1. Leave granted. Since the matter was fixed for final hearing, we have heard the learned Counsel for the parties at length.

2. The facts which are required to be taken note of, in brief, are that Appellant No. 1 (hereinafter referred to as the Appellant company) is a company incorporated under the laws of the United States of America and is having its head office in New York. It is engaged in the business of offering data base services internationally for the last several years. Appellant No. 2 is the Chairman and Chief Executive Officer of Appellant-company and Appellant No. 3 is its executive Vice-President. Respondent is a company registered under the Indian Companies Act, 1956, having its registered office in Pudducherry, India. It is engaged in the business of providing quality knowledge based back and works (KPO) and software solutions to various enterprises in the World from its centers based in India.

3. Negotiations took place between the Respondent-company and the Appellant-company as the Appellant-company expressed its willingness to utilise the services of the Respondent, i.e., knowledge based back and works and software development skills as well as professional services capabilities. In this behalf, an agreement dated 01.05.2009 was entered into between the Appellant-company and the Respondent whereby the Respondent agreed to provide the aforesaid services on certain remuneration, terms whereof were also stipulated in the said agreement.

4. According to the Respondent, the Appellant company was irregular in making payments. As on November, 2010, under the said agreement, for the services rendered by the Respondent, the Appellant-company had to make a total payment of USD 316,513 and as against this, the Appellant-company had made payment of USD 207,558.05. In this manner, a sum of USD 108,954.95 remained due to be paid by the Appellant-company to the Respondent. On the other hand, the Appellant-company took up the position that it is the Respondent which did not provide adequate services to the Appellant-company as per the terms and conditions of the agreement dated 01.05.2009 and for this reason the Appellant-company cancelled the said agreement dated 01.05.2009. After the cancellation, the parties again negotiated the matter which resulted into second agreement dated 01.12.2010. Under this agreement, it was agreed that the Appellant-company shall make payment of outstanding dues of USD 108,954.95 under the first agreement in six monthly installments from December, 2010 to May, 2011. It was also agreed that no party shall institute any proceedings in any Court to resolve any dispute with the other party and if any case arises in future, the same shall be resolved by the parties amicably by a dispute resolution procedure, mechanism whereof was provided in Clause 1.8 of Article 8 of the agreement. In fact, this clause is an arbitration clause as per which parties agreed to settle their disputes peacefully by means of arbitration.

5. Unfortunately, in spite of the aforesaid second agreement entered into between the parties, the working relationship between them could not be carried out satisfactorily and disputes again arose between them. As per the Appellant, the Respondent again committed breach of material terms of the second agreement in respect to quality and timely providing of services and failed to discharge its contractual obligations which resulted in suffering of losses by the Appellant-company. On the other hand, the Respondent-company maintained that it had provided satisfactory and complete quality services as per the agreement and it is the Appellant-company which failed to make payment of the services provided as per the second agreement and, also, they did not discharge their obligation to pay the outstanding amount of USD 108,954.95 as well which was due in the first agreement. According to the Respondent, only two payments in the sum of USD 24,735 and USD 122,997 were made which were not complete payments in respect of the dues which were payable by the Appellant-company to the Respondent-company for the services rendered by the Respondent to the Appellant-company. Because of the aforesaid disputes, the Appellant-company sent legal notice dated 20.06.2012 to the Respondent-company invoking the arbitration clause contained in the agreement dated 01.12.2010 and nominating Mr. Justice Mohan Ram, a retired Judge of the Madras High Court as Arbitrator and requested the Respondent to also accept the said Arbitrator for adjudication of disputes between the parties. In response to the said notice, the Respondent sent communication dated 18.07.2012 wherein the Respondent informed that it had already filed Criminal Complaint No. 142 of 2012 against the Appellants alleging that the Appellants had committed offence of cheating and misappropriation punishable Under Sections 420, 406, 409 read with 120(B) of the Indian Penal Code and in the said complaint, after recording the statement of the complainant, the learned Magistrate had issued summons dated 05.04.2012 to the Appellants finding that prima facie case under the aforesaid provisions was made out.

6. The Appellants challenged the aforesaid summoning orders by filing petition Under Section 482 of the Code of Criminal Procedure, 1973, in the High Court of Madras. This petition has been dismissed by the High Court vide impugned judgment dated 11.11.2014 and challenging this judgment, the instant petition has been preferred by the Appellants wherein leave has been granted hereinabove.

7. To record the events that have taken place thereafter and have a bearing on the present case, we may note that when the Respondent-company had refuted the allegations of the legal notice dated 20.06.2012 sent by the Appellants for appointment of the Arbitrator, the Appellant-company filed petition Under Section 11(6) of the Arbitration and Conciliation Act, 1996, for appointment of an Arbitrator in this Court in terms of the arbitration agreement. Though this application was contested by the Respondent, ultimately, on a consensus being arrived at between the parties, orders dated 08.10.2014 were passed in the said arbitration application of the Appellants, appointing Mr. Justice Doraiswamy Raju, a former Judge of this Court, as the sole arbitrator to adjudicate the claims and counter claims of both the parties. It is also a matter of record that arbitration proceedings are going on before the learned Arbitrator. We are informed that both the parties have filed claims against each other. Evidence of both the parties is substantially over and the proceedings are at an advanced stage. We were also informed that the arbitration award is expected in near future.

8. Coming to the case at hand, a perusal of the judgment of the High Court would show that the High Court formulated the following three questions for determination:

(i) Whether the complaint is liable to be quashed on the ground that the allegations made in the complaint do not constitute any offence Under Section 420 Indian Penal Code

(ii) Whether the criminal law can be set in motion in this case, since the agreement comprises a provision for arbitration

(iii) Whether the Magistrate has conducted the enquiry Under Section 202 Code of Criminal Procedure, since the Petitioners are residing outside the jurisdiction of the Court

9. The High Court was of the view that the allegations contained in the complaint filed by the Respondent, particularly in paragraph 7 thereto, satisfy the ingredients of the offences for which the Appellants are implicated. But the High Court further observed that merely because arbitration proceedings were pending between the parties, it would not preclude the Respondent from launching criminal prosecution when prima facie criminal case was also made out against the Appellants. In the three question formulated, the High Court took the view that the Magistrate had conducted a proper inquiry Under Section 202 of the Code of Criminal Procedure before proceeding against the Appellants.

10. The moot question before us revolves around Question No. 1 which was formulated by the High Court and it is to be seen as to whether dispute between the parties is essentially of a civil nature or any case is made out against the Appellants for launching criminal prosecution under the aforesaid Sections.

11. After going through the allegations contained in the complaint and the material on record, we are of firm conclusion that the matter entirely pertains to civil jurisdiction and not even a prima facie case is made out for offences Under Sections 420, 406, 409 read with Section 120B of Indian Penal Code even if the allegations contained in the complaint are to be taken on their face value. The complaint gives a clear impression that it was primarily a case where the Respondent had alleged breach of contract on the part of the Appellants in not making the entire payments for the services rendered to the Appellants. On the other hand, it is not in dispute that substantial amounts have been paid by the Appellants to the Respondent-company for the services rendered.

12. Reason for non-payment of the balance amount as given by the Appellants is that the services rendered by the Respondent-company were not in terms of the agreement entered into between the parties and were deficient in nature. For this reason, even the Appellants have filed claims against the Respondent-company alleging that Appellant suffered losses because of the defective services provided by the Respondent.

13. On the basis of it, we find that it cannot be said that at the time of entering into the agreement, either the first agreement or even the second agreement, there was any intention on the part of the Appellants to cheat the Respondent. No suspicion of any nature was shown or even alleged. It is also not the allegation of the Respondent in the complaint that the agreement was entered into with fraudulent or dishonest intention on the part of the Appellants in inducing the Respondent to enter into such a contract. At best, the dispute between the parties is of a civil nature, proceedings in respect of which are pending before the learned Arbitrator.

14. We, thus, allow this appeal, set aside the judgment of the High Court and thereby allow the petition filed by the Appellants in the High Court Under Section 482 of Code of Criminal Procedure. The result whereof would be quashing of the proceedings arising out of Complaint No. 142 of 2012 pending in the Court of Judicial Magistrate-II, Puducherry. No costs.