M/S. Loyalty Hr Benefits Pvt. Ltd., Vs the State of Maharashtra and Ors.

Ethape 1 Cri. Appln-717-2021.doc

IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPLICATION NO. 717 OF 2021

M/s. Loyalty HR Benefits Pvt. Ltd....Applicant

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Versus

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The State of Maharashtra and Others

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...Respondents

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Mr. Sanjiv Sawant with Mr. Rohan Mahadik, Ms. Shailja Patel i/by
The Juris Partners for Applicant.

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Mr. Amit Ghag i/by Mr. Vishal Maheshwari, Advocate for
Respondent Nos. 2 to 11.

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Mr. A. D. Khamkhedkar, APP for the Respondent – State.

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Digitally signed by DNYANESHWAR DNYANESHWAR ASHOK ETHAPE ASHOK ETHAPE Date: 2023.02.16 10:21:37 +0530

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CORAM : PRAKASH D. NAIK, J.

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DATE : 16th JUNE 2022

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PC :

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1. The Applicant is the original complainant in C.C. No. 58/SW/

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2015 filed in the Court of learned Metropolitan Magistrate 61st Court
at Kurla, Mumbai for offences punishable under Sections 406, 409,
420 of Indian Penal Code and Section 63 (b) of the Copy Rights Act,

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1957 and Sections 16, 51, 107 read with 96 of Copy Rights, Design
and Patents Act, 1988.

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2. The summary of the allegations in the complaint is that, the complainant is in the field of marketing and developed Swipe Card

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Ethape 2 Cri. Appln-717-2021.doc

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similar to credit card. This card was to be used by customer. There
are various companies and traders to give it to their customers and
employees for promoting business and customers and employees
would be benefited by various discounts and schemes. The
complainant approached accused No.1 and after deliberation, the
accused agreed to make software to support the card and to set up
the terminals. The complainant paid the amount of Rs.14,85,900/-
obtained from loan through State Bank of India credit guarantee
fund trust for small and medium enterprises schemes established by
Government of India and SIDBI. The software was registered under
the intellectual property Act. Accused though agreed to deliver web
base PC applications but denied it to give and supplied defective EDC
terminals causing loss to the complainant. The accused deleted the
software from their system and started using it for their own. The
Act of accused was infringement of copy right. The accused
demanded more money. Complaint was filed with the Police. No
action was initiated by police. The applicant then preferred Writ
Petition before this Court which was withdrawn on 3rd September
2014 with liberty to file complaint before appropriate Court.

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3. Learned Metropolitan Magistrate directed investigation

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under Section 156(3) of Cr.P.C. vide order dated 8th April 2015.

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Ethape 3 Cri. Appln-717-2021.doc

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4.Pursuant to directions under Section 156(3) of Cr.P.C. MECR
No.131 of 2015 was registered with Antop Hill Police Station,
Mumbai on 25th April 2015 for offences under Sections 406, 409, 420
of Indian Penal Code. Section 63, 63(b) of Copyright Act read with
Sections 16 and 51, 107 read with 96 of Copy Rights Designs and
Patent Act, 1988 and Sections 27, 28, 29, 30, 31 and 117 of
Trademark Act.

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5.Investigation was conducted by Police and report dated 18th
November 2015 was submitted to the Court of learned Metropolitan
Magistrate stating that, no offence is made out. The report was
challenged by applicant/complainant by filing Protest Petition. The
learned Metropolitan Magistrate vide order dated 26th April 2016
directed Senior Inspector of Police, Antop Hill Police Station to
conduct further investigation and submit report. Pursuant to said
order further investigation was conducted. Supplementary statement
of the complainant was recorded. The police submitted second report
dated 6th January 2017 opining that, the dispute is of civil nature.
The complainant filed Protest Petition challenging the report. The
learned Metropolitan Magistrate vide order dated 1st February 2018
dismissed the complaint. The Protest Petition was rejected and the
final report filed by Investigating Officer was accepted.

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Ethape 4 Cri. Appln-717-2021.doc

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6.The applicant/complainant challenged the order dismissing
the complaint by preferring Criminal Revision Application No.370 of
2018. By order dated 28th February 2020, the said Revision
Application was rejected.

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7.The Applicant/complainant is aggrieved by aforesaid adverse
orders and has preferred this application under Section 482 of Cr.P.C.
challenging the said orders.

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8.Learned Advocate for the applicant submitted that, the order
dismissing the complaint, rejecting Protest Petition and order passed
by revisional Court are contrary to law. The offences alleged in the
complaint were clearly made out against the accused. The Court was
required to adopt prima facie view at this stage. The accused were
required to be tried for the said offences. Merely because, there are
facets of civil dispute, the complaint cannot be dismissed. Penal
offences were made out. The contents of complaint, statement of
complainant and investigation conducted by the police supports the
contention of the complainant and the offences under the IPC and
copyright Act were clearly made out. The police had ignored vital
documents and submitted report that, the dispute is of civil nature.
The Sessions Court has mechanically rejected the revision
Application. The Court below has not appreciated the principle laid
down by the Apex Court in several decisions while passing the

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Ethape 5 Cri. Appln-717-2021.doc

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impugned orders. The learned Magistrate was satisfied with the fact
that the complaint is required to be investigated by police and
directed investigation under Section 156(3) of Cr.P.C. The
Investigating Officer has misdirected himself in concluding that no
offences are is made out or that the dispute is of civil nature.
Learned Magistrate was not satisfied with the first report dated 18th
November 2015 and directed further investigation vide order dated
26th April 2016. The Investigating Officer again carried out
investigation and called upon bank officials as the applicant had
obtained loan facility which was given to the accused for developing
the software. The State Bank of India issued letter to the Senior
Inspector of Police, Antop Hill Police Station stating that, the cash
credit limit of Rs.3,00,000/- and term loan of Rs. 14.75 lakhs were
sanctioned to the applicant in July 2009 by the Bank. The said
account was turned into non-performing asset on 14th February 2011
and migrated to their Branch in March 2011 for further recovery of
Bank’s dues. The payment of Rs.14,85,900/- was made in favour of
vendor M/s. AGS Infotech Pvt. Ltd. on 31st March 2010 for supply of
software at the request of applicant by SME City Credit Centre,
Mumbai. The said letter clearly shows that, the applicant availed
loan facility and the payment was made to the accused for supply of
software. During the course of investigation, statement which

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Ethape 6 Cri. Appln-717-2021.doc

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supports the complaint was recorded by Police. The Commissioner of
Police had directed to conclude investigation expeditiously. The
statement of accused were also recorded. Contradictory versions
were given by them. Investigating Officer again failed to carry out
investigation and file second report. It was opined that, the dispute
is of civil nature. Assuming that, the transactions has some features
of civil transactions, it cannot be said that, the penal offences are not
made out. There was clear violation of Copyright and Trademark Act.
Wrongful loss was caused to the complainant due to false
representation by the accused. There is no denial that amount was
parted to the accused by the complainant. The order passed by
Sessions Court is erroneous. The findings in the report submitted by
Investigating Agency are irrelevant and without application of mind.
The learned Magistrate has ignored the contents of Protest Petition.

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9.Learned Advocate for Applicant relied upon following
decisions:-

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(i)State of Odisha Vs. Pratima Mohanty Etc. delivered by
Supreme Court in Criminal Appeal Nos.1455-1456 of 2021 decided
on 11th December 2021.

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(ii)Kamaladevi Agarwal Vs. State of West Bengal delivered by
Supreme Court in Criminal Appeal No. 1059 of 2001 decided on 17th

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Ethape 7 Cri. Appln-717-2021.doc

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October 2001.

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(iii)Lalmuni Devi Vs. State of Bihar & Ors. delivered by Supreme
Court in Criminal Appeal No.1127 of 2000 decided on 15th December
2000.

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10.Learned Advocate for Respondent Nos. 2 to 11 submitted that,
there is no infirmity in the order passed by learned Magistrate and
the learned Sessions Judge. The applicant has suppressed material
facts in respect of EOW investigation and EOW report and
defamation proceedings initiated by respondent against the applicant
and apology submitted by the applicant before the High Court. The
revisional powers under Section 397 of Cr.P.C. are discretionary. Only
in the event, the glaring defect in the procedural aspect or there is
manifest error on the point of law. The exercise of revisional
jurisdiction ought to be called for. None of the offences are made
out. The investigation was conducted twice. In both the reports,
Investigating Agency did not find any material constituting the
alleged offences. Considering the report submitted by Police, the
learned Magistrate rejected the Protect Petition and dismissed the
complaint. The complaint was filed with ulterior motive to harass
the respondent Nos.2 to 11. The business venture of the applicant
did not take off as expected due to which the applicant did not get
response for his cards. In the month of January 2012 i.e. after a

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Ethape 8 Cri. Appln-717-2021.doc

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period of one year from the last communication between applicant
and respondent No.2, notice was served upon respondent No.2
calling upon to return amount of Rs.14,85,000/- being the amount
paid for the services rendered by the Respondent No.2 for developing
and hosting the application. Respondent No.2 by letter dated 17th
February 2012 responded to this notice and denied the claim and
called upon applicant to pay the sum of Rs.3,91,000/- which was
towards the balance payment of set up fees and making cards. The
applicant failed to pay the said amount. The applicant lodged the
false complaint bearing No.162 of 2012 against Respondent No.2
and others with EOW Crime Branch. On the said complaint, the
EOW conducted detailed investigation and on 23rd September 2013,
the Senior Inspector of Police of the Crime Branch closed the
investigation on the ground that, no case was made out against
respondent No.2 and its directors and officer bearers. The applicant
has not disclosed about the EOW investigation and said report before
the Sessions Court and this Court. The applicant filed Criminal Writ
Petition No. 204 of 2014 in this Court praying that EOW should be
directed to register the offence against the respondent No.2 and
others. The Writ Petition was withdrawn on 3rd September 2014.
Thereafter, the applicant filed criminal complaint before the
Magistrate. The Court directed investigation under Section 156(3)

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Ethape 9 Cri. Appln-717-2021.doc

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of Cr.P.C. The report was submitted by concerned Police Station
stating that no offence was made out against respondent No.2 and
others. The learned Magistrate directed to further investigation.
Second report submitted by police reiterating that no criminal
offence was made out against the respondent No.2 and others. The
learned Magistrate rejected the protest Petition and dismissed the
complaint. Cogent reasons were assigned by learned magistrate
while dismissing the complaint which is apparent from the
observation in paragraph No.10, 13, 15, 16 and 18 of impugned
order dated 1st February 2018 passed by learned Magistrate. The
application is devoid of merits and hence, it may be rejected.

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11.From the tenor of the complaint it appears that, there
were certain contractual obligations between the parties. From the
document on record it appears that the applicant/complainant had
initially approached the EOW Crime Branch, Mumbai. Letter dated
3rd May 2013 issued by Senior Inspector of Police, Unit-3, EOW
Crime Branch, Mumbai to the complainant indicate that preliminary
enquiry No. 162 of 2012 which was registered at the Economic
Offences Wing, Mumbai in connection with application dated 20th
June 2012 has been closed. Apparently the police did not take
cognizance of complaint. The applicant preferred Criminal Writ
Petition No. 204 of 2014 which was allowed to be withdrawn by

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Ethape 10 Cri. Appln-717-2021.doc

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order dated 3rd September 2014 with liberty to file complaint before
appropriate Court. The applicant then filed private complaint before
the Metropolitan Magistrate. Vide order dated 8th April 2015
directions were issued to the police to conduct investigation and
submit report in accordance with Section 156(3) of Cr.P.C. MECR
No. 131 of 2015 was registered with Antop Hill Police Station on 25th
April 2015. After conducting investigation report dated 18th
November 2015 was submitted before the learned Magistrate stating
that no offence is made out. Protest Petition was filed by the
complainant. Learned Magistrate directed further investigation by
order dated 26th April 2016. Supplementary Statement of the
complainant was recorded on 9th June 2016. On completing
investigation second report was submitted by police on 6th January
2017 stating that dispute is of civil nature. Protest Petition was filed
by complainant. The learned magistrate vide order dated 1st
February 2018 rejected the Protest Petition and report of
Investigating Officer was accepted. The complaint was dismissed.
While dismissing the complaint vide order dated 1st February 2018 it
was observed that, the complainant did not mention in complaint
about written contract of meeting for demo of software in which he
accepted the software. There were no terms and conditions decided
between them whether web base PC application would be there or

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Ethape 11 Cri. Appln-717-2021.doc

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EDC terminals would be set up. In fact two/three EDC terminals
were set in Bhivandi. The complainant was aware about it. There
was no business response as expected by complainant or accused.
The accused demanded remaining payment as well as the amount for
EDC terminals set up in Bhivandi. The complainant denied to pay it.
Notice was issued by complainant to accused for payment. Till this
notice of accused to complainant, the complainant did not object.
The complainant himself approached accused. There were series of
e-mail exchanged between them for the software. The complainant
did not object to set up terminal in Bhivandi but this was not pleaded
by complainant in complaint. The accused charged complainant for
his services. The complainant accepted and made initial payment. It
is immaterial how the accused paid an amount to complainant and
whether it was borrowed as loan. As per the documents, the accused
never gave any inducements to the complainant. The complainant
has alleged that the software was registered as per the Copyright,
Design and Patents Act. No such documents were produced by
complainant. The swipe card was developed and it was registered
under the Trademark Act for the complainant. There was no
allegation against the accused for infringement of Trademark of
swipe card. The software was not registered as a intellectual
property of complainant. The accused is professional software

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Ethape 12 Cri. Appln-717-2021.doc

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developer and developed the software for complainant. There was
dispute between them as accused demanded the remaining amount.
Nothing was entrusted by the complainant to accused. There is no
prima facie evidence to show that the accused used the software for
their own use. The Investigating Officer made proper investigation
and filed his report. There were no exact terms decided between
complainant and accused regarding set up of EDC Terminal or web
base. But EDC Terminal were set up at Bhivandi. Accused never
protested. There was no response from the market customers. At the
most, there was civil dispute between the parties. There was no
intention to cheat. There was no wrongful gain to the accused.
There was no inducement to deliver property.

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12.The revisional Court has rejected the application by
assigning cogent reasons. The learned Sessions Judge has observed
that investigation was carried out by police twice. As per direction of
trial Court. At the most, there would be dispute between the parties
which is of civil nature but does not attract criminal liability. The
reasoning of trial Court is acceptable. The report of the investigating
Officer revealed that the complainant along with Police team visited
various clients of accused but their computer system did not reveal
any use of complainant’s smart card or relating developed software.
Complainant of misappropriation is not found acceptable. There was

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Ethape 13 Cri. Appln-717-2021.doc

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no breach of Patent Act and Trademarks Act.

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13.It is apparent that the police machinery has investigated

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the complaint and reports were submitted before the Court of
learned Magistrate. The learned Magistrate considered the Protest
Petition and documents on record and rejected the Protest petition
and dismissed the complaint. In the light of the factual aspects of this
matter and documents on record, I do not find any illegality in the
impugned orders. The report submitted by police and the reasons
assigned by the Court while passing impugned orders are within the
parameter of law. The dispute is indeed of civil nature. No offences
has alleged by complainant are made out and no interference is
warranted in the impugned orders. The law relating to quashing the
proceedings is well settled. The decisions relied upon were delivered
in facts of respective cases. Hence, I pass the following order:-

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ORDER

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Criminal Application No.717 of 2021 is rejected and disposed off.

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(PRAKASH D. NAIK, J.)

M/S. Loyalty Hr Benefits Pvt. Ltd., v. the State of Maharashtra and Ors.

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M/S. Loyalty Hr Benefits Pvt. Ltd., v. the State of Maharashtra and Ors.

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