Supreme Court Allows Investigation into Vehicle Emission Deception: Skoda Auto Volkswagen vs. State of Uttar Pradesh (26 November 2020)

Date of the Judgment: 26 November 2020

Citation: Not Available

Judges: S.A. Bobde, CJI, A.S. Bopanna, J., V. Ramasubramanian, J.

Can a criminal investigation be stopped simply because a related environmental matter is already being heard in civil appeals before the Supreme Court? The Supreme Court of India recently addressed this question in a case involving allegations of vehicle emission violations. The court had to determine if a First Information Report (FIR) could be quashed, where the allegations in the FIR were similar to those in the civil appeals pending before the Court. The bench comprised of Chief Justice S.A. Bobde and Justices A.S. Bopanna and V. Ramasubramanian, with the judgment authored by Justice V. Ramasubramanian.

Case Background

The case originated from a complaint against Skoda Auto Volkswagen India Private Limited, a company involved in manufacturing and selling passenger vehicles in India. The Automotive Research Association of India (ARAI) issued a notice on 04.11.2015 to the company, alleging that their vehicles violated Central Motor Vehicles Rules. The ARAI’s study suggested that vehicles with Diesel EA 189 Engines emitted 3-9 times more NOx pollution on the road compared to lab tests, indicating possible “defeat devices.”

Around the same time, two original applications were filed before the National Green Tribunal (NGT) against Skoda Auto India Private Limited, Volkswagen India Private Limited, and Volkswagen Group Sales India Private Limited, among others. The NGT, on 16.11.2018, found a prima facie case of environmental damage and directed the manufacturers to deposit Rs. 100 crores with the Central Pollution Control Board (CPCB). The manufacturers appealed this order, and the Supreme Court directed the NGT to consider the objections to the expert report.

The NGT, on 07.03.2019, concluded that the manufacturers used cheat devices to suppress lab tests, that NOx emissions were higher, and that the manufacturers were liable to pay damages of Rs. 500 crores. The NGT also directed the CPCB to consider initiating prosecution. These orders were challenged in civil appeals before the Supreme Court, where an interim order was passed on 06.05.2019, stating that no coercive steps should be taken against Volkswagen India Private Limited.

Subsequently, on 10.07.2020, a complaint was lodged with the police by a buyer of seven Audi cars, alleging that the company had misled him by claiming their vehicles did not have defeat devices installed, and that he was defrauded. The complainant sought action against the manufacturers for offences under the Indian Penal Code (IPC). The company then filed a petition before the High Court of Judicature at Allahabad seeking to quash the FIR, which was rejected on 01.10.2020.

Timeline

Course of Proceedings

The Automotive Research Association of India (ARAI) issued a notice to the petitioner companies, alleging violations of the Central Motor Vehicles Rules. Subsequently, the National Green Tribunal (NGT) took up the matter based on applications alleging the use of “defeat devices” in vehicles. The NGT initially directed the manufacturers to deposit Rs. 100 crores, which was challenged in the Supreme Court. The Supreme Court then asked the NGT to consider the objections to the expert report.

The NGT then concluded that the manufacturers had used cheat devices, resulting in higher NOx emissions and imposed a fine of Rs. 500 crores. This order was also appealed before the Supreme Court. During the pendency of these appeals, a complaint was lodged with the police, leading to the registration of an FIR. The High Court of Judicature at Allahabad refused to quash the FIR but granted protection against arrest to the officers of the petitioner company till the submission of the police report under Section 173(2) of the Code of Criminal Procedure (Cr.P.C).

Legal Framework

The legal framework for this case is primarily based on the Motor Vehicles Act, 1988, and the Central Motor Vehicles Rules, 1989. Section 110(1) of the Motor Vehicles Act empowers the Central Government to make rules regulating the construction, equipment, and maintenance of motor vehicles, including the emission of smoke, visible vapor, sparks, ashes, grit, or oil.

The Central Motor Vehicles Rules, 1989, particularly Rules 112 to 116, deal with emissions from motor vehicles. Rule 126 mandates that manufacturers submit prototypes for testing, and Rule 126A allows testing agencies to verify compliance. The Ministry of Road Transport and Highways issued a document (No. MoRTH/CMV/TAP-116-116) prescribing test methods and procedures for verifying compliance with these rules.

Clause No. 2.27 of Chapter-1, Part-XIV of this document defines a “Defeat Device” as:


“Defeat Device means any element of design which senses temperature, vehicle speed, engine rotational speed, transmission gear, manifold vacuum or any other parameter for the purpose of activating, modelling, delaying or deactivating the operation of any part of the emission control system, that reduces the effectiveness of the emission control system under conditions which may reasonably be expected to be encountered in normal vehicle operation and use.”

Arguments

The petitioner, Skoda Auto Volkswagen India Private Limited, argued that:

• The police cannot investigate an issue that is already being adjudicated in civil appeals before the Supreme Court arising out of the order of the NGT.
• There was a significant delay on the part of the complainant in lodging the complaint.
• The VAHAN Portal of the Government shows that the complainant purchased only 3 vehicles, not 7 as claimed.

The petitioner contended that the complaint lodged by the 3rd respondent was a reproduction of the contentions made before the NGT, and therefore, the police investigation was an attempt to re-litigate the same issues. They argued that the substratum of the police complaint was the same as the matter pending before the Supreme Court.

The 3rd Respondent, the complainant, argued that:

• He was misled by the company, who had clarified that they had not installed any “cheat devices” in the vehicles sold in India.
• Despite this clarification, his cars were found to contain such devices.
• The company was guilty of preparing wrong records and documents.

The complainant contended that the issues raised in his complaint were specific to his purchase and the misrepresentation made to him, which were not directly addressed in the NGT proceedings.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the Police can investigate an issue, the substratum of which is sub judice before this Court in the civil appeals arising out of the order of the NGT.
2. Whether the High Court failed to take note of the long delay on the part of the 3rd Respondent in lodging the complaint and also the fact that the VAHAN Portal of the Government shows the purchase of only 3 vehicles as against the claim of the 3rd Respondent to have purchased 7 vehicles.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

The Court also considered the following legal provisions:

• Section 110(1) of the Motor Vehicles Act, 1988: Empowers the Central Government to make rules regarding the construction, equipment, and maintenance of motor vehicles.
• Central Motor Vehicles Rules, 1989: Rules 112 to 116 deal with emissions from motor vehicles, Rule 126 mandates prototype testing, and Rule 126A allows verification of compliance.

Judgment

The Court relied on the following authorities:

• King Emperor vs. Khwaja Nazir Ahmed [AIR 1945 PC 18]*: The Court reiterated that courts should not interfere with police investigations.
• State of Haryana vs. Bhajan Lal [(1992) Supp. (1) SCC 335]*: The Court emphasized that the power to quash an FIR should be used sparingly.
• S.M. Datta vs. State of Gujarat [(2001) 7 SCC 659]*: The Court cautioned against scuttling criminal proceedings at the initial stage.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to allow a proper investigation into the specific allegations of misrepresentation and fraud made by the complainant. The Court emphasized that the NGT proceedings were broad and aimed at addressing environmental damage, while the complainant’s grievance was individual and related to the company’s assurances about the absence of “defeat devices.” The Court also highlighted that questions of fact, such as the number of vehicles purchased and the veracity of the misrepresentation, needed to be investigated.

The Court’s reasoning was based on the following points:

• The NGT proceedings were initiated to address environmental damage caused by the alleged use of defeat devices, while the complainant’s case was about being defrauded by the company’s misrepresentations at the time of purchase.
• The complainant’s grievance was specific to his purchase and the misrepresentation made to him, which were not directly addressed in the NGT proceedings.
• The question of whether the company had indeed installed defeat devices in the complainant’s cars and whether there was a misrepresentation made to him were questions of fact that needed to be investigated.
• The Court also emphasized that the mere delay in lodging a complaint cannot be a ground to quash an FIR, and disputed questions of fact cannot be gone into in a petition for quashing the FIR.

The Court considered and rejected the argument that the police investigation should be stopped due to the pendency of civil appeals. It reasoned that the issues before the NGT and the Supreme Court in the civil appeals were different from the issues raised in the criminal complaint. The NGT proceedings were related to environmental violations, while the complaint was related to misrepresentation and fraud.

The Court also considered the argument that there was a delay in lodging the complaint and that the complainant had purchased only three vehicles instead of seven. However, the Court held that these were questions of fact that could be determined only during the investigation or trial.

The Supreme Court, therefore, concluded that the High Court was correct in refusing to quash the FIR. The Court did not find any reason to interfere with the High Court’s order.

The Court quoted the following from the judgment:


“In a petition for quashing the FIR, the Court cannot go into disputed questions of fact.”



“The mere delay on the part of the 3rd Respondent-complainant in lodging the complaint, cannot by itself be a ground to quash the FIR.”



“Courts would not thwart any investigation. It is only in cases where no cognizable offence or offence of any kind is disclosed in the first information report that the Court will not permit an investigation to go on.”

Key Takeaways

The key takeaways from this judgment are:

• A criminal investigation can proceed even if related environmental issues are under adjudication in civil appeals before the Supreme Court.
• Individual grievances of purchasers, such as misrepresentation and fraud, are distinct from broad environmental concerns and warrant separate investigation.
• Disputed questions of fact, such as the number of vehicles purchased and the veracity of misrepresentations, must be determined during investigation/trial.
• Mere delay in lodging a complaint is not a sufficient ground to quash an FIR.
• Courts should be hesitant to interfere with police investigations unless no cognizable offence is disclosed.

Directions

The Supreme Court did not issue any specific directions other than dismissing the special leave petition. The High Court’s order, which protected the officers of the petitioner company from arrest until the submission of the police report, was upheld.

Development of Law

The ratio decidendi of this case is that a criminal investigation into specific allegations of fraud and misrepresentation can proceed even if related environmental issues are under adjudication in civil appeals. The Court clarified that individual grievances of purchasers are distinct from broad environmental concerns and warrant separate investigation. This judgment reinforces the principle that courts should not interfere with police investigations unless no cognizable offence is disclosed and that disputed questions of fact should be determined during investigation or trial. This case does not change the previous position of law, but it clarifies the distinction between environmental issues and individual grievances.

Conclusion

The Supreme Court dismissed the special leave petition filed by Skoda Auto Volkswagen India Private Limited, upholding the High Court’s decision not to quash the FIR. The Court held that the police investigation into the complaint of misrepresentation and fraud could proceed, as the issues raised were distinct from those being adjudicated in the civil appeals related to environmental violations. The judgment underscores the importance of allowing investigations into individual grievances and not thwarting them based on the pendency of related civil matters.