Hacking, Data Theft Attract Offences Under IPC Also, Not Just Information Technology Act : Supreme Court | #computerhacking | #hacking


One of the questions of law raised in the SLP was “Whether the Petitioner is entitled to the benefit of Anticipatory Bail, where his statutory right to bail is defeated by mischievously invoking non-bailable offences of the IPC?”

It had been urged that the allegations pertain to alleged theft of software and at best may amount to offences under the IT Act under its Sections 43 and 66, which are bailable offences. “However, the FIR has mischievously invoked the provisions of the IPC to deprive the Petitioner of his statutory right to bail”, it had been advanced.

Mr. Aggarwal indicated that it is section 43 which speaks of the offence where one, without permission of the owner or person in-charge of a computer, computer system or network, accesses such computer; or downloads, copies or extracts any data from such computer; or destroys, deletes or alters any information residing in such computer; steals, conceals, destroys or alters any computer source code; or denies access to any person authorised to access such computer, etc.

Further, Section 66 prescribes that if any person, dishonestly or fraudulently, does any act referred to in section 43, he shall be punishable with imprisonment for a term which may extend to three years or with fine which may extend to five lakh rupees or with both.

“The High Court has failed to appreciate that the Apex Court in Sharat Babu Digumarti v. Government of NCT of Delhi [(2017) 2 SCC 18] has categorically held that where the alleged criminal acts pertain to electronic records covered by the IT Act, which is a special statute having an overriding effect, the offender gets out of the net of the IPC. Accordingly, the allegations at best may amount to offences under the IT Act, which are bailable offences and FIR could not have invoked the offences under IPC against the Petitioner”, it had been submitted on behalf of the petitioner.

“You are saying that this is not a case of theft by agent/servant? If 381 (of the IPC) will not come in here, then I don’t know what will come!”, observed Justice Maheshwari.

“66 (of the IT Act) is ‘hacking’ straightaway. But the misappropriation of the hacked materials is not covered under the IT Act! So the IPC would apply”, concurred Justice Bose.

In the SLP, it was also urged that the High Court had failed to appreciate that the allegations in the FIR pertain to the alleged acts of the Accused No.1, 2 and 3 (one Rahul Nagpal, his wife Harpreet Kaur, and one Ramandeep Singh who is also a co-founder of and Director in Exoways Web), who are ex-employees of the Complainant Company, and that the Petitioner has been named in the FIR only on the ground of him being a Director of Exoways Web Technologies.

“As per the contents of the FIR, there is basic breach of trust! And you are part of the company! IPC is applicable!”, noted Justice Maheshwari.

Further, indicating that he has joined in and is cooperating in the investigation, the petitioner had prayed for interim relief by way of an ex-parte ad-interim protection from any coercive action and an ex-parte ad-interim stay on the High Court judgment which concluded that custodial interrogation in the case was necessary. Reliance was placed on the 2014 Supreme Court judgment in Arnesh Kumar, where it was held that arrests should be an exception in cases where the offences are punishable with less than 7 years imprisonment. It may be noted that the Supreme Court, in view of the COVID situation, recently declared that authorities should not make arrests in violation of the guidelines in Arnesh Kumar’s case.

“Charge against me has been levelled based on the first forensic report. In another report procured subsequently, no issue is made out”, pressed Mr. Aggarwal.

“Even after perusing the second report, the High Court said that custodial interrogation is needed. A co-accused (one Ramandeep Singh, former employee of the Complainant-company and co-founder and director of Exoways Web) has also been denied anticipatory bail by an order of this court of April 19“, noted the bench.

“If we give anticipatory bail in such cases, it would be a cross on our system”, said Justice Maheshwari.

The bench then proceeded to dismiss the SLP. However, the bench added “in the interest of justice” that “it is provided that in case the petitioner surrenders before the Court concerned and files an application for regular bail, the same may be considered and disposed of on its own merits and in accordance with law expeditiously; and for that matter it is also provided that the observations made by the High Court in the order dated 17.03.2021 shall remain confined towards consideration of the prayer for anticipatory bail only”

Facts

The High Court, in the impugned order of March 17, recorded that the brief facts, as culled out from the FIR, are that M/s TCY Learning Solutions Private Limited (complainant-company) is a leader in the field of education technology and test preparation including classroom and online coaching. The company has been in the business for more than a decade and has developed its own software for imparting education.

The Single Bench noted that the Petitioner No.1 before the HC (Ramandeep Singh, who is also the co-founder and director of Exoways) had joined the Complainant-Company in February, 2015 as Deputy Manager Marketing and subsequently resigned to set up another company along with Jagjit Singh (petitioner No.2; the SLP petitioner before the SC) and one Rupinder Singh in the year 2018 and formed a Company in the name of M/s Exoways Web Technologies Pvt. Ltd. The said company is also in the business of providing English language training modules for students and coaching centers for English language test preparations like IELTS through its website fourmodules.com.

Subsequently, there was leakage of the software of the complainant company- The complainant got to know from the market that a company under the brand name of “Fourmodules.in/Fourmodules.com” was providing software with similar look and use as that of the complainant.

“Therefore, the complainant in order to check theft from the employees created a fake client data which had fake E-mail Ids. The said data was posted on the server of the company and its access was open to the employees of the Company. The complainant was stunned when it received a promotional mail from Fourmodules.in/Fourmodules.com on an email ID which was fake and intentionally added in the fake client data which was posted on the server of the company. The said Email ID was not used at any other place. It was created to find out about the leakage in the complainant’s company. The said data/email ID was posted on the server of the company and its access was open only to select few and accused No. 1 (Rahul Nagpal; ex-employee of the complainant company) was one of them. The complainant investigated and found out that the software used by the accused persons is based on the Source Codes of the complainant’s software”, recorded the High Court

On coming to know that the web applications used by the accused persons were identical to the files of the complainant-company, a forensic report was obtained by the Complainant-company from one M/s Webrosoft Solution Pvt. Ltd., which compared the files of the complainant with the Fourmodules.in/Fourmodules.com. The Webrosoft Report claims that it accessed 10 files from https://www.tcyonline.com and https://www.fourmodules.in, the websites of the Complainant Company and Exoways Web Technologies respectively for comparison and stated that these 10 files used many identical files, similar layouts etc.

On the complaint so received from the complainant company, investigation was conducted and thus the above said FIR came to be registered.

Averments in the SLP

It was urged in the SLP that the allegations pertain to alleged theft of software and at best may amount to offences under the IT Act under its Sections 43 and 66, which are bailable offences. “However, the FIR has mischievously invoked the provisions of the Indian Penal Code to deprive the Petitioner of his statutory right to bail”, it was contended.

“The Hon’ble High Court has failed to appreciate that this Hon’ble Court in Sharat Babu Digumarti v. Government (NCT of Delhi), (2017) 2 SCC 18 has categorically held that where the alleged criminal acts pertain to electronic records covered by the IT Act, which is a special statute having an overriding effect, the offender gets out of the net of the Indian Penal Code. Accordingly, it is submitted that the allegations at best may amount to offences under the IT Act, which are bailable offences and FIR could not have invoked the offences under IPC against the Petitioner”, it was averred.

Further, it was submitted that the FIR was registered before ascertaining the allegations made by the Complainant-Company and that too when a Complaint case was already pending before the Chief Judicial Magistrate, Ludhiana on the same cause of action. It was submitted that the said complaint has been pending before the Court for more than 1.5 year for preliminary evidence, but the Complainant-Company has not been able to lead any preliminary evidence.

The SLP petitioner even advanced that the dispute between the Complainant-Company and Exoways Web Technologies is civil in nature and pertains to claims over Intellectual Property and that the same is evident from the pending civil suit on the same cause of action between the parties before the Addl. District Judge, Ludhiana. “The High Court failed to appreciate that the Complainant Company has maliciously and falsely tried to implicate its commercial rival Exoways Web Technologies and its Directors in criminal proceedings with an intention to derail their business. The same is evident from the conduct of the Complainant Company in initiating multiple criminal proceedings against its ex-employees and business rivals”, it was argued.

Besides, it was contended by the petitioner that the Punjab & Haryana High Court has, in dismissing the application of the Petitioner, erroneously relied on an earlier judgement of the HC which was delivered prior to the 2009 amendment of the IT Act, whereby Section 66 of IT Act has been made a bailable offence.

In the SLP, it was also urged that the High Court has failed to appreciate that the Petitioner, Jagjit Singh, is only a Director of Exoways Web Technologies and is not involved in its day-today affairs. It was submitted that the allegations in the FIR pertain to the alleged acts of the Accused No.1, 2 and 3 (one Rahul Nagpal, his wife Harpreet Kaur, and Ramandeep Singh who is also a co-founder of and Director in Exoways Web), who are ex-employees of the Complainant Company and the Petitioner has been named in the FIR only on the ground of him being a Director of Exoways Web Technologies.

Authorities cited by the SLP petitioner

In the case of Sharat Babu Digumarti v. Government of NCT of Delhi, the conflict between provisions of the IPC and the IT Act came to the fore. In this case, on November 27, 2004, an obscene video had been listed for sale on baazee.com. The listing was intentionally made under the category ‘Books and Magazines’ and sub-category ‘ebooks’ in order to avoid its detection by the filters installed by Baazee. A few copies were sold before the listing was deactivated. Later Delhi police’s crime branch charge-sheeted Avinash Bajaj, Bazee’s managing director and Sharat Digumarti, Bazee’s manager. The company Bazee was not arraigned as an accused and this helped Avinash Bajaj get off the hook since it was held that, vicarious liability could not be fastened on Avinash Bajaj under either section 292 of the IPC or section 67 of the IT Act when Avinash’s employer Bazee itself was not an accused. Later changes under section 67 of the IT Act and section 294 of IPC against Sharat Digumarti were also dropped, but the charges under section 292 of the IPC were retained. The Supreme Court then considered if, after the charges under section 67 of the IT Act was dropped, a charge under section 292 of the IPC could be sustained. The Supreme Court quashed the proceedings against Sarat Digumarti and ruled that if an offence involves an electronic record, the IT Act alone would apply since such was the legislative intent. It is a settled principle of interpretation that special laws would prevail over general laws and latter laws would prevail over prior legislation. Further, section 81 of the IT Act states that the provisions of the IT Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

The other case cited in the SLP is the 2018 Bombay High Court decision in Gagan Harsh Sharma v. The State of Maharashtra, where certain individuals were accused of theft of data and software from their employer and charged under sections 408 and 420 of the IPC and also under sections 43, 65 and 66 of the IT Act. Therefore, the petitioners pleaded that the charges against them under the IPC be dropped and the charges against them under the IT Act be investigated and pursued. It was further argued that if the Supreme Court’s ruling in Sharat Babu Digumarti were to be followed, the petitioners could only be charged under the IT Act and not under the IPC, for offences arising out of the same actions.

The Bombay High Court upheld the contentions of the petitioners and ruled that the charges against them under the IPC be dropped.

Proceedings before the Single Judge of the High Court

The High Court recorded that subsequent to Webrosoft’s forensic report, the petitioners had approached one Stellar Data Solutions for re-examining Exoways’ website and Webrosoft’s report which was submitted at the instance of the Complainant-company. The Application Analysis Report so prepared by Stellar Data was relied on by the advocate for the petitioners before the HC.

The High Court noted that the Stellar report claims that “The aforesaid 10 images (relied on by the Webrosoft report) are open-source and freely available on the internet. Anyone can use/edit/modify these images since they are without copyright of the original author”. However, the Single Bench opined that the observations made in the Stellar report to the extent “We do not have access to TCYONLINE application and it is not possible to ascertain if a software has been copied/stolen without comparing the Source Code, Database Architecture & Database. A detailed, deep & thorough comparison of both the Web Application is required to reach any conclusion” cannot be ignored.

“There is a categoric finding therein that it would not be possible to

ascertain if the software has been copied/stolen when compared with the Source Code of TCYONLINE Application. Whereas, on the other hand, there is also a report of M/s Webrosoft Solutions Private Limited, which had done a comparison of two web applications for PTE and IELTS mock test modules found on https:www.tcyonline.com and https://fourmodules.in was carried out both visually and using professional file comparisons tools as appropriate. The two web applications were found to be using many identical files with same names and identical digital fingerprints, similar layouts and similar programming code snippets. The report of M/s Webrosoft Solutions Private Limited further holds ‘Further the final PTE Academic score report generated by PTE modules of both the web applications after the test is completed by the candidate also has strong similarities in appearance including title of the scorecard graph ‘Scaled Score’ appearing exactly at the same position at value 26 of the 0-90 scale

provided on both the web applications'”, noted the Single Judge of the High Court.

The Single Bench concluded that the instant case involves complicated questions as to how the software was stolen and what modus operandi was used by the accused to do so, for which custodial interrogation is necessary, and dismissed the anticipatory bail plea.

Other relevant statutory provisions

Section 66B, IT Act stipulates that whoever dishonestly receives or retains any stolen computer resource or communication device knowing or having reason to believe the same to be stolen computer resource or communication device, shall be punished with imprisonment of either description for a term which may extend to three years or with fine which may extend to rupees one lakh or with both.

Section 406, IPC prescribes punishment of imprisonment of either description

for a term which may extend to three years, or fine, or both. Section 409 stipulates punishment of imprisonment of either description for a term which may extend to seven years, and fine.

Section 379, IPC provides for imprisonment of either description for a term which may extend to three years, or fine, or both. Section 381 provides imprisonment of either description for a term which may extend to seven years, and fine.



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