appln2697.07
1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH : NAGPUR
Criminal Application [APPLN] No. 2697 of 2007
01. Damodarlal Ladha,
aged about 66 years,
resident of Mahendra Garden,
A-3/61,
S. V. Road, Goregaon [West],
Mumbai-62.
02. Vishnudayal son of Premsukh
Sarda,
aged about 65 years,
resident of 301, Shivkutir,
10th Road, Khar,
Mumbai-400 052.
03. Sharadchandra V. Sharma,
aged about 61 years,
resident of B-104, Poonam Apartment,
Dr. A. B. Road,
Worli, Mumbai. ..... Applicants
Versus
State of Maharashtra,
through Assistant Commissioner
of Sales Tax [Assessment],
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appln2697.07
2
Sales Tax Department,
B-252, Nagpur. ..... Non-applicant
*****
Mr. S. S. Dewani, Adv., for the applicants.
Mr. C. Lokhande, Addl. Public Prosecutor for non-applicant.
*****
CORAM : A.S. CHANDURKAR, J.
Date : 06th December, 2017 ORAL JUDGMENT:
01. By this Criminal Application filed under Section 482, Criminal Procedure Code, 1973, a challenge has been raised to the order passed by the learned Magistrate refusing to discharge the applicants herein from the proceedings in Regular Criminal Case No. 1929 of 2006 which order has been maintained in the Revision Application filed by the applicants.
02. Facts, in brief, are that the present applicants claim to be Directors of M/s. Raj Pipes Ltd., which was subsequently known as "M/s. Raj Irrigation Pipes & Fittings Ltd." Said Company was holding a Registration Certificate under the Bombay Sales Tax Act, 1959 [as it then was]. According to the Sales Tax Department, said Company failed to make payment of its outstanding liabilities towards Sales Tax ::: Uploaded on - 12/12/2017 ::: Downloaded on - 13/12/2017 00:58:09 ::: appln2697.07 3 dues. Hence, the Complaint alleging offence under Section 406 of the Indian Penal Code read with Section 63 (8) (ii) of the Bombay Sales Tax Act, 1959 [for short, "the said Act"] came to be filed. In this Complaint, the present applicants - Directors were arrayed as accused persons. The Company in question was not joined as an accused. The learned Magistrate was pleased to issue Process under Section 406 of the Indian Penal Code. The applicants moved an application below Exh.16 praying that they be discharged from the said proceedings. The trial Court by its order dated 20th January, 2007 rejected that application. This order was challenged by filing a Revision Petition before the Sessions Court. By judgment dated 21st July, 2007, the same came to be dismissed. Being aggrieved, the present Criminal Application has been filed.
03. Shri S.S. Dewani, learned counsel for the applicants, submitted that the learned Magistrate was not justified in issuing Process in the said Complaint on the ground that the Company which was said to be in arrears of Sales Tax dues had not been arrayed as an accused. It was submitted that in view of provisions of Section 66 of the said Act, in absence of the Company as an accused, the Complaint itself was not maintainable. The offence in question was alleged to have arisen on account of Sales Tax dues of the Company of which ::: Uploaded on - 12/12/2017 ::: Downloaded on - 13/12/2017 00:58:09 ::: appln2697.07 4 applicants were Directors. It is only if the Company was held guilty that the Directors could be proceeded against. In that regard, the learned counsel placed reliance on the judgment of the Honourable Supreme Court in Aneeta Hada Vs. Godfather Travels & Tours Pvt. Ltd. [ (2012) 5 SCC 661]. It was then submitted that in so far as offence punishable under Section 406 of the Penal Code is concerned, the same does not contemplate any vicarious liability on the part of an accused who is not directly charged for said offence. For said purpose, the learned counsel placed reliance on the decision in S. K. Alagh Vs. State of Uttar Pradesh & others [ (2008) 5 SCC 662]. It was, therefore, submitted that in the light of this settled legal position, the applicants were entitled to be discharged from the proceedings. By rejecting the application for discharge, the learned Magistrate as well as the learned Judge of the Sessions Court committed an error of law and jurisdiction and hence the present application deserves to be allowed.
04. Shri C. Lokhande, learned Addl. Public Prosecutor, supported the impugned judgment. According to him, the Company was in arrears of Sales Tax as the dues were not cleared. The applicants were the Directors of the said Company and hence they were responsible for clearing such dues. Because of their failure to do so, they were liable ::: Uploaded on - 12/12/2017 ::: Downloaded on - 13/12/2017 00:58:09 ::: appln2697.07 5 to be proceeded against and punished in accordance with law. The learned Judge of the Sessions Court after considering the entire material on record rightly refused to discharge the applicants.
05. I have heard the learned counsel for the parties at length and I have perused the impugned orders.
06. The record indicates that it is only the applicants who have been arrayed as accused persons in the complaint which is filed by the non-applicant. Reference to the status of the applicants is as Directors of the Company in question. In Aneeta Hada [supra], while considering the provisions of Section 141 of the Negotiable Instruments Act, 1881, which are in pari materia with provisions of Section 66 of the said Act, it was observed that when a Company commits an offence, then certain categories of persons in charge of the affairs of the Company as well as the Company would be deemed to be liable for the offence in question. After considering the legal position, it was held that for maintaining the prosecution under Section 141 of the Negotiable Instruments Act, 1881, the presence of the Company as an accused was necessary. Thereafter, as it was found that the Company was not arrayed as an accused, the proceedings came to be quashed.
I find that the challenge as raised on this count is clearly ::: Uploaded on - 12/12/2017 ::: Downloaded on - 13/12/2017 00:58:09 ::: appln2697.07 6 answered by the aforesaid decision of the Honourable Supreme Court. In absence of the Company as an accused in the Complaint, the Complaint itself was not liable to be entertained.
07. In so far as issuance of Process under Section 406 of the Penal Code is concerned, it has been held in S. K. Alagh [supra] that the Penal Code, except in certain provisions, does not contemplate any vicarious liability on the part of a party who is not charged directly for commission of an offence. It has been held in clear terms that when a person has been held to be vicariously liable for the offence committed by the Company in a case falling under Section 406 of the Penal Code, such vicarious liability cannot be extended to the Directors or officers of the Company.
In view of this legal position, it is clear that the applicants as Directors cannot be held liable even under Section 406 of the Penal Code with regard to their role as Directors of the Company.
08. It is, therefore, found that on both these counts, the applicants herein could not have been proceeded against. There was a serious legal lacuna in the complaint as filed as the Company itself was not arrayed as an accused. The order issuing Process, therefore, is not liable to be sustained.
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appln2697.07 7
09. In view of aforesaid, the following order is passed:-
The order issuing Process against the present applicants for the offence punishable under Section 406 of the Indian Penal Code read with Section 63 (8)
(ii) of the said Act is quashed and set aside. Consequently, the judgment dated 21st July, 2007 in Criminal Revision Petition No.98 of 2007 is also set aside. The proceedings in Regular Criminal Complaint Case No. 1929 of 2006 stand dismissed as not maintainable in law.
10. The Criminal Application is allowed in aforesaid terms. No costs.
Judge
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