in   all   communications/advertisements   relating
to premium rate services, the pulse rate/tariff
for the service.
This issues with the approval of the Authority.
(Sudhir Gupta)
Advisor (QOS)”
13.  However, we need not dwell on this issue much longer, since
not much turns upon it with regard to the determination of the
commission of an unfair trade practice, except to note that the
transmission of SMSes for the purpose of the HSHS contest being a
19
value added service, the Appellants had also taken care to comply
with the TRAI direction dated 3.5.2005 (supra) which mandated the
communication/advertisement of any increase in the cost of cellular
services on account of the rendering of such a value­added service.
Thus, even if the SMS charge is taken as the ‘cost’ of participating
in the contest for the purpose of Section 2(1)(r)(3)(a) of the 1986 Act,
it cannot be said that the Appellants had wrongfully advertised the
charges for the same.
14.  Hence,   we   find   that   the   complainant   has   clearly   failed   to
discharge the burden to prove that the prize money was paid out of
SMS revenue, and its averments on this aspect appear to be based
on pure conjecture and surmise. We are of the view that there is no
basis to conclude that the prize money for the HSHS contest was
paid directly out of the SMS revenue earned by Airtel, or that Airtel
and Star India had colluded to increase the SMS rates so as to
finance   the   prize   money   and   share   the   SMS   revenue,   and   the
finding of the commission of an “unfair trade practice” rendered by
the National Commission on this basis is liable to be set aside.
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15. With regard to the award of punitive damages made by the
National Commission, the same could not have been done in as
much as the complainant in the present case had not prayed for
punitive damages in the complaint or proved that any actual loss
was suffered by consumers (See  General  Motors  (India)  Private
Limited v. Ashok Ramnik Lal Tolat, (2015) 1 SCC 429). However,
we need not delve further into this aspect since we have found that
there was no unfair trade practice committed by the Appellants in
the first place.
16.  On an ancillary note, it was briefly contended before us by the
learned counsels for the Appellants, as mentioned supra, that the
National Commission did not have jurisdiction over the complaint
and   it   should   have   been   referred   to   the   TDSAT.   However,   this
argument was not seriously pressed by either of the parties. Hence,
we do not find it relevant to adjudicate upon this issue for the
purpose of the present matter. However, the question of law, as
regards   the   maintainability   of   complaints   filed   by   consumer
organisations  against  telecom service providers before consumer
fora may be kept open. 
21
17.  Thus, we find that the finding of the commission of an unfair
trade practice under Section 2(1)(r)(3)(a) in the impugned judgement
is bad in law. The appeals are allowed and the impugned judgement
is set aside in the aforesaid terms.
…..…………................................J.
 (MOHAN M. SHANTANAGOUDAR)
….…………………………...............J.
            (R. SUBHASH REDDY)
New Delhi;
January 23, 2020
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