TaxTMI 
TaxTMI 
2016 (3) TMI 1289
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....l Judge for C.B.I. cases, Hyderabad has taken cognizance for the offences punishable under Sections 120-B read with 420 IPC and Section 12 of the Prevention of Corruption Act, 1988, in so far as against the petitioner/A3 concerned, leave about other 8 accused charged including A7-M/s. India Cements Limited, rep. by its Vice-Chairman and Managing Director (petitioner/A3-iV. Srinivasan). Brief allegations in the charge-sheet insofar against the petitioner/A3 concerned are the following: 2(i) The petitioner/A3 herein being the Vice-Chairman and Managing Director of M/s. India Cements Limited (A7) is in charge of the day-to-day management and functions of the A7-Company. 2(ii) Allegations against M/s. India Cements Limited (A7): (a) During the year 1990 M/s. India Cements Limited acquired Coromandel Cement plant at Kadapa, Kadapa District; in the year 1997 they acquired Cement plant of Visakha Cement Industry Limited at Tandur, Ranga Reddy District; in the year 1998 they acquired cement plant of Cement Corporation of India at Yerraguntla, Kadapa District and in the year 1998 they acquired M/s. Raasi Cement Limited of Nalgonda District (of th....
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....40 in the year 1996. As per the G.O.Ms. No. 840, dated 14.10.1996 initial period of lease should be for only five years and the maximum period of lease shall in no case exceed twenty five years. On receipt of the proposal, a circulation note was put by the then Joint Secretary (Sri N. Venkata Subbaiah), Revenue Department endorsed that "proposals at Para 43 may kindly be considered for approval, regarding the period, it is submitted that the present lease granted has been expired by 30.6.2003, extension of lease for further period 5 years from 1.7.2003 may be considered for approval". (d) Sri M. Samuel, IAS (A4) the then Principal Secretary, Revenue Department, Government of Andhra Pradesh, at the initial stage got the above note circulated for extension of lease of land for a period of five years from 1.7.2003 to 1.7.2008 by giving his assent. Said note was routed through Principal Secretary (Finance) and was approved by the Minister for Revenue-Sri Dharmana Prasada Rao and it was finally approved by the then Chief Minister, Late Dr. Y.S. Rajasekhara Reddy for placing before the Council of Ministers. The file was re-circulated to the then Chief Minister for obtainin....
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....gamated later with India Cements Limited (A7) in the year 2007 and on 10.3.2008, India Cements Limited (A7) filed an application with Superintending Engineer, Irrigation Circle, Hyderabad requesting for additional allocation of 13 Mcft water from River Kagna in addition to the already allocated 10 Mcft water to M/s. Visaka Cements. The Chief Engineer, Minor Irrigation forwarded the request of India Cements Limited (A7) to the Irrigation Department for obtaining Government Orders for utilization of 13 Mcft water by India Cements Limited (A7) in addition to the existing utilization of 10 Mcft water accorded by G.O.Ms. No. 244, I & C Department, dated 19.12.1996. Sri N. Bhaskar Rao, Superintending Engineer having the knowledge about the payment of royalty, intentionally ignored and did not insist for payment of royalty by the entity before recommending for allocation of additional water and Sri B. Seetharamaiah, Chief Engineer merely forwarded the proposal received from Superintending Engineer to the Irrigation Department and on receipt of the proposal, Sri Alahari Subba Rao, the then Special Officer (Technical), Irrigation & Command Area Development (I & CAD) Department raised the fo....
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....a Cements Limited (A7). The proposal was put upto the Minister, keeping him in dark by ignoring the vital technical facts. Sri Adithyanath Das (A5) was in the knowledge of all the intricacies relating to this issue in furtherance of criminal conspiracy got final approval of the then Chief Minister. Accordingly, G.O.Ms. No. 94, I & CAD dated 12.8.2009 was issued. India Cements Limited (A7) owed royalty to irrigation Department since May, 1997 and it has not complied one of the conditions of the earlier G.O.Ms. No. 244 of 1996. A5 was in the knowledge of the above fact raised by the Special Officer. The conditional clause No. 9 of G.O.Ms. No. 244 of 1996 warranted that violation of the any of the conditions mentioned in the G.O., shall entail the cancellation of the permission granted to India Cements Limited (A7) for drawl of water without any notice. This fact was intentionally omitted by Sri Adithyanath Das (A5) in abuse of his official position as part of the criminal conspiracy for favouring India Cements Limited (A7). M/s. India Cements Limited (A7) was owing water royalty since May, 1997 which was later calculated in 2011 after registration of the case by C.B.I., for an amount....
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....mended the request of India Cements Limited (A7) for enhancement of water to a tune of 10 lakh gallons per day vide his letter dated 23.2.2008. Sri Bhaskar Rao, Superintendent Engineer, Irrigation & Command Area Development, Irrigation Circle, Hyderabad vide letter No. DEEI/TS-2/7152, dated 12.3.2008 addressed to the Chief Engineer, Minor Irrigation, Hyderabad requesting the Chief Engineer to obtain and communicate necessary permission from the Government. Sri B. Seetha Ramaiah, Chief Engineer, Minor Irrigation addressed a letter No. DCE(MI)/OT3-T4/India Cements/2008, dated 28.3.2008 to the Principal Secretary, Irrigation & CAD, Department, Hyderabad stating that permission was accorded to India Cements Limited (A7) formerly M/s. Raasi Cement to draw water from Krishna River, downstream of Nagarjunasagar Dam near Wazirabad village at the rate of 3 lakh gallons per day as per G.O.Ms. No. 408, Irrigation & Power (Irrigation-II) Department dated 21.6.1979. The letter also stated that an agreement had been entered with the firm and royalty is being paid by the firm. The letter also contained that the firm has represented for enhancement of water drawl from 3 lakh gallons to 10 lakh gal....
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....se of official position, Sri Adityanath Das (A5), IAS, Secretary, Irrigation Department overruled the above aspect and made an endorsement that the Chief Engineer, ISWR has agreed to the proposal of the Chief Engineer, Minor and agreed to give additional 7 lakh gallons of water per day in addition to already 3 lakh gallon (total 10 lakh gallon in all) to India Cements Limited (A7). On 25.6.2008 the then Minister (M & MI) Sri Ponnala Lakshmaiah agreed to the proposal and finally the then Chief Minister late Sri Y.S. Rajasekhara Reddy, in furtherance of criminal conspiracy accorded his assent on 3.7.2008, in quid-pro-quo to the illegal gratification paid by India Cements Limited (A7). The draft G.O. was put up on 8.7.2008, the Special Officer (Technical) made an observation that the terms and conditions must be specified and he also observed that the period of permission to be specified as five years as there was no mention of the period in the earlier G.O.Ms. No. 408, that G.O.Ms. No. 146 dated 22.7.2008 was issued according permission to India Cements Limited (A7) to draw 10 lakh gallons of total quantity of water per day including 3 lakh gallons of water already permitted from Kri....
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....learly shows that the investment into M/s. Raghuram Cements Limited, M/s. Bharathi Cement Corporation Limited by M/s. India Cements Limited (A7) was nothing but a quid-pro-quo investment. In April, 2010 M/s. Pani & Associates, Bangalore evaluated the share price of M/s. Raghuram Cement Corporation Private Limited and arrived at the value of share at Rs. 221.17 Ps. That the Board Resolution of India Cements Limited (A7) dated 14.4.2010 resolved to invest upto Rs. 125 crores by way of Inter Corporate Loans/Advance/Investment in M/s. Bharathi Cement Group whereas on the same day India Cements Limited (A7) had sold their stake 1803973 shares of Rs. 10/- each in M/s. Bharathi Cements Corporation Limited at a total price of Rs. 121.00 crores to M/s. PARFICIM, SAS, FRANCE. 2(iii) There is no averment from the above of any role of the petitioner/A3-Srinivasan to make him liable. It is however averred in the charge-sheet as if therefrom, it is clearly establishing that Sri N. Srinivasan (A3) representing (A7) India Cements Ltd. proposed to give back the entire amount received by selling shares to PARFICIM, back to Sri Y.S. Jagan Mohan Reddy (A1) which was invested as a quid-pro-quo....
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....rections of Sri V. Vijaya Sai Reddy (A2) in conspiracy with Sri Y.S. Jagan Mohan Reddy (Al) to justify the investments already solicited from India Cements Limited (AT) at the rate of Rs. 350/- per share. 2. From the above there is no specific role of petitioner/A3 to attribute, but for if at all he represented the India Cements Limited (A7) being its Vice-Chairman-cum-Managing Director. It discloses that the investigation proceeded on accusing the petitioner/A3 from his status to the India Cements Limited (A7) being its Vice-Chairman-cum-Managing Director and beyond that there is nothing of how personally and if not atleast by what provision or fiction of law by virtue of his status vicariously liable to charge for any of the offences. However, it is averred that in brief the charge-sheet filed by 2nd respondent reveals the role of petitioner/A3-Sri N. Srinivasan as follows: 3. A3 being the Managing Director of A7 Company conspired with A1 by entering into share subscription agreement dated 19.5.2007, that in pursuance of such agreement, A7 surrendered their rights in favour of M/s. Raghuram Cements Limited (A6) represented by A1 as a quid-pro-quo. For which A7 got the benef....
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....he offence punishable under Section 420 I.P.C. have been made out against the petitioner/A3, that petitioner/A3 has neither made any false inducement or representation knowingly so as to deprive another of any valuable security or other things while discharging his duties as Vice-Chairman and Managing Director of A7 company, when the basic ingredients of the offence charged against the petitioner/A3 are absent, the charge-sheet is liable to be quashed, that the learned Special Judge has committed a grave error in mechanically issuing process to the petitioner/A3 based upon the CBI/respondent's final report which does not any way point out the personal involvement of the petitioner/A3 for any personal benefits or obligations or in any conspiracy to bestow undue benefits on A7, a public company which is managed by a Board of Directors, that the learned Special Judge has not given any reasons in the order dated 25.9.2013 taking cognizance for inclusion of the alleged offence under Section 12 of the Prevention of Corruption Act, 1988. The impugned order suffers from clear legal infirmity without recording reasons why the Court felt compelled to include offence under the prevention ....
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....ation as to how the transaction discloses any criminal offence, that as regards the substantive offence of Section 420 I.P.C. manifestly no ingredients of the offence are disclosed against accused No. 3, that the charge-sheet is totally silent as to what false representation was made by accused No. 3 and to whom, it is also silent on the question whether any person was induced to part with any property by virtue of any false representation on the part of accused No. 3, that there is no suggestion of wrongful gain on the part of accused No. 3 and having caused wrongful loss to anybody and accordingly the substantive offence of Section 420 IPC is totally unsubstantiated against the petitioner and as regards the offence of conspiracy to cheat, the charge-sheet is totally silent as to who cheated whom. The criminal conspiracy charge can never be proved against the petitioner since each and every allegation that has been made against the petitioner in the charge-sheet pertains to the business activities of the Company (A7). There is not a single overt act which has been attributed to the petitioner/A3 suggesting any conspiracy in the making of investments by A7, that even assuming witho....
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.... 372-A(2) exemption will not apply and he did not obtain specific approval in the said Board meeting but for general approval for the investments in Raghuram Cements, which nowhere mentions the actual loan/investment even the 0% dividend and 0% preference shares, though the Board resolution supra authorized him to finalize the terms of the said investment of Rs. 90.00 Crores with Raghuram Cements and he even surrendered 0% C.P.S. in the share subscription agreement dated 19.5.2007 with Raghuram Cements even he was not a signatory to it, it cannot be avoided for nothing out of his knowledge and said investment by diversion of funds of India Cements Limited to Raghuram Cements is by abusing his position in India Cements. The other contention of he played vital role in diverting money of India Cements without board approval of Rs. 5.00 crores each by cheque Nos. 022249, 039912 and 918273 dated 2.2.2007, 20.4.2007 and 8.5.2007 respectively before board approval dated 16.1.2008 and the Board resolution dated 16.1.2008 is also with no legal affect for violation of Sections 372-A(2) read with 9(b) of Companies Act and it is not enough of there is no loss of India Cements as the investment....
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....sp;I. Whether the petitioner/A3-Srinivasan, being the Vice-Chairman and Managing Director of M/s. India Cements Limited (A7), be made personally liable for any acts of India Cements Limited with vicarious liability for the offences punishable under Sections 120-B read with 420 IPC and Section 12 of the Prevention of Corruption Act, by virtue of any statutory liability or legal fiction? II. If not, whether petitioner/A3-Srinivasan, other than of his status or position as Vice-Chairman and Managing Director of India Cements Limited, be made personally liable for any acts and if so on what basis for the final report to accuse and for the learned Special Judge to take cognizance without specifying as to on vicarious liability or personnel liability? III. Whether the cognizance taken by the learned Special Judge without specifying as to on vicarious liability or personnel liability, is outcome of non-application of judicial mind and same is otherwise unsustainable for not reflecting any reasons or otherwise and is liable to be quashed? IV. To what result? 9. Points I to III : As points 1 to 3 are interrelated and to avoid repetition by separate dealing, tak....
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....s entity if at all at best represented by its Managing Director-cum-Vice-Chairman Srinivasan named A3, there is no name of A3 Srinivasan as accused in the crime and there is no material from the investigation directly to show his role actively to make him personally liable for the accusation as to any participation or privy for any conspiracy muchless to commit the offence or to abet the offence under Prevention of Corruption Act. 12. Undisputedly, charges are not framed so far in the above calendar case at the post-cognizance stage from the appearance of the accused persons including against the petitioner/A3 or India Cements/A7. 13. It is but for contextually to mention that the writ petition supra among the directions of registration of crime to investigate, the direction is specific to protect the genuine investors who made in the State and that might be the reason though in the FIR there are more than 73 accused, the final report speaks against only 9 accused persons including A7/India Cements and the petitioner separately as A3 being its Vice-Chairman and Managing Director leave about other final reports against some others. 14. A7/India Cements from the material on ....
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.... respective contentions in the quash petition and in the final report taken cognizance with counter opposing the quash petition material points out any role of the petitioner/A3 to sustain the accusation in the final report that was taken cognizance and if no material, the cognizance taken can be said by judicial non application of mind leave about reasons are required to be given or not though generally the application of mind shall reflect by reasons, even some of the expressions say mere non assigning of reasons will not entitle to quash the cognizance, once the cognizance taken reflects the judicial application of mind. It is also necessary to mention in this regard that in showing the benefits if at all said to have been conferred to A7/India Cements by the then Government some of the officials acted in privy or there were dereliction of duties in conferring favours to A7 entity as a quid-pro-quo for the investments made by A7 with A1 or any of his controlled or representing entities directly or indirectly. None of the Government Orders or proceedings of the alleged benefits were withdrawn or varied or revised by Government and in fact those were approved including by placing ....
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....r G.O.Ms. No. 1484, dated 15.11.1977 on payment of rent at 10% of the market value of Rs. 2,50,000/- per acre per annum and the CCLA forwarded said proposals by accepting the recommendation and the Revenue Department put up the latest amendment to the lease rules to Finance Department, which in turn returned the file to Revenue Department with remarks to take action as per G.O.Ms. No. 1484, dated 15.11.1977 read with G.O.Ms. No. 840, dated 14.10.1996. On receipt of the proposal, a circulation note was put by the then Joint Secretary Revenue Department endorsed to consider for approval and placed before the Council of Ministers in the Cabinet meeting held on 30.6.2008 and approved for five years period from 1.7.2003 and would expire on 1.7.2008 vide its resolution No. 241/2008, dated 1.7.2008. Sri M. Samuel (A4)-Principal Secretary, in furtherance of the criminal conspiracy with other accused persons, by abusing his office as a public servant said to have issued orders vide G.O.Ms. No. 865, dated 11.07.2008 extending the lease of land in Sy. No. 657/2, Acs. 2-60 cents of Chowduru Village of Proddatur Mandal in favour of India Cements Limited (A7), Chilamkur for a period as prescribe....
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....he extension for further periods and the total period if counted comes beyond 25 years. In fact the Board Standing Orders 24 speaks with proforma of lease even coming to G.O.Ms. No. 53, the same referring to B.S.O. No. 24 for the lease rightly. Even coming to G.O.Ms. No. 865, dated 11.7.2008, same amended by G.O.Ms. No. 1000, dated 2.2.2010, it also reflects B.S.O. 24 and amended from five years to 25 years or so. As referred supra in none of the proceedings or material, there is anything to reflect any role or petitioner/A3 specifically as privy but for to say by virtue of his status in A7/India Cements which no way makes him vicariously liable for no statutory provision or legal fiction including on the principal of alterago. 19. So far as the water distribution or allotment of additional water component to any of the entities that were acquired by IC/A7 concerned and making of the provision concerned, M/s. Visaka Cement Industries Limited was undisputedly amalgamated with India Cements Limited (A7) only in the year 2007. In fact long prior to it, M/s. Visaka Cement Industries Limited was given permission undisputedly to draw 10 mcft of water vide G.O.Ms. No. 244 dated 19.12.1....
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....as given permission to draw 3 lakh gallons of water from Krishna River by G.O.Ms. No. 408 dated 21.6.1979 issued by Irrigation & Power (IRR.III) Department. What all later continued was in saying Sri R. Nagi Reddy, Senior Personal Manager of India Cements Limited (A7), Wazirabad entered into Article of Agreement for permission to draw 3 lakh gallons of water per day from Krishna River for cement factory for the period, from 20.9.2007 to 19.9.2008 for an amount of Rs. 1,62,000/- for 12 months and Sri P.R.K. Raju, Chief Manager of India Cements Limited (A7) vide letter dated 10.12.2007 addressed to the Executive Engineer, Irrigation Department, Nalgonda stating that they had taken permission to draw 3 lakh gallons of water per day from Krishna River earlier from Irrigation Department vide letter No. C/1, dated 12.10.1982 and that they were expanding their plant and require additional quantity of water to an extent of 7 lakhs gallons per day. Even therefrom, it is not A3-Srinivasan but local officers that were party to above agreement, based on which, the Superintendent Engineer requested Chief Engineer to obtain permission from the Government by alleged creation of agreement dated 20....
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....008, in quid-pro-quo to the illegal gratification paid by India Cements Limited (A7) and A5 by abusing his official position as a public servant issued G.O.Ms. No. 146, dated 22.7.2008 according permission to draw 10 lakh gallons of total quantity of water per day including 3 lakh gallons of water already permitted from Krishna River unduly favouring the firm, by suppressing the facts pertaining to the terms and conditions mentioned in the earlier G.O.Ms. No. 408, during the period 2007 to 2008 apart from India Cements Limited (A7) other companies viz., M/s. Deccan Cements Limited, Hyderabad, M/s. Madhucon Sugar and Power Industries, M/s. Maruti Ispat and Energy Private Limited had also applied for allocation of water and whose proposals kept pending as there was quid-pro-quo investments by India Cements Limited (A7) into the companies of Sri Y.S. Jagan Mohan Reddy out of 12,50,000 preference shares at a premium of Rs. 110/- for a sum of Rs. 15,00,00,000/-, India Cements Limited (A7) invested Rs. 80.31 crores at a premium of Rs. 1440/- with no explanation available in the minutes of the meeting or the statements recorded from top management of the company with regard to the necessi....
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....wing due process and under A.P. Business Rules and Secretariat instructions and the allegation of water to India Cements Limited thus was only in public interest following the due process. The affidavit further reads the industrial policy of the State mandates that 10% of the water will be reserved from existing and future reservoirs for industrial use which policy is in vogue since the year 2001 and as public interest will be better served more by timely utilization of water as it not only would accrue revenue through royalty to the Government but also facilitates industrial development and spurring economic growth besides employment generation and state water policy puts industrial use of water at third priority after drinking water and irrigation with subsidized price and the only way commercial use can be made of water is thereby through industrial use in order to subsidies atleast the O & M cost of said sources and if water is not used in the Run of the river then it assumes a perishable nature as it goes as waste to the sea or evaporates and it is from the field officers examined of availability interstate issues, upper and lower riparian rights, Run of the water and sources ....
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....1 undisputedly India Cements got a sister concern as an investment entity with its financial resources to invest. Even it lent any amounts; it is part of its business activity for very purpose it is in existence. If at all such investment by A7 entity and its sister concern with Al, to make with liability for alleged cheating it must be to cheat the shareholders or Directors with investment for no proper returns and same to assume not even with any complaint by any shareholders or directors or debenture holders or others and when such is the case that may at best serve as one of the links or circumstances to say any privy of quid-pro-quo between A1 and A7 and nothing to make A3 liable personally. Even coming to the investment of Rs. 5.00 crores each by three cheques dated 2.2.2007, 20.4.2007 and 8.5.2007, by India Cements in Sandur power and R.R. Global concerned, the main accusation against A7/India Cements made the investments and it is A3/petitioner acting as its Managing Director and for the said investments there were no prior board resolutions of A7 or its sister concern as the case may be concerned, in fact there is a board resolution dated 16.1.2008, which is no doubt subse....
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....ferred supra. Apart from it, the investment with M/s. Raghuram Cements of about Rs. 95.32 Crores later sold for Rs. 121.00 crores and same is also subjected to income tax and capital gains tax as shown of the counsel for the quash petitioner of the claim of genuine investment with returns to it. Further, on taken preferential shares as per the company law particularly with reference to Section 82 to 87 in Chapter IV of the Act, the same can be converted into equity shares besides preference shares got priority in all respects of dividend and preference to claim if wound up though there is no voting rights like in equity shares and the Companies Act Section 85 clearly speaks two types of shares one is preferential and the other is only equity and the contention of Board resolution dated 16.1.2008 is void for non-application of exemption and non-obtaining of prior consent under Section 372-A(2) of the Act does not arise in the case on hand for the investment not impugned by any of the shareholders or Directors of the India Cements apart from any lapse of the Company, the Company is already arrayed as accused and there is nothing to show how A3 is personally liable in the absence of h....
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....usation as A7 for nothing to show how A3 is privy and personally liable by any specific acts and in the absence of which can he be made liable by virtue of his status as Chairman-cum-Managing Director of India Cements. Before coming to discuss the legal position with further facts in this regard even at the cost of repetition subject to context requires, now coming to the sustainability of quash petition from the expressions relied and referred supra and those relied being referred hereunder. 24. From above facts, now coming to the scope of Section 482 Cr.P.C. and whether the same can be invoked in present facts to quash the proceedings, in R. Kalyani v. Janak C. Mehta, (2009) 1 SCC 516, it was held that for invoking the inherent power in discharge of paramount duties by the High Court, it is to see a person apparently is not subjected to persecution and humiliation on the basis of wholly untenable complaint/report. In Sunitha Jain v. Pavan Kumar Jain, (2008) 2 SCC 705 at Para No. 39 it was held that, inherent power of High Court would not embark upon an enquiry as to whether evidence is reliable or not which is a function of trial Magistrate to appreciate as to the accusation i....
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....the private complaint as vendetta to harass the persons needlessly. Vindication of majesty of justice and maintenance of law and order in the society are the prime objects of criminal justice but it would not be the means to wreak personal vengeance. Considered from any angle we find that the respondent had abused the process and laid complaint against all the appellants without any prima facie case of harass them for vendetta." 27. However, it is the contention of the learned counsel for C.B.I. that this is not a fit case to quash the proceedings invoking the inherent powers under Section 482 Cr.P.C. It is further contended that the petitioner/A3 can be made liable also by virtue of his status even under Company Law as per Sections 5 and 291, as for the offences under the Companies Act, the Managing Director of the Company can be prosecuted by virtue of his position. For more clarity on the scope of the provisions same incorporated below: "Section 5. Meaning of "Officer Who is in Default For the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any punishment or penalty, whether by way of imprisonment,....
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....act in the case on hand there is no offence under the Companies Act that could be made out muchless to invoke the provision, in the absence of its showing same can be extended to I.P.C. offences and offences of corruption also, if involved with any Company offence. 29. Coming to the further contention of the learned counsel for C.B.I. to make A3/petitioner liable by virtue of his status, he placed reliance upon the three Judge Bench expression in R.K. Dalmia v. Delhi Administration, AIR 1962 SC 1821. In that expression, it was observed that a Director of a Company is not only an agent but is in the possession of a trustee and for that placed reliance on the expression in People Bank v. Hari Kishanlal, AIR 1936 Lah. 408, holding both Dalmia and Chokkani therefore had dominion over the assets of the Insurance Company, as in People's Bank it was observed Lal Hari Kishan is a trustee of all the monies in the Bank. In Palmar's Company Law 20th Edn., at page No. 517 it is stated, Directors are not only agents but they are in same sense and to some extent trustees are in the possession of trustees and Lord Selborne in G.E.R. 7 Company v. Turner, 1972 (2) Cha. 149, observed that....
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....inst petitioner/A3 to make him personally liable for the offence of cheating and criminal conspiracy or abatement, muchless for the offence under Section 12 of the Prevention of Corruption Act, as there is no material to sustain any accusation in the police final report with any stray sentence without basis. None of the material discussed supra is suffice to say A3/petitioner is personally liable from his status as Vice-Chairman and Managing Director of India Cements Limited for no complaint muchless any of Directors or shareholders or debenture holders of he cheated India Cements or the share holders or Directors etc., by privy with A1 or with any others. The alleged lapse of investments prior to Board resolutions ratifying and once such is the case any imperfection or dereliction no way sufficient to implicate in a criminal offence by attributing mens rea to make the petitioner/A3 personally liable and there is nothing to show or attribute any dishonest or fraudulent intentions under Sections 24 and 25 I.P.C. or wrongful loss or wrongful gain there from as held by the Apex Court in Mohd. Ibrahim v. State of Bihar, 2009 (2) ALD (Crl.) 775 (SC) : (2009) 8 SCC 751, particularly at p....
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....offence and mere use of expression cheating in the complaint is of no consequence for no basis to the averment of deciding cheating or fraudulent intention of accused at the time of entering into the transactions. In the other expression of the Apex Court in Uma Shanker Gopalika v. State of Bihar, (2006) 2 SCC (Crl.) 49, it was held that to constitute the offence of cheating, intention to cheat was shown existing from the inception and if such intention developed later that would not amount to cheating. In the other expression of the Apex Court in Ram Jas v. State of U.P., 1974 Crl. LJ 1261, also it is laid down on the ingredients required for cheating that, there should be fraudulent or dishonest inducement by deceiving from the inception which is lagging to say no offence made out. The other three Judges Bench expression of the Apex Court in Ajay Mitra v. State of M.P., 2003 (1) ALD (Crl.) 644 (SC) : 2003 Cri. LJ 1249, it was held that mens rea of inducing the persons deceived to deliver property is essential to constitute offence of cheating and in ultimately quashing the F.I.R. therein referred the other expressions of A.L., Panian Shanmugam v. State of Andhra Pradesh, (1991) S....
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....ther there is nothing to show the petitioner/A3 is the instigator or abettor to any of the alleged offence committed by A1 or others to make liable for the offence under Section 12 of the P.C. Act as referred supra from the material on record. 34. Coming even to the legal position till date on vicarious liability, in R. Kalyani v. Janak C. Mehta (supra), it was held that vicarious liability can be fastened only by reason of a conferment by a statute and not otherwise, and for said purpose a legal fiction has to be created thereby for the I.P.C. offences of cheating and forgery or breach of trust of the respondents charged in individual capacity in the absence of showing how personally liable, referring to several expressions and upholding the F.I.R. proceedings quashed by the High Court, by the Apex Court for no interference. 35. In S.K. Alagh v. State of U.P., 2008 (2) ALD (Crl.) 78 (SC) : (2008) 5 SCC 662, it was held that vicarious liability in I.P.C. offences does not cast on the party not directly charged for commission of offence unless specifically provided there for like under Sections 34 or 149 I.P.C. etc. The relevant Paras 20 & 21 read that: "20. Ind....
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....n or to record sworn statements as pre-cognizance enquiry to take cognizance or not or even on police final report/charge-sheet to take cognizance, as the case maybe, as to how they or any of them individually liable and on what basis. 37. For that it also referred on the principle of alter-ego of no vicarious liability in IPC offences, the earlier expression of Apex Court in Saroj Kumar Poddar v. State, (2007) 3 SCC 693, that placed reliance on Everest Advertising Private Limited v. State Government of NCT of Delhi, (2007) 5 SCC 54 and S.M.S. Pharmaceuticals Limited v. Neeta Bhalla,: (2005) 4 SCC 70, in observing "The Penal Code does not contain any provision for attaching vicarious liability on the part of Managing Director or Director of a Company when the accused is the company. The learned Magistrate did not pose unto himself the correct question as to whether the complaint petition, even if given face value and taken to be correct in its entirety, would lead to the conclusion of the quash petitioners are personally liable for any offence. The bank is a body corporate. Vicarious liability of the Managing Director and Director would arise provided any provision exists in tha....
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.... Directors of the Company should not have been summoned only because some allegations were made against the Company." 41. In fact in the three Judges bench expression in Standard Chartered Bank v. Director of Enforcement, 2005 (4) ALD 10 (SC) : (2005) 4 SCC 530, it was held that a Company can be prosecuted and convicted for an offence which requires a minimum sentence of imprisonment, though not expressed any opinion on the question whether a Corporation could be attributed with requisite mens rea to prove the guilt, the same is later clarified by the subsequent three Judge bench expression in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and another, 2007 (3) Scale 245, of a Corporation could be attributed with requisite mens rea to prove the guilt and same is reiterated in several later expressions including in National Small Industries Corporation v. Harmeet Singh, (2010) 3 SCC 330 and subsequent expressions following it and mainly in Iridium India Telecom Ltd. v. Motorola Inc., 2011 (1) ALD (Crl.) 591 (SC) : (2011) 1 SCC 74, referring to the several expressions of the Apex Court and of American and England Courts in Paras 59 to 64 of the expression page Nos. 98 to 100 in nutsh....
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....tory regime itself attracts the doctrine of vicarious liability by specifically incorporating by such a provision. It was held referring to Maharashtra State Electricity Distribution Co. Ltd.'s case (supra), that merely on the basis of the appellant's status in the company, it could not be presumed that it is the appellant who became a party to the alleged conspiracy. 42. It was held further referring to the Section 141 of N.I. Act in particular as an example at para No. 44 of Sunil Bharti Mittal's case (supra) and also from the expression of the Apex Court in Aneeta Hada (II) v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661, that the group of persons that guide the business of the company if the criminal intent that would be imputed to the body corporate and in this back drop Section 141 of the N.I. Act has to be understood. Such a position is therefore because of statutory intendment making it a deemed fiction. In Sunil Bharti Mittal's case (supra), it also referred the observations in the three Judge Bench expression of the Apex Court in S.M.S. Pharmaceuticals's case (supra) at para No. 8 that there is no universal rule that a Director of a Company ....
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....ted in para No. 12 in saying the decision in Anil Hada's case (supra) is over ruled with the clarification as stated in Para No. 51 of Aneeta Hada(2)'s case (supra) and the decision in U.P. Pollution Control Board supra has to be restricted to its own facts. In S.M.S. Pharmaceuticals supra also it is made clear with reference to section 141 of the N.I. Act that it is necessary to aver that at the time the offence was committed, the person accused was incharge of and responsible for conduct of business of the Company and without this averment being made in the complaint, the requirements of Section 141 of the N.I. Act cannot be said to be satisfied. A clear case should be spelled out in the complaint against the persons sought to be made liable to show as incharge of and responsible to the Company for the conduct of its business. Every person connected with the Company thereby shall not fall within the ambit of Section 141 of the N.I. Act but of those persons who were incharge of and responsible for the conduct of business of the Company at the time of commission of the offence. The liability arises on account of conduct or act or omission on the part of a person and not mer....
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....SCC 505 at para Nos. 18 and 19 it was observed by the Apex Court as follows: "18. From bare perusal of the order passed by the Magistrate, it reveals that two witnesses including one of the trustees were examined by the complainant but none of them specifically stated as to which of the accused committed breach of trust or cheated the complainant except general and bald allegations made therein." 19. In the order issuing summons, the learned Magistrate has not recorded his satisfaction about the prima facie case as against respondent Nos. 2 to 7 and the role played by them in the capacity of Managing Director, Company Secretary or Directors which is sine qua non for initiating criminal action against them. Recently, in the case of M/s. Thermax Ltd. and others v. K.M. Johny and others, 2012 (1) ALD (Crl.) 655 (SC) : (2011) 13 SCC 412, while dealing with a similar case, this Court held at para Nos. 20 and 21 as under:- "20. Though respondent No. 1 has roped all the appellants in a criminal case without their specific role or participation in the alleged offence with the sole purpose of settling his dispute with appellant-Company by initiating the crim....
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....ations showing how liable for the acts alleged. 46. So far as the I.P.C. offences concerned it is held that there is no such statutory fiction or vicarious liability, but for individually made liable for their individual acts, and not merely while holding an office of the Company for acts of the persons concerned with the affairs of the Company are the acts of the Company under the principle of alter-ego. It is what is reaffirmed and detailed for the IPC offences and for offences under the prevention of corruption Act, in the latest expression of the Apex Court in Sunil Bharti Mittal's (supra), of the concept of 'vicarious liability' is unknown to criminal law. 47. In Sunil Bharti Mittal's case (supra), on facts, the C.B.I. registered the crime, investigated and filed final report. The person not named in the final report as accused by differing to the police Investigating officer's opinion, the learned Magistrate has taken cognizance under Section 190 Cr.P.C. after hearing public prosecutor and in issuing process against the non-accused of charge-sheet and the same was impugned and the matter reached before the Apex Court on the question when a person not....
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.....P.C. deals with issuing process after taking cognizance on the private complaint from sworn statement recorded where there is sufficient ground for proceeding as per Section 204 of Cr.P.C. which is of immense importance. It was observed in Sunil Bharathi Mittal's case (supra), that the learned Special Judge on the basis of the material on record, done no such exercise and thereby the impugned order dated 19.3.2013 is held unsustainable so far as it relates to implicating the appellants and summoning them as accused. For that on facts observed, the allegation against the appellants is a ground of additional spectrum by luring condition of 9 lakhs subscribers to 4.50 lakhs subscribers be only charging additional 1% A.G.R. instead of charging 2% AGR which caused loss to government's revenue and further the case of prosecution that this was the result of conspiracy hatched between the then Minister concerned as well as the accused-cellular operator. The decision taken in haste on 31.1.2002 itself exchanges notes prepared by J.R. Gupta, the then Secretary telecom, on that day, which was agreed 2/5th and thereafter approved by the Minister on the same day. On that basis circular....
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....o the decisions which these three persons held/hold in the three cases (companies) respectively. 49. In Para 4 the special Judge did not mention about any incriminating material against them in the statements of witnesses and documents etc. On the other hand, the reason for summoning these persons and proceed against them are specifically described in this paragraph which prima facie are these persons were in control of affairs of the respective companies, as such, they represent the directing mind and will of each company and their state of mind is the state of mind of the companies. Thus, they are described as 'alter ego' of their respective cases. It is on this basis these three persons are treated as alter ego of their respective companies and in the opinion of the learned Special Judge, the acts of the companies are "to be attributed and imputed to them". On the erroneous presumption in law the special Judge/'Magistrate issued summons. For the learned Magistrate/Special Judge, it is always open to invoke special exercise after going through the material on record, if he is satisfied that there is enough incriminating material on record to proceed against he may ....
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....ssion in Sarath Mathew supra of what is laid down in Sunil Bharti Mittal's case (supra), is to understand of reasons are required to be given generally and not that for mere omission to give reasons fatal to quash the order of cognizance taken, if otherwise it is sustainable. Even from that, when there is nothing to show judicial application of mind to the material on record in taking cognizance of the offences under Sections 420 & 120B IPC & Section 12 of the PC Act, so far as the petitioner/A3-Sri N. Srinivasan concerned, the cognizance taken by the special judge for CBI cases requires to be quashed for no basis to sustain the cognizance order from the material on record from what is elaborately discussed supra on facts and law. Thus, the proceedings so far as petitioner/A3 concerned are liable to be quashed for above material on its face when can be held not sufficient to accuse in the police final report or to take cognizance by the learned Special Judge there from against the petitioner/A3 personally, to say no prima facie material to make him liable to face the ordeal of trial or even to frame charge against him from the prosecution material placed reliance with the polic....