Introduction
In the intricate landscape of intellectual property disputes, the intersection of civil and criminal law often presents complex challenges, particularly when allegations of trademark infringement escalate into accusations of criminal misconduct. The case of Arddy Engineering Innovations Pvt. Ltd. & Ors. v. Heraeus Technologies India Pvt. Ltd., adjudicated by the High Court at Calcutta, exemplifies this convergence. This criminal revisional application, decided on April 16, 2025, addresses the contentious issue of whether a criminal proceeding for cheating, forgery, and criminal conspiracy should be quashed when rooted in a terminated distributorship agreement and alleged trademark misuse. Centered on the misuse of the trademark 'Hydris' for hydrogen sensors critical to railway safety, the case underscores the judiciary’s cautious approach to quashing criminal proceedings at a preliminary stage, emphasizing the need for trial to test serious allegations. The Calcutta High Court’s ruling reinforces the distinction between civil disputes and criminal offenses, offering significant insights for businesses navigating trademark enforcement in India.
Detailed Factual Background
Heraeus Technologies India Pvt. Ltd., the complainant, is a company that owns proprietary trademarks and technologies, including the 'Hydris' hydrogen sensor, uniquely approved by the Research Design and Standard Organization for measuring hydrogen levels in liquid steel, a critical safety component for railway tracks. Arddy Engineering Innovations Pvt. Ltd., along with its managing directors (petitioners 2 and 3), entered into an International Exclusive Distributorship Agreement (IEDA) with Heraeus in 2002, granting Arddy the right to distribute Heraeus’s products, including those bearing the 'Hydris' trademark, for advertising purposes only. This agreement was terminated by Heraeus on October 24, 2013, ending Arddy’s entitlement to use Heraeus’s trademarks.
Heraeus alleged that post-termination, Arddy developed a hydrogen sensor named 'Hysen' and affixed the 'Hydris' trademark to it, falsely representing it as Heraeus’s genuine product. These counterfeit sensors were allegedly supplied to Indian Railways, Bhilai Steel Plant (approximately 7,000–8,000 units in 2014), and other steel factories, deceiving customers and compromising railway and defense safety. Heraeus claimed this caused wrongful loss to its reputation and finances, constituting cheating under Section 415, illustration (b) of the Indian Penal Code (IPC), as well as forgery and criminal conspiracy. Despite a civil court injunction on October 28, 2015, from the District Judge of Sundergarh, prohibiting Arddy from using the 'Hydris' mark, Heraeus alleged that Arddy continued these infringing activities with impunity.
Arddy countered that the 11-year business relationship under the IEDA was unblemished until its termination, negating any initial intent to cheat. They argued that Heraeus’s allegations were a civil dispute over breach of contract, already addressed in a 2015 civil suit where Heraeus obtained the injunction, and a 2013 suit by Arddy for damages against Heraeus for IEDA violations, both pending. Arddy claimed the criminal complaint, filed six years after the civil suit, was a belated attempt to harass them.
Detailed Procedural Background
Heraeus initiated a criminal complaint (Case No. 743 of 2021) before the Judicial Magistrate, 4th Court, Barrackpore, under Sections 420 (cheating), 406 (criminal breach of trust), 461 (breaking open receptacle with intent to commit offense), 471 (using forged document as genuine), 120B (criminal conspiracy), and 34 (common intention) of the IPC. The Magistrate took cognizance on December 29, 2021, and, after examining witnesses under Section 200 of the Code of Criminal Procedure (Cr.P.C.), issued process against Arddy on January 4, 2022, finding a prima facie case.
Arddy challenged this order in a prior revisional application before the Calcutta High Court, arguing that the Magistrate issued process without conducting a mandatory inquiry under Section 202 Cr.P.C., as the accused resided outside the court’s jurisdiction. The High Court directed the Magistrate to order an inquiry by the Officer-in-Charge, Noapara Police Station. The police submitted a report on October 14, 2022, verifying the complainant’s accusations. On November 14, 2022, the Magistrate reissued process under Section 204 Cr.P.C., prompting Arddy to file the present revisional application (CRR 4690 of 2022) with an interim application (CRAN 2 of 2024), seeking to quash the proceedings and the November 14, 2022, order.
The matter was heard on January 29, 2025, by Hon’ble Dr. Justice Ajoy Kumar Mukherjee, with judgment delivered on April 16, 2025, after considering arguments from both parties.
Issues Involved in the Case
The case raised several pivotal issues. First, whether the allegations in the complaint constituted prima facie offenses under Sections 420, 406, 461, 471, 120B, and 34 of the IPC, or were merely a civil dispute over breach of contract? Second, whether the criminal complaint, filed six years after Heraeus’s civil suit, was a malicious attempt to harass Arddy, warranting quashing under Section 482 Cr.P.C? Third, whether the stands taken by Heraeus in the civil and criminal proceedings were contradictory, undermining the criminal case. Fourth, whether specific allegations against petitioners 2 and 3 (managing directors) were sufficient to implicate them, or if they were vicariously targeted. Fifth, whether the Magistrate applied judicial mind in issuing process, or if the order was mechanical, violating procedural norms.
Detailed Submission of Parties
Arddy argued that the complaint failed to establish the ingredients of the alleged IPC offenses. They emphasized the 11-year unblemished business relationship under the IEDA, terminated in 2013, negating any initial intent to cheat under Section 420 IPC.
The allegations, they contended, amounted to a civil breach of contract, as evidenced by Heraeus’s 2015 civil suit and Arddy’s 2013 damages suit, both pending. The six-year delay in filing the criminal complaint suggested malice, supported by State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335, which lists malicious prosecution as a ground for quashing.
Arddy cited All Cargo Movers India (P) Ltd. v. Dhanesh Badarmal Jain, (2007) 14 SCC 776, arguing that Heraeus’s civil suit claimed breach of IEDA terms, while the criminal complaint alleged counterfeiting, indicating contradictory stands. They relied on Mitesh Kumar J. Shah v. State of Karnataka, (2022) 14 SCC 572, to assert that civil disputes should not be criminalized.
For petitioners 2 and 3, Arddy argued no specific overt acts were alleged, citing Sharad Kumar Sanghi v. Sangita Rane, (2015) 12 SCC 781, and Maksud Saiyed v. State of Gujarat, (2008) 5 SCC 668, which protect directors from vicarious liability without evidence of active involvement. They further contended that the Magistrate’s order was mechanical, lacking judicial application, per Mehmood Ul Rehman v. Khazir Mohammad Tunda, (2015) 12 SCC 420. Arddy relied on admitted documents (civil suit plaint, injunction order) as sterling evidence for quashing under Section 482 Cr.P.C.
Heraeus countered that the complaint clearly alleged cheating under Section 415, illustration (b) IPC, as Arddy affixed the 'Hydris' mark to counterfeit 'Hysen' sensors, deceiving customers like Bhilai Steel Plant. They argued that the Noapara Police inquiry, ordered under Section 202 Cr.P.C., verified these allegations, and the Magistrate’s November 14, 2022, order reflected satisfaction, negating claims of mechanical issuance. Heraeus cited M. Krishnan v. Vijay Singh, (2001) 8 SCC 645, to assert that pending civil suits do not bar criminal proceedings, as civil and criminal actions have distinct yardsticks. They relied on State of Bihar v. P.P. Sharma, 1992 Supp (1) SCC 222, to argue that Arddy’s untested documents (supplementary affidavits) should not be considered at this stage.
Heraeus maintained that their civil and criminal stands were consistent, both alleging Arddy’s unauthorized use of 'Hydris' post-termination, violating the 2015 injunction. They distinguished All Cargo Movers, noting no contradiction, and Mitesh Kumar J. Shah, as factually irrelevant, given Heraeus’s unilateral termination rights under the IEDA. For petitioners 2 and 3, Heraeus pointed to specific allegations in the complaint (paragraphs 4, 6, 13), negating vicarious liability claims, distinguishing Sharad Kumar Sanghi and Maksud Saiyed. They urged the court to allow the trial to proceed, citing the inquiry report’s findings and public safety concerns, and sought expeditious disposal.
Detailed Discussion on Judgments Cited by Parties
The court analyzed several precedents cited by the parties, each shaping its approach to quashing criminal proceedings:
State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335: Arddy relied on paragraph 102(7), which lists malicious prosecution with ulterior motives as a ground for quashing under Section 482 Cr.P.C. The court found this inapplicable, as Heraeus’s complaint, supported by the police inquiry, disclosed prima facie offenses, negating claims of malice or personal grudge.
All Cargo Movers India (P) Ltd. v. Dhanesh Badarmal Jain, (2007) 14 SCC 776: Arddy cited this Supreme Court ruling, where contradictory stands in civil and criminal proceedings justified quashing. The court distinguished it, noting that Heraeus’s civil suit (breach of IEDA) and criminal complaint (counterfeiting) were consistent, both alleging unauthorized use of 'Hydris,' as evidenced by the 2015 injunction order.
Mitesh Kumar J. Shah v. State of Karnataka, (2022) 14 SCC 572: Arddy invoked this Supreme Court decision, which cautioned against criminalizing civil disputes. The court deemed it inapplicable, as Heraeus’s allegations of cheating and forgery involved distinct criminal elements (deceptive counterfeiting), not merely contractual breaches, and the IEDA’s termination clause supported Heraeus’s unilateral action.
Sharad Kumar Sanghi v. Sangita Rane, (2015) 12 SCC 781: Arddy relied on this Supreme Court ruling, which protects directors from vicarious liability absent specific allegations. The court distinguished it, noting that Heraeus’s complaint (paragraphs 4, 6, 13) detailed petitioners 2 and 3’s roles, implicating them directly, and the company (petitioner 1) was also a party, unlike in Sanghi.
Maksud Saiyed v. State of Gujarat, (2008) 5 SCC 668: Arddy cited this Supreme Court case, reinforcing that directors require specific allegations for liability. The court found it inapplicable, as Heraeus’s complaint specified individual roles for petitioners 2 and 3, distinguishing it from cases of vicarious implication.
Mehmood Ul Rehman v. Khazir Mohammad Tunda, (2015) 12 SCC 420: Arddy argued that the Magistrate’s order lacked judicial application, per this Supreme Court ruling, which requires magisterial satisfaction for issuing process. Heraeus countered, citing the same case, that no formal speaking order is needed. The court agreed with Heraeus, noting the Magistrate’s reliance on the Section 202 inquiry report, reflecting satisfaction.
M. Krishnan v. Vijay Singh, (2001) 8 SCC 645: Heraeus relied on this Supreme Court decision, which held that pending civil suits do not justify quashing criminal proceedings, as civil and criminal actions have distinct standards. The court found this persuasive, noting that Heraeus’s allegations of cheating and forgery required independent trial adjudication, despite civil litigation.
State of Bihar v. P.P. Sharma, 1992 Supp (1) SCC 222: Heraeus cited this Supreme Court ruling to argue that Arddy’s untested documents should not be considered under Section 482 Cr.P.C. The court agreed, limiting its analysis to the complaint and police report, excluding Arddy’s supplementary affidavits.
Faisal v. State of U.P., (2013) 2 SCC 801: Heraeus referenced this Supreme Court case (though not detailed in the judgment), likely to support the coexistence of civil and criminal proceedings. The court implicitly accepted this, aligning with M. Krishnan.
Hira Lal Hari Lal Bhagwati v. CBI, (2009) 11 SCC 529: Heraeus cited this Supreme Court decision, possibly to emphasize criminal liability for deceptive practices. The court did not elaborate but found Heraeus’s allegations sufficient for trial.
These precedents underscored the court’s reluctance to quash proceedings when prima facie offenses are disclosed, prioritizing trial for evidence testing.
Detailed Reasoning and Analysis of Judge
Court’s analysis was grounded in the principles governing Section 482 Cr.P.C., which allows quashing only when no prima facie case is disclosed or proceedings are an abuse of process. The court focused on the complaint’s allegations, the Section 202 inquiry report, and Section 415, illustration (b) IPC, which defines cheating as deceiving by counterfeit marks to induce purchase.
The court found that Heraeus’s complaint detailed Arddy’s post-termination use of the 'Hydris' mark on 'Hysen' sensors, deceiving customers like Bhilai Steel Plant into believing they were Heraeus’s products. This aligned with illustration (b), establishing a prima facie case of cheating. Specific allegations of supplying 7,000–8,000 counterfeit units in 2014, violating the 2015 injunction, and causing monetary and reputational loss to Heraeus, further supported offenses under Sections 406, 461, 471, 120B, and 34 IPC. The Noapara Police report, following a court-directed inquiry, corroborated these claims, indicating witness examination and verification.
Addressing Arddy’s arguments, the court rejected the claim that the dispute was purely civil. While acknowledging civil elements (breach of IEDA), it relied on M. Krishnan to hold that criminal allegations of cheating and forgery required independent trial adjudication. The six-year delay in filing the complaint was not fatal, as the complaint disclosed ongoing violations post-injunction. The court found no contradiction between Heraeus’s civil and criminal stands, distinguishing All Cargo Movers, as both proceedings targeted Arddy’s unauthorized 'Hydris' use. The 2015 injunction order’s narrative confirmed consistency, undermining Arddy’s reliance on contradictory pleadings.
For petitioners 2 and 3, the court noted specific allegations in the complaint, distinguishing Sharad Kumar Sanghi and Maksud Saiyed, as Heraeus implicated the company and directors directly. On the Magistrate’s order, the court, per Mehmood Ul Rehman, held that the November 14, 2022, process issuance, based on the October 14, 2022, inquiry report, reflected judicial satisfaction, not mechanical action. The court adhered to State of Bihar v. P.P. Sharma, excluding Arddy’s untested documents, limiting analysis to the complaint and police report.
The court dismissed Arddy’s Bhajan Lal argument, finding no evidence of malicious intent, as Heraeus’s allegations were substantiated. Public safety concerns, given the sensors’ railway applications, further justified trial. The court concluded that the complaint disclosed prima facie offenses, and quashing would prematurely halt justice, relegating both parties to prove their case at trial.
Final Decision
The Calcutta High Court dismissed the revisional application (CRR 4690 of 2022) on April 16, 2025, refusing to quash the criminal proceedings (Complaint Case No. 743 of 2021) or the Magistrate’s order dated November 14, 2022. The court directed the Judicial Magistrate, 4th Court, Barrackpore, to expedite the trial, ensuring urgent certified copies of the judgment were provided upon request.
Law Settled in This Case
This case establishes several key principles in Indian criminal and intellectual property law. First, under Section 482 Cr.P.C., courts will not quash criminal proceedings when the complaint discloses prima facie offenses, such as cheating under Section 415 IPC, even if civil disputes coexist, per M. Krishnan v. Vijay Singh. Second, allegations of trademark misuse post-termination of a distributorship agreement can constitute criminal offenses like cheating, forgery, and conspiracy, warranting trial to test evidence. Third, civil and criminal proceedings can proceed concurrently, as they involve distinct legal standards, and pending civil suits do not bar criminal action. Fourth, specific allegations against company directors negate claims of vicarious liability, per Sharad Kumar Sanghi, requiring individual roles to be detailed. Fifth, magisterial orders issuing process under Section 204 Cr.P.C. need not be elaborate, provided satisfaction is reflected, per Mehmood Ul Rehman, especially when supported by a Section 202 inquiry. Finally, untested defense documents are inadmissible under Section 482, limiting analysis to the complaint and inquiry reports, per State of Bihar v. P.P. Sharma.
