2020 (4) TMI 766 - HC - Indian Laws

Breach of trust - accusations against petitioners are that petitioners have floated a Company and have acted in violation of the terms of the employment - HELD THAT - There is no dispute with regard to the fact that petitioners were employed by respondent No.2 and as on the date of tendering their resignation, accused No.1 was holding the position of Director Solution and accused No.2 was holding the position of Director Sales and Marketing. There is also no dispute that petitioners were bound by the undertaking given by them to respondent No.2 - The accusation against petitioners is that in violation of the aforesaid terms and conditions, they floated a Company by name M/s. Sun Telematics Private Limited and thereby committed breach of trust. The records produced along with charge-sheet indicate that the said Company was incorporated on 28.5.2013. But there is no material to show that during their service under respondent No.2, petitioners had commenced any operations in the name of the Company floated by them. The documents produced before this Court indicate that Form C Registration Certificate of Establishment was obtained on 26.2.2014 and Value Added Tax Registration Certificate was issued on 19.9.2013 indicating that the actual operations had commenced only after the resignation of petitioners from respondent No.2 Company. It is only when a property entrusted to accused has been dishonestly misappropriated or converted to his own use, the accused can be held culpable for the offence under Section 405 of IPC. In the instant case, there are no allegations whatsoever that either at the time of employment or at the time of resignation, any property was entrusted to petitioners. Though in the complaint it was alleged that the software belonging to respondent No.2 was stolen and the same was made use of to procure rival business, but the material referred above clearly indicates that even the title or right to the said software vested with the Smart comm and not with respondent No.2. That apart, there is no allegation whatsoever in the charge-sheet that petitioners herein have committed any theft of such a software - in the absence of any material to show that either during the employment or any time subsequent thereto, any properties which has been entrusted to petitioners have been converted to their own use, provisions of Section 405 of IPC do not get attracted to the facts of this case. Since the facts of the case do not make out the ingredients of the offences under Sections 406 and 408 of IPC, the prosecution of petitioners for the alleged offence is illegal and cannot be sustained. For the said reasons, the petition is allowed. Petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Whether the allegations against the petitioners attract the ingredients of the offences under Sections 406 and 408 read with Section 34 of IPC.
2. Whether the petitioners misappropriated or converted any property entrusted to them by respondent No.2.
3. Whether the criminal proceedings initiated against the petitioners are valid or should be quashed.

Issue-wise Detailed Analysis:

1. Allegations and Applicability of Sections 406 and 408 read with Section 34 of IPC:
The petitioners were charged under Sections 406 and 408 read with Section 34 of IPC for allegedly floating a company, M/s. Sun Telematics Private Limited, during their employment with respondent No.2, Cert Infotrack Telematics Private Limited. The petitioners argued that the allegations do not meet the necessary ingredients of the offences under the cited sections. Specifically, they contended that there was no material evidence showing that any property was entrusted to them by respondent No.2 that they misappropriated or converted for personal use. Additionally, they highlighted that the incorporation of their company did not involve any business transactions during their tenure with respondent No.2, as all operations commenced post-resignation.

2. Misappropriation or Conversion of Entrusted Property:
The court examined whether the petitioners had misappropriated or converted any property entrusted to them by respondent No.2. The charge-sheet and accompanying records indicated no evidence that any property was entrusted to the petitioners during their employment. The complaint's allegations of software theft were unsupported, as the exclusive rights to the software belonged to Smartcomm, not respondent No.2. The court found no allegations or material in the charge-sheet suggesting that the petitioners committed theft or misappropriated any property during or after their employment.

3. Validity of Criminal Proceedings:
The court considered whether the criminal proceedings against the petitioners were justified. It was noted that respondent No.2 had already initiated a civil suit for damages against the petitioners, which was pending adjudication. The court referenced the Supreme Court's observations in similar cases, emphasizing that disputes of a predominantly civil nature should not be pursued through criminal prosecution. The court concluded that the allegations, even if uncontroverted, indicated a breach of employment terms rather than a criminal offense. Consequently, the prosecution of the petitioners under Sections 406 and 408 of IPC was deemed illegal and unsustainable.

Conclusion:
The court allowed the petition, quashing the proceedings initiated against the petitioners in C.C.No.24121/2015. The court clarified that its observations were confined to the issues raised in the petition and would not influence the pending civil trial.