Crl.M.C.No.6144/2018

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI** **TUESDAY, THE 10TH DAY OF DECEMBER 2019 / 19TH AGRAHAYANA, 1941** ## **Crl.MC.No.6144 OF 2016** **CRIME NO.829/2016 OF Thrikkakara Police Station, Ernakulam** ## **PETITIONERS/ACCUSED NO.4, 6, 7 & 8:** - **1 GOVIND M.S AGED 40 YEARS, S/O.G. SASI SEKHARAN,NAMBOODIRI, 05, CORAL 2, KRISTAL CAMPUS 10,YAMERE CILLAGE, SARJAPUR, BANGALORE 562125** - **2 SIVADASAN KOMATH AGED 56 YEARS, S/O.KUTTY KRISHNAN NAIR,KOMATH, CHALIKKARA, PERAMBRA PO, KOZHIKODE** - **3 BADRII NARAYAN S AGED 63 YEARS, S/O.K. SRINIVASA MOORTHY,FLAT D/2, KRISHNA LEELA APARTMENTS, 8TH MAIN ROAD, MALLESHWARAM, BANGALORE 560003** **4 BASHEER SHAFEEK AGED 43 YEARS, S/O.P.A.BASHEER,FLAT NO. 120, SOBHA QUARTZ,BELLANDUR, BANGALORE 560103** **BY ADVS. SRI.C.V.MANUVILSAN SRI.P.C.ANIL KUMAR SRI.T.K.SUJITH SMT.K.VIDYA SRI.M.V.VIPINDAS** ## **RESPONDENTS/STATE – DE FACTO COMPLAINANT:** - **1 THE STATE OF KERALA REPRESENTED BY THE SECRETARY,DEPARTMENT OF HOME AFFAIRS, GOVERNMENT OF KERALA,SECRETARIAT, THRIRUVANANTHAPURAM -01,REPRESENTED THROUGH THE PUBLIC PROSECUTOR,HIGH COURT OF KERALA, ERNAKULAM 682031** Crl.M.C.No.6144/2018 2 - **2 RAJU P.K. H/O.BEENA, NIRMALYAM, INJIPARAMBU ROAD,UNICHIRA, EDAPPALLY, ERNAKULAM 682024** - **3 THE DEPUTY COMMISSIONER OF POLICE (DCP LAW & ORDER), KOCHI CITY, KOCHI 682011** - **4 THE SUB INSPECTOR OF POLICE THRIKKAKARA POLICE STATION,KUSUMAGIRI PO, ERNAKULAM 682030** ## **SMT M K PUSHPALATHA -SR PP** **THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 09-10-2019, THE COURT ON 10-12-2019 PASSED THE FOLLOWING:** Crl.M.C.No.6144/2018 3 **“CR”** ## **R.NARAYANA PISHARADI, J** ************************ Crl.M.C.No.6144 of 2016 -----------------------------------------------Dated this the 10[th] day of December, 2019 ## **O R D E R** This is a petition filed under Section 482 Cr.P.C for quashing Annexure-A2 first information report (FIR) in Crime No.829/2016 of the Thrikkakkara police station. 2. The aforesaid case was registered under Sections 406 and 420 read with 34 I.P.C on the basis of Annexure-A1 complaint made by the second respondent (hereinafter referred to as 'the complainant') to the police. 3. The material averments in Annexure-A1 complaint can be stated as follows: The first accused is a public limited company. The third accused is the owner and the Managing Director of the first accused company. The complainant entered into an agreement with the first accused for purchasing apartment No.1306 in the apartment complex proposed to be Crl.M.C.No.6144/2018 4 constructed by the company. The complainant paid a total amount of Rs.32,00,000/- to the company. As per the agreement, the construction of the apartment had to be completed within ten months of the agreement executed in the year 2011. However, the accused failed to comply with the terms and conditions of the agreement and to complete the construction of the apartment within the stipulated period. A fresh agreement was executed on 10.09.2015 by the complainant and the accused. As per this agreement, the project had to be completed and possession of the apartment had to be handed over to the complainant on or before 31.07.2016. The chance of completing the construction of the project in the near future is very remote. The accused had dishonestly induced the complainant to part with money and they have made unjust enrichment. The Chairman, Managing Director/owner and other accused have colluded and conspired together to cheat the complainant by misappropriating the funds obtained in the name of the company. 4. It is stated in Annexure-A1 complaint that the third Crl.M.C.No.6144/2018 5 accused is the Managing Director of the first accused company. The status of the other accused in relation to the first accused company is only mentioned in the title of the complaint. It is stated that the second accused is the Chairman and the fourth accused is the Joint Managing Director and accused 5 to 8 are the Directors of the first accused company. 5. The petitioners are accused 4, 6, 7 and 8 in Annexure-A1 complaint. They have filed this petition under Section 482 Cr.P.C for quashing Annexure-A2 FIR against them on the ground that they are not the directors of the first accused company. 6. Heard learned counsel for the petitioners and the learned Public Prosecutor. 7. Learned counsel for the petitioners contended that the petitioners are not directors of the first accused company and they had no role in conducting the day to day business and the management of the company and therefore, Annexure-A2 FIR against them is liable to be quashed. 8. As per Annexure-A2 FIR, petitioners 1 to 3 are Crl.M.C.No.6144/2018 6 accused 4, 6 and 7 in the case. The fourth petitioner is not an accused as per Annexure-A2 FIR. However, he is shown as accused No.8 in Annexure-A1 complaint. 9. The petitioners have not produced any authentic documents to show that they are not the directors of the first accused company. The petitioners could have produced authentic documents from the Registrar of Companies to show that they were not the directors of the first accused company during the period when the offences alleged against the company were committed. In the absence of such documents produced by the petitioners, I am not inclined to quash the proceedings against the petitioners on the ground that they were not directors of the first accused company at the relevant time. 10. However, the proceedings against petitioners 1 to 3 are liable to be quashed for another reason. There is no averment in Annexure-A1 complaint that the petitioners had signed or executed the agreement entered into between the complainant and the first accused company. Annexure-A1 complaint does not contain any specific averment regarding the Crl.M.C.No.6144/2018 7 role of the petitioners in the conduct of the affairs of the company. There is no allegation in Annexure-A1 complaint that the petitioners have committed any offence. There is no whisper in Annexure-A1 complaint that the petitioners have committed any act which would attract the offences alleged against them. 11. Even if it is accepted that the petitioners were directors of the first accused company at the relevant time, vicarious liability cannot be attributed upon them for the offences under the Indian Penal Code allegedly committed by the first accused company. ## 12. In **Radhey Shyam Khemka v. State of Bihar :** ## **(1993) 3 SCC 54** , it has been held as follows: _“The persons managing the affairs of such company cannot use the juristic entity and corporate personality of the company as a shield to evade themselves from prosecution for offences under the Penal Code, if it is established that primary object of the incorporation and existence of the company is to defraud public. ...... It need not be impressed that for prosecution for offences_ Crl.M.C.No.6144/2018 8 _under the Penal Code the complainant has to make out a prima fade case against the individuals concerned, regarding their acts and omissions which constitute the different ingredients of the offences under the Penal Code. It cannot be overlooked that there is a basic difference between the offences under the Penal Code and acts and omissions which have been made punishable under different Acts and statutes which are in nature of social welfare legislations. For framing charges in respect of those acts and omissions, in many cases, mens rea is not an essential ingredient; the concerned statue imposes a duty on those who are in charge of the management, to follow the statutory provisions and once there is a breach or contravention, such persons become liable to be punished. But for framing a charge for an offence under the Penal Code, the traditional rule of existence of mens rea is to be followed”_ ## 13. In **Maksud Saiyed v. State of Gujarat : (2008) 5** ## **SCC 668** , the Supreme Court has held as follows: Crl.M.C.No.6144/2018 9 _“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”._ ## 14. In **S.K.Alagh v. State of U.P : AIR 2008 SC 1731** , the Apex Court has held as follows: _“As, admittedly, drafts were drawn in the name of the company, even if appellant was its Managing Director, he cannot be said to have committed an offence under Section 406 of the Indian Penal Code. If and when a statute contemplates creation of such a legal fiction, it provides specifically therefor. In 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. ..... Whereas a person in charge of the affairs of the company and in_ Crl.M.C.No.6144/2018 10 _control thereof has been made vicariously liable for the offence committed by the company along with the company but even in a case falling under Section 406 of the Indian Penal Code vicarious liability has been held to be not extendable to the Directors or officers of the company”._ ## 15. In **Keki Hormusji Gharda v. Mehervan Rustom** ## **Irani : AIR 2009 SC 2594** , it has been held as follows: _“Indian Penal Code, save and except some matters does not contemplate any vicarious liability on the part a person. Commission of an offence by raising a legal fiction or by creating a vicarious liability in terms of the provisions of a statute must be expressly stated. The Managing Director or the Directors of the Company, thus, cannot be said to have committed an offence only because they are holders of offices”._ ## 16. In **Sunil Bharti Mittal v. Central Bureau of** **Investigation : AIR 2015 SC 923** , the Supreme Court has held as follows: Crl.M.C.No.6144/2018 11 _“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 specifically provides so. 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. When the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect”._ Crl.M.C.No.6144/2018 12 ## 17. In **Shiv Kumar Jatia vs State: AIR 2019 SC 4463** , the Supreme Court has reieterated the principle as follows: _“An individual either as a Director or a Managing Director or Chairman of the company can be made an accused, along with the company, only if there is sufficient material to prove his active role coupled with the criminal intent. Further the criminal intent alleged must have direct nexus with the accused”._ 18. The principles on the point can be summarised as follows: Indian Penal Code does not contain any provision for attributing vicarious liability upon the directors of a company, when the offence is committed by the company. 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 an offence committed by the company itself. Vicarious liability of the director of a company would arise provided there is specific provision in the statute. Statute must contain provision fixing such vicarious liability. Even then, it is obligatory on the part of the complainant to make requisite allegations which Crl.M.C.No.6144/2018 13 would attract the provisions constituting vicarious liability upon the directors of a company. When the company is the offender, vicarious liability of the directors cannot be imputed automatically, in the absence of any statutory provision to that effect. 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. There is no vicarious liability in criminal law unless the statute takes that also within its fold. A director of a company can be made an accused, along with the company, only if there is sufficient material to prove his active role coupled with the criminal intent. 19. In the instant case, in the absence of any specific allegation made against petitioners 1 to 3 in Annexure-A1 complaint, attracting the offences punishable under Sections 406 and 420 I.P.C, Annexure-A2 FIR which is based on such complaint, as against them, is liable to be quashed. Since the fourth petitioner is not an accused in the case registered by the Crl.M.C.No.6144/2018 14 police as per Annexure-A2 FIR, no relief, as prayed for in the petition, can be granted to him. 20. In the aforesaid circumstances, I find it not necessary to consider whether the averments in Annexure-A1 complaint would constitute the ingredients of the offences punishable under Sections 406 and 420 I.P.C. 21. Consequently, the petition is allowed in part. The entire proceedings against petitioners 1 to 3, pursuant to Annexure-A2 FIR in Crime No.829/2016 of Thrikkakkara police station, are hereby quashed. (sd/-) **R.NARAYANA PISHARADI, JUDGE** **jsr** Crl.M.C.No.6144/2018 15 ## **APPENDIX** ## **PETITIONERS' EXHIBITS:** **ANNEXURE A1** **A TRUE PHOTOCOPY OF THE COMPLAINT GIVEN BY THE DEFACTO COMPLAINANT BEFORE THE DCP (ERNAKULAM 10.05.2016** **ANNEXURE A2 A CERTIFIED COPY OF THE FIR IN CR. NO. 829/2016 OF THRIKKAKARA POLICE STATION** **ANNEXURE A3 A TRUE PHOTO COPY OF THE MEMORANDUM OF ASSOCIATION OF THE COMPANY VIZ. M/S. KRYSTAL INFRA STRUCTURE LTD.** - **ANNEXURE A4 A TRUE PHOTO COPY OF THE ARTICLE OF ASSOCIATION OF THE COMPANY VIZ. M/S.KRYSTAL INFRA STRUCTURE CO. WHICH CLEARLY SHOWS THAT THERE ARE ONLY THREE DIRECTORS TO THE SAID COMPANY AND PETITIONERS ARE NOT THE DIRECTORS** - **ANNEXURE A5 A TRUE PHOTO COPY OF THE LATES INFORMATION DOWNLOADED FROM THE OFFICIAL WEBSITE OF THE REGISTRAR OF COMPANIES, BANGALORE, SHOWING THAT AS PETITIONERS ARE NOT THE DIRECTORS OF M/S.KRISTAL INFRA STRUCTURE LTD AND THERE ARE ONLY 3 DIRECTORS FOR THE SAID COMPANY** **ANNEXURE A6 A TRUE PHOTO COPY OF THE CERTIFICATE DATED 17.06.2016 WHICH HAS BEEN ISSUED BY SMT. VARSHA V SHENOY, WHO IS A PRACTICING COMPANY SECRETARY VIDE CP. NO. 10499** **ANNEXURE A7 A TRUE PHOTO COPY OF THE ORDER DATED 09.06.2016 IN BA.NO.4406/2016** Crl.M.C.No.6144/2018 16 ## **ANNEXURE A8** **A TRUE PHOTOCOPY OF THE REMAND REPORT DATED 04.06.2016 SUBMITTED BY THE 4TH RESPONDENT BEFORE THE LEARNED JFCM** **RESPONDENTS' EXHIBITS : NIL** **PS TO JUDGE**