Mere Delay In Investigation Won’t Vitiate Proceedings: Karnataka High Court Rejects Plea Of US Based Corporation’s President Allegedly Shipping Faulty Machines To DRDO & DARE

The Karnataka High Court has rejected the Petition of the President of a United States (US) based Corporation, accused of shipping faulty machines to Defence Avionics Research Establishment (DARE) and Defence Research and Development Organization (DRDO).

A Criminal Petition was preferred against the Orders and entire proceedings pending before the Sessions Judge and Principal Special Judge arising out of an FIR registered for offences under Sections 120B read with 420 of the Indian Penal Code, 1860 (IPC) and Sections 13(2) read with 13(1)(d) of the Prevention of Corruption Act, 1988 (PC Act).

A Single Bench of Justice M. Nagaprasanna held, “The case at hand is of a global tender and the successful tenderer allegedly cheated the DRDO. Therefore, there has been some delay in investigating an overseas allegation. In that light, delay in the case at hand, has not vitiated the proceedings, as it is trite law that mere delay would not vitiate the proceedings; it is only unexplained delay. The delay finds explanation in the case at hand and therefore, the said contention does not merit any acceptance. Therefore, the second submission of the learned counsel for the petitioner also tumbles down.”

The Bench said that if the facts obtaining in a particular case has both flavours of civil and criminal, such criminal proceedings cannot be quashed.

Senior Advocate Sandesh J. Chouta appeared on behalf of the Petitioner while Special Public Prosecutor (SPP) P. Prasanna Kumar and Advocate Rahul Krishna Reddy P. appeared on behalf of the Respondent.

Brief Facts

The Petitioner-accused was the President and Chief Executive Officer (CEO) of M/s AKON Inc., a Corporation incorporated under the laws of the State of California, United States of America (USA). In 2007, DARE and DRDO notified a global tender for procurement of VO based radio frequency engines. AKON Inc. emerged as the successful tenderer and was awarded the contract. A purchase order was issued in which the payment terms decided was that 90% to be paid through Line of Credit (LoC) at State Bank of India (SBI) upon delivery of generators and the final payment after approval. In terms of the purchase order, AKON was to ship some units in 2009. It was alleged that some mischief was played in the said shipping and the Central Bureau of Investigation (CBI) was asked to step in and conduct a preliminary inquiry. Such an inquiry led to several communications between the office bearers of AKON and other accused during the years 2009, 2010, and 2011.

Communications also galore between AKON and DARE, DRDO on the score that they were faulty machines. In 2012, a Complaint was preferred to the Director (Vigilance) by DARE, DRDO highlighting irregularities in the procurement of VO based RF engines and also complained that balance payments made to AKON were deliberately and erroneously done after the expiry of warranty period. After about 5 years of conduct of inquiry by the CBI, the Ministry of Defence, Government of India registered a Complaint. The preliminary inquiry was again conducted by the CBI which revealed certain public servants and private persons involved in the entire episode. A crime, after three years of preliminary inquiry, came to be registered by the CBI and it conducted the investigation. The Special Judge took cognizance of the offence against the Petitioner and others and issued summons. Hence, the Petitioner approached the High Court.

Reasoning

The High Court in view of the above facts, noted, “There can be no vicarious liability in the offences under the IPC. Accused No.2, in the case at hand, is M/s AKON inc., USA, the Company is made an accused. Accused No.4 is the petitioner, the then President and CEO of M/s AKON Inc. USA. The role of the petitioner again is clearly brought out in the statements quoted supra. Therefore, the contention that the petitioner has been deliberately dragged and there can be no vicarious liability cannot be accepted. It is a matter of trial for the petitioner to come out clean.”

The Court remarked that the last submission that the issue in the lis relates to contract between DARE, DRDO and M/s AKON Inc and therefore criminal law could not have been set into motion in a purely civil dispute is a statement that cannot be accepted.

“It is trite law that a particular action can lead to two circumstances – one invoking civil remedy and the other criminal law to be set into motion. Not in all cases merely because civil remedy is sought in criminal proceedings it can be quashed. Not in all cases wherein the allegations in the criminal law has a civil flavour criminal proceeding can be quashed. It depends on a case to case basis and dependent upon facts obtaining in those cases”, it added.

The Court was of the view that this case is a classic illustration of prima facie offence of Sections 420 and 120B of the IPC against the Petitioner and the entire issue revolves round a maze of facts, certain disputed and certain matters on record.

“Therefore, interference at this stage of the proceedings, would run foul of the judgment of the Apex Court in the case of KAPTAN SINGH v. STATE OF UTTAR PRADESH Insofar as the judgments relied on by the learned counsel for the petitioner of the Apex Court or of this Court, there can be no qualm about the principles laid down in those cases, as they are laid down based upon facts obtaining in those cases. Therefore, they are not applicable to the facts obtaining in the case at hand”, it concluded.

Accordingly, the High Court rejected the Petition and refused to interfere with the impugned proceedings.

Cause Title- Surya Sareen v. The Central Bureau of Investigation (Case Number: CRIMINAL PETITION No.5297 OF 2023)

Appearance:

Petitioner: Senior Advocate Sandesh J. Chouta and Advocate Chinmay J. Mirji.

Respondent: SPP P. Prasanna Kumar and Advocate Rahul Krishna Reddy P.

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