Crl.M.C. No. 3103 of 2022

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE P.G. AJITHKUMAR** **THURSDAY, THE 4[TH] DAY OF JANUARY 2024 / 14TH POUSHA, 1945 CRL.M.C. NO. 3103 OF 2022** **C.C.NO.192/2021 OF THE JUDICIAL MAGISTRATE OF FIRST** **CLASS -II, HOSDRUG** **CRIME NO.138/2019 OF MELPARAMBA POLICE STATION, KASARGOD PETITIONERS/ACCUSED 1 TO 4:** - **1 RAJITH KUMAR K AGED 43 YEARS SON OF RAGHAVAN, LAYAM NIVAS, KUNHADUKKAM, PERUMBALA, KASARAGOD DISTRICT, PIN – 671317.** - **2 DEEPESH MELATH, AGED 36 YEARS, SON OF RAGHAVAN, LAYAM NIVAS, KUNHADUKKAM, PERUMBALLA , KASARAGOD DISTRICT, PIN – 671317.** - **3 UNNIKRISHNAN K., AGED 40 YEARS, SON OF NARAYANAN NAIR KUKKAL HOUSE, PALLIPPURAM, PARAVANADUKKAM, CHEMMANADU, KASARAGOD DISTRICT, PIN – 671317.** - **4 NITHESH ADUKKAM, AGED 34 YEARS, SON OF NARAYANAN NAIR KUKKAL HOUSE, PALLIPPURAM, PARAVANADUKKAM, CHEMMANADU, KASARAGOD DISTRICT, PIN – 671318.** **BY ADVS. P.V.ANOOP M.P.PRIYESHKUMAR PHIJO PRADEESH PHILIP** 2 Crl.M.C.No.3103 of 2022 ## **RESPONDENTS/STATE & COMPLAINANT:** - **1 STATE OF KERALA REPRESENTED BY PUBLIC PROSECUTOR,HIGH COURT OF KERALA, PIN – 682031.** **2 SHAKUNTHALA, AGED 36 YEARS, WIFE OF KRISHNAN, UPPIRAMKULAM, Y C NAGAR, PERUMBALA KASARAGOD DISTRICT, PIN – 671317.** ## **R1 BY SMT.PUSHPALATHA MK, SR.PUBLIC PROSECUTOR** **THIS CRIMINAL MISC. CASE HAVING COME UP FOR FINAL HEARING ON 18.12.2023, THE COURT ON 04.01.2024 PASSED THE FOLLOWING:** 3 Crl.M.C.No.3103 of 2022 ## **P.G. AJITHKUMAR, J.** **----------------------------------------------------------Crl.M.C.No.3103 of 2022 ----------------------------------------------------------Dated this the 4[th] day of January, 2024** ## **O R D E R** This is a petition filed under Section 482 of the Code of Criminal Procedure, 1973 (Code) seeking to quash the entire proceedings in C.C.No.192 of 2021 on the files of the Judicial Magistrate of the First Class-II, Hosdurg. The offences alleged against the petitioners are punishable under Sections 406, 418 and 420 read with Section 34 of the Indian Penal Code, 1860 (IPC). 2. In the final report, following allegations were levelled against the petitioners. They are the Directors of M/s Chandragiri Chitty Fund Private Ltd., having its office at Nayax Road, Kasaba Village, Kasaragod. The Chit Fund had permission to conduct five chits. Under that guise, the petitioners commenced several other chits unauthorisedly. The de facto complainant and similar others were deceived and lured to join such chits. The de facto complainant subscribed a 4 Crl.M.C.No.3103 of 2022 chit and the amount she prized of Rs.2,48,000/- was deposited in the said chit funds. On maturity, a cheque was issued to the de facto for repayment, but it was dishoboured for want of funds in the account of the said chit funds. It was thus alleged that the petitioners have committed the said offences. 3. Heard the learned counsel for the petitioners and the learned Public Prosecutor. Despite service of notice, the 2[nd] respondent did not choose to appear before this Court. 4. The essential contentions of the petitioners are that the transaction was only a debtor-creditor transaction involving no criminal offence, no _mens rea_ could be inferred on the part of the petitioners, being the Directors of the company, the petitioners cannot be personally prosecuted for a criminal offence committed by the company and when cheques were issued for the discharge of the debt due to the de facto complainant, a prosecution for the offence or cheating of breach of trust would not lie against the petitioners. 5 Crl.M.C.No.3103 of 2022 5. The learned counsel for the petitioners would submit that as held in **Sunil Bharti Mittal v. Central Bureau of Investigation [(2015) 4 SCC 604]** , no vicarious liability can be fastened to the petitioners for the non-payment of money by the company, which is an incorporated body. Further, it is submitted that the de facto complainant could initiate a prosecution for an offence under Section 138 of the Negotiable Instruments Act, 1881 alone and that too, if she is able to establish that the petitioners were in charge and responsible for the affairs of the company. In that regard, the learned counsel for the petitioner placed reliance on the decision of the Apex Court in **Aneeta Hada and others v. M/s Godfather Travels & Tours Pvt.Ltd. and another [(2012) 5 SCC 661 : 2012 KHC 4244]** . The learned counsel for the petitioners further would submit that in the nature of the allegations in this case, a trial would only be a futile exercise and therefore, the proceedings are liable to be quashed. The law laid down by the Apex Court in **Pepsi Foods Ltd. v. Special Judicial Magistrate [(1998) 5 SCC 749]** is placed reliance on. 6 Crl.M.C.No.3103 of 2022 6. The learned Public Prosecutor, on the other hand, would submit that from the very allegations that the chit in question was commenced and conducted without permission, deposit was received unauthorisedly and there occurred failure to return the amount that was deposited, the intention on the part of the petitioners to cheat its customers has been established. A company can act only through a human agency and when the acts of the petitioners as Directors, resulted in the aforementioned consequence, they are answerable to the charge levelled against them. Accordingly, the learned Public Prosecutor seeks to dismiss this petition. ## 7. In **Sunil Bharti Mittal** (supra) the Apex Court held ## that,- “42. No doubt, a corporate entity is an artificial person which acts through its officers, directors, managing director, chairman etc. If such a company commits an offence involving _mens rea_ , it would normally be the intent and action of that individual who would act on behalf of the company. It would be more so, when the criminal act is that of conspiracy. However, at the same time, it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute 7 Crl.M.C.No.3103 of 2022 specifically provides so. 43. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated is in those cases where the statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision.” ## In **Sunil Bharti Mittal** (supra) it was further held, “It is abundantly clear from the above that the principle which is laid down is to the effect that the criminal intent of the "alter ego" of the company, that is the personal group of persons that guide the business of the company, would be imputed to the company/corporation. The legal proposition that is laid down in the aforesaid judgment is that if the person or group of persons who control the affairs of the company commit an offence with a criminal intent, their criminality can be imputed to the company as well as they are "alter ego" of the company.” 8. When the petitioners admit that they are the Directors of the company and the de facto complainant specifically alleges that the petitioners had assured to return the money, they cannot have a contention that the prosecution is altogether illegal or a futile exercise. 8 Crl.M.C.No.3103 of 2022 9. It is the settled law that the facts constituting an offence under Section 138 of the N.I.Act and the offences of cheating and criminal breach of trust are totally distinct. The Apex Court in **Sangeetaben Mahendrabhai Patel v. State of Gujarat & another [AIR 2012 SC 2844]** , held that,- “27. Admittedly, the appellant had been tried earlier for the offences punishable under the provisions of Section 138 N.I. Act and the case is _sub judice_ before the High Court. In the instant case, he is involved under Sections 406/420 read with Section 114 IPC. In the prosecution under Section N.I. Act, the _mens rea_ i.e. fraudulent or dishonest intention at the time of issuance of cheque is not required to be proved. However, in the case under IPC involved herein, the issue of _mens rea_ may be relevant. The offence punishable under Section 420 IPC is a serious one as the sentence of 7 years can be imposed. In the case under N.I.Act, there is a legal presumption that the cheque had been issued for discharging the antecedent liability and that presumption can be rebutted only by the person who draws the cheque. Such a requirement is not there in the offences under IPC. In the case under N.I.Act, if a fine is imposed, it is to be adjusted to meet the legally enforceable liability. There cannot be such a requirement in the offences under IPC. The case under N.I.Act can only be initiated by filing a complaint. However, in a case under the IPC such a condition is not necessary.” 9 Crl.M.C.No.3103 of 2022 10. Therefore, the contentions of the petitioners that a prosecution for offence under Section 138 of the N.I.Act alone is possible against them is untenable. When the materials produced by the prosecution make out sufficient grounds for a prosecution of the petitioners, their contention based on the proposition of law in **Pepsi Foods Ltd.** (supra) cannot be accepted. In the circumstances, I am of the view that the proceedings in C.C.No.192 of 2021 before the Judicial Magistrate of the First Class-II, Hosdurg are not liable to be quashed. This petition is accordingly dismissed. Sd/- **P.G. AJITHKUMAR, JUDGE** dkr 10 Crl.M.C.No.3103 of 2022 ## **APPENDIX OF CRL.MC 3103/2022** ## **PETITIONER ANNEXURES** **ANNEXURE A CERTIFIED COPY OF THE FIR IN CRIME NO.138/2019 OF MELPARAMBA POLICE** **ANNEXURE B CERTIFIED COPY OF THE FINAL REPORT IN CRIME NO.138/2019 OF MELPARAMBA POLICE**