Sanchayita Lahkar

The High Court of Karnataka Single Bench of Justice M. Nagaprasanna dismissed a petition seeking to quash proceedings in a corruption and cheating case related to a defence procurement contract. The court held that the allegations and material available in the charge sheet warranted trial and did not call for interference under Section 482 of the Code of Criminal Procedure. The petitioner had challenged the initiation of proceedings and orders passed in a case arising out of an FIR registered by the Central Bureau of Investigation under various provisions of the Indian Penal Code and the Prevention of Corruption Act.

Justice Nagaprasanna, while pronouncing the judgment, recorded that the material collected by the investigating agency and statements of key witnesses indicated a prima facie case against the petitioner and others, thereby rejecting the contention that the proceedings were baseless or delayed beyond justification. The petition was accordingly dismissed, allowing the CBI trial to proceed before the Special Court for CBI Cases in Bengaluru. The court concluded that it was not a fit case for exercising inherent powers under Section 482 CrPC to interfere with or quash the trial proceedings.

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The petitioner, a 76-year-old individual residing in California, United States, was identified as Accused No.4 in a criminal case pertaining to the alleged fraudulent supply of defence equipment. The case stems from a contract awarded to M/s AKON Inc., a U.S.-based corporation, for the supply of VCO-based Radio Frequency (RF) generators to the Defence Avionics Research Establishment (DARE), a laboratory under the Defence Research and Development Organisation (DRDO).

The factual matrix began with a global tender issued by DARE/DRDO on 23 March 2007. M/s AKON Inc. emerged as the successful bidder and was awarded the purchase order on 11 July 2007. As per the agreed terms, the firm was to supply 35 VCO-based RF generators. Shipments were made on 19 February, 23 February, and 27 February 2009, with DARE receiving 24 units on 4 March 2009 and the remaining 11 on 11 March 2009.

Allegations arose concerning the genuineness and functionality of the units supplied. DARE officials raised complaints that the goods delivered were dummy units devoid of internal components. Consequently, a complaint dated 16 March 2012 was lodged with the Director (Vigilance), Ministry of Defence. A preliminary inquiry was initiated by the Central Bureau of Investigation (CBI) and spanned several years.

Following the inquiry, a First Information Report was registered by the CBI on 29 December 2020. The FIR named officials of DARE and representatives of M/s AKON Inc., including the petitioner, and was registered under Sections 120B read with 420 of the Indian Penal Code and Sections 13(2) read with 13(1)(d) of the Prevention of Corruption Act, 1988.

The charge sheet was filed on 12 December 2022, and cognizance was taken by the Special Judge on 7 January 2023, followed by issuance of summons on 5 June 2023. The petitioner approached the High Court seeking quashing of the proceedings on multiple grounds.

The petitioner contended that no specific allegations or overt acts were attributed to him and that the requirements to establish conspiracy, particularly a meeting of minds, were absent. He also pointed to significant delays in the initiation of proceedings and stated that the charge sheet did not demonstrate active involvement. Furthermore, it was submitted that the petitioner was not the sole owner of M/s AKON Inc., a fact contested by the CBI relying on statements from the company’s Indian representative.

The CBI, in its response, argued that the conspiracy was supported by circumstantial evidence and that the petitioner, as President and CEO of M/s AKON Inc., had knowledge of and facilitated the supply of non-functional units. According to the prosecution, dummy units were returned under the pretext of upgrade without any functional testing and without necessary guarantees or timelines. Communications between DARE officials and representatives of M/s AKON Inc. during 2009–2011 allegedly confirmed awareness of deficiencies in the supplied equipment.

Statements from key witnesses, including Pandurang Deshmukh, General Manager of the Indian subsidiary, pointed to the petitioner’s central role. The witness stated that the petitioner was the sole owner and beneficiary of M/s AKON Inc. and was directly involved in communications regarding specifications and remedial action post-delivery. Email trails supported the view that testing was still underway even after shipment, casting doubt on compliance with contractual obligations.

The case involved three other accused: a Scientist ‘D’ who was head of the RF Division at DARE, the then Director of DARE, and the company M/s AKON Inc. itself. The total alleged fraud amounted to Rs. 5.28 crore.

The court scrutinised the contentions and evidence presented. It began by noting the chronology of events, observing "On 12-03-2009, the representative of the Indian entity of M/s AKON addressed a communication seeking complete details of each RF Generator and received a reply...that the document might get modified minutely when real results of testing is available."

Justice Nagaprasanna recorded that the emails between the parties suggested that M/s AKON was still testing the equipment post-shipment. "This would prima facie demonstrate that M/s AKON was still conducting the test of machines." The court stated that on 2 April 2009, the receiving authority at DARE found that several units were not working.

It was also recorded that the preliminary inquiry revealed that all 35 units were incomplete and amounted to outer casings without internal electronic components. "The investigation revealed that the units received...were empty casings and did not contain any component inside."

The court examined the role of each accused, noting in particular the internal acceptance of the units by DARE officials despite email communication evidencing their non-functional status. The judgment noted "Smt. Priya N. Suresh...accepted these 35 units...even when she was having the knowledge through the emails from the representatives of M/s AKON that the said units were only at the development stage."

It also examined the flow of payment, recording that 90% of the contract value was paid based on shipment documents, and the final payment was released despite no evidence of proper delivery. The judge noted "The units were returned in the pretext of upgrade without conducting any test, without confirming the scope of update and without confirming the time schedule of upgrade."

In relation to the petitioner, the court observed "The statements of witnesses clearly pin down the petitioner for all the acts." The role of the petitioner was deemed material due to his position and communications confirming that he was apprised of all developments.

The court found no merit in the argument of vicarious liability being inapplicable, stating "Concrete material is available in the form of statements and emails indicating direct participation of the petitioner."

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On the issue of delay, the court acknowledged that while there was delay in filing the charge sheet, it was not fatal in the context of defence procurement, where scrutiny and inter-departmental coordination often prolong inquiries.

In its concluding portion, the High Court summarised its findings and dismissed the petition. The final operative part of the judgment reads:

"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. In that light, I do not find any warrant to interfere with the impugned proceedings."

Further, the Court recorded: "The petition lacking in merit stands rejected."

Advocates Representing the Parties:

For the Petitioners: Sri Sandesh J. Chouta, Senior Advocate with Sri Chinmay J. Mirji, Advocate

For the Respondents: Sri Rahul Krishna Reddy P., Advocate for Sri P. Prasanna Kumar, Special Public Prosecutor

Case Title: Surya Sareen v. Central Bureau of Investigation

Case Number: CRL.P.5297/2023

Bench: Justice M. Nagaprasanna

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