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CASE NO.:

Appeal (crl.) 129 of 2003

PETITIONER:

Ajay Mitra

RESPONDENT:

State of M.P. & Ors.

DATE OF JUDGMENT: 28/01/2003

BENCH:

S. Rajendra Babu, Brijesh Kumar & G.P. Mathur.

JUDGMENT:

JUDGMENT

(Arising out of S.L.P.(Crl.) No.914 of 2002)

With Crl. Appeal Nos.130-132 of 2003 (Arising out of S.L.P.

(Crl.) Nos.1710-1712 of 2002)

Mathur, J.

Leave granted.

These appeals by special leave are directed against the

judgment and order dated January 16, 2002 of High Court of

Madhya Pradesh, by which three Petitions filed by the appellants

under Section 482 Cr.P.C. were dismissed.

M/s Cadbury Schweppes Beverages India Private Ltd.

entered into three identical Bottling Agreements with the

complainant, Sanjiva Bottling Company Private Limited on March

1, 1996 pursuant to a Master Trademark License entered into by

associate companies of Cadbury Schweppes plc. United Kingdom

and Cadbury Schweppes Beverages India Private Limited. In

terms of these three agreements, M/s Sanjiva Bottling Company

was authorised to manufacture and sell certain specified beverages

under specified trademarks owned by Cadbury Schweppes plc.

U.K. or its associate companies. The agreements contained

identical clauses with regard to their respective terms and

conditions and provided that they shall continue for an initial term

of five years and for further successive period of five years, unless

terminated by either party by giving to the other not less than 12

calendar months notice in writing to terminate the agreement. On

July 29, 1999, Atlantic Industries (a wholly owned indirect

subsidiary of The Coca-Cola Export Corporation, USA) purchased

about 3500 trademarks in 155 countries from Cadbury Schweppes

plc., upon which the bottling agreements between Cadbury

Schweppes Beverages India Pvt. Ltd. and Sanjiva Bottling

Company were duly assigned to Atlantic Industries and an

information regarding the same was given to Sanjiva Bottling

Company in writing. On February 14, 2000, Atlantic Industries

gave notice in writing to the complainant, Sanjiva Bottling

Company that the bottling agreements shall not be renewed after

their expiry on February 28, 2001.

Sanjiva Bottling Company through its Director, Rajiv Mehta

filed a criminal complaint against 11 accused including the

appellants in the Court of Judicial Magistrate, First Class, Bhopal

on July 24, 2000 for their prosecution under Section 420 read with

Section 511 IPC. The accused no.1 arrayed in the complaint is

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Cadbury Schweppes Beverages India Pvt. Ltd. (A-1) and

accused nos.2 to 5 are Chairman, Managing Director and Finance

Director etc. of the said Company. Besides them, Coca Cola

India (A-6), Alex Von Behr, President and Chief Executive Officer

(A-7). Nitin Dalvi, Vice-President, Strategic Business, Planning

and Information Services (A-8) and Samip Shah, Vice-President,

Business Development of Coca Cola India, (A-8) Ajay Mitra,

Regional Operational Director, Hindustan Coca Cola Beverages

Pvt. Ltd. (A-10) and Steve M. Whaley, Vice-President and General

Tax Counsel, Atlantic Industries (A-11) have been arrayed as

accused nos. 6 to 11. The case set up in the complaint is that the

complainant is engaged in the business of bottling soft drinks since

1983 at Bhopal. The complainant was approached by A-1 in 1995

to discontinue its competing brand 'Sprint' and a Memorandum of

Understanding was signed on October 9, 1995. Thereafter, an

agreement was entered into between the complainant and A-1 on

March 1, 1996 by which the complainant became one of the

bottlers of A-1, made investments in the bottling plant and also

promoted the sales of A-1 in its area. By a letter dated July 29,

1999, A-1 informed the complainant that the brands Schweppes,

Crush and Canada Dry and associated brands in India would be

acquired by a member of the Coca Cola group of companies. A-1

had 19 bottlers in the year 1997 but Coca Cola India (A-6) had

reduced them to 7 and is installing its own bottling plants in

different places. The case of the complainant further is that by the

letter dated February 14, 2000, A-6 informed the complainant that

they would not renew the agreements on their expiry on February

28, 2001. In paras 47 and 48 of the complaint, it is alleged that

A-6 is adopting all sorts of unfair trade practices and that it has

made wrongful gain of over Rs.100 crores. In para 50, it is

alleged that A-1 and A-6 have not replied properly to the letters of

the complainant and the accused have, therefore, cheated the

complainant by making false representation.

The learned Magistrate before whom the complaint was filed

passed an order under Section 156 (3) Cr.P.C. on July 27, 2000

directing the police to investigate the offence as the same was

cognizable offence. The police thereafter submitted a report on

October 31, 2000 which reads as under :

"After the entire inquiry it appears that the

Cadbury Schweppes Company and Coca Cola

Company have violated the terms and conditions of

Business Agreement, as a result, the complainant has

suffered financial loss. The complainant was kept in

darkness and supplied confusing information,

consequently, Complainant suffered economic loss.

Prima facie a case of business competition and violation

of Agreements is made out and the complainant is

advised to approach the Civil Court."

After consideration of the report the learned Magistrate was

of the opinion that the police had not submitted the same in

accordance with Section 173(2) Cr.P.C. and also in the proforma

prescribed in the Rules framed by the State Government as the

same had been submitted on plain paper. The SHO, PS

Govindpura was accordingly directed on November 16, 2000 to

submit a report in the prescribed proforma.

On January 11, 2001, the Police submitted a report that on

the basis of the complaint, Case Crime No.5 of 2001, Case Crime

No.13 of 2001 and Case Crime No.18 of 2001 has been registered

under Section 420, 120-B, 34 IPC. On the same date, the learned

Magistrate passed an order that the Police had registered the

offence and investigation is being carried on and, therefore, the

complainant should make available Hindi translation of the

documents and fixed January 30, 2001 as the next date.

Thereafter, the appellants filed three Criminal Miscellaneous

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Petitions under Section 482 Cr.P.C. before the High Court for

quashing of the FIR and the proceedings of the case before the

learned Magistrate. After hearing the parties, the High Court held

that the investigation had not yet commenced in connection with

the FIRs which had been registered at the Police Station and,

therefore, the Petitions were pre-mature and accordingly all the

three Petitions were rejected.

Shri F.S. Nariman, learned senior counsel for the appellants

has submitted that M/s Cadbury Schweppes Beverages India Pvt.

Ltd. (A-1) had entered into bottling agreements with the

complainant Sanjiva Bottling Company on March 1, 1996 and the

said agreements were to continue for a term of five years. It also

contained a clause that either party could terminate the agreement

at the end of initial term by giving to the other side not less than 12

calendar months notice in writing. Subsequent to the execution of

the agreement, Atlantic Industries (a wholly owned indirect

subsidiary of The Coca-Cola Export Corporation, USA) purchased

the trademarks from Cadbury Schweppes plc. on July 29, 1999,

upon which the bottling agreements between the complainant,

Sanjiva Bottling Company were duly assigned to Atlantic

Industries and information regarding the same was also given to

the complainant. Atlantic Industries thereafter gave notice to the

complainant on February 14, 2000 not to renew the bottling

agreements which were to expire on February 28, 2001 and the

agreements with the complainant came to end on the said date.

The learned counsel has further submitted that there is absolutely

no allegation in the complaint that the appellants (A-7 to A-11) had

at any time made any kind of mis-representation to the

complainant or had asked it to do or omit to do anything and as

such no offence under Section 420 IPC is made out against them.

It has thus been urged that the allegations made in the complaint,

even if accepted at their face value, do not disclose commission of

any offence by the appellants and, therefore, the proceedings of the

complaint case and also the FIRs lodged against the appellants are

liable to be quashed.

The learned Advocate General for the State of Madhya

Pradesh has submitted that as per the order of the learned

Magistrate dated July 27, 2000, the Police had submitted a report

that prima facie it was a case of violation of agreement for which

the complainant could seek relief from the Civil Court. However,

in view of subsequent order passed by the learned Magistrate on

November 16, 2000 a case had been registered at the Police Station

and the matter was being investigated.

Shri Sushil Kumar, learned senior counsel for the

complainant has submitted that the allegations made in the

complaint disclose commission of an offence under Section 420

IPC by the accused persons and a case has been registered at the

Police Station and investigation is being carried out. Learned

counsel has further submitted that the High Court rightly took the

view that the Petitions filed by the appellants for quashing of the

proceedings were pre-mature and the said order does not suffer

from any error of law.

We have given our careful consideration to the submissions

made by learned counsel for the parties. It may be stated at the

very outset that the main allegation made in the complaint is

against M/s Cadbury Schweppes Beverages India Pvt. Ltd.

(A-1). It is stated in para 5 of the complaint that the Technical

Directors of A-1 approached the complainant and a Memorandum

of Understanding was signed on October 9, 1995 and the

complainant was asked to discontinue competing brand 'Sprint'

within six months of the introduction of 'Canada Dry' and it was

also asked to carry out certain jobs at its bottling plant. The

complainant thereafter modernised its bottling plant as per the

requirement and satisfaction of A-1. Thereafter, the bottling

agreements were executed between the complainant and A-1 on

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March 1, 1996. Coca Cola India (A-6) came into picture for the

first time when Atlantic Industries (a wholly owned indirect

subsidiary of The Coca-Cola Export Corporation, USA) purchased

3500 trademarks in 155 countries from Cadbury Schweppes plc. on

July 29, 1999, upon which the bottling agreements between A-1

and the complainant was assigned to Atlantic Industries. A-1 also

informed the complainant in writing on July 29, 1999 that the

brands Schweppes, Crush and Canada Dry and associated brands

in India will be acquired by a Member of the Coca Cola Group of

Companies and the bottling agreements will be assigned to

Atlantic Industries. Clause 19 of the Agreement which was

executed between the complainant and A-1 on March 1, 1996

reads as under:-

"This Agreement shall come into operation on the

Effective Date and subject to the terms herein contained

shall continue for a term of 5 (five) years therefrom (the

"Initial Term") and thereafter provided that the

Company has complied with the conditions set out

below shall continue in force for further successive

periods of 5 (five) years unless and until terminated by

either party giving to the other not less than twelve

calendar months notice in writing to terminate the same

expiring at the end of the Initial Term or any such

subsequent period, the said conditions being :

(i) that the Company has complied with its

obligations during (as the case may be) the Initial

Term or the relevant subsequent period (including

without limitation its obligations pursuant to Sub-

clause 7.1) and

(ii) prior agreement of the parties in writing on the

Base Plan to come into effect at the start of such

subsequent period and as to the levels of Annual

Minimum Aggregate Sales which shall apply

during such subsequent period."

Thereafter on February 14, 2000 a notice was given jointly by

Atlantic Industries, Canada Dry Corporation Limited and Cadbury

Schweppes Beverages Ltd. to the complainant, Sanjiva Bottling

Company and it reads as under :

"We refer to Agreements (to include any addenda

entered into subsequently) entered into between

yourselves ("the Company") in relation to the

production, sale and distribution of "Crush", "Canada

Dry", "Schweppes", and "Sport Cola" Products with an

Effective Date of 01 March 1996 ("called the

Agreement"). All defined terms used in the Agreement

shall have the same meaning prescribed in this letter,

save as expressly stated otherwise.

Please take this letter as the required 12 months notice,

pursuant to clause 19 of our intention not to renew this

Agreement on expiry on 28 February 2001 ("the Expiry

Date"). We would however, require that you continue

to fully carry out all obligations under the terms of your

Agreement until the Expiry Date."

The agreements executed between the complainant and A-1

on March 1, 1996 were for a period of five years. Though the

same could continue for a further successive period of five years,

but either party to the agreement had a right to terminate the same

expiring at the end of the initial term by giving not less than 12

calendar months notice in writing. The initial period of five years

would have come to an end on February 28, 2001 but on February

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14, 2000, notice was given to the complainant that the said

agreements would not be renewed after expiry of the initial period

i.e. after February 28, 2001. Even when the agreements were

executed in March, 1996, the complainant was fully aware that the

same may not be renewed further after expiry of the initial term of

five years.

According to the allegations made in the complaint, it was

the Technical Directors of A-1 who had approached the

complainant and a Memorandum of Understanding was signed on

October 9, 1995. The modernisation of the bottling plant was

done by the complainant as per the requirement and satisfaction of

A-1 and thereafter the agreements were executed between them

(Complainant and A-1) on March 1, 1996 in pursuance whereof

the complainant claims to have spent considerable amount of

money in improvement of the bottling plant. There is no

allegation in the complaint that A-6 to A-11 or anyone on their

behalf ever met the complainant or asked it to invest any money or

to do anything for improvement of the bottling plant. In fact

there is absolutely no reference to A-6 to A-11 in the complaint

except that A-6 is installing its own bottling plants and that A-6

gave notice to the complainant not to renew the agreements after

expiry of the initial term. In paras 33 and 34 of the complaint, the

entire allegations are made against A-1 and it is said that A-1 was

actuated by dishonest intention to cheat the complainant and that

A-1 has committed the offence of cheating. In para 47 of the

complaint it has been alleged that A-6 is adopting all sorts of unfair

trade practices.

Section 420 IPC says that "Whoever cheats and thereby

dishonestly induces the person deceived to deliver any property to

any person shall be punished with imprisonment "

Cheating has been defined in Section 415 IPC and it says that

"Whoever, by deceiving any person, fraudulently or dishonestly

induces the person so deceived to deliver any property to any

person, or to consent that any person shall retain any property, or

intentionally induces the person so deceived to do or omit to do

anything which he would not do or omit if he were not so

deceived, and which act or omission causes or is likely to cause

damage or harm to that person in body, mind, reputation or

property, is said to "cheat"."

A guilty intention is an essential ingredient of the offence of

cheating. In other words 'mens rea' on the part of the accused

must be established before he can be convicted of an offence of

cheating. (See Jeswantrai Manilal Akhaney v. The State of

Bombay AIR 1956 SC 575). In Mahadeo Prasad v. State of

West Bengal AIR 1954 SC 724, it was held as follows :

"Where the charge against the accused is under

S.420 in that he induced the complainant to part with

his goods, on the understanding that the accused would

pay for the same on delivery but did not pay, if the

accused had at the time he promised to pay cash against

delivery an intention to do so, the fact that he did not

pay would not convert the transaction into one of

cheating. But if on the other hand he had no intention

whatsoever to pay but merely said that he would do so

in order to induce the complainant to part with the

goods then a case of cheating would be established."

In Hari Prasad Chamaria v. Bishun Kumar Surekha & Ors.

AIR 1974 SC 301 it was held that unless the complaint showed

that the accused had dishonest or fraudulent intention at the time

the complainant parted with the money it would not amount to an

offence under Section 420 IPC and it may only amount to breach

of contract. In G.V. Rao v. L.H.V. Prasad & Ors. 2000 (3) SCC

693, it was reiterated that guilty intention is an essential ingredient

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of the offence of cheating and, therefore, to secure conviction

'mens rea' on the part of the accused must be established. It has

been further held that in order to constitute the offence of cheating

the intention to deceive should be in existence at the time when the

inducement was offered.

So far as the present appellants are concerned, they came into

picture much later in July 1999, when various trademarks and

brands of A-1 were purchased by A-6. The appellants were not at

all in picture at the time when the complainant claims to have spent

money in improvement of its bottling plant on the basis of the

agreement executed with Cadbury Schweppes Beverages India

Pvt. Ltd. (A-1). Since the appellants were not in picture at all at

the time when the complainant alleges to have spent money in

improving the bottling plant, neither any guilty intention can be

attributed to them nor there can possibly be any intention on their

part to deceive the complainant. No offence of cheating can,

therefore, be said to have been committed by the appellants on

account of the fact that a notice was given to the complainant that

the bottling agreements will not be renewed any further after

expiry of the initial term. Thus, even if the allegations made in the

complaint are accepted to be absolutely true and correct, the

appellants cannot be said to have committed any offence of

cheating as provided in Section 420 IPC.

The High Court has held that the Petitions filed by the

appellants for quashing the complaint and the FIRs registered

against them are pre-mature. The question which arises is that

where the complaint or the FIR does not disclose commission of a

cognizable offence, whether the same can be quashed at the initial

stage ? This question was examined by this Court in State of West

Bengal & Ors. v. Swapan Kumar Guha & Ors. AIR 1982 SC 949

and it was held that the First Information Report which does not

allege or disclose that the essential requirements of the penal

provision are prima facie satisfied, cannot form the foundation or

constitute the starting point of a lawful investigation. It is surely

not within the province of the police to investigate into a Report

(FIR) which does not disclose the commission of a cognizable

offence and the Code does not impose upon them the duty of

inquiry in such cases. It was further held that an investigation can

be quashed if no cognizable offence is disclosed by the FIR. The

same question has been considered in State of Haryana & Ors. v.

Ch. Bhajan Lal & Ors. AIR 1992 SC 604 and after considering all

the earlier decisions, the category of cases, in which the Court can

exercise its extra-ordinary power under Article 226 of the

Constitution or the inherent power under Section 482 Cr.P.C.

either to prevent abuse of the process of any Court or to secure the

ends of justice, were sumarised in para 108 of the Report and sub-

paras 1 to 3 thereof are being reproduced hereinbelow :

"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 F.I.R. do

not disclose a cognizable offence, justifying an

investigation by police officers under Section 156(1) 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."

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As mentioned earlier, the allegations made in the complaint,

even if they are taken at their face value and accepted in their

entirety, do not constitute any offence as against the appellants.

Therefore, the complaint filed by the respondent and the FIRs

registered in pursuance thereof are liable to be quashed. Trisuns

Chemical Industry v. Rajesh Agarwal & Ors. 1999(8) SCC 686

cited by learned counsel for the complainant is clearly

distinguishable as in the said case the allegation in the complaint

was that the complainant had paid in advance a price higher than

the market price for purchasing "toasted soyabean extracts" but the

accused sent the commodity which was of most inferior and

substandard quality due to which the complainant suffered a loss of

Rs.17 lakhs. In view of the allegations made in the complaint, the

matter required investigation and the proceedings could not have

been quashed on the ground that the dispute was of a civil nature.

In the result, the appeals are allowed. The impugned

judgment and order dated January 16, 2002 of the High Court is set

aside and the complaint filed by the Respondent no.2 and the FIRs

registered in pursuance thereof as Case Crime Nos.5 of 2001, 13 of

2001 and 18 of 2001, as against the appellants, are quashed.