K.P. Narasimhan vs The State Of Karnataka
2022 Latest Caselaw 11889 Kant

 IN THE HIGH COURT OF KARNATAKA AT BENGALURU

     DATED THIS THE 16TH DAY OF SEPTEMBER 2022

                             BEFORE

 THE HON'BLE Dr. JUSTICE H.B.PRABHAKARA SASTRY

     CRIMINAL REVISION PETITION No.843 OF 2013

BETWEEN:

1.     K.P. Narasimhan
       S/o Late K.R. Padmanabha
       80 years, No.19, Raja Annamalai
       Road, Purusawalkam
       Chennai 600084

2.     Farooq Dadabhai
       S/o L.N. Dadabhai
       66 years, No.13, 1st Road
       Subbarao Avenue
       Chennai 600006
                                                      .. Petitioners

(Vide order dated 02.06.2022 petition of petitioner No.1 is abated;
Sri S.G. Bhagavan, Advocate for petitioner No.2)

AND:

The State of Karnataka
By the Inspector of Police
Corps of Detectives
Bangalore 560 001
                                                     .. Respondent

(By Sri K. Nageshwarappa, HCGP)
                                               Crl.R.P.No.843/2013
                               2




      This Criminal Revision Petition is filed under Section 397
read with Section 401 of the Code of Criminal Procedure, 1973,
praying to allow the petition, set aside the order dated 19th
August, 2013, passed by the Court of the XVII Additional Chief
Metropolitan Magistrate (Special Court for CBI Cases, Bangalore,
in C.C.No.8257/2001 framing charge against the petitioners and to
discharge them from the case to meet the ends of justice.

      This Criminal Revision Petition (Bengaluru Bench matter)
having been heard through video conferencing hearing and
reserved on 07.09.2022, at the Kalaburagi Bench, coming on
for pronouncement of Orders, this day, the Court made the
following:
                            ORDER

The respondent-Police have filed a charge sheet against

the present petitioners and four other persons alleging that

they have committed the offences punishable under Sections

406 and 420 read with Section 34 of the Indian Penal Code,

1860 (hereinafter for brevity, referred to as the 'IPC').

It is alleged in the charge sheet that the accused

persons are the Directors of a company by name M/s.

Synergy Financial Exchange Limited with its registered office

at Chennai (hereinafter for brevity referred to as the

'Company'). The Company is said to have been incorporated

under the Companies Act, 1956.

Crl.R.P.No.843/2013

It is further alleged that, about in the year 1992, the

Company opened its branch office at Bengaluru and collected

deposits from several persons, promising them to return the

amounts in deposit with good accruals thereupon. However,

the amounts were not returned. Cheques were signed and

issued by the authorised signatories of the Company. Thus,

after conducting an investigation in their station Crime

No.252/1999, the respondent - police filed charge sheet

against the six accused for the offences mentioned above.

2. The Court of the XVII Additional Chief Metropolitan

Magistrate (Special Court for CBI Cases), Bengaluru

(hereinafter for brevity referred to as the 'Special Court')

where the charge sheet was filed in C.C.No.8257/2001,

proceeded to frame the charges against the accused,

including the petitioners, for the offences punishable under

Sections 406 and 420 read with Section 34 of the IPC for

fourteen heads purported to have been committed between Crl.R.P.No.843/2013

the dates 16.10.1996 and 14.09.1997. Challenging the said

framing of charges against them, accused Nos.1 and 5 before

the Special Court have preferred the present revision

petition.

3. The respondent is being represented by the

learned High Court Government Pleader.

4. Records from the Special Court pertaining to the

matter were called for and the same are placed before this

Court.

5. Heard the arguments of learned counsel for the

petitioner and the learned High Court Government Pleader for

the respondent. Perused the materials placed before this

Court.

6. After hearing both side, the only point that arise

for my consideration in this revision petition is:

Crl.R.P.No.843/2013

Whether the Special Court was at error in framing the charge against the present petitioners (accused Nos.1 and 5) before it, when the Company - M/s. Synergy Financial Exchange Limited not being arraigned as an accused in the charge sheet?

7. The learned counsel for the petitioner, in his very

brief argument, submitted that the offence is alleged to have

been committed by the Company, however, the said

Company has not been arraigned as an accused either in the

FIR or in the charge sheet. The accused against whom the

charge sheet is filed are only the Directors, as such, without

arraigning the Company as one of the accused, no vicarious

liability can be fastened and the act of framing of charges,

without there being Company as an accused, would not

sustain. He also submitted that nowhere in the charge sheet

there is an averment of inducement by the Directors who are

accused herein.

Crl.R.P.No.843/2013

In support of his argument, the learned counsel relied

upon few judgments of the Hon'ble Apex Court, which would

be discussed hereafterwards at the relevant place.

8. The learned High Court Government Pleader

appearing for the respondent, in his brief argument,

submitted that the State can still either implead the Company

in the case or can still file an additional charge sheet.

Therefore, the framing of the charge cannot be set aside.

However, he fairly conceded that the Company was not made

a party, though arraigning the Company also as one of the

accused was mandatory.

9. A perusal of the Special Court's records which

were summoned and placed before this Court would go to

show that the complainant and also the charge sheet

witnesses who are said to have lodged the complaint and

given their statements before the Investigating Officer

respectively, have alleged the act of criminal breach of trust Crl.R.P.No.843/2013

and cheating mainly against the Company showing the

accused as the Directors of the Company at the relevant

point of time. Some of them have mentioned the names of

the accused also. However, the fact remains that neither in

the FIR nor in the charge sheet, the Company has been

arraigned as an accused.

10. Learned counsel for the petitioners, in his

memorandum of petition has relied upon the judgment of the

Hon'ble Apex Court in S.K. Alagh vs. State of Uttar

Pradesh and others, reported in (2008) 5 SCC 662. With

respect to the offences punishable under Sections 405 and

406 of IPC against the Directors of a Company, the Hon'ble

Apex Court observed that vicarious liability cannot be

fastened on Managing Director, Director or other officers of a

Company which is accused of commission of offence

punishable under Sections 406. Sections 34, 146 to 149 of

IPC does not cast vicarious liability on a party not directly

charged for commission of an offence, unless specifically Crl.R.P.No.843/2013

provided therefor. In para-19 of its judgment, the Hon'ble

Apex Court observed as below:

"19. As admittedly, drafts were drawn in the name of the Company, even if the appellant was its Managing Director, he cannot be said to have committed an offence under Section 406 of the Penal Code. If and when a statute contemplates creation of such a legal fiction, it provides specifically therefor. In the absence of any provision laid down under the statute, a Director of a Company or an employee cannot be held to be vicariously liable for any offence committed by the Company itself."

In the second judgment relied upon by the learned

counsel for the petitioner, i.e., Maksud Saiyed vs. State of

Gujarat and others reported in (2008) 5 SCC 668

regarding vicarious liability of Directors for the charges

levelled against the Company, in para-13 of its judgment the

Hon'ble Apex Court was pleased to observe as below:

"13. ... The Bank is a body corporate. Vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. Statutes indisputably must contain Crl.R.P.No.843/2013

provision fixing such vicarious liabilities. Even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability."

In another judgment relied upon by the petitioners in

their memorandum of petition which is R. Kalyani vs. Janak

C. Mehta and others reported in (2009) 1 SCC 516, in

para-41 of its judgment the Hon'ble Apex Court was pleased

to observe as below:

"41. If a person, thus, has to be proceeded with as being vicariously liable for the acts of the company, the company must be made an accused. In any event, it would be a fair thing to do so, as legal fiction is raised both against the company as well as the person responsible for the acts of the company."

Learned counsel for the petitioner in his argument relied

upon a judgment of the Hon'ble Apex Court in the case of

Aneeta Hada vs. Godfather Travels and Tours Private

Limited and connected matters reported in (2012) 5 SCC Crl.R.P.No.843/2013

661. In the said case, with respect to Section 141 of the

Negotiable Instruments Act, 1881, regarding criminal liability

for dishonour of cheque drawn by company, the Hon'ble Apex

Court at paras-24 and 59 of its judgment was pleased to

observe as below:

"24. Section 141 uses the term "person" and refers it to a company. There is no trace of doubt that the company is a juristic person. The concept of corporate criminal liability is attracted to a corporation and company and it is so luminescent from the language employed under Section 141 of the Act. It is apposite to note that the present enactment is one where the company itself and certain categories of officers in certain circumstances are deemed to be guilty of the offence."

59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. ..."

Crl.R.P.No.843/2013

11. In Sharad Kumar Sanghi vs. Sangita Rane

reported in (2015) 12 SCC 781, the Hon'ble Apex Court in a

petition seeking quashing of criminal proceeding against the

petitioner for the offence punishable under Section 420 IPC

was pleased to observe that though the allegations were

made against the Company, the Company was not made a

party, therefore, the allegations were restricted to the

Managing Director. The allegations were vague and in fact

the same were principally levelled against the Company. It

further observed that there was no specific allegation against

the Managing Director. When a Company had not been

arrayed as a party, no proceeding could have been initiated

against it even where vicarious liability was fastened under

certain statutes. When a complainant intends to rope in a

Managing Director or any officer of a Company, it would be

essential to make requisite allegation to constitute the

vicarious liability. Thus, it was observed that where company

had not been arrayed as a party to the complaint, the Crl.R.P.No.843/2013

criminal proceedings initiated against Managing Director were

not maintainable.

12. The above judgments clearly go to show that

when the allegations are against the Company of alleged

cheating or criminal breach of trust, in such a circumstance,

the registered Company under the Companies Act, 1956

being a juristic person is required to be arraigned as an

accused. Independent of the Company arraigning only the

Managing Director or Directors of that Company against

whom no individual allegations or specific allegations are

made, then the said criminal proceedings initiated only

against the Managing Director or Directors is not

maintainable.

In the instant case also, as observed above, a perusal

of the materials placed before this Court would go to show

that the complaint and the statements of the witnesses

recorded by the Investigating Officer during the course of the Crl.R.P.No.843/2013

investigation only go to show that the alleged depositors

have accused the Company. According to them it is based on

the representation of the Company they have kept deposit

with the Company. Though the Directors may be in the

Board of the Company, however, without arraigning the

Company, the vicarious liability cannot be fastened on the

Directors in the instant case. As such, the order of the

Special Court framing charges against the present petitioners

under the impugned order deserves to be set aside.

However, since according to the learned HCGP the alleged

defect is curable, it is for the prosecution to take such

remedial course if available to them and in accordance with

law, if they feel so. However, considering the fact that the

alleged transactions are said to have taken place during the

year 1996 and 1997, the matter requires to be expedited by

the Special Court. Accordingly, I proceed to pass the

following:

Crl.R.P.No.843/2013

ORDER

The petition is allowed in part. The order dated

19.08.2013 passed by the XVII Additional Chief Metropolitan

Magistrate (Special Court for CBI Cases), Bengaluru in

C.C.No.8257/2001, framing the charges against the present

petitioner for the offences punishable under Sections 406 and

420 read with Section 34 of the Indian Penal Code, 1860

stands set aside.

The liberty is reserved to the respondent to cure the

alleged defect in their charge sheet, in accordance with law,

provided they feel doing so.

Since the alleged transactions resulting the criminal

case in the Special Court are said to have taken place during

the years 1996 and 1997, as such, nearly 25 to 26 years old,

the Special Court is requested to expedite and dispose of the

main case at the earliest.

Crl.R.P.No.843/2013

Registry to transmit a copy of this order to the

concerned trial Court along with its records immediately.

Sd/-

JUDGE

swk