Point of Law : Escrow agreement – Criminal Breach of Trust and Cheating - Proceedings quashed - Without knowing actual role of petitioners and in what manner they have participated in affairs of company, it would be unjust to rope in petitioners in criminal proceedings.

ORDER :

CRLP.No.1951 of 2010 is filed by A3, A6, A8 and A12 and CRLP.No.6364 of 2010 is filed A5, A7 and A13 to quash the proceedings in CC.No.140 of 2010 on the file of the IX Metropolitan Magistrate, Miyapur, Ranga Reddy District.

2. The respondent No.1 is the complainant in CC.No.140 of 2010 filed under Section 200 of the Criminal Procedure Code to prosecute the petitioners/accused and the other accused for the offences under Sections 405, 406, 409, 430, 120B read with Section 34 of the Indian Penal Code.

3. In the complaint, it is stated by the respondent No.1 that A1 company, its Directors and some of its officers in conspiracy with one another and with a common intention have unlawfully caused financial loss to the complainant company by indulging in acts of cheating and breach of trust and the acts are of such nature, which will have the possible effect of seriously affecting the ability of Hyderabad to attract foreign investments and in particular form Japan.

4. The complainant company is represented through its authorized representatives vide Special Power of Attorney dated 06.08.2010. The complainant company is engaged in the business of international trade and inter alia, provides trade finance in respect of sale equipment and accessories required in the field of telecommunications. A2 is the Chairman of A1 company (registered under the Indian Companies Act, 1956). However, the 10th Annual Report of A1 company for the financial year 2007-2008 makes no reference to A2 holding the said office. A3 is stated to be the Chairperson of A1 and inter alia looks after the affairs of A1 company in US. A4 is the Managing Director of A1 company; A9 and A12 are based in Delhi at the relevant period and were interacting with the complainant’s representatives on regular basis. A9 and A12 made numerous misrepresentations to the representatives of the complainant’s company. A9 signed a letter calling upon the Bharat Sanchar Nigam Limited (BSNL) to set aside the instructions earlier received by it from A1 to make all payments in stipulated Escrow agreement. A10, inter alia, signed the mandate forms with respect to Axis Bank wherein most of the dishonestly misappropriated funds were diverted. A13 with active support of A2 and A4 held himself out to be an Advisor of the A1 and in that capacity attended most of the meetings at Hyderabad and was actively involved in misrepresentations made and false undertakings given to the complainant. The other accused are variously involved in fraudulent activities of A1 whereby unlawful gain was attained by A1 and unlawful loss was caused to the complainant.

5. The main substratum of the allegations in the complaint is as under:

(a) In March 2007, BSNL announced tender for procurement of certain telecommunication equipment. Clause XI of the tender document clearly stipulates that 95% of the value of the equipment would be payable by BSNL immediately upon satisfactory supply of equipment, which was subject matter of the tender and the remaining 25% was payable by BSNL within six months thereafter. A1 was one of the bidders in respect of the said tender. HUAWEI, Chinese Company, who manufactured the equipment to be supplied, entered into negotiations with A1 and the salient features of the bid such as price bid, specifications, delivery schedule, logistics, hardware/software ratio, other commercial conditions were decided between HUAWEI and A1. The bid was submitted by A1 on 04.06.2007 at BSNL Corporate Office in New Delhi and on the same day, the bids were opened and A1’s bid was found to be in order.

(b) HUAWEI has done business with complainant in the past. It contacted the complainant and asked it to consider grant of trade finance to A1. Thereafter, pursuant to the telephonic discussions between HUAWEI, the complainant and A1, a meeting was held on 26.06.2007, which was attended by the Mr. Woichi and Mr. Gopalan on behalf of the complainant and A2, A11 and A13 on behalf of A1. The meeting was chaired by