Karnataka High Court

Sri. Y. G. Rajendran vs The State Of Karnataka on 29 May, 2024

Author: M.Nagaprasanna

Bench: M.Nagaprasanna

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                                                          NC: 2024:KHC:18011
                                                      CRL.P No. 5010 of 2023




                     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

                           DATED THIS THE 29TH DAY OF MAY, 2024

                                           BEFORE
                          THE HON'BLE MR JUSTICE M.NAGAPRASANNA
                            CRIMINAL PETITION NO. 5010 OF 2023
                   BETWEEN:

                   SRI. Y. G. RAJENDRAN,
                   S/O LATE Y. G. PARTHASARTY,
                   AGED ABOUT 67 YEARS,
                   RESIDING AT NO.14-C,
                   NORTH CRESENT ROAD,
                   T. NAGAR,
                   CHENNAI - 600 017.
                                                               ...PETITIONER
                   (BY SRI. N.B.N. SWAMY, ADVOCATE)
                   AND:

                   THE STATE OF KARNATAKA,
                   BY THE INSPECTOR OF POLICE,
                   CORPS OF DETECTIVES,
                   BANGALORE - 560 001.
                   REPRESENTED BY
Digitally signed
by NAGAVENI        STATE PUBLIC PROSECUTOR,
Location: HIGH     KARNATAKA STATE,
COURT OF
KARNATAKA          KARNATAKA.
                                                              ...RESPONDENT
                   (BY SRI.HARISH GANAPATHI, HCGP)
                        THIS CRL.P. IS FILED U/S.482 OF CR.P.C., PRAYING TO
                   a) QUASH THE FURTHER PROCEEDINGS OF THE CASE IN
                   C.C.NO.8257/2001 ON THE FILE OF XVII ADDL.C.M.M.,
                   (SPECIAL COURT FOR CBI CASES), BENGALURU AND ETC.,

                        THIS PETITION, COMING ON FOR ADMISSION, THIS DAY,
                   THE COURT MADE THE FOLLOWING:
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                                                     NC: 2024:KHC:18011
                                              CRL.P No. 5010 of 2023




                                   ORDER

The petitioner is before this Court, seeking the following

prayers:

"(a) Quash the further proceedings of the case C.C. No.8257/2001 on the file of the Learned XVII Additional Chief Metropolitan Magistrate, (Special Court for CBI cases) at Bengaluru.

(b) Quash the charges framed against him in the case C.C.No.8257/2001 on the file of the Learned XVII Additional Chief Metropolitan Magistrate, (Special Court for CBI cases) at Bengaluru

(c) Consequently, allow this Petition

(d) Pass such other order or further orders as this Hon'ble Court deems fit in the facts and circumstances of the above, in the interest of justice and equity."

2. Heard Sri. N.B.N. Swamy, learned counsel

appearing for the petitioner, Sri. Harish Ganapathi, learned

HCGP appearing for the respondent and have perused the

material on record.

3. Learned counsel appearing for the petitioner

submits that in an identical petition in Crl.R.P.No.843/2013, the

Co-ordinate Bench of this Court in terms of its order dated

16.09.2022, has allowed the petition insofar as those

petitioners.

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4. The issue that becomes applicable to the case at

hand is the fact that the company is not made a party to these

proceedings.

5. The Co-ordinate Bench of this Court follows the

judgment of the Apex Court including ANEETA HADA V.

GODFATHER TRAVELS AND TOURS PRIVATE LIMITED

AND CONNECTED MATTERS1 and allows the petition.

The Co-ordinate Bench of this Court in the aforesaid judgment,

has held as follows:

"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 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

(2012) 5 SCC 661

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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 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 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

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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. ..."

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 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

NC: 2024:KHC:18011

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 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:

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

NC: 2024:KHC:18011

years old, the Special Court is requested to expedite and dispose of the main case at the earliest.

Registry to transmit a copy of this order to the concerned trial Court along with its records immediately."

6. Learned HCGP though would refute the submissions

is not in a position to dispute the law as is considered and laid

down by the Co-ordinate Bench of this Court supra.

7. In that light, the petition deserves to succeed and

I pass the following:

ORDER

i. The petition is allowed.

ii. Proceedings pending in C.C.No.8257/2001 on

the file of the XVII Additional Chief Metropolitan

Magistrate (Special Court for CBI cases),

Bengaluru, stands quashed qua the petitioner.