TaxTMI 
TaxTMI 
2019 (8) TMI 1757
X X X X Extracts X X X X
X X X X Extracts X X X X
....e absconded and are said to be living in a foreign country and are yet to be brought back to India, and therefore there is absolutely no progress in the case for the last 13 years. 3. The petitioner who has been arrayed as A-4, was working as a Director of the Company during the period from 27.02.1997 to 04.07.1999. 4. Mr. V.P. Raman, learned Senior Counsel appearing on behalf of the petitioner submitted that the petitioner is a Chartered Accountant by profession, and he was made as an accused in this case only on the ground that he was one of the Directors in the Company. The learned Senior Counsel submitted that no overt act, has been attributed against the petitioner and the respondent Police have added the petitioner as an accused by merely applying the principle of vicarious liability. The learned Senior Counsel further submitted that the concept of vicarious liability will not apply for IPC offences. The learned Senior Counsel concluded his arguments by submitting that the main accused persons have escaped from the clutches of, law, and the petitioner who was a Non-Executive Director and a Chartered Accountant by profession, has been going through the ordeal of facing crimi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inst the petitioner/accused and therefore he was included as A4 in the Final Report which was taken on file by the Chief Metropolitan Magistrate, Egmore and C.C. No. 4670/2006 was assigned. 11. It is submitted that the averments made in Para. 10, 11, 12 & 13 are totally false. There is a sufficient direct and oral as well as documentary evidence to substantiate the offences against petitioner/accused. The petitioner/accused name was mentioned in the pamphlet issued by the Alwarpet Benefit Fund Ltd., with regard to deposit scheme. The petitioner/accused has also to attended the Board of Directors meeting and signed in the minutes of the meeting. Further the petitioner/accused had signed in the Balance Sheet for the period 1996-97, 1997-98. The above facts disclosed the petitioner was involved in the management of the affairs of the company. The petitioner/accused along with the other accused issued pamphlet with the promise to pay 20% interest per annum for the deposit and there by induced depositors to invest their money with the company. The petitioner/accused along with the other accused entered into the conspiracy and deceived the depositors to the tune of Rs. 118 Crores to 46,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eral depositors were settled, Unfortunately, in this case the prime accused persons [A-1 to A-3] escaped from India and they were declared as proclaimed offenders. Till today, they have not been brought back to India. 10. At this juncture, it is necessary to find out if there are any materials available against the petitioner, who was functioning as a Director of the Company from 27.02.1997 to 04.07.1999. 11. A reading of the Final Report along with the statement of witnesses and other materials collected by the prosecution, shows various overt acts against [A-1 to A-3] and certain other accused persons. Originally, the petitioner was ranked as A-5 and due to the death of A-4, during the course of investigation, the petitioner was made as A-4 in the case. The petitioner has not been roped in for any individual offences attributed against the other accused persons. The petitioner has been roped in only for the offence of criminal conspiracy under Section 120B of IPC and for the offence of abetment Under Section 109 IPC; 12. The specific averment that was made against the petitioner in the Final Report is extracted hereunder: The accused [A-4] N. Magesh, Director of the Company i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... act of the company, an individual is made accused, unlessthere is a categorical provision in the statute making such a person vicariously liable or there is enough material to attribute the alleged acts of criminality to the said person. For his aforesaid submissions, he placed heavy reliance upon the decision of this Court in Iridium India Telecom Ltd. v. Motorola Inc[2]. He further submitted 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, as was held in Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd.[3] in the following manner: "27. A bare perusal of the complaint shows that the gravamen of the allegation is that a fabricated document containing the offending endorsement was tendered in evidence before the Arbitral Tribunal on behalf of MSEB by Accused 6, who was in charge of Shirpur Section. It is evident from the afore extracted paragraphs of the complaint that other accused have been named in the complaint because, according to the complainant, MSEB, Accused 1 was acting under their control and management. It bears repetition tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ance was also placed on the decision in the case of Aneeta Hada v. Godfather Travels & Tours (P) Ltd. AIR 2012 SC 2795 : (2012) 5 SCC 661: LNIND 2012 SC 260, with particular emphasis on the following passage: "32. We have referred to the aforesaid authorities to highlight that the company can have criminal liability and further, if a group of persons that guide the business of the, companies have the criminal intent, that would be imputed to the body corporate. In this backdrop, Section 141 of the Act has to be understood. The said provision clearly stipulates that when a person which is a company commits an offence, then certain categories of persons in charge as well as the company would be deemed to be liable for the offences under Section 138. Thus, the statutory intendment is absolutely plain. As is perceptible, the provision makes the functionaries and the companies to be liable and that is by deeming fiction. A deeming fiction has its own signification." 32. The moot question is whether the aforesaid proposition, to proceed against the appellants is backed by law? In order to find the answer, let us scan through the case law that was cited during the arguments. 33. First ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he knowledge of the agent must be imputed to the body corporate. Counsel for the respondents says that, although a body corporate may be capable of having an intention, it is not capable of having a criminal intention. In this particular case the intention was the intention to deceive. If, as in this case, the responsible agent of a body corporate puts forward a document knowing it to be false and intending that it should [pic] deceive, I apprehend, according to the authorities that Viscount Caldecote, L.C.J., has cited, his knowledge and intention must be imputed to the body corporate." 61. The principle has been reiterated by Lord Denning in Bolton (H.L.) (Engg.) Go. Ltd. v. T.J. Graham & Sons Ltd. in the following words: (AC p. 172): "A company may in many ways be likened to a human body. They have a brain and a nerve centre which controls what they do. They also have hands which hold the tools and act in accordance with directions from the centre. Some of the people in the company are mere servants and agents who are nothing more than hands to do the work and cannot be said to represent the mind or will. Others are directors and managers who represent the directing mind and w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ffence is committed in relation to the business of the corporation by a person or body of persons in control of its affairs. In such circumstances, it would be necessary to ascertain that the degree and control of the person or body of persons is so intense that a corporation may be said to think and act through the person or the body of persons. The position of law on this issue in Canada is almost the same. Mens rea is attributed to corporations on the principle of "alter ego" of the company. 64. So far as India is concerned, the legal position has been clearly stated by the Constitution Bench judgment of this Court in Standard Chartered Bank v. Directorate of Enforcement (2005) 4 SCC 530. On a detailed consideration of the entire body of case laws in this country as well as other jurisdictions; it has been observed as follows: (SCC p. 541, para 6) "6. There is no dispute that a company is liable to be prosecuted and punished for criminal offences. Although there are earlier authorities to the effect that corporations cannot commit a crime, the generally accepted modern rule is that except for such crimes as a corporation is held incapable of committing by reason of the fact tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision. 39. When the company is the offendor, vicarious liability of the Directors cannot be imputed automatically, in the' absence of any statutory provision to this effect. One such example is Section 141 of the Negotiable Instruments Act, 1881. In Aneeta Hada (supra), the Court noted that if a group of persons that guide the business of the company have the criminal intent, that would be imputed to the body corporate and it is in this backdrop, Section 141 of the Negotiable Instruments Act has to be understood. Such a position is, therefore, because of statutory intendment making it a deeming fiction. Here also, the principle of "alter ego", was applied only in one direction namely where a group of persons that guide the business had criminal intent, that is to be imputed to the body corporate and not the vice versa. Otherwise, there has to be a specific act attributed to the Director or any other person allegedly in control and management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company. This very princip....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n National Small Industries Corpn. [National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330 : (2010) 1 SCC (Civ) 677 : (2010) 2 SCC (Cri) 1113] this Court observed: (SCC p. 336, paras 13-14) "13. Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent 1 was in charge of or was responsible to the accused Company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability. 14. A company may have a number of Directors and to make any or all the Directors as accused in a complaint merely on the basis of a statement that they are in charge of and responsible for the conduct of the business of the company without anything more is not a sufficient or adequate fu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....all. The provision made for bad debts, it is well said, was inadequate; but those who assured him that it was adequate were the very persons who were to attend to that part of the business; and so of the rest. If the state and condition of the bank were what was represented, then no one will say that the sum paid in dividends was excessive. (at pages 485-86) Per Lord Davey, it was held: "In this state of the evidence, my Lords, I ask whether the course of business at the board meetings, as described by the respondent, was a reasonable course to be pursued by the respondent and other directors, or whether the knowledge which might have been derived from a careful and comparative examination of the weekly states and quarterly returns from the different branches of the bank ought to be imputed to the respondent, or (alternatively) whether he was guilty of such neglect of his duty as a director as would render him liable to damages. I do not think that it is made out that either of the two latter questions should be answered in the affirmative. I think the respondent was bound to give his attention to and exercise his judgment as a man of business on the matters which were brou....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... criminal jurisprudence, unless the statute specifically provides for the applicability of the doctrine of vicarious liability like in the case of Negotiable Instruments Act, 1881, Employees Provident Fund Act, 1952, Food Safety and Standards Act, 2006, etc. 17. In case of a Non-Executive Director, they cannot be presumed to be involved in the day-to-day affairs of the running of the Company and they cannot be made liable just because they have attended Board Meetings or signed Balance Sheets. 18. In the instant case, the only allegation that is found against the petitioner in the Final Report and in the materials collected by the prosecution during the course of investigation, is that the petitioner did not interfere with the illegal act committed by A-1 to A-3, and thereby he has abetted the commission of crime under Section 109 of IPC. Therefore, the prosecution has proceeded against the petitioner more on an assumption and by applying the principle of vicarious liability, without there being any material to show that the petitioner had perpetrated the commission of the offence, by playing an active role coupled with criminal intent. Unless, this minimum requirement is satisfi....