1. Heard learned counsel for the petitioner and learned Law Officer appearing on behalf of the Department of Vigilance.

2. The present application has been filed by the petitioner for quashing the order of cognizance dated 30.08.2018 passed by learned Special Judge, Vigilance-1st, Patna in Special Case No.343 of 2017 arising out of Patna Vigilance P.S. Case No.81 of 2017, whereby the learned Special Judge has taken cognizance against the petitioner for the offences punishable under Sections 406, 409, 420, 467, 468, 471, 477A, 120-B of the Indian Penal Code (for short ‘IPC’) as well as section 13(2) and 13(1)(d) of the Prevention of Corruption Act, 1988.

3. The prosecution case is based upon the written report/complaint filed by one Arun Kumar, the Superintendent of Police, Vigilance Bureau, Patna giving rise to Vigilance P.S. Case No.81 of 2017, stating therein that Bihar Mahadalit Vikas Mission, a society registered under the Societies Registration Act (hereinaÆer referred to as ‘BMVM’) is an autonomous entity constituted under the Scheduled Caste and Scheduled Tribes, Welfare Department with a vision to fulfil all the basic needs of Mahadalit Caste, so as to make them socially, economically, culturally empowered and to ensure their full participation in the formation of society. It is further stated in the complaint that having received a complaint, a preliminary enquiry was conducted for the irregularities committed in the training provided for MicrosoÆ Office Trade and payment made pursuant to the said training. It is further alleged that on 29.03.2011, an Expression of Interest (for short ‘EOI’) was issued by the BMVM. Pursuant to the said EOI, 10 agencies had shown their interest for providing training for the MicrosoÆ Office Trade. In furtherance thereof, a committee was constituted for taking a decision upon the proposals sent by those ten agencies wherein out of 10 agencies, 8 agencies have been declared qualified in the technical bid. On 22.09.2011, financial bid of 8 agencies has been opened wherein Sri Ram New Horizon (for short ‘SRNH’) was found eligible for the said work and its name was recommended by the Committee. It is further alleged that during the enquiry, it was found that pursuant to the recommendation of the said committee, on 30.09.2011, the said recommendation was further placed before the State Project Officer, BMVM (for short ‘SPO’), namely, Devjani Kar. The SPO further recommended to approve the recommendation of the committee and added an additional point in her comments that for the work of examination and certification, a proposal for request may be sent to MicrosoÆ, which was further approved by the officers of the BMVM. ThereaÆer, on 23.09.2011, an agreement was entered into between SRNH, where 3445 students were to be provided training at the rate of Rs.4081 per student. 70% of the amount was payable aÆer the completion of training, supplying of course ware and conducting the examination. It has been further alleged that SRNH provided training only to 3445 students and the payments of Rs.88,41,322/- was made without having it approved. Pursuant to the said agreement, SRNH started the programme of training from 17.11.2011 and payment of Rs.10,29,228/- was made to the SRNH by BMVM for the year 2011-12 and Rs.89,23,923/- was paid for the year 2012-13 against the work done. It is further alleged that during the enquiry, it was also found that Rs.4081/- was to be paid to SRNH as per the work order, which includes supplying of course ware, examination and certification but, SPO vide recommendation dated 30.09.2011 added an additional point with regard to the examination and certification to be done from MicrosoÆ. In furtherance thereof, the MicrosoÆ informed BMVM that MicrosoÆ makes the soÆware but, for the work of examination and certification, there are resellers of MicrosoÆ and M/s. Indus Integrated Information Management Ltd (in short ‘IIIM Ltd’) is also one of the reseller of the MicrosoÆ. It is further alleged that in the light of the letter received from the MicrosoÆ, the SPO recommended the name of IIM Ltd. for the work of examination and certification, which has been further approved by the officers of the BMVM. It is further alleged that despite the fact that the work of examination and certification were also to be carried out by SRNH, the said work was allotted to IIM Ltd. Payment of Rs.62,40,200/- has been made to the IIM Ltd. for the year 2010-11 and 2011-12 which is in violation of the rules of the payment schedule. It is further alleged that during the investigation, it was found that the Accountant General, Bihar had conducted an audit and an audit report was also sent accordingly. In the said audit report, an objection was raised in connection with issuance of work order to the IIM Ltd. and payment was made pursuant thereto. ThereaÆer, on 16.05.2013, an EOI was issued for 8 trades wherein the MicrosoÆ office examination and the certification were als included as one of the trades. Pursuant to the said EOI, 35 proposals were received from different agencies and on 26.08.2013, a meeting was held by the committee. In the said meeting, it was decided to gather the information in connection with the authorization of the agencies from MicrosoÆ, which were submitted the proposal in the trade of MicrosoÆ office examination and certification. Pursuant to this, on 25.10.2013 at 3.52 P.M., the SPO sent the list of the agencies to the MicrosoÆ via e-mail and on same day, an email was received from the MicrosoÆ, wherein it was mentioned that other than IIIM and SRNH, none are authorized learning partners of MicrosoÆ. ThereaÆer, a new fact also came in light that MicrosoÆ does not hold examination and the examination is being held by a company, namely, CERTIPORT. An objection was also raised by one of the agency that there is no requirement of the authorization from the MicrosoÆ for conducting the examination but, BMVM did not pay any attention to the said objection. It is further alleged that having ignored the objection, the BMVM opened the financial bid of only two agencies, namely, IIIM Ltd. and SRNH despite the participation of the thirty nine agencies. IIIM Ltd. being the lower bidder, the work of MicrosoÆ office examination and certification was awarded to IIM Ltd at the rate of Rs.1800 per student, which was further approved by the Chief Executive Officer, BMVM. ThereaÆer, a payment of Rs.2,68,000,00/- was made to IIIM Ltd. for the financial year 2013-14, 2014-15 and 2015-16 and a payment of Rs.1,16,000,00/- was made to SRNH for the same period without following procedure prescribed before releasing the payment, which show the connivance of the CEO and SPO with Director of IIIM Ltd., namely, Sarad Kumar Jha (petitioner). It is further alleged that on 01.01.2015, the Chief Executive Officer made certain remarks with regard to the payment made to IIM Ltd. It was also mentioned that the payment of Rs.2,00,000,00/- has been made to IIM Ltd. which is objectionable and further directed to recover the amount from IIIM Ltd. Lastly, it is alleged that the SPO has misused her position and helped her husband in getting a job of Head Strategic Project in IIIM Ltd. and further in connivance with each other, the payment has been made to the IIIM Ltd. without following the due procedure.

4. Mr. Gouranga Chatterjee, learned counsel appearing for the petitioner submitted that the petitioner had signed the agreement dated 23.11.2011, being one of the Directors of M/s. IIIM Ltd, which qualified the EOI as lowest bidder, he is facing the entire allegations out of said reason only. It is pointed out that from entire narration of FIR, nothing appears on its face, which may suggest that a prima facie case is made out against the petitioner. It is submitted that allegation of conspiracy, which is the main part of allegation qua petitioner also not surfaced prima facie from the perusal of FIR or even surfaced during the investigation. While arguing the matter, it is submitted by Mr. Chatterjee that IIIM Ltd. was engaged for supplying the material, books, etc. and also conducting the examination and issuing certificate only, whereas the training part was to be done by another company, namely, M/s. Sri Ram New Horizon (for short ‘SRNH’). It is pointed out that so far as supply of book, etc. is concerned, there is no allegation against M/s. IIIM Ltd. It is submitted that allegation is limited qua conducting examination in irregular manner and issuance of forged certificate. In this context, Mr. Chatterjee submitted that the examination and certification was issued in terms of list supplied by M/s. SRNH and for same, M/s. IIIM Ltd. cannot be held liable. It is also submitted that entire execution of work was done by M/s. IIIM Ltd. and payment was also received by the said company but, M/s. IIIM Ltd. company was not arrayed as an accused in the entire prosecution and on this score alone, the entire proceeding is fit to be set aside/quashed against petitioner, who implicated in private capacity without any allegation.

5. Learned counsel for the petitioner further submitted that M/s. IIIM Ltd. has preferred Request Case Nos. 86 of 2018, 87 of 2018 and 88 of 2018 respectively on 11.07.2018 before the High Court of Judicature at Patna for three different contracts and Hon’ble High Court was pleased to sent the case of M/s. IIIM Ltd. for arbitration accepting the dispute as civil in nature, as the agreement itself make provision for arbitration in terms of Clause-22 of the contract. All three matters were sent for arbitration, where Hon’ble Mr. Justice (Retd.) Sadanand Mukherjee was appointed as sole arbitrator. AÆer taking note of all relevant facts, the award was passed in favour of M/s. IIIM Ltd., and, thus, an amount of Rs.1,06,65,207/- (One crore six lakhs sixty five thousand two hundred seven) was awarded in favour of M/s. IIIM Ltd., which was challenged by BMVM before the learned District Judge, Patna under Section 34 of the Arbitration Act, which is still pending.

6. It is also submitted that the entire dispute is civil in nature, which is guided by agreement dated 23.11.2011 and, therefore, the present criminal case was lodged only with harassing attitude out of ulterior and oblique motive.

7. In support of his aforesaid submission, learned counsel relied upon the legal reports of Hon’ble Supreme Court as reported in the matter of Usha Chakraborty and Anr. vs State of West Bengal and Anr. [2023 SCC Online SC 90]; R. Kalyani vs Janak C. Mehta & Ors [2009 (1) SCC 516]; and Sushil Sethi and Another vs. State of Arunachal Pradesh and Ors. [(2020) 3 SCC 240]. Learned counsel further relied upon the legal report of Hon’ble Supreme Court as reported in the matter of State of Haryana and Ors. Vs. Bhajan Lal and Ors [(1992) Supp (1) SCC 335] in support of submission regarding malicious prosecution.

8. While concluding argument, learned counsel further submitted that the entire proceeding was initiated on the basis of audit report of Accountant General, Bihar for the period 15.04.2013 to 29.04.2013, which is the part of FIR itself, but the Accountant General itself withdraw the said irregularities vide letter dated 12.04.2019, which is Annexure-16 and, as such, the entire allegation appears false on its face.

9. Per contra, Mr. Arvind Kumar, learned Law Officer appearing for the Department of Vigilance submitted that M/s. IIIM Ltd. caused wrongful loss to the government to the tune of Rs.3,30,36,289/-, but he fairly submitted that the petitioner had signed the agreement as a Director of M/s. IIIM Ltd. where entire payment was received by M/s. IIIM Ltd. and not by this petitioner. It is also submitted that having arbitration clause in agreement does not preclude to file criminal case. In support of his submission, learned Law Officer relied upon the legal report of Hon’ble Supreme Court rendered in the matter of Trisuns Chemical Industry vs. Rajesh Agarwal and others [AIR 1999 SC 3499].

10. It would be apposite to reproduce paragraph 41 of R. Kalyani case (supra), in which the Hon’ble Supreme Court has held as under:

“41. If a person, thus, has to be proceeded with as being variously liable for the acts of the company, the company must be made an accused. In any event, it would be a fair thing to do so, as legal fiction is raised both against the company as well as the person responsible for the acts of the company.”

11. It would be apposite to reproduce Para-7.2, 7.5, 8.1 and 8.2 of judgment of Hon’ble Supreme Court in the case of Sushil Sethi (supra), which runs as under:-

“7.2. In Vesa Holdings (P) Ltd. v. State of Kerala, [(2015) 8 SCC 293] , it is observed and held by this Court that every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the very inception. It is further observed and held that for the purpose of constituting an offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. It is further observed and held that even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in the absence of a culpable intention at the time of making initial promise being absent, no offence under Section 420 IPC can be said to have been made out. It is further observed and held that the real test is whether the allegations in the complaint disclose the criminal offence of cheating or not.

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7.5. In Sharad Kumar Sanghi v. Sangita Rane, [(2015) 12 SCC 781], this Court had an occasion to consider the initiation of criminal proceedings against the Managing Director or any officer of a company where company had not been arrayed as a party to the complaint. In the aforesaid decision, it is observed and held by this Court that in the absence of specific allegation against the Managing Director of vicarious liability, in the absence of company being arrayed as a party, no proceedings can be initiated against such Managing Director or any officer of a company. It is further observed and held that when a complainant intends to rope in a Managing Director or any officer of a company, it is essential to make requisite allegation to constitute the vicarious liability.

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8.1. As observed hereinabove, the charge-sheet has been filed against the appellants for the offences under Section 420 read with Section 120-B IPC. However, it is required to be noted that there are no specific allegations and averments in the FIR and/or even in the charge-sheet that fraudulent and dishonest intention of the accused was from the very beginning of the transaction. It is also required to be noted that contract between M/s SPML Infra Limited and the Government was for supply and commissioning of the Nurang Hydel Power Project including three power generating units. The appellants purchased the turbines for the project from another manufacturer. The company used the said turbines in the power project. The contract was in the year 1993. ThereaÆer in the year 1996 the project was commissioned. In the year 1997, the Department of Power issued a certificate certifying satisfaction over the execution of the project. Even the defect liability period ended/expired in January 1998. In the year 2000, there was some defect found with respect to three turbines. Immediately, the turbines were replaced. The power project started functioning right from the very beginning— 1996 onwards. If the intention of the company/appellants was to cheat the Government of Arunachal Pradesh, they would not have replaced the turbines which were found to be defective. In any case, there are no specific allegations and averments in the complaint that the accused had fraudulent or dishonest intention at the time of entering into the contract. Therefore, applying the law laid down by this Court in the aforesaid decisions, it cannot be said that even a prima facie case for the offence under Section 420 IPC has been made out.

8.2. It is also required to be noted that the main allegations can be said to be against the company. The company has not been made a party. The allegations are restricted to the Managing Director and the Director of the company respectively. There are no specific allegations against the Managing Director or even the Director. There are no allegations to constitute the vicarious liability. In Maksud Saiyed v. State of Gujarat [Maksud Saiyed v. State of Gujarat, (2008) 5 SCC 668 : (2008) 2 SCC (Cri) 692] , it is observed and held by this Court that the Penal Code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the company when the accused is the company. It is further observed and held that the vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. It is further observed that the statute indisputably must contain provision fixing such vicarious liabilities. It is further observed that even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability. In the present case, there are no such specific allegations against the appellants being Managing Director or the Director of the company respectively. Under the circumstances also, the impugned criminal proceedings are required to be quashed and set aside.”

12. It would further be apposite to reproduce para 6, 7, 8 and 10 of the legal report of Hon’ble Supreme Court in the case of Usha Chakraborty (supra), which are being reproduced hereunder for a ready reference:

“6. In Paramjeet Batra v. State of Uttarakhand [(2023) 11 SCC 673], this Court held:—

“12. While exercising its jurisdiction under Section

482 of the Code of the High Court has to be cautious. This power is to be used sparingly and only for the purpose of preventing abuse of the process of any court or otherwise to secure ends of justice. Whether a complaint discloses a criminal offence or not depends upon the nature of the facts alleged therein. Whether essential ingredients of criminal offence are present or not has to be judged by the High Court. A complaint disclosing civil transactions may also have a criminal texture. But the High Court must see whether a dispute which is essentially of a civil nature is given a cloak of criminal offence. In such a situation, if a civil remedy is available and is, in fact, adopted as has happened in this case, the High Court should not hesitate to quash the criminal proceedings to prevent abuse of process of the court.”

7. In Vesa Holdings Private Limited v. State of Kerala [(2015) 8 SCC 293], it was held that:—

“13. It is true that a given set of facts may make out a civil wrong as also a criminal offence and only because a civil remedy may be available to the complainant that itself cannot be a ground to quash a criminal proceeding. The real test is whether the allegations in the complaint disclose the criminal offence of cheating or not. In the present case there is nothing to show that at the very inception there was any intention on behalf of the accused persons to cheat which is a condition precedent for an offence under Section 420 IPC. In our view the complaint does not disclose any criminal offence at all. The criminal proceedings should not be encouraged when it is found to be mala fide or otherwise an abuse of the process of the court. The superior courts while exercising this power should also strive to serve the ends of justice. In our opinion in view of these facts allowing the police investigation to continue would amount to an abuse of the process of the court and the High Court committed an error in refusing to exercise the power under Section 482 of the Criminal Procedure Code to quash the proceedings.”

8. In Kapil Aggarwal v. Sanjay Sharma [(2021)

5 SCC 524], this Court held that Section 482 is designed to achieve the purpose of ensuring that criminal proceedings are not permitted to generate into weapons of harassment.

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10. In Neeharika Infrastructure Pvt. Ltd. v. State of Maharashtra [2021 SCC OnLine SC 315], a three Judge Bench of this Court laid down the following principles of law:—

“57. From the aforesaid decisions of this Court, right from the decision of the Privy Council in the case of Khawaja Nazir Ahmad (supra), the following principles of law emerge:

i) Police has the statutory right and duty under the relevant provisions of the Code of Criminal Procedure contained in Chapter XIV of the Code to investigate into cognizable offences;

ii) Courts would not thwart any investigation into the cognizable offences;

iii) However, in cases where no cognizable offence or offence of any kind is disclosed in the first information report the Court will not permit an investigation to go on;

iv) The power of quashing should be exercised sparingly with circumspection, in the ‘rarest of rare cases’. (The rarest of rare cases standard in its application for quashing under Section 482 Cr. P.C. is not to be confused with the norm which has been formulated in the context of the death penalty, as explained previously by this Court);

v) While examining an FIR/complaint, quashing of which is sought, the court cannot embark upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR/complaint;

vi) Criminal proceedings ought not to be scuttled at the initial stage;

vii) Quashing of a complaint/FIR should be an exception and a rarity than an ordinary rule;

viii) Ordinarily, the courts are barred from usurping the jurisdiction of the police, since the two organs of the State operate in two specific spheres of activities. The inherent power of the court is, however, recognised to secure the ends of justice or prevent the above of the process by Section 482 Cr. P.C.

ix) The functions of the judiciary and the police are complementary, not overlapping;

x) Save in exceptional cases where non-interference would result in miscarriage of justice, the Court and the judicial process should not interfere at the stage of investigation of offences;

xi) Extraordinary and inherent powers of the Court do not confer an arbitrary jurisdiction on the Court to act according to its whims or caprice;

xii) The first information report is not an encyclopaedia which must disclose all facts and details relating to the offence reported. Therefore, when the investigation by the police is in progress, the court should not go into the merits of the allegations in the FIR. Police must be permitted to complete the investigation. It would be premature to pronounce the conclusion based on hazy facts that the complaint/FIR does not deserve to be investigated or that it amounts to abuse of process of law. During or aÆer investigation, if the investigating officer finds that there is no substance in the application made by the complainant, the investigating officer may file an appropriate report/summary before the learned Magistrate which may be considered by the learned Magistrate in accordance with the known procedure;

xiii) The power under Section 482 Cr. P.C. is very wide, but conferment of wide power requires the court to be cautious. It casts an onerous and more diligent duty on the court;

xiv) However, at the same time, the court, if it thinks fit, regard being had to the parameters of quashing and the self-restraint imposed by law, more particularly the parameters laid down by this Court in the cases of R.P. Kapur (supra) and Bhajan Lal (supra), has the jurisdiction to quash the FIR/complaint; and

xv) When a prayer for quashing the FIR is made by the alleged accused, the court when it exercises the power under Section 482 Cr. P.C., only has to consider whether or not the allegations in the FIR disclose the commission of a cognizable offence and is not required to consider on merits whether the allegations make out a cognizable offence or not and the court has to permit the investigating agency/police to investigate the allegations in the FIR.”

13. Lastly, in paragraph No. 102 of legal report of Hon’ble Supreme Court in the case of Bhajan Lal (supra), the Hon’ble Supreme Court held as under:

‘‘102. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extraordinary power under Article 226 or the inherent powers under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised.

(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 FIR 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.

(4) Where, the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code.

(5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused.

(6) Where there is an express legal bar engraÆed in any of the provisions of the Code or the Act concerned (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the Act concerned, providing efficacious redress for the grievance of the aggrieved party.

(7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.’’

14. In view of aforesaid legal and factual submission, it appears that entire business activities were done in furtherance of agreement dated 23.11.2011 executed between BMVM C IIIM Ltd., which was signed by petitioner being one of the Directors. It is admitted position that payment was received by M/s. IIIM Ltd. Certificates of training which was alleged to be forged was not signed by the petitioner and moreover the same appears to be issued by other authorized person by IIIM Ltd. on the basis of the list supplied by SRNH. M/s. IIIM Ltd. executed aforesaid agreement only aÆer qualifying EOI, being lowest bidder and as such, it cannot be said prima facie that petitioner being a Director was intended to cheat from very inception and, as such, no prima facie case as alleged regarding cheating and forgery appears convincing against this petitioner. It is admitted position that M/s. IIIM Ltd. was not arrayed as an accused in this case as to established legal fiction for vicarious liability qua petitioner being Director of the company. Implication of petitioner appears in private capacity. Moreover, arbitration stands in favour of M/s. IIIM Ltd, prima facie negating any financial irregularities on part of petitioner.

15. Accordingly, by taking a guiding note from R. Kalyani case (supra) and from Sushil Sethi case (supra), the impugned order of cognizance dated 30.08.2018 as passed by learned Special Judge, Vigilance- 1st, Patna in Special Case No.343 of 2017 arising out of Patna Vigilance P.S. Case No.81 of 2017 with all its consequential proceedings qua petitioner is, hereby, quashed and set aside.

16. The application stands allowed.

17. Let a copy of this judgment be sent to the learned trial court forthwith.