The Delhi High Court has held that when the dispute arose from a commercial distributorship arrangement involving supply of goods, quality issues, branding-related representations, and settlement of accounts, it would give rise, at best, to civil and contractual remedies. Since no prima facie offence under Sections 406 or 420 IPC was disclosed, the charge of criminal conspiracy under Section 120-B IPC also could not survive.
The Court clarified that to attract Section 420 IPC, there must be deception, dishonest or fraudulent inducement, and fraudulent or dishonest intention from the very inception of the transaction; and to attract Section 406 IPC, there must be entrustment of property coupled with dishonest misappropriation or misuse. On the material collected during investigation, these essential ingredients were not made out. Accordingly, the Court held that continuation of the criminal proceedings would amount to abuse of the process of law, quashed the FIR and all consequential proceedings arising from it.
A Single Judge Bench of Justice Amit Mahajan observed that mere filing of a chargesheet does not bar the High Court from exercising jurisdiction under Section 482 CrPC. It reiterated that even after filing of the chargesheet, the Court can quash proceedings if the FIR and the chargesheet, read together, do not disclose the commission of any offence or if continuation of the proceedings would amount to abuse of process of law. On merits, the Bench found that the chargesheet itself contained material showing that the petitioner had authorization to use the Goodyear trademark and branding. The Bench referred to the authorization letter issued by Goodyear USA, the response from Goodyear India, the trademark licence agreement, and the Trademark Registry’s verification, and held that the allegation that the petitioner had falsely portrayed itself as associated with Goodyear USA or had illegally used the trademark did not sustain from the material on record.
On the allegation that the products were spurious or sub-standard, the Bench noted that the laboratory report found the samples to be synthetic-based and compliant with Indian Standards. It also noted that the lab did not give any conclusive finding on API compliance and had stated that API verification required specifications which had not been supplied. The Bench held that, prima facie, the material did not indicate that the goods were spurious or inherently sub-standard so as to show dishonest or fraudulent intention from the inception, which is necessary for Section 420 IPC. It further observed that whether the products strictly conformed to API specifications or international standards would essentially be a matter of quality assurance, contractual representations, and commercial warranties, falling predominantly in the realm of civil and commercial adjudication.
The Bench also found that the complainant had continued placing orders from January 2021 to February 2022 and that large quantities of lubricants were supplied during this period. According to the Bench, if the products had been consistently inferior in the manner alleged, such continued and substantial orders would appear improbable. The Bench further held that the allegations regarding unpaid amounts, dead stock, market dues, replacement and refund essentially related to reconciliation and settlement of accounts under the distributorship arrangement, and could at best form the basis of civil remedies, not criminal breach of trust under Section 406 IPC, since entrustment and dishonest misappropriation were absent.
The Bench also considered the allegation regarding manufacturing origin and branding. It noted that the welcome email itself disclosed that the products would be manufactured in India at facilities in Mumbai and Haryana, while Goodyear would provide development and support. The Bench held that questions as to whether the products were imported, technically supported, or whether the packaging created a particular commercial impression were, at best, matters of commercial representation and contractual dispute, and not sufficient by themselves to disclose offences under Sections 406 or 420 IPC in the absence of material showing dishonest inducement from the inception. The Bench additionally found that the complainant had approached multiple authorities and police stations on the same allegations, and treated this as forum shopping and abuse of process.
Briefly, a petition was filed under Section 482 CrPC seeking quashing of FIR registered at PS Hazarat Nizamuddin under Sections 406/420/506 IPC against Assurance International Ltd. and its officials. The complainant, a distributor of “Goodyear Lubricants”, alleged that he was induced to place orders of about Rs. 1.75 crore on the representation that the products were associated with Goodyear, met international quality standards, and were of high quality. He further alleged that the products were inferior, mixed with water, made from reused substances, one invoice was raised for goods never delivered, and that he suffered losses in the form of unrecovered market dues, dead stock, and pending credit notes. During investigation, the complainant also alleged that early batches created the impression that the products were manufactured in the USA, while later batches disclosed manufacture in India.
During investigation, notices were issued to Goodyear India Limited, The Goodyear Tire & Rubber Company, USA, and the petitioner company. Goodyear India stated that it had no direct relationship with the petitioner, but that its parent company had granted a trademark licence to the petitioner. The petitioner stated that it was an authorised licensee of Goodyear USA under a trademark licence agreement dated April 09, 2020, and that it had rights to manufacture, distribute and market lubricant products under the Goodyear trademark. Samples of the lubricants were tested by Shri Ram Laboratory, Noida, which found that the products conformed to applicable Indian Standards and were synthetic-based products, while API compliance could not be verified because the required specifications were not provided.
