HONBLE SRI JUSTICE A. SHANKAR NARAYANA
CRIMINAL PETITION Nos.3276 OF 2017 AND BATCH
09-10-2017
Avva Sita Ram Rao alias Seetha Ram & others .. Petitioners
The State of Andhra Pradesh & another..Respondents
Counsel for the Petitioner in : Sri Kapil Sibal, Senior Counsel,for Sri M. Prathap Reddy
Crl. Pet. Nos.3276, 3277 & 3278 of 2017
Counsel for the Petitioner in: Sri V. Pattabhi, learned Counsel,
Crl. Pet. Nos.3074 & 3075 of 2017for Ms. Thota Suneetha
Counsel for the Petitioner in : Sri Kanakamedala Ravindra Kumar,
Crl. Pet. Nos.3076 & 3077 of 2017 learned counsel, for Ms. Elipe Shantha
Sree
Counsel for the Petitioner in : Sri L. Ravichandran, Senior Counsel, for Sri K. Janakirami Reddy
Crl. Pet. Nos.3078& 3079 of 2017
Counsel for the Petitioner in: Sri V. Pattabhi, learned counsel,for Sri M.P. Kashyap
Crl. Pet. Nos.3080 & 3099 of 2017
Counsel for the respondents:Public Prosecutor for the State of A.P.
<GIST:
>HEAD NOTE:
?CASES REFERRED:
1. 2011 (3) SCC 351.
2. 2012 (1) SCC 520
3. 2003 (5) SCC 257
4. 2006 SC 1683
5. 2008 (5) SCC 662
6. 2008 (5) SCC 668
7. 2007 (9) SCC 481
8. 1992 Supp. (1) SCC 335
9. 1993 (3) SCC 54
10. 1987 2 RCR (Cri) 427
11. 2012 6 AD (Delhi) 568
12. 2009 151 CompCas 583 (Gauhati)
13. (2015) 12 SCC 781
14. (2013) 4 SCC 505
15. (2015) 4 SCC 609
16. (2009) 1 SCC 516
17. 1994 (4) SCC 260
18. 2014 (8) SCC 273
19. (2017) (2) SCC 779
20. 2009 (4) SCC 439
21. 2016 (11) SCC 703
22. (2005) 2 APLJ 374 (AP)
23. (2007) 12 SCC 1
24. (2013) 10 SCC 677
25. (2014) 15 SCC 29
26. (2016) 4 SCC 469
27. (2017) 6 SCC 263
28. 1977 C.L.R. (Pb. & Har) 134
29. (2007) 3 SCC 693
30. (2014) 4 SCC 282
31. (2010) 3 SCC 330
32. 2000 (1) ALT (Crl.) 349 (SC) : 2000 SCC (Cri) 786
33. (2011) 1 SCC 74
34. 2017 (3) ALT (Crl.) 30 (DB) (AP)
35. (2002) 2 SCC 210
36. Criminal Appeal No(s) 1660-1662 of 2017
[Arising out of Special Leave Petition (Criminal Nos.2875-2877 of 2016]
37. Criminal Appeal No.1723 of 2017
[ arising out of SLP (Crl) No.9549 of 2016), dated 04-10-2017]
38. Criminal Appeal Nos.1660-1662 of 2017 dated 15.09.2017
DATE OF JUDGMENT PRONOUNCED: 09-10-2017
HONOURABLE SRI JUSTICE A. SHANKAR NARAYANA
CRIMINAL PETITION Nos.3276, 3277 AND 3278 OF 2017,
CRIMINAL PETITION Nos.3074 AND 3075 OF 2017,
CRIMINAL PETITION Nos.3076 AND 3077 OF 2017,
CRIMINAL PETITION Nos.3078 AND 3079 OF 2017,
AND
CRIMINAL PETITION Nos.3080 AND 3099 OF 2017
COMMON ORDER:
Requests are made in these applications by the petitioners,
who are arraigned as accused in Crime No.6 of 2015 of
Madanapalle
II Town Police Station, Chittoor District, Andhra Pradesh; Crime
No.378 of 2014 of Nellore III Town Police Station, SPSR Nellore,
Andhra Pradesh; and Crime No.3 of 2015 of Peddapadu Police
Station, West Godavari District, Andhra Pradesh, to invoke the
inherent power under Section 482 of the Code of Criminal
Procedure, 1973 (for short Code), and to quash the First
Information Reports (FIR) in the said crimes.
2. The offences alleged against the petitioners are
punishable under Sections 406, 420 and 120-B of Indian Penal
Code 1860, 5 of Andhra Pradesh Protection of Depositors of
Financial Establishment Act, 1999 (APPDFE Act), 4 of Prize Chits
and Money Circulation Scheme (Banning) Act, 1978 (PC & MCSB
Act) and under the provisions of Reserve Bank of India Act, 1934
(RBI Act).
3. For convenience sake, the names of the petitioners in
these petitions, crime numbers, their status in the array of accused
in these crimes, names of the company with which they are
associated and the offences alleged against them are projected in a
tabular column, as hereunder:
Sl.
No.
Name of the Accused
Crimin
al
Petitio
n No.
Crime No. &
Police Station
Accused
No.
Name of the Company
1.
Avva Sita Ram Rao alias
Seetha Ram
3276
6 of 2015
Madanapalle
II Town
Police
Station,
Chittoor
District, A.P.
A-8
Agri Gold Farm Estates
India Private Limited
2.
Avva Sita Ram Rao alias
Avva Seetha Ram
3277
378 of 2014,
III Town
Police
Station,
SPSR Nellore,
A.P.
A-6
Agri Gold Estate Privaet
Limited
3.
Avva Sita Ram Rao alias
Avva Seetha Ram
3278
3 of 2015
A-7
Agri Gold Management
4.
Avva Uday Bhaskar Rao
3074
378 of 2014
Nellore III
Town Police
Station,
SPSR Nellore,
A.P.
A-9
Agri Gold Farm Estates
India Private Limited
Management
5.
Ava Udya Bhaskar Rao
3075
3 of 0215
Peddapadu
Police
Station, West
Godavari
District, A.P.
A-10
Agri Gold Farm Estates
India Private Limited
Management
6.
Ava Venkata
Subramanyeswara
Sarma 3076
3076
378 of 2014,
Nellore III
Town Police
Station,
SPSR Nellore,
A.P.
A-11
Agri Gold Farm Estates
India Private Limited
Management
7.
Avva Venkata
Subramanyeswara
Sarma
3077
3 of 2015,
Peddapadu
Police
Station, West
Godavari
District, A.P.
A-12
Agri Gold Farm Estates
India Private Limited
Management
8.
Avva Venkata Siva Ram
/ Siva Rama Krishna
3078
3 of 2015,
Peddapadu
Police
Station, West
Godavari
District, A.P.
A-11
Agri Gold Farm Estates
India Private Limited
Management
9.
Avva Venkata Siva Ram
/ Siva Rama Krishna
3079
378 of 2014
Nellore III
Town Police
Station,
SPSR Nellore,
A.P.
A-10
Agri Gold Farm Estates
India Private Limited
Management
7.
K.V.S. Sai Ram
3080
3 of 2015,
Peddapadu
Police
Station, West
Godavari
District, A.P.
A-9
Agri Gold Farm Estates
India Private Limited
Management
8.
KVS Sai Ram alias
Avva Sai Ram
3099
378 of 2014
Nellore III
Town Police
Station,
SPSR Nellore,
A.P.
A-8
Agri Gold Farm Estates
India Private Limited
Management.
CONTENTIONS/PLEAS RAISED IN THE PETITIONS:
Criminal Petition Nos.3276, 3277 and 3278 of 2017:
4. It would be convenient if these petitions are taken up
commonly since almost identical pleas have been set out in
requesting quashment of the FIRs.
5(i). One Avva Sita Ram Rao alias Seetha Ram is the
petitioner in these petitions. He is arraigned as accused Nos.8, 6
and 7 in Crime Nos.6 of 2015, 378 of 2014 and 3 of 2015
respectively. It is not in dispute that he worked as director from
the year 2004 to 03.01.2011, on which date, he retired from the
three companies viz., M/s. Agri gold Farm Estates India Private
Limited, Agri Gold Constructions Private Limited and Dreamland
Ventures Private Limited. On the basis of the complaints lodged
by respondent No.2 - de facto complainant viz., R.V. Subbareddy,
V. Venkat Ram Prasad and Gantasala Venkanna Babu,
respectively, in each of these crimes, the concerned Station House
Officers have registered the aforesaid crimes for the offences
referred to in the above.
(ii). Substantially, the allegations levelled in Crime No.6 of
2015 have been that the de facto complainant started investing an
amount of Rs.60/- per day with M/s. Agri Gold Farm Estates India
Private Limited in Madanapalle from 14.07.2014 which
cumulatively amounted to approximately Rs.20,000/-. He
complained that the investment returns were not paid to him by
the company after the due date was passed and the company was
closed. He learnt from the news channels that even other
customers/depositors have been duped and the officials of the
company refused to make payments.
(iii) He alleges that the cheques issued by the company,
when presented, were bounced and the companys sister concern,
M/s. Chandana Priya Ventures was even promoted by Mr. Sai
Kumar, cine actor, who used to propagate to promote the scheme.
He even alleged that the company was involved in milk business
and earned crores of money in benami names. The de facto
complainant also alleges that when he approached the 11 accused
persons requesting them to pay the amount, they refused, upon
which, he filed the complaint with the Station House Officer,
Madanapalle II Town Police Station, on 06.01.2015, which was
registered as Crime No.6 of 2015 and later investigation was taken
up by the Crime Investigation Department, Hyderabad (CID).
(iv) The de facto complainant in Criminal Petition No.3277
of 2017 states that he deposited an amount of Rs.25,000/- in Agri
Gold Scheme in the name of his daughter for a period of six and
half (6) years who promised him that he will get double the
amount or a plot upon maturity of the scheme. He believed and
deposited the said amount on 22.11.2007 and receipt was passed
with maturity date as 22.5.2014.
(v) Lured by another scheme started by the company that
within six (6) years, the deposit would be doubled, he invested an
amount of Rs.4,05,000/- in the year 2013. When he approached
the Agri Gold Office situated at Nellore on maturity of the first
deposit, the representatives of the company initially asked him to
come again and for sometime thereafter, he wandered around the
company, but the company did not return his deposit amount.
For the second deposit, he was given bonds by the company, but,
according to the de facto complainant, when he approached the
branch, the persons in the branch, illegally collected the deposit
bond receipts from him,
a month before the maturity date and gave acknowledgement
promising to repay the deposit amount on maturity, but failed to
keep up the promise. He named one G. Prabhakar Rao and
Suresh of Kovuru village, at whose instance, he joined the said
scheme and paid the amount at Brundavanam Office of Agri Gold
and that constrained him to file the complaint with the Nellore III
Town Police Station, SPSR Nellore District, Andhra Pradesh.
(vi) In Criminal Petition No.3278 of 2017, the de facto
complainant viz., Gantasala Venkanna Babu, belonging to
Vaddigudem village, Peddapadu Mandal, West Godavari District,
also met with the same fate having deposited Rs.10,000/- on
30.05.2004 through one Ghantasala Venkata Ranga Raju with
A/c. No.489721 and after ten years period, when the company was
supposed to give him Rs.40,000/- on maturity date 30.05.2014,
they did not pay the amount. The cheque for Rs.40,000/-, issued
in favour of his grandmother, when presented, was dishonoured
and the company issued yet another cheque dated 06.12.2014
drawn on Bank of India, Gajuwaka, Vizag Branch, but, it too met
with the same fate.
He was, therefore, constrained to lodge a complaint with the
Station House Officer, Peddapadu Police Station, West Godavari
District. The investigation was subsequently taken up by the CID.
(vii) These have been the allegations, based on which,
complaints were registered by the concerned Station House
Officers, and, of course, investigation was taken up by the CID.
6(i) Turning to the pleas put-forth in these three petitions,
as they are identical, reference to the details mentioned in Criminal
Petition No.3267 of 2017 would suffice.
(ii) The petitioner states that he is being roped in the present
crimes in his capacity as being the erstwhile director of the
companies, even though, he had resigned as the director of the
company on 03.01.2011 i.e., more than three years before the
investigation was commenced. He would state that based on his
designation, he had no interaction with the companies and was in
any way involved in the management or working of the companies
and the de facto complainant has deliberately suppressed the same
with a malicious intention who arraigned him as an accused in
order to arm-twist him to come into his illegal demands. The
investigating agency, without due application of mind and without
conducting preliminary enquiry, holding him vicariously liable for
the alleged offences on the basis of his former designation in the
company and by ignoring the settled principles of law that there is
no concept of vicarious liability in the jurisprudence.
(iii) Touching the incorporation of the company, he would
state that he was the erstwhile director of Agri Gold Farm Estates
India Private Limited, Agri Gold Constructions Private Limited
and Dreamland Ventures Private Limited. He had resigned from
the directorship of the said companies with effect from 03.01.2011
and Form - 32 was also submitted before the Registrar of
Companies (ROC) and, therefore, he has no relation with the
aforesaid companies subsequent to 2011. He would state that he
remained as director of the company from the year 2004 till
03.01.2011.
(iv) He states that a bare perusal of the FIR shows that it is
riddled with errors and registered in a rush rather than any sort of
analysis or investigation into the complaint. To substantiate this
ground, he would state that in the first line of the FIR, it is stated
that FIR number is 06/15 whereas the complaint itself was made
in 2015 and in column information received at the PS and in the
General Diary reference column, the date is given as 06.10.2015,
whereas the complaint clearly states that it was given on
06.01.2015 and, therefore, claims that some clarification is also
required from the appropriate authorities as to the correct details
of FIR No.6 of 2015.
(a) The first ground agitated by the petitioner is that the
alleged offence took place subsequent to 14.07.2014, when the de
facto complainant commenced investing Rs.60/- per day, that is
more than three years after he resigned on 03.01.2011. The
allegation levelled by the de facto complainant that he moved
towards him (present petitioner) for recovery of his dues, is false
as he (petitioner) never interacted with the de facto complainant,
and, therefore, no role can be attributed to him and he has been
made needlessly liable for the alleged offences on the basis of his
former designation in the company.
(b) Second, the police authorities, without following the due
procedure and on the basis of the false and baseless allegations
made by the de facto complainant, registered the FIR mechanically,
against him for the alleged offences which he has not committed
since he ceased to be the director in the company with effect from
03.01.2011, whereas the de facto complainant had began investing
the amount from 14.07.2014.
(c) Third, the aforesaid facts would leave no manner of
doubt that on the date of offence, if any, committed by the
company, he was not a director and he had nothing to do with the
affairs of the company and if the FIR is allowed to be proceeded
against him, it would result in gross injustice to him and
tantamount to abuse of process of Court. The petitioner refers to
the law declared by the Honble Supreme Court in Harshendra
Kumar D. v. Rebatilata Koley .
(d) Fourth, Form - 32 annexed to the petition as Annexure -
B will ascertain that it is an established fact that the petitioner had
resigned from the company as director on 03.01.2011, which is
well before the relevant date in the year 2014-15, when the cheques
may have been issued to the de facto complainant. The same has
been accepted by the Honble Supreme Court as a valid ground for
quashing the criminal proceedings in the cases of Mrs. Anita
Malhothra v. Apparel Export Promotion Council .
(e) Fifth, the allegations in the complaint are bald and
frivolous as the de facto complainant miserably failed to even
prima facie prove the essential ingredients of the offences
punishable under Sections 406 and 420 read with 34 of the Indian
Penal Code, 1860 (IPC), more particularly, the entrustment and
inducement respectively, therein qua the petitioner. Even the de
facto complainant failed to prima facie ascribe any role to him in
the entire alleged conspiracy and has failed to even remotely
ascribing any role to him.
(f) Sixth, it is settled law by a catena of decisions that for
establishing the offence of cheating, the de facto complainant is
required to show that the accused had fraudulent or dishonest
intention at the time of making promise of representation. But, in
the present case, firstly, there have never been any interaction
between the de facto complainant and himself (petitioner) and,
therefore, the question of any representation, which is one of the
main ingredients for constitution of an offence of cheating as
contended in Section 420 IPC, did not and could not arise. He
places reliance on the ruling in Hira Lal Hari Lal Bhagwati v.
CBI .
(g) Seventh, the present complaint fails to disclose as to
whether he was entrusted with or otherwise had dominion over the
property of the de facto complainant or he has committed any
criminal breach of trust and in order to bring the evidence of
breach of entrustment, proof of entrustment is essential and a
perusal of the complaint reveals that there is not even an iota of
proof of entrustment alleged against him and, therefore, the offence
punishable under Sections 406 IPC alleged against him is not made
out and the investigation ought to be quashed qua the petitioner.
(h) Eighth, while submitting that fraudulent or dishonest
intention on the part of the accused must be at the inception and
not at a subsequent stage and the present complaint is, therefore,
liable to be quashed for the offences punishable under Section 420
IPC, the petitioner refers to the ruling in Suryalakshmi Cotton
Mills Limited v. Rajvir Industries Limited and basing on the fact
that he resigned more than three years before the de facto
complainant had begun investing the amount of Rs.60/- per day
with effect from 14.07.2014, he would contend that he has been
made vicariously liable for the alleged offences and no specific role
has been assigned to him. He refers to the law declared by the
Honble Apex Court that there is no such concept of vicarious
liability under criminal law until and unless the same is specifically
provided for under a Legislation/Act, referring to the rulings in
S.K. Alagh v. State of Uttar Pradesh , Maksud Saiyed v. State
of Gujarat and N.K. Wai v. Shekar Singh .
(i) Tenth, that the police authorities ought to have
considered that the uncontroverted allegations made in the
complaint by the de facto complainant did not disclose
commission of any offence qua the petitioner and, as such, this
Court has jurisdiction under Section 482 of the Code to verify and
quash the FIR and investigation qua the petitioner. He placed
reliance on the ruling in State of Haryana v. Bhajan Lal . He
states that the complaint does not even mention or make out any
case against him and in the absence of any evidence, leave aside
the material evidence, qua the petitioner herein and, therefore,
requests the Court to exercise the inherent power under Section
482 of the Code in the interest of justice for quashing the
investigation against him in order to avoid and prevent him from
undergoing mental agony of a criminal trial in the absence of any
material against him.
7. In Criminal Petition No.3277 of 2017, the de facto
complainant besides raising the grounds agitated in Criminal
Petition No.3276 of 2017, adverted to in the above also agitates
the offence punishable under Section 5 of the APPDFE Act. The
petitioner in the said context would state that the said offences
cannot be imposed upon him as he was not a part of the
management of the company and he has extracted the provisions
of Section 5 in ground D.
8. In Criminal Petition No.3278 of 2017, besides adverting
to the grounds agitated in the aforesaid two petitions, the
petitioner would also refer to the ruling in Radhey Shyam
Khemka v. State of Bihar in the context of absence of specific
role ascribed to the petitioner.
Criminal Petition Nos.3074 and 3075 of 2016:
9(i). The petitioner viz., Avva Udaya Bhaskar Rao, in these
two petitions is arraigned as accused Nos.9 and 10 in Crime
Nos.378 of 2014 and 3 of 2015 respectively. The offences alleged
against him are punishable under Sections 120-B, 406 and 420
IPC and Section 5 of APPDFE Act besides the offence under the
provisions of the RBI Act. Since the substratum of the case is
substantially referred to in the first set of three petitions mentioned
hereinbefore, reference to his position, only to the extent of the
case set out by him would suffice. His main plea is that he is
unconnected with any of the three companies. He is a Technical
Diploma Engineer. He worked in a Cement Factory (India
Cements) at Chilamakuru, Kadapa District, for twenty four (24)
years from the year 1980 to 2004 as Technical In-charge and had
taken voluntary retirement in the month of April, 2004 due to ill
health of his wife, who got affected with severe heart disease in the
year 1988 and thus, he is neither a director nor consultant nor
employee in any of the companies.
(ii) He referred to the complaint allegations to the effect that
the de facto complainant, V. Venkata Rama Prasad, claimed that
he deposited an amount of Rs.25,000/- in the Agri Gold Scheme
for a period of six and half (6) years as the company promised to
pay double the amount or a plot after the maturity date and
believing the same, he has deposited such amount in the name of
Velapula Jhansi Lakshmi for which a receipt dated 22.11.2007,
was issued showing the maturity date as 22.05.2014, with the
value of double the amount. Again in the year 2013, when he
learnt that the very same Agri Gold Company making the double
amount within six (6) years only, he has deposited Rs.4,05,000/-
in various installments, and, when he visited the Agri Gold office
at Nellore on 22.05.2015, to collect the maturity amount, he was
asked to visit after a few days and, thereafter, though, he made
several visits to the office of the company, the company has not
returned the maturity amount. He made a specific allegation that
the company has collected crores of rupees from the public and
converted the same in benami names. Basing on the said
complaint, Crime No.378 of 2014 was registered for the offences
punishable under Sections 406 and 420 IPC and Section 5 of
APPDFE Act.
(iii) He would plead that a notice dated 08.04.2017, under
Section 41-A of the Code has been issued by the Investigating
Officer, Superintendent of Police, EOW, CID, A.P., Hyderabad,
directing him to appear before him at the office of the
Superintendent of Police EOW, CID, RTC Complex, Vijayawada,
on 11.04.2017 at 11.00 a.m., with a clear stipulation in the said
notice that failure to comply with the said notice amounts to
offence punishable under Section 174 of IPC. He filed the said
notice in the material papers. According to him, issue of such
notice is totally unwarranted and uncalled for and the same has to
be set aside in the interest of justice.
10. In Criminal Petition No.3075 of 2017, one Gantasala
Venkanna Babu is the de facto complainant. He deposited an
amount of Rs.10,000/- on 30.05.2004 to the Agri Gold Branch
No.1018, vide A/c. No.489721 through the agent viz., Gantasala
Venkata Ranga Raju, SMO - 223967. The scheme provided that
after ten years, four times over the said amount would be returned
by the date of its maturity as 30.05.2014, and, when he
approached the Branch people for return of the amount of
Rs.40,000/-, they did not pay the said amount and gave some
reasons; four months prior thereto, on 10.01.2014 a cheque
bearing No.728011014120 drawn on ING Vysya Bank,
Venkojipalem Branch, Visakhapatnam, for Rs.40,000/- was issued
by the branch, but, the said cheque stood dishonored and another
cheque issued by the branch on 06.12.2014, drawn on Bank of
India, Gajuwaka Branch, Vizag, was also dishonoured, and, when
he approached the company people, he was asked to go to
Vijayawada to take cheque or cash and, therefore, he lodged the
complaint alleging that the petitioner has committed the offences
under money circulation Act.
11 (i). In defence to the said allegations, the petitioner has
put-forth identical grounds stating that he is unconnected with any
of the companies. He never acted as Director or Consultant in any
capacity in the said three companies and never involved in any
kind of marketing/sales/promotion/ administration
activities/meetings of the accused companies and he never involved
in any kind of misappropriation of funds nor indulged in any kind
of misappropriation, embezzlements and conspiracies nor helped
anybody to do such
misappropriation/embezzlements/conspiracies.
(ii). He has pleaded the grounds raised by the petitioner in
Criminal Petition Nos.3276, 3277 and 3278 of 2017 referred to
hereinabove and also relied on the ruling in Hira Lal Hari Lal
Bagwathi3.
(iii) He would plead that a notice dated 06.04.2017, under
Section 41-A of the Code has been issued by the Investigating
Officer, Superintendent of Police, EOW, CID, A.P., Hyderabad,
directing him to appear before him at the office of the
Superintendent of Police EOW, CID, RTC Complex, Vijayawada,
on 07.04.2017 at 11.00 a.m. with a clear stipulation in the said
notice that failure to comply with the said notice amounts to
offence punishable under Section 174 of IPC. He filed the said
notice in the material papers. According to him, issue of such
notice is totally unwarranted and uncalled for and the same has to
be set aside in the interest of justice.
Criminal Petition Nos.3076 and 3077 of 2017:
12(i). The petitioner viz., Avva Venkata Subramanyeswara
Sarma is arraigned as accused Nos.11 and 12 in Crime Nos.378 of
2014 and 3 of 2015 respectively, in these two petitions. The
offences alleged against him in both the crimes are punishable
under Sections 120-B, 406 and 420 IPC, and Section 5 of
APPDFE Act. He refers to the allegations of the complaint lodged
by the de facto complainant, V. Venkat Ram Prasad, which have
been adverted to in Criminal Petition NNo.3075 of 2017.
Therefore, it is unnecessary to advert to them once again. Directly
turning to the pleas, he has put-forth that he worked in Indian
Army for about twelve (12) years and then for Central
Government in the Department of Stores for twelve (12) years and
took voluntary retirement in April, 2006. According to him, he is
neither a director nor consultant nor employee in any of the
accused companies. He states that he was never involved in any
kind of marketing/sales/ promotion/administration
activities/meetings of the accused companies, never involved in
any kind of misappropriation of funds, nor indulged in any kind of
embezzlements, and conspiracies nor helped anybody to do such
misappropriation/ embezzlements/ conspiracies. He has set up the
very same defence which the petitioner in Criminal Petition
Nos.3074 and 3075 of 2017 has raised and also relied on the
ruling in Hira Lal Hari Lal Bagwathi3. He has extracted the
order dated 29.09.2016, passed by this Court in Crime No.7 of
2015 while disposing of Criminal Petition No.14164 of 2016, thus:
Learned Senior Counsel appearing for the
petitioner contends that petitioner is not an employee
of Agri Gold Farm Estates India Private Limited and
further he is innocent and not committed any offence
and there are no specific allegations against the
petitioner. On the other hand, learned Additional
Public Prosecutor opposed the Criminal Petition
contending that, since the investigation is still going
on, the question of quashing investigation does not
arise. In view of the facts and circumstances of the
case, this Court is not inclined to interfere with
investigation. However, the Station House Officer,
C.I.D., Hyderabad is hereby directed not to arrest the
petitioner in connection with Crime No.7 of 2015 till
completion of investigation or filing of charge sheet or
final report. With the above direction, the Criminal
Petition is disposed of. Consequently, Miscellaneous
Petitions, if any, pending in this Criminal Petition shall
stand closed.
(ii) He would state that he is suffering from acute back pain
due to L-4 and L-5 disk slip, which had occurred in a road
accident, due to which he cannot sit or stand continuously for
longer period.
(iii) In Criminal petition No.3076 of 2017, he would state
that he was issued notice under Section 41-A of the Code dated
08.04.2017 by the very same Investigating Officer asking him to
appear on 11.04.2017 at 11.00 a.m., and he has annexed the said
notice as one of the material documents thereto.
13. In Criminal Petition No.3077 of 2017, he would state
that he was issued notice under Section 41-A of the Code dated
08.04.2017, by the very same Investigating Officer asking him to
appear on 11.04.2017 at 11.00 a.m., and he has annexed the said
notice as one of the material documents hereto.
Criminal Petition Nos.3078 and 3079 of 2017:
14 (i) The petitioner viz., Avva Venkata Siva Ram alias
Siva Ramakrsihna, in these two applications is arraigned as
accused Nos.11 and 10 in Crime Nos.3 of 2015 and 378 of 2014,
respectively, on the complaints of one Gantasala Venkanna Babu
and Venkata Ram Prasad, respectively. The allegations made by
both of them in the complaints have been adverted to in the above
petitions. Therefore, it is unnecessary to once again advert to
them.
(ii) The defence set out by him in Criminal Petition No.3078
of 2015 would suffice as the very same defence occurs in the latter
petition.
(iii) He claims that he never had any personal involvement
with Agri Gold Farms Estates Limited, Management either directly
or indirectly nor did he take any remuneration or fee nor involved
in any kind of marketing/sales/promotion/administrative
activities/meetings of the accused companies nor involved in any
kind of misappropriation of funds nor embezzlements and
conspiracies, or help from anybody to such misappropriation and
embezzlement conspiracies. He claims himself to be a prudent
citizen and had never faced any FIR, complaint, criminal or civil
case during his entire life time. According to him, he has been
doing his own business unconnected with the Agri Gold
Companies.
(iv) He referred to the complaint lodged by the de facto
complainants in both these criminal petitions which were hitherto
referred to.
(v) In Criminal Petition No.3078 of 2017, the petitioner
claims that a notice under Section 41-A of the Code dated
07.04.2017, has been issued in both these crimes directing him to
appear before the Investigation Officer, Superintendent of Police,
EOW, CID, A.P., Hyderabad, on 11.04.2017 at 11.00 a.m., with a
clear stipulation in the said notice that failure on his part to
comply with the said notice amounts to an offence punishable
under Section 174 of IPC. He has filed the said notice as one of
the material documents annexed thereto.
(v) In Criminal Petition No.3079 of 2017, he claims that a
notice under Section 41-A of the Code dated 07.04.2014 has been
issued in both these crimes directing him to appear before the
Investigation Officer, Superintendent of Police, EOW, CID, A.P.,
Hyderabad, on 11.04.2017 at 11.00 a.m. with a clear stipulation in
the said notice that failure on his part to comply with the said
notice amounts to an offence punishable under Section 174 of IPC.
He has filed the said notice as one of the material documents
annexed thereto.
Criminal Petition Nos.3080 and 3099 of 2017:
15(i). The petitioner viz., K.V.S. Sai Ram alias Avva Sai
Ram is arraigned as accused No.9 and accused No.8 in Crime
Nos.3 of 2015 and 378 of 2014 respectively. He alleged to have
committed the offences punishable under Sections 120-B and 420
IPC. The de facto complainants are Gantasala Venkanna Babu
and V. Venkat Ram Prasad. The allegations in the complaints in
these two crimes referred to by the petitioner have been already
adverted to in the above petitions.
(ii) Turning to the defence, the petitioner has taken in these
two petitions is, that he is innocent and he is unnecessarily roped
in the FIRs, that he has nothing to do with the family of Avva or
with the Agri Gold companies or its affairs, and, in fact,
according to him, thirty (30) years back, he had gone on adoption
to a family of Katamaraju and he has been living on his own by
doing small business. He denied his involvement in Agri Gold
Farm Estates India Private Limited Management. According to
him, he never had any personal involvement in Agri Gold Farm
Estates India Private Limiteds Management, either directly or
indirectly nor did he take any remuneration or fee nor involved in
any kind of marketing/sales/promotions/administrative
activities/meetings of the accused companies nor in any kind of
misappropriation of funds nor indulged in any kind of
embezzlements and conspiracies nor helped anybody to do such
misappropriation/embezzlements/conspiracies.
(iii) Raising the pleas put-forth by the other petitioners in
the afore referred applications, he has extracted the order dated
29.09.2016 passed by this court in Crime No.7 of 2015 in
Criminal Petition No.14164 of 2016 which was referred to in the
above.
(iv) In Criminal Petition No.3080 of 2017, the petitioner
claims that a notice under Section 41-A of the Code dated
06.04.2017, has been issued in both these crimes directing him to
appear before the Investigation Officer, Superintendent of Police,
EOW, CID, RTC Complex, Vijayawada, on 07.04.2017 at 11.00
a.m. with a clear stipulation in the said notice that failure on his
part to comply with the said notice amounts to an offence
punishable under Section 174 of IPC. He has filed the said notice
as one of the material documents annexed thereto.
16. In Criminal Petition No.3099 of 2017, he claims that a
notice under Section 41-A of the Code dated 08.04.2017 has been
issued in both these crimes directing him to appear before the
Investigation Officer, Superintendent of Police, EOW, CID, RTC
Complex, Vijayawada, on 11.04.2017 at 11.00 a.m. with a clear
stipulation in the said notice that failure on his part to comply
with the said notice amounts to an offence punishable under
Section 174 of IPC. He has filed the said notice as one of the
material documents annexed thereto.
17. Heard Sri Kapil Sibal, learned senior counsel assisted
by Sri M. Prathap Reddy, learned counsel for the petitioner in
Criminal Petition Nos.3276, 3277 and 3278 of 2017; Sri V.
Pattabhi, learned counsel, assisted by Ms. Thota Suneetha, learned
counsel for the petitioner in Criminal Petition Nos.3074 and 3075
of 2017; Sri Kanakamedala Ravindra Kumar, learned senior
counsel, assisted by Ms. Elipe Shantha Sree, learned counsel for
the petitioner in Criminal Petition Nos.3076 and 3077 of 2017; Sri
L. Ravichandran, learned senior counsel, assisted by Sri K.
Janakirami Reddy, learned counsel for the petitioner in Criminal
Petition Nos.3078 and 3079 of 2017; and Sri V. Pattabhi, learned
counsel, assisted by Sri M.P. Kashyap, learned counsel for the
petitioner in Criminal Petition Nos.3080 and 3099 of 2017; and
the learned Public Prosecutor for the State of Andhra Pradesh on
behalf of respondents.
SUBMISSIONS:
CRIMINAL PETITION Nos.3276, 3277 AND 3278 OF 2017:
18. The submissions, made by the learned Senior Counsel
for the Petitioner, have been:
i) The petitioner was the Director of Agri Gold Farm
Estates Indian Private Limited from 2004 to
03.01.2011, thus, he was roped in the present FIRs in
his capacity being the Erstwhile Director of Agri Gold
Farm Estates India Private Limited even though, he
had resigned on 03.01.2011.
ii) The learned Senior Counsel would submit that the
petitioner was not only the Director of the said
Company, but also the Director of Agri Gold
Constructions Private Limited, Dreamland Ventures
Private Limited during the said period and Form
No.32 shows that the petitioner made an application
to the Board of Directors of Agri Gold Farm Estates
India Private Limited on 03.01.2011, tendering his
resignation on the ground that he was unable to
continue as Board of Directors of the Company and
requests to accept and intimate the Registrar of
Companies by filing Form No.32 with MCA/ROC,
and even Form No.32, confirmation of resignation
w.e.f. 03.01.2011 was accepted.
iii) The learned senior counsel would submit that the
petitioner herein, in fact, commenced depositing the
amount of Rs.2,000/- per month in the month of July,
2014, by which time, the petitioner was not a Director
of any of the Companies and three years prior thereto
itself he resigned his post of Director of the Company
which was accepted by the Registrar of Companies.
iv) The learned senior counsel would submit that in Crime
No.3 of 2015, the de facto complainant lodged the
complaint alleging the offence of non-payment of
investment returns which was due on 30.05.2014, due
to a cheque issued by one of the Companies on
10.10.2014, which was dishonoured, thus, the offence
complained was more than three years after he ceased
to be the Director of the said Company.
v) In Crime No.378 of 2014, the learned senior counsel
would submit that the complaint lodged by the de
facto complainant was based on an alleged offence of
non-payment of investment returns which was due on
22.05.2014 and, thus, the petitioner had no connection
whatsoever with the Company as by which date, the
petitioner had ceased to be the Director of the same.
vi) The learned senior counsel would submit that the
offences punishable under Sections 406 IPC and 420
IPC cannot co-exist in view of the rulings in Jalpa
Parshad Aggarwal v. State of Haryana ; Wolfgang
Reim v. State ; R.S. Sodhi Manoranjan Pani v.
Partha Pratim Saikia .
vii) The learned senior counsel would submit that since the
complaint lodged would show that none of the
complainants did ascribe any role to the petitioner, no
dishonest intention as such can be attributed.
viii) Concerning the complaints in F.I.R. Nos.3 of 2015
and 6 of 2015, notices under Section 41A of the Code
were not issued, and only in FIR No.378 of 2014,
notices under Section 41A were issued by the
Investigating Agency.
ix) The learned senior counsel also would submit that the
concept of vicarious liability is not available in IPC
offences as the Penal Code does not contemplate any
vicarious liability on the part of party not charged
directly for the commission of offences, since the
petitioner ceased to be the Director of the Company
by virtue of his resignation on 03.01.2011, which was
accepted even according to Form No.32, the FIRs are
liable to be quashed. Touching the law declared by the
Honble Supreme Court on this aspect of the case, the
learned senior counsel places reliance on the rulings in
S.K. Alagh5; Sharad Kumar Sanghi v. Sangita
Rane Maksud Saiyed6; GHCL Employees Stock
Option Trust v. India Infoline Limited and Sunil
Bharti Mittal v. CBI .
x) The learned senior counsel would further submit that
to constitute an offence punishable under Section 420
IPC, a reading of Section 415 IPC with Section 420
IPC would clearly lead to the conclusion that
fraudulent or dishonest inducement on the part of the
petitioner must be at the inception and not at a
subsequent stage. Since nothing is attributed in that
direction in any of the complaints by the respondents
respectively, the FIR in these crimes are liable to be
quashed; To fortify his submission, he refers to the
rulings in Hira Lal Hari Lal Bhagwati3,
Suryalakshmi Cotton Mills Limited4; and R. Kalyani
v. Janak C. Mehta .
(xi) The learned senior counsel lastly would submit
that even if the First Information Report in these three
crimes if taken at face value, they do not prima facie
constitute any offence of making out a case against the
petitioner and, therefore, these FIRs are liable to be
quashed under Section 482 of the Code and relies on
the ruling in Bhajan Lal8.
Criminal Petition Nos.3074 and 3075 of 2017:
19(i) The petitioner viz., Avva Udaya Bhaskar Rao, in these
two Criminal Petitions, is shown as accused No.9 in Crime No.378
of 2014 of III Town Police Station, Chittoor District, Andhra
Pradesh, and accused No.10 in Crime No.3 of 2015 of Peddapadu
Police Station, West Godavari District, respectively.
(ii) Sri V. Pattabhi, learned Senior Counsel for the
petitioner, would submit that the petitioner worked as employee in
India Cements up to 2004 and quit the job. The Investigating
Officer projected him as director of the three core companies, but,
Form - 32 would not disclose that he was director of any of the
companies and that the three core companies, of which the
petitioner is shown as a director, are independent companies
without any subsidiaries.
(iii) The learned senior counsel would submit that the
complaints in these two crimes and even the Case Diary Part - I
dated 19.07.2003 in Crime No.378 of 2014, does not refer to the
name of the petitioner or to the companies and on what basis the
petitioner is shown as an accused is not forthcoming. The learned
Senior Counsel would submit that the petitioner is only the
brother of accused No.1 viz., Avva Venkat Ram Rao and,
therefore, the very issue of notice under Section 41-A of the Code
was unwarranted.
Criminal Petition Nos.3076 and 3077 of 2017:
20(i) The petitioner viz., Avva Venkata Subramanyeswara
Sarma, in both these petitions, is shown as accused Nos.11 in
Crime No.378 of 2014 of Nellore III Town Police Station, SPSR
Nellore, and accused No.12 in Crime No.3 of 2015 of Peddapadu
Police Station, West Godavari District, respectively.
(ii) The learned Senior counsel for the petitioner would
submit that the petitioner is not a director in any of the three
companies and he is only the brother of accused Nos.4, 5 6 and 7.
He is not concerned with the complaint allegations in these two
crimes. The petitioner, in fact, worked for twelve years from 1980
to 2004 in Indian Army and for another period of twelve years in
the Department of Stores altogether six (6) F.I.Rs. have been
registered and the name of the petitioner is not occurring in any of
them. Therefore, the very issue of notice under Section 41-A of
the Code is unwarranted. Hence, to quash the FIRs against the
petitioner.
(iii) The learned Senior counsel referred to the ruling in
Joginder Kumar v. State of U.P. (paragraph Nos.8, 9, 11 and
200) and Arnesh Kumar v. State of Bihar , in connection with
issue of notice under Section 41-A of the Code.
(iv) The learned Senior counsel in the context of exercise of
power under Section 482 of the Code by the Court places reliance
on the rulings in State of Telangana v. Habib Abdullah Jeelani
(paragraph No.23) and Mahesh Chaudhary v. State of
Rajasthan (paragraph No.18).
(v) Lastly, the learned Senior counsel would submit that
while adopting the arguments advanced by the learned senior
counsel in Criminal Petition Nos.3276, 3277, 3278, 3074 and
3075 of 2017 seek to quash the FIRs against the petitioner in these
two crimes.
Criminal Petition Nos.3078 & 3079 of 2017:
21(i) The petitioner herein viz., Avva Venkata Siva Ram /
Siva Rama Krishna, in both these petitions, is shown as accused
No.11 in Crime No.378 of 2014 of Nellore III Town Police Station,
SPSR Nellore, Andhra Pradesh, and accused No.10 in Crime No.3
of 2015 of Peddapadu Police Station, West Godavari District,
Andhra Pradesh.
(ii) Sri Ravi Chandran, learned senior counsel, while
adopting the arguments advanced by the learned senior counsel
appearing for the petitioners in Criminal Petition Nos.3276, 3277,
3278, 3074 and 3075 of 2017, would submit that the investigating
agency failed to establish any link between the petitioner and the
three core companies and the allegations are just based on
confessional statements said to have made by the other accused
and the alleged confessional statement cannot constitute basis for
involving the petitioner herein in the present crimes and places
reliance on a ruling rendered by the Honble Supreme Court in
Rini Johar v. State of Madhya Pradesh (paragraph No.16) and,
therefore, sought to quash the FIRs.
Criminal Petition Nos.3080 & 3099 of 2017:
22(i) The petitioner herein viz., K.V.S. Sai Ram alias Avva
Sai Ram is accused No.9 in Crime No.3 of 2015 of Peddapadu
Police Station West Godavari District, Andhra Pradesh, and
accused No.8 in Crime No.378 of 2014 of Nellore III Town Police
Station, SPSR Nellore, Andhra Pradesh.
(ii) The learned counsel while adopting the arguments
advanced by the learned senior counsel in the first three criminal
petitions, would attack the notice issued under Section 41-A of the
Code contending that when the petitioner is not at all a director,
the investigating officer cannot mention the name of the petitioner
as director of the company in the notice under Section 41-A of the
Code. It is his submission that there has been inordinate delay in
reporting the matter and registering the FIR; second submission is
that no specific role or allegation is attributed to the petitioner in
the complaint allegations; third submission is that the Honble
Division Bench of this Court has already seized the matter where
the Agri Gold Cases have been dealt with. Therefore, it is his
submission that the present crimes registered against the
petitioners are liable to be quashed.
SUBMISSIONS MADE BY THE LEARNED PUBLIC PROSECUTOR:
23. The learned Public Prosecutor for the State of Andhra
Pradesh, per contra, would submit that:
(i) The investigation done so far would unearth that
altogether 162 Companies have been floated by the accused
persons in all these crime.
(ii) He would categorize these 162 companies into three
categories; the first category, according to him, would constitute
Core Companies, they are, (i) M/s. Agri Gold Farm Estates India
Private Limited; (ii) Agri Gold Constructions Private Limited; and
(iii) Dreamland Ventures Private Limited. These three companies
were involved in introducing the Schemes, luring the Depositors
by appointing Agents in each of its branches in more than one
State and in each of the Districts percolating deeply to the Mandal
level and collection of amounts.
(iii) The second category consists of 13 companies.
These companies are floated from the moneys collected by the
Core Companies of first category, mostly investing the amounts
by syphoning the funds collected by the Core Companies.
(iv) Third category consists of 146 companies, which are
floated mostly in acquiring the properties in the names of the
Directors of the Companies who are no other than the kith and kin
of the Directors of the Core Companies and, thus, right from the
inception, there has been fraudulent motive of deception.
(v) The learned Public Prosecutor would submit that about
32 lakh depositors have invested the amounts and more than
Rs.6,000/- Crores have been syphoned to the companies under
second and third categories.
(vi) The learned Public Prosecutor would submit that the
petitioner herein though, resigned to his post of Directorship on
03.01.2011 in the Core Companies, but he continued to be the
whole-time Director or the Director, as the case may be, in the
second category of the Companies and the same is borne out by
the very documents filed by the petitioner himself which were
issued from Ministry of Corporate Affairs relating to the
petitioner showing his name as Sitaramarao Avva, and his status
as on 01.02.11. In fact, the date is shown as 01/02/115, and the
time is shown as 03:39:51 P.M.. The said document which
relates to the particulars of the Companies/LLPs in which a person
is/was a director/designated partner. It gives the details of serial
number, CIN/LLPIN, name of the Company/LLP, Current
designation of the Director/Designated Partner, Date of
appointment at current designation, original date of appointment,
date of cessation, Company/LLP Status and Defaulting status.
The learned Public Prosecutor would point out the companies at
serial Nos.4, 13, 16, 27, 28 and 31 are certain examples amongst
several, showing that the petitioner was holding the post of either
whole-time Director or Director in the Companies mentioned
against the serial numbers. Under vertical column intended to
show the date of cessation, the same is left blank indicating that he
was continuing as a member even in the year 2015-16. Thus, the
petitioner was still continuing even after 03.01.2011 as whole-time
director in Agri Gold Project Limited, as Director in Siddavaram
Agro Projects Private Limited, as whole-time Director in North
Karnataka PowerGen Private Limited, as Director in Shakti
Timber Estates Private Limited and Susila Infra Developers
Private Limited. There are further more companies, where his date
of cessation is not mentioned indicating that he has been
continuing as either as director or additional director of the
companies mentioned against serial Nos.35 to 44. Thus, as on
01.02.2015, the petitioner since was continuing as a whole-time
Director or Director or Additional Director in either category-II or
in category-III Companies, and the moneys collected from the Core
Companies have been utilized by syphoning the amounts
deposited by the depositors for floating these companies,
according to the learned Public Prosecutor, it cannot be said, at
this stage, that there was no dishonest intention and nothing is
attributed to him in the complaints.
(vii) It is according to the learned Public Prosecutor that the
complaints in these three crimes since laid by the depositors, they
do not contain the relevant details, and the details which are
necessary for them respectively, alone have been mentioned but, in
view of the serious allegations in each of these cases, it cannot be
concluded that the petitioner is innocent and roped in these crimes
without application of mind by the Investigating Officers, nor can
it be construed that there was no dishonest intention right from the
inception of these companies.
(viii) Concerning Crime No.6 of 2015, the learned Public
Prosecutor would submit that by the date of tendering his
arguments, 38 witnesses (depositors) were examined and their
statements were recorded by the Investigating Officer who have
deposited the amounts between 2004 and 2014 years. He has
given the numbers of some of the witnesses as LW.5, 9, 11, 17, 18
and 24, who deposited moneys from the year 2004.
(ix) In Crime No.378 of 2014, the learned Public Prosecutor
would submit that 180 witnesses were examined and, in fact, the
entire episode came into light by the arrest of accused Nos.18 and
19 having taken the custodial interrogation and when interrogated,
they spoke about the role of the petitioners in maintaining the
accounts. Thus, the statements they made, stand in the status of a
confession made by a co-accused and since relevant, cannot be
brushed aside, when investigation is in process.
(x) Concerning FIR No.3 of 2015, the learned Public
Prosecutor would submit that as many as 186 witnesses were
examined who are not only depositors, but also agents appointed
by the Core companies and the confessional statements of the
accused Nos.11 and 12 were recorded and they would show the
active role of the petitioners herein and the modus operandi on the
part of the petitioner, and, in consequence thereof, even the entire
record was retrieved and seized by the Investigating Officer.
(xi) The learned Public Prosecutor would submit that
altogether 10 Crimes were registered against the petitioners
involving huge money and the depositors deceived were huge in
number amounting to 30-40 lakhs.
(xii) Incidentally, the learned Public Prosecutor would
submit that a Public Interest Litigation (PIL) bearing No.193 of
2015 is pending before a Division Bench of this Court. The wife
of the petitioner - Pushpalatha, in fact, filed a petition not to arrest
them. According to the learned Public Prosecutor, the petitioners,
who filed those M.Ps. are the persons on whose names properties
have been purchased utilizing the amounts collected by the Core
Companies from the Depositors and an extent of 450 acres of land
was purchased in the name of Pushpalatha alone, wife of the
petitioner.
(xiii) The learned Public Prosecutor, while referring to the
rulings in Jalpa Parshad Aggarwal10; Wolfgang Reim11; R.S.
Sodhi Manoranjan Pani12 would submit that the fact-situation
would show that charge-sheets were filed in all these cases. But,
investigation in the present crimes is still pending, and though,
number of witnesses were examined in these crimes, still
examination of many a witness either depositors or the agents or
the employees of the branches or the officers where the branches
are located or maintained by the Core Companies and the
companies falling under other two categories, is absolutely
indispensable and, therefore, exercise of extraordinary power
under Section 482 of the Code as requested by the petitioners does
not arise.
(xiv). The learned Public Prosecutor refers to the rulings of
the Honble Supreme Court in the context of: (i) invocation of
doctrine of lifting the veil where protection of public interests is of
paramount importance and to prevent a device to avoid any
welfare legislation by a corporate entity in an attempt to evade
legal obligation; (ii) concerning the principle that power under
Section 482 of the Code should be exercised sparingly with judicial
restraint and circumspection; and (iii) that the intention of the
accused at the time of inducement can always be inferred by
subsequent conduct associated with other factors.
(xv) The rulings relied on by the learned Public Prosecutor
have been: (i) Pothani Chandrasekher v. State of Andhra
Pradesh ; (ii) Inder Mohan Goswami and another v. State of
Uttaranchal and Others ; (iii) Soma Suresh Kumar v.
Government of Andhra Pradesh and Others ; (iv) State of
Maharashtra v. Vikram Anantrai Doshi ; (v) State of
Rajasthan and Others v. Gotan Lime Stone Khanji Udyog Pvt.
Ltd. and Others ; and (vi) State of Karnataka v. Selvi J.
Jayalalitha and others .
ANALYSIS OF SUBMISSIONS:
24. Since the submissions made by the learned senior
counsel in Criminal Petition Nos.3276, 3277 and 3278 of 2017
have been adopted by the learned counsel for the petitioners in
other Criminal Petitions, it would suffice to take up the
submissions made in the first three Criminal Petitions in the light
of the arguments advanced by the learned Public Prosecutor with
reference to the rulings relied on by both sides and contextually to
refer to other submissions made by the learned senior counsel in
the remaining eight Criminal Petitions.
(i) The first submission is, that the petitioner - Avva Sita
Rama Rao alias Avva Seetha Ram was erstwhile Director holding
the office from the year 2004 to 3rd January, 2011. As already
mentioned hereinbefore, that his resignation was accepted and
Form No.32 was also approved, and since the complainant alleged
the non-payment of investment returns due on 30.05.2014 and
even the cheque issued therefor by one of the companies on
10.10.2014 was dishonoured, the offence complained was more
than three years after the petitioner ceased to be the director of the
said company, the petitioner cannot be roped in.
(ii) In Harshendra Kumar1 relied on by the learned senior
counsel, the appellant before the Honble Supreme Court resigned
from the post of Director on 02.03.2004 and the dishonoured
cheques were issued by the Company on 30.04.2004. The
acceptance of the appellants resignation was duly reflected in the
resolution, dated 02.03.2004 and the same was informed to the
Registrar of Companies on 04.03.2004, and opining that it was
not even the case of the complainants that the dishonoured
cheques were issued by the appellant, opining that the offence was
committed by the Company when the appellant was not the
Director, held that it would result in gross injustice to the
appellant and tantamount to an abuse of process of the Courts if
the criminal complaints are ready to proceed against the appellant
therein. The learned senior counsel relies on the expression of the
Honble Apex Court contained in paragraph Nos.26 and 27 thus:
26. Criminal prosecution is a serious matter; it affects the
liberty of a person. No greater damage can be done to the
reputation of a person than dragging him in a criminal case. In
our opinion, the High Court fell into grave error in not taking
into consideration the uncontroverted documents relating to
Appellant's resignation from the post of Director of the
Company. Had these documents been considered by the High
Court, it would have been apparent that the Appellant has
resigned much before the cheques were issued by the Company.
27. As noticed above, the Appellant resigned from the post of
Director on March 2, 2004. The dishonoured cheques were
issued by the Company on April 30, 2004, i.e., much after the
Appellant had resigned from the post of Director of the
Company. The acceptance of Appellant's resignation is duly
reflected in the resolution dated March 2, 2004. Then in the
prescribed form (Form No. 32), the Company informed to the
Registrar of Companies on March 4, 2004 about Appellant's
resignation. It is not even the case of the complainants that the
dishonoured cheques were issued by the Appellant. These facts
leave no manner of doubt that on the date the offence was
committed by the Company, the Appellant was not the Director;
he had nothing to do with the affairs of the Company. In this
view of the matter, if the criminal complaints are allowed to
proceed against the Appellant, it would result in gross injustice
to the Appellant and tantamount to an abuse of process of the
court.
The fact-situation therein would reflect that a company, by name
Rifa Health care (India) Pvt. Ltd, which was doing business for
sale of bio-ceramic products, having received demand drafts from
the purchasers for the orders, they had placed, not delivered the
products ordered by the complainants, and when they demanded
for return of their money, eighteen (18) cheques were issued by the
Company, and the cheques were dishnoured. Aggrieved over the
same, the complainants filed 18 complaint cases under Section 138
read with 141 of N.I. Act. In the said context, the Honble
Supreme Court held as in the above.
(iii) In Mrs. Anita Malhothra2, the Honble Supreme Court
while re-stating that in case of a Director, the complaint should
specifically spell out how and in what manner the Director was In-
charge of or was responsible to the accused Company for conduct
of its business, and mere bald statement that he or she was in
charge of and was responsible to the company for conduct of its
business is insufficient, held in paragraph Nos.22 and 23, on
which reliance is placed by the learned senior counsel, thus:
22. This Court has repeatedly held that in case of a Director,
complaint should specifically spell out how and in what manner
the Director was in charge of or was responsible to the accused
Company for conduct of its business and mere bald statement
that he or she was in charge of and was responsible to the
company for conduct of its business is not sufficient. (Vide
National Small Industries Corporation Limited v. Harmeet
Singh Paintal and Anr. (2010) 3 SCC 330). In the case on hand,
particularly, in para 4 of the complaint, except the mere bald
and cursory statement with regard to the Appellant, the
complainant has not specified her role in the day to day affairs
of the Company. We have verified the averments as regard to
the same and we agree with the contention of Mr. Akhil Sibal
that except reproduction of the statutory requirements the
complainant has not specified or elaborated the role of the
appellant in the day to day affairs of the Company. On this
ground also, the Appellant is entitled to succeed.
23. In the light of the above discussion and of the fact that the
appellant has established that she had resigned from the
Company as a Director in 1998, well before the relevant date,
namely, in the year 2004, when the cheques were issued, the
High Court, in the light of the acceptable materials such as
certified copy of annual return dated 30.09.1999 and Form 32
ought to have exercised its jurisdiction under Section 482 and
quashed the criminal proceedings. We are unable to accept the
reasoning of the High Court and we are satisfied that the
Appellant has made out a case for quashing the criminal
proceedings. Consequently, the criminal complaint No. 993/1
of 2005 on the file of ACMM, New Delhi, insofar as the
appellant herein (A3) is quashed and the appeal is allowed.
Again, the fact-situation reflects that it was a case where offence
punishable under Section 138 read with 141 of the N.I. Act was
alleged.
(iv) These two decisions have been relied on by the learned
senior counsel in the context of giving weight to the documents,
such as Form No.32 showing the resignation of a Director and its
consequences on the offences alleged against Ex-Director.
(v) On the second ground that the offences punishable under
Section 406 IPC and 420 IPC cannot co-exist, in Jalpa Parshad
Aggarwal10, a learned Single Judge of the Punjab and Haryana
High Court, referring to its earlier decision in Iqbal Singh
Randhawa v. Doctor Satpaul Goyal where it was ruled that an
offence under Section 406 IPC is, an, antithesis of offence under
Section 420 of IPC held in paragraph No.3 thus:
3. At the very outset it may be mentioned that this Court held
in Iqbal Singh Randhawa v. Doctor Satpaul Goyal, 1977 C.L.R.
(Pb. & Har.) 134, that an offence under Section 406, Indian
Penal Code, is, an antithesis of offence under section 420,
Indian Penal Code. In a case of criminal misappropriation the
property is voluntarily kept in the custody of an accused
whereas in a case of cheating, the accused, by adoptinig
deceitful means, induces the complainant to part with the
property. Thus, an accused cannot be tried for these two
offences simultaneously. Either he is committed an offence
under Section 406, Indian Penal Code or under Section 420,
Indian Penal Code.
(vi) In Wolfgang Reim11, explaining the reason why the
offence of cheating and criminal breach of trust cannot co-exist, a
learned Single Judge of Delhi High Court held in paragraph No.33
thus:
33. Further, a person cannot be charged with the offence of
cheating and criminal breach of trust simultaneously for the
same transaction because for the offence of cheating, it is a
prerequisite that dishonest intention must exist at the inception
of any transaction whereas in case of criminal breach of trust,
there must exist a relationship between the parties whereby one
party entrusts another with property as per law, therefore, for
commission of criminal breach of trust, the dishonest intention
comes later, i.e., after obtaining dominion over the property by
the accused person whereas for commission of cheating,
dishonest intention of the accused has to be present at the
inception of the transaction.
(vii) In R.S. Sodhi Manoranjan Pani12, detailed further, the
very same proposition in paragraph Nos.13 to 15 by a learned
Single Judge of Gauhati High Court thus:
3. Before entering into the discussion as to whether the
impugned order taking cognizance of offences aforementioned
and directing issuance of processes against the accused-
petitioners is sustainable in law or not, one needs to point out
the principal distinction between "criminal breach of trust" and
"cheating". In "criminal breach of trust", the accused comes into
possession of the property or acquires dominion over the
property honestly and bona fide, but he develops dishonest
intention subsequent to the taking possession of, or subsequent
to having acquired the dominion over, the property and, having
developed such dishonest intention, he dishonestly
misappropriates or converts to his own use the property or
dishonestly uses or disposes of the property in violation of any
direction of law prescribing the mode in which such trust is to
be discharged, or of any legal contract, express or implied,
which he has made touching the discharge of such trust, or
willfully suffers any other person so to do.
14. Thus, in "criminal breach of trust", the intention of the
accused cannot be dishonest or mala fide at the time, when he
comes into possession of the property or comes to acquire
dominion over the property; but, having come into possession
of, or having acquired dominion over the property, the accused
develops dishonest intention and actuated by such mens rea, he
converts to his own use the property or dishonestly uses or
disposes of the property in violation of any direction of law
prescribing the mode in which such trust is to be discharged, or
of any legal contract, express or implied, which he has made
touching the discharge of such trust, or willfully suffers any
other person so to do.
15. Contrary to what happens in '"criminal breach of trust",
the intention of the accused, in a case of "cheating", is
dishonest from the very commencement of the transaction.
There is really no consent by the person, who is intentionally
induced by deception to deliver the property or allow any
person to retain the property or is intentionally induced, as a
result of deception, to do or omit to do anything, which he
would not do or omit to do if he were not so deceived, and
which act or omission causes or is likely to cause damage or
harm to that person in body, mind, reputation or property. In
short, thus, while in "criminal breach of trust", the accused
comes into possession of the property without dishonest
intention and develops dishonest intention subsequent to his
coming into possession of the property, the offence of cheating
is one, wherein the accused has dishonest intention from the
very commencement of the transaction.
(viii) At this stage itself, it would be relevant to mention
that the relief sought for, is quashment of FIR and the crimes are
under investigation and if both the offences do not co-exist, but,
either of the two would have to be examined by the Investigating
Agency. Further, the offences alleged in all these crimes are not
just the offences punishable under Sections 406 and 420 IPC
alone, but the allegations are in regard to the other offences under
IPC, APPDFE Act, PC & MCSB Act and infraction of provisions
of RBI Act.
(ix) On the submission that the concept of vicarious liability
is not available in IPC offences and also in the context of the
petitioner in first three Criminal Petitions ceased to be the Director
of the Company by virtue of his resignation on 03.10.2011, the
learned senior counsel refers to the relevant expressions of the
Honble Supreme Court in the following rulings:
(x) In S.K. Alagh5, the Honble Supreme Court while
holding that except some provisions specifically providing
vicarious liability, the Penal Code does not contemplate any
vicarious law on the part of a party, who is not charged directly
for the commission of offence, held in paragraph Nos.16 and 19
thus:
16. Indian Penal Code, save and except some provisions
specifically providing therefore, does not contemplate any
vicarious liability on the part of a party who is not charged
directly for commission of an offence.
19. 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
therefore. 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. {See Sabitha Ramamurthy v. R.B.S.
Channabasavaradhya [ (2006) 10 SCC 581].
(xi) In Sharad Kumar Sanghi13, while insisting that when a
complainant intends to rope in a Managing Director or any officer
of the company, it is essential to make requisite allegation to
constitute the vicarious liability, held in paragraph No.9 thus:
9. The allegations which find place against the Managing
Director in his personal capacity, as we notice, are absolutely
vague. When a complainant intends to proceed against the
Managing Director or any officer of a company, it is essential to
make requisite allegation to constitute the vicarious liability. In
Maksud Sajyad v. State of Gujarat [(2008) 5 SCC 668], it has
been held, thus:
13. Where a jurisdiction is exercised on a complaint petition
filed in terms of Section 156(3) or Section 200 of the Code of
Criminal Procedure, the Magistrate is required to apply his mind.
The Penal Code does not contain any provision for attaching
vicarious liability on the part of the Managing Director or the
Directors of the Company when the accused is the Company.
The learned Magistrate failed to pose unto himself the correct
question viz. as to whether the complaint petition, even if given
face value and taken to be correct in its entirety, would lead to
the conclusion that the Respondents herein were personally
liable for any offence. 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 obligator on
the part of the complainant to make requisite allegations which
would attract the provisions constituting vicarious liability.
xii) Though, the learned senior counsel refers to the ruling in
Maksud Saiyed6, it is unnecessary to advert to since the
expression contained in paragraph No.16 therein has been referred
to by extracting the same in Sharad Kumar Sanghi13. In the same
context is the decision rendered by the Honble Apex Court in
GHCL Employees Stock Option Trust14. The learned senior
counsel refers to the expression of the Honble Supreme Court in
paragraph Nos.12 to 14 thus:
12. From bare perusal of the complaint and the allegations
made therein, we do not find in any of the paragraphs that the
complainant has made specific allegations against Respondent
Nos. 2 to 7. In paragraph 2 of the complaint, it is alleged that
Respondent Nos. 2 to 6 are looking after the day-to-day affairs
of the Company. With whom the complainant or its authorized
representative interacted has also not been specified. Although
in paragraph 11 of the complaint it is alleged that the
complainant on numerous occasions met accused Nos. 2 to 7
and requested to refund the amount, but again the complainant
has not made specific allegation about the date of meeting and
whether it was an individual meeting or collective meeting.
Similarly, in paragraph 17 of the complaint, there is no
allegation that a particular Director or Managing Director
fabricated debit note. In the entire complaint there are bald and
vague allegations against Respondent Nos. 2 to 7.
13. There is no dispute with regard to the legal proposition
that the case of breach of trust or cheating are both a civil
wrong and a criminal offence, but under certain situations
where the act alleged would predominantly be a civil wrong,
such an act does not constitute a criminal offence.
14. Be that as it may, as held by this Court, summoning of
accused in a criminal case is a serious matter. Hence, criminal
law cannot be set into motion as a matter of course. The order
of Magistrate summoning the accused must reflect that he has
applied his mind to the facts of the case and the law applicable
thereto. The Magistrate has to record his satisfaction with
regard to the existence of a prima facie case on the basis of
specific allegations made in the complaint supported by
satisfactory evidence and other material on record.
xiii) In Sunil Bharti Mittal15, while referring to the principle
that criminal intent of person (s) controlling the company can be
imputed to the company based on principle of of "alter ego", but
reverse application of principle is impermissible, held in paragraph
Nos.40 to 55 thus:
40. 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.
41. In the present case, however, this principle is applied in
an exactly reverse scenario. Here, company is the accused
person and the learned Special Magistrate has observed in the
impugned order that since the Appellants represent the
directing mind and will of each company, their state of mind is
the state of mind of the company and, therefore, on this
premise, acts of the company is attributed and imputed to the
Appellants. It is difficult to accept it as the correct principle of
law. As demonstrated hereinafter, this proposition would run
contrary to the principle of vicarious liability detailing the
circumstances under which a direction of a company can be
held liable.
(iii) Circumstances when Director/Person in charge of the
affairs of the company can also be prosecuted, when the
company is an accused person:
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 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.
44. 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. One such example is
Section 141 of the Negotiable Instruments Act, 1881. In
Aneeta Hada [ (2012) 5 SCC 661], the Court noted that if a
group of persons that guide the business of the company have
the criminal intent, that would be imputed to the body
corporate and it is in this backdrop, Section 141 of the
Negotiable Instruments Act has to be understood. Such a
position is, therefore, because of statutory intendment making
it a deeming fiction. Here also, the principle of "alter ego", was
applied only in one direction namely where a group of persons
that guide the business had criminal intent, that is to be
imputed to the body corporate and not the vice versa.
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. This very principle is elaborated in various other
judgments. We have already taken note of Maharashtra State
Electricity Distribution Company Ltd.. [ (2010) 10 SCC 479]
and S.K. Alagh [ (2008) 5 SCC 662]. Few other judgments
reiterating this principle are the following:
45.1. Jethsur Surangbhai v. State of Gujarat [(1984) Supp. SCC
207, (SCC pp.210-11, para 9):
9. . With due respect what the High Court seems to
have missed is that in a case like this where there was serious
defalcation of the properties of the Sangh, unless the
prosecution proved that there was a close cohesion and collusion
between all the accused which formed the subject matter of a
conspiracy, it would be difficult to prove the dual charges
particularly against the Appellant (A-1). The charge of
conspiracy having failed, the most material and integral part of
the prosecution story against the Appellant disappears. The only
ground on the basis of which the High Court has convicted him
is that as he was the Chairman of the Managing Committee, he
must be held to be vicariously liable for any order given or
misappropriation committed by the other accused. The High
Court, however, has not referred to the concept of vicarious
liability but the findings of the High Court seem to indicate that
this was the central idea in the mind of the High Court for
convicting the Appellant. In a criminal case of such a serious
nature mens rea cannot be excluded and once the charge of
conspiracy failed the onus lay on the prosecution to prove
affirmatively that the Appellant was directly and personally
connected with acts or omissions pertaining to Items 2, 3 and 4.
It is conceded by Mr. Phadke that no such direct evidence is
forthcoming and he tried to argue that as the Appellant was
Chairman of the Sangh and used to sign papers and approve
various tenders, even as a matter of routine he should have acted
with care and caution and his negligence would be a positive
proof of his intention to commit the offence. We are however
unable to agree with this somewhat broad statement of the law.
In the absence of a charge of conspiracy the mere fact that the
Appellant happened to be the Chairman of the Committee
would not make him criminally liable in a vicarious sense for
items 2 to 4. There is no evidence either direct or circumstantial
to show that apart from approving the purchase of fertilisers he
knew that the firms from which the fertilisers were purchased
did not exist. Similar is the case with the other two items.
Indeed, if the Chairman was to be made liable then all members
of the Committee viz. Tehsildar and other nominated members,
would be equally liable because all of them participated in the
deliberations of the meetings of the Committee, a conclusion
which has not even been suggested by the prosecution. As
Chairman of the Sangh the Appellant had to deal with a large
variety of matters and it would not be humanly possible for him
to analyse and go into the details of every small matter in order
to find out whether there has been any criminal breach of trust.
In fact, the hero of the entire show seems to be A-3 who had so
stage-managed the drama as to shield his guilt and bring the
Appellant in the forefront. But that by itself would not be
conclusive evidence against the Appellant. There is nothing to
show that A-3 had either directly or indirectly informed the
Appellant regarding the illegal purchase of fertilisers or the
missing of the five oil engines which came to light much later
during the course of the audit. Far from proving the intention
the prosecution has failed to prove that the Appellant had any
knowledge of defalcation of Items 2 to 4. In fact, so far as item
3 is concerned, even Mr. Phadke conceded that there is no
direct evidence to connect the Appellant. (emphasis
supplied)
45.2. Sham Sunder v. State of Haryana [(1989) 4 SCC 630, SCC
p.632, para 9]
9. But we are concerned with a criminal liability under
penal provision and not a civil liability. The penal provision must
be strictly construed in the first place. Secondly, there is no
vicarious liability in criminal law unless the statute takes that
also within its fold. Section 10 does not provide for such
liability. It does not make all the partners liable for the offence
whether they do business or not. (emphasis supplied)
45.3. Hira Lal Hari Lal Bhagwati v. CBI [ (2003) 5 SCC 257,
SCC p.277, para 30]
30. In our view, under the penal law, there is no concept
of vicarious liability unless the said statute covers the same
within its ambit. In the instant case, the said law which prevails
in the field i.e. the Customs Act, 1962 the Appellants have been
thereinunder wholly discharged and the GCS granted immunity
from prosecution. (emphasis supplied)
45.4. Maksud Saiyed v. State of Gujarat [(2008) 5 SCC
668, SCC p.674, para 13]
13. Where a jurisdiction is exercised on a complaint
petition filed in terms of Section 156(3) or Section 200 of the
Code of Criminal Procedure, the Magistrate is required to apply
his mind. The Penal Code does not contain any provision for
attaching vicarious liability on the part of the Managing Director
or the Directors of the Company when the accused is the
Company. The learned Magistrate failed to pose unto himself
the correct question viz. as to whether the complaint petition,
even if given face value and taken to be correct in its entirety,
would lead to the conclusion that the Respondents herein were
personally liable for any offence. 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.
(emphasis supplied)
45.5 R. Kalyani v. Janak C. Mehta [(2009) 1 SCC 516, SCC
p.527, para 32)
32. Allegations contained in the FIR are for commission of
offences under a general statute. A vicarious liability can be
fastened only by reason of a provision of a statute and not
otherwise. For the said purpose, a legal fiction has to be created.
Even under a special statute when the vicarious criminal liability
is fastened on a person on the premise that he was in charge of
the affairs of the company and responsible to it, all the
ingredients laid down under the statute must be fulfilled. A
legal fiction must be confined to the object and purport for
which it has been created.
45.6. Sharon Michael v. State of T.N. [(2009) 3 SCC 375, SCC
p. 383, para 16)
16. The first information report contains details of the terms of
contract entered into by and between the parties as also the
mode and manner in which they were implemented. Allegations
have been made against the Appellants in relation to execution
of the contract. No case of criminal misconduct on their part has
been made out before the formation of the contract. There is
nothing to show that the Appellants herein who hold different
positions in the Appellant Company made any representation in
their personal capacities and, thus, they cannot be made
vicariously liable only because they are employees of the
Company. (emphasis supplied)
45.7. Keki Hormusji Gharda v. Mehervan Rustom Irani
[(2009) 6 SCC 475, SCC pp. 480-81, paras 16-19)
16. We have noticed hereinbefore that despite of the said road
being under construction, the first Respondent went to the
police station thrice. He, therefore, was not obstructed from
going to the police station. In fact, a firm action had been taken
by the authorities. The workers were asked not to do any work
on the road. We, therefore, fail to appreciate that how, in a
situation of this nature, the Managing Director and the Directors
of the Company as also the Architect can be said to have
committed an offence Under Section 341 Indian Penal Code.
17. The Penal Code, 1860 save and except in some matters does
not contemplate any vicarious liability on the part of 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.
The learned Additional Chief Metropolitan Magistrate,
therefore, in our opinion, was not correct in issuing summons
without taking into consideration this aspect of the matter. The
Managing Director and the Directors of the Company should
not have been summoned only because some allegations were
made against the Company.
18. In Pepsi Foods Ltd. v. Special Judicial Magistrate [(1998) 5
SCC 749] this Court held as under: (SCC p. 760, para 28)
28. Summoning of an accused in a criminal case is a
serious matter. Criminal law cannot be set into motion as a
matter of course. It is not that the complainant has to bring
only two witnesses to support his allegations in the
complaint to have the criminal law set into motion. The
order of the Magistrate summoning the accused must
reflect that he has applied his mind to the facts of the case
and the law applicable thereto. He has to examine the
nature of allegations made in the complaint and the
evidence both oral and documentary in support thereof
and would that be sufficient for the complainant to
succeed in bringing charge home to the accused. It is not
that the Magistrate is a silent spectator at the time of
recording of preliminary evidence before summoning of
the accused. The Magistrate has to carefully scrutinise the
evidence brought on record and may even himself put
questions to the complainant and his witnesses to elicit
answers to find out the truthfulness of the allegations or
otherwise and then examine if any offence is prima facie
committed by all or any of the accused.
19. Even as regards the availability of the remedy of filing an
application for discharge, the same would not mean that
although the allegations made in the complaint petition even if
given face value and taken to be correct in its entirety, do not
disclose an offence or it is found to be otherwise an abuse of the
process of the court, still the High Court would refuse to
exercise its discretionary jurisdiction Under Section 482 of the
Code of Criminal Procedure.
46. It is stated at the cost of repetition that in the present case,
while issuing summons against the Appellants, the Special
Magistrate has taken shelter under a so-called legal principle,
which has turned out to be incorrect in law. He has not recorded
his satisfaction by mentioning the role played by the Appellants
which would bring them within criminal net. In this behalf, it
would be apt to note that the following observations of this
Court in the case of GHCL Employees Stock Option Trust v.
India Infoline Ltd. [(2013) 4 SCC 505, SCC p.516, paras 19 &
21]:
19. In the order issuing summons, the learned Magistrate has not
recorded his satisfaction about the prima facie case as against
Respondents 2 to 7 and the role played by them in the capacity
of Managing Director, Company Secretary or Directors which is
sine qua non for initiating criminal action against them.
(Thermax Ltd. v. K.M. Johny followed)
xxx
21. In the instant case the High Court has correctly noted that
issuance of summons against Respondents 2 to 7 is illegal and
amounts to abuse of process of law. The order of the High
Court, therefore, needs no interference by this Court.
47. We have already mentioned above that even if the CBI did
not implicate the Appellants, if there was/is sufficient material
on record to proceed against these persons as well, the Special
Judge is duly empowered to take cognizance against these
persons as well. Under Section 190 of the Code, any Magistrate
of first class (and in those cases where Magistrate of the second
class is specially empowered to do so) may take cognizance of
any offence under the following three eventualities:
(a) upon receiving a complaint of facts which constitute such
offence;
(b) upon a police report of such facts; and
(c) upon information received from any person other than a
police officer, or upon his own knowledge, that such offence
has been committed.
42. This Section which is the starting section of Chapter XIV is
subject to the provisions of the said Chapter. The expression
"taking cognizance" has not been defined in the Code.
However, when the Magistrate applies his mind for proceeding
Under Sections 200-203 of the Code, he is said to have taken
cognizance of an offence. This legal position is explained by
this Court in S.K. Sinha, Chief Enforcement Officer v. Videocon
International Ltd. and Ors. [(2008) 2 SCC 492] in the following
words:
19. The expression "cognizance" has not been defined in the
Code. But the word (cognizance) is of indefinite import. It has
no esoteric or mystic significance in criminal law. It merely
means "become aware of: and when used with reference to a
court or a Judge, it connoted "to take notice of judicially". It
indicates the point when a court or a Magistrate takes judicial
notice of an offence with a view to initiating proceedings in
respect of such offence said to have been committed by
someone.
20. Taking Cognizance" does not involve any formal action of
any kind. It occurs as soon as a Magistrate applies his mind to
the suspected commission of an offence....
48. Sine Qua Non for taking cognizance of the offence is the
application of mind by the Magistrate and his satisfaction that
the allegations, if proved, would constitute an offence. It is,
therefore, imperative that on a complaint or on a police report,
the Magistrate is bound to consider the question as to whether
the same discloses commission of an offence and is required to
form such an opinion in this respect. When he does so and
decides to issue process, he shall be said to have taken
cognizance. At the stage of taking cognizance, the only
consideration before the Court remains to consider judiciously
whether the material on which the prosecution proposes to
prosecute the accused brings out a prima facie case or not.
49. Cognizance of an offence and prosecution of an offender
are two different things. Section 190 of the Code empowered
taking cognizance of an offence and not to deal with offenders.
Therefore, cognizance can be taken even if offender is not
known or named when the complaint is filed or FIR registered.
Their names may transpire during investigation or afterwards.
50. Person who has not joined as accused in the charge-sheet
can be summoned at the stage of taking cognizance Under
Section 190 of the Code. There is no question of applicability
of Section 319 of the Code at this stage (See SWIL Ltd.. v. State
of Delhi [(2001) 6 SCC 670)]. It is also trite that even if a
person is not named as an accused by the police in the final
report submitted, the Court would be justified in taking
cognizance of the offence and to summon the accused if it feels
that the evidence and material collected during investigation
justifies prosecution of the accused (See Union of India v.
Prakash P. Hinduja and Anr. [(2003) 6 SCC 195)]. Thus, the
Magistrate is empowered to issue process against some other
person, who has not been charge-sheeted, but there has to be
sufficient material in the police report showing his
involvement. In that case, the Magistrate is empowered to
ignore the conclusion arrived at by the investigating officer and
apply his mind independently on the facts emerging from the
investigation and take cognizance of the case. At the same time,
it is not permissible at this stage to consider any material other
than that collected by the investigating officer.
51. On the other hand, Section 204 of the Code deals with the
issue of process, if in the opinion of the Magistrate taking
cognizance of an offence, there is sufficient ground for
proceeding. This Section relates to commencement of a
criminal proceeding. If the Magistrate taking cognizance of a
case (it may be the Magistrate receiving the complaint or to
whom it has been transferred Under Section 192), upon a
consideration of the materials before him (i.e., the complaint,
examination of the complainant and his witnesses if present, or
report of inquiry, if any), thinks that there is a prima facie case
for proceeding in respect of an offence, he shall issue process
against the accused.
52. A wide discretion has been given as to grant or refusal of
process and it must be judicially exercised. A person ought not
to be dragged into Court merely because a complaint has been
filed. If a prima facie case has been made out, the Magistrate
ought to issue process and it cannot be refused merely because
he thinks that it is unlikely to result in a conviction.
53. However, the words "sufficient grounds for proceeding"
appearing in the Section are of immense importance. It is these
words which amply suggest that an opinion is to be formed only
after due application of mind that there is sufficient basis for
proceeding against the said accused and formation of such an
opinion is to be stated in the order itself. The order is liable to
be set aside if no reason is given therein while coming to the
conclusion that there is prima facie case against accused,
though the order need not contain detailed reasons. A fortiori,
the order would be bad in law if the reason given turns out to be
ex facie incorrect.
54. However, there has to be a proper satisfaction in this
behalf which should be duly recorded by the Special Judge on
the basis of material on record. No such exercise is done. In this
scenario, having regard to the aforesaid aspects coupled with
the legal position explained above, it is difficult to sustain the
impugned order dated 19.03.2013 in its present form insofar as
it relates to implicating the Appellants and summoning them as
accused persons. The appeals arising out of SLP (Crl.) No. 2961
of 2013 and SLP (Crl.) No. 3161 of 2013 filed by Mr. Sunil
Bharti Mittal and Ravi Ruia respectively are, accordingly,
allowed and order summoning these Appellants is set aside. The
appeals arising out of SLP (Crl.) Nos. 3326-3327 of 2013 filed
by Telecom Watchdog are dismissed.
55. While parting, we make it clear that since on an erroneous
presumption in law, the Special Magistrate has issued the
summons to the Appellants, it will always be open to the
Special Magistrate to undertake the exercise of going through
the material on record and on that basis, if he is satisfied that
there is enough incriminating material on record to proceed
against the Appellants as well, he may pass appropriate orders
in this behalf. We also make it clear that even if at this stage, no
such prima facie material is found, but during the trial,
sufficient incriminating material against these Appellants
surfaces in the form of evidence, the Special Judge shall be at
liberty to exercise his powers Under Section 319 of the Code to
rope in the Appellants by passing appropriate orders in
accordance with law at that stage.
These have been the submissions made by the learned senior
counsel relying on the aforesaid rulings requesting to quash the
FIR on the main ground that the Company is not the accused in
any of the First Information Reports herein.
25. In order to fortify the submission that it is difficult to
cull out dishonest intention from the inception is to constitute
offence of cheating, the learned senior counsel refers to the
following rulings:
i) In Hira Lal Hari Lal Bhagwati3, which ruling has been
consistently referred to by the learned senior counsel in all these
criminal petitions, the Honble Supreme Court while insisting that
the complainant is required to show that the accused had
fraudulent or dishonest intention at the time of making promise or
representation, held in paragraph No.40 thus:
40. It is settled law, by catena of decisions, that for
establishing the offence of cheating, the complainant is
required to show that the accused had fraudulent or dishonest
intention at the time of making promise of representation. From
his making failure to keep up promise subsequently, such a
culpable intention right at the beginning that is at the time when
the promise was made cannot be presumed. It is seen from the
records that the exemption certificate contained necessary
conditions which were required to be complied with after
importation of the machine. Since the GCS could not comply
with it and, therefore, it rightly paid the necessary duties
without taking advantages of the exemption certificate. The
conduct of the GCS or the appellant in their capacities as office
bearers right at the time of making application for exemption.
As there was absence of dishonest and fraudulent intention, the
question of committing offence under Section 420 of the Indian
Penal Code does not arise. We have read the charge sheet as a
whole. There is no allegation in the First Information Report or
the Charge sheet indicating expressly or impliedly any
intentional deception or fraudulent/dishonest intention on the
part of the appellants right from the time of making the promise
or misrepresentation. Nothing has been said on what those
misrepresentations were and how the Ministry of Health was
duped and what where the roles played by the appellants in the
alleged offence. The appellants, in our view, could not be
attributed any mens rea of evasion of customs duty or cheating
the Government of India as the cancer society is a non profit
organization and, therefore, the allegation against the
appellants leveled by the prosecution are unsustainable. Kar
Vivad Samadhan Scheme Certificate along with the Duncan's
and Sushila Rani's judgments clearly absolve the appellants
herein from all charges and allegations under any other law
once the duty so demanded has been paid and the alleged
offence has been compounded. It is also settled law that once a
civil case has been compromised and the alleged offence has
been compounded, to continue the criminal proceedings
thereafter would be an abuse of the judicial process.
ii) On the same principle, the learned senior counsel relies
on the expression of the Honble Supreme Court in paragraph
No.26 in Suryalakshmi Cotton Mills Limited4 thus:
26. A bare perusal of Section 415 read with Section 420 of
the Indian Penal Code would clearly lead to the conclusion that
fraudulent or dishonest inducement on the part of the accused
must be at the inception and not at a subsequent stage.
iii) In R. Kalyani v. Janak C. Mehta16, the Honble
Supreme Court observing that in the absence of allegation that the
accused were entrusted with or otherwise had dominion over the
property to have committed breach of trust, held in paragraph
Nos.29 and 30 thus:
29. The allegations contained in the First Information
Report, therefore, do not disclose an offence against the
respondent Nos 1 and 2. They have in their individual capacity
been charged for commission of offences of cheating, criminal
breach of trust and forgery. As there had never been any
interaction between the appellant and them, the question of any
representation which is one of the main ingredients for
constituting an offence of cheating, as contained in Section 415
of the Indian Penal Code, did not and could not arise.
30. Similarly, it has not been alleged that they were entrusted
with or otherwise had dominion over the property of the
appellant or they have committed any criminal breach of trust.
iv) In the context of absence of specific allegation regarding
role of Directors in the present complaints, the learned senior
counsel places reliance in N.K. Wai7. The Honble Supreme Court
observing that if the offence is committed by a Company, every
person who is a Director or employee of the company is not liable,
and only such person would be held liable if at the time when
offence is committed he was in charge and was responsible for the
company for the conduct of the business of the company as well as
the company, held in paragraph Nos.7 and 8 thus:
7. This provision clearly shows that so far as the companies
are concerned if any offence is committed by it then every
person who is a Director or employee of the company is not
liable. Only such person would be held liable if at the time
when offence is committed he was in charge and was
responsible to the company for the conduct of the business of
the company as well as the company. Merely being a Director
of the company in the absence of above factors will not make
him liable.
8. To launch a prosecution, therefore, against the alleged
Directors there must be a specific allegation in the complaint as
to the part played by them in the transaction. There should be
clear and unambiguous allegation as to how the Directors are
incharge and responsible for the conduct of the business of the
company. The description should be clear. It is true that precise
words from the provisions of the Act need not be reproduced
and the court can always come to a conclusion in facts of each
case. But still in the absence of any averment or specific
evidence the net result would be that complaint would not be
entertainable.
The said proposition was rendered by the Honble Apex Court in
the context of the offence punishable under Section 138 read with
141 of N.I. Act, where there is a specific provision occurring in the
N.I. Act.
v) In Radhey Shyam Khemka9, the Honble Supreme
Court while cautioning the Courts at the time of taking cognizance
that the Court must be satisfied that prima facie an offence under
the Penal Code disclosed on the material produced before the
Court, at the time of taking cognizance of the alleged offence in
connection with the registration, issuance of prospectus, collection
of moneys from the Investors and the misappropriation of the
funds collected from the shareholders which constitute one offence
or the other under the Penal Code, held in paragraph No.6 thus:
6. But, at the same time, while taking cognizance of alleged
offences in connection with the registration, issuance of
prospectus, collection of moneys from the investors and the
misappropriation of the fund collected from the share-holders
which constitute one offence or other under the Penal Code,
court must be satisfied that prima facie and offence under the
Penal Code has been disclosed on the materials produced
before the court. If the screening on this question is not done
properly at the stage of initiation of the criminal proceeding, in
many cases, some disgruntled share-holders may launch
prosecutions against the promotors, directors and those in
charge of the management of the company concerned and can
paralyse the functioning of such company. It need not be
impressed that for prosecution for offences 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.
vi) In Saroj Kumar Poddar v. State , where the petitioner
therein had resigned from the Directorship of the company at the
time when the dishonoured cheque was issued, the Honble
Supreme Court while observing that the complaint - petitions were
silent as to how and in what manner, the appellant was
responsible for the conduct of the business of the company or
otherwise responsible to it in regard to its functioning, held in
paragraph No.14 thus:
14. Apart from the Company and the appellant, as noticed
hereinbefore, the Managing Director and all other Directors
were also made accused. The appellant did not issue any
cheque. He, as noticed hereinbefore, had resigned from the
directorship of the Company. It may be true that as to exactly
on what date the said resignation was accepted by the Company
is not known, but, even otherwise, there is no averment in the
complaint petitions as to how and in what manner the appellant
was responsible for the conduct of the business of the Company
or otherwise responsible to it in regard to the functioning. He
had not issued any cheque. How he is responsible for dishonor
of the cheque has not been stated. The allegations made in para
3, thus, in our opinion do not satisfy the requirements of
Section 141 of the Act.
vii) In G.N. Verma v. State of Jharkhand and another ,
the Honble Supreme Court while observing that Section 141 of
N.I. Act is a Penal provision creating a vicarious liability and
referring to the earlier ruling in National Small Industries Corpn.
Ltd. V. Harmeet Singh Paintal , in the context of absence of
specific allegation against the Director that he was In charge of and
responsible to the company for the conduct of the business of the
company without anything more as to the role of the Director, held
in paragraph Nos.19 and 20 thus:
19. It has been laid down, in the context of Sections 138 and 141
of the Negotiable Instruments Act, 1881 in National Small Industries
Corporation Ltd. v. Harmeet Singh Paintal [(2010) 3 SCC 330 that
Section 141 is a penal provision creating a vicarious liability. It was
held as follows: (SCC p.336, para 13)
13. . It is therefore, not sufficient to make a bald
cursory statement in a complaint that the Director (arrayed as an
accused) is in charge of and responsible to the company for the
conduct of the business of the company without anything more as
to the role of the Director. But the complaint should spell out as to
how and in what manner Respondent 1 was in charge of or was
responsible to the accused Company for the conduct of its
business. This is in consonance with strict interpretation of penal
statutes, especially, where such statutes create vicarious liability.
(emphasis in original)
It was then concluded: (SCC p.345, para 39)
39. (i) The primary responsibility is on the complainant to
make specific averments as are required under the law in the
complaint so as to make the accused vicariously liable. For
fastening the criminal liability, there is no presumption that every
Director knows about the transaction.
20. Insofar as the criminal complaint is concerned, it does not
contain any allegation against G.N. Verma. The only statement
concerning him is that he was the Chief General Manager/deemed
Agent of the mine and was exercising supervision, management and
control of the mine and in that capacity was bound to see that all
mining operations were conducted in accordance with the Act, the
rules, regulations, orders made thereunder. In the face of such a
general statement, which does not contain any allegation, specific or
otherwise, it is difficult to hold that the Chief Judicial Magistrate
rightly took cognizance of the complaint and issued summons to G.N.
Verma. The law laid down by this Court in Harmeet Singh Paintal
(though in another context) would be squarely applicable. Under the
circumstances, we are of the opinion that on the facts of this case and
given the absence of any allegation in the complaint filed against him
no case for proceeding against G.N. Verma has been made out.
26. The learned Public Prosecutor refers to the ruling in
Pothani Chandrasekher22 rendered by a learned Single Judge of
this Court. In answering the proposition that in an offence under
Section 420 of IPC, deception at inception is not absolutely
indispensable but the subsequent conduct of a person receiving the
property should furnish some indication of his original intention,
the learned Single Judge referred to the ruling of the Honble
Supreme Court in Hridaya Ranjan p.d. Verma v. State of
Bihar , relied on by the learned counsel for the petitioner therein
(Pothani Chandrasekher22). The factual matrix would reflect that
the petitioner therein floated a finance institution called Koratla
Permanent Fund Limited inviting deposits from the general public
promising to give twice the amount or thrice the amount after
expiry of five years, a large number of people were attracted by the
said promise, deposited the amounts, but as usual, such companies
would do, after expiry of the period, did not return the redeemable
value of deposit receipt amounting to Rs.15,000/-. Thus,
complaints came to be filed for the offences of cheating and
misappropriation punishable under Sections 420 and 406 IPC.
i) Thus, the facts are almost alike occurring in the present
cases, though not, on such huge scale as is available in the present
petitions. It is forthcoming that even the petitioner filed a
company petition before the Company Court and the said
company was in liquidation. Certain submissions were made by
the learned counsel therein including the submission that the
deception from inception is not occurring and there was no
intention at the inceptive stage for the petitioner to act dishonestly.
This apart, even the submission was that the complaints were
registered by the concerned police station and other police stations
in gross violation of the provisions of Section 220 (1) of the Code
urging that by reason of the definition Financial Establishments
under Section 2 (c) of the Act, a company registered under the
Companies Act, 1956 is not liable for prosecution for an alleged
offence under Section 5 of the Act. While answering the
submissions, the learned Single Judge referred to the amendment
effected to the definition financial establishments with effect from
14.07.2003 by amendment Act No.12 of 2003, extracting the
definition and observing that the amended definition of financial
establishments would belie the submission made by the learned
counsel for the petitioner therein and held that as per law, a
person, or group of individuals accepting deposits under any
scheme or arrangement is liable for punishment for a term which
may extend to ten years, if such person or group of persons
defaults in return of the deposit either in cash or in kind. Since
paragraph Nos.5, 6, 10, 11 and 12 are relevant, it would be useful
to extract them as to what has been observed by the learned Single
Judge therein thus:
5. The above definition did not permit the police to take
action against the companies registered under Companies Act,
1956. Therefore, Andhra Pradesh Legislature by Amendment
Act No.12 of 2003 amended the definition of Financial
Establishmentwith effect from 14-7-2003. After amendment,
the definition reads as under.
[2(c)Financial Establishments means any person or group of
individuals accepting deposit under any scheme or arrangement
or in any other manner but does not include a corporation or a
co-operative society owned or controlled by any State
Government or the Central Government or a banking company
as defined under clause (c) of Section 5 of the Banking
Regulation Act, 1949 (Central Act 10 of 1949]
6. A reading of the definition of Financial Establishments
as it stands in the Statute would belie the submission of the
learned counsel for the petitioner that the Act has no
application. As per law, a person or group of individuals
accepting the deposits under any scheme or arrangement is
liable for punishment for a term which may extend to ten years,
if such person or group of persons defaults in return of the
deposit either in cash or in kind. (See Section 5 read with
Section 2 (c) of the Act). Therefore, the submission is rejected.
7.
8.
9.
10. The learned counsel for the petitioner has placed strong
reliance on the oft-quoted judgment of the Supreme Court in
Hridaya Ranjan p.d. Verma v. State of Bihar, 2000 (1) Alt (Crl.)
349 (SC): 2000 SCC (Cri) 786 in support of the submission that
the petitioner cannot be said to have deceived the depositors by
fraudulently and dishonestly inducing and that he had no
intention to deceive anybody initially. He placed reliance on
paragraph-14 of the said judgment, which reads as under.
On a reading of the section it is manifest that in the
definition there are set forth two separate classes of acts which
the person deceived may be induced to do. In the first place he
may be induced fraudulently or dishonestly to deliver any
property to any person. The second class of acts set forth in the
section is the doing or omitting to do anything which the person
deceived would not do or omit to do if he were not so deceived.
In the first class of cases the inducing must be fraudulent or
dishonest. In the second class of acts, the inducing must be
intentional but not fraudulent or dishonest.
11. In the same judgment, in paragraph-15, the Supreme Court
made the following observations.
In determining the question it has to be kept in mind that
the distinction between mere breach of contract and the offence
of cheating is a fine one. It depends upon the intention of the
accused at the time of inducement which may be judged by
his subsequent conduct but for this subsequent conduct is
not the sole test. Mere breach of contract cannot give rise to
criminal prosecution for cheating unless fraudulent or dishonest
intention is shown right at the beginning of the transaction, that
is the time when the offence is said to have been committed.
Therefore, it is the intention which is the gist of the offence. To
hold a person guilty of cheating it is necessary to show that he
had fraudulent or dishonest intention at the time of making the
promise. From his mere failure to keep up promise subsequently
such a culpable intention right at the beginning that is, when he
made the promise cannot be presumed.
12. It is no doubt true that textually the offence of cheating
requires fraudulent dishonest intention to cheat on the part of
the accused at the very beginning when the deceived person
delivered property or valuable security. If the same were
interpreted textually, the same would result in a situation where
no person can be accused of cheating and can be made
punishable under Section 420 I.P.C. It may not require a big
logical argument to conclude that, a person, however, gullible
the deceived may be, would not reveal his true intention before
making the deceived person to part with valuable property. It is
always done by some inducement of making false promises or
making to believe the other person to deliver the property in the
existence of certain facts, which are nonexistent. For instance,
no depositor would deposit money in any Non-Banking.
Financial Company, if such company were to announce that the
chance of returning the deposit made by a person with interest
would be remote or would be doubtful. Therefore, every
financial company would certainly induce persons to part with
the money by promising attractive rates of interest as well as
attractive benefits by way of gifts. Therefore, the subsequent
conduct of a person receiving the property should furnish some
indication of his original intention. Indeed, as observed by the
Supreme Court in the above case, the intention of the accused
at the time of inducement can always be inferred by subsequent
conduct associated with other factors.
ii) In Soma Suresh Kumar24 relied on by the learned Public
Prosecutor, the Honble Supreme Court while holding that Section
2 (c) of Andhra Pradesh Protection of Depositors of Financial
Establishments Act, 1999 (17 of 1999) does not exclude
cooperative banks from penal action and attachment of property
provisions, and only excludes company registered under the
Companies Act or a corporation or a cooperative society owned
and controlled by any State Government or the Central
Government, rejected the request seeking mandamus to direct the
respondents not to arrest them or attach the properties of
Directors of alleged cooperative banks. The learned Public
Prosecutor places reliance on the observations of the Honble
Apex Court contained in paragraph Nos.8, 9, 10 and 17 thus:
8. We notice that the State of Andhra Pradesh was
contemplating a legislation similar to one enacted in the State
of Tamil Nadu, for a long time. On many occasions, the State's
attention was drawn, to the large scale diversion of money by
many financial institutions in the State, by cheating the
depositors of their hard-earned savings, misappropriating the
same and then later vanishing from the scene. Several cases
were booked against the persons responsible for the same, but
the presence of a comprehensive legislation to curb such unfair
practice was lacking. This was the reason for the State of
Andhra Pradesh to enact the Andhra Act.
9. The Statement of Objects and Reasons of the Act read as
under:
Instances have come to the notice of the State
Government, wherein a number of unscrupulous financial
establishments in the State are cheating innocent, gullible
depositors by offering very attractive rates of interest, collecting
huge deposits and then vanishing suddenly. The depositors are
being cheated and are put to grave hardship by losing their hard
earned savings. To curb these malpractices, the State
Government has decided to bring a law to protect the interests
of depositors of the financial establishment in the State and for
matters connected therewith or incidental thereto. The above
issue was also discussed in a conference of the State Chief
Ministers and Finance Ministers presided by the Union Finance
Minister on 14.9.1998 at Vigyan Bhavan, New Delhi. The
Union Finance Minister also desired that States should take
expeditious steps for enacting legislation on the lines of "Tamil
Nadu Protection of Depositors (in Financial Establishments)
Act, 1997, "to restore the confidence amongst the innocent
depositors and also to serve as a deterrent against malpractices
by such establishments during the course of acceptance of public
deposits.
To achieve the above object, the Government has decided
to make separate law by undertaking legislation.
10. The above mentioned Act was reserved by the Governor
on 13th April, 1999 for consideration and assent of the
President and on 23rd June, 1999, the same was granted and the
Act was published on 1st July, 1999, in the Andhra Pradesh
Gazette for general information.
and
17. Learned Counsel for the Petitioner raised a further
contention that Vasavi Cooperative Bank Ltd. does not come
within the definition of "financial establishment" Under Section
2(c) of the Andhra Act. We find it difficult to accept that
contention. What has been excluded from that definition is a
Company registered under the Companies Act or a Corporation
or a Cooperative Society owned and controlled by any State
Government or the Central Government. The Society in
question does not fall in that category. Consequently, the Co-
operative Bank in question is also governed by the provisions
of the Andhra Act.
It was a case where the Board of Directors of Vasavi Cooperative
Urban Bank Limited had swindled away the money of the
depositors by creating false documents, amounting to crores of
rupees.
iii) In the context of serious consequences that flow from a
financial fraud, the ruling in Vikram Anantrai Doshi25 is relied on
by the learned Public Prosecutor. The learned Public Prosecutor
would rely on the catastrophic effect of financial frauds as the one
occurring in the present cases creating a hazard in the financial
interest of the society, relies on paragraph No.26. The Honble
Supreme Court referring to the gravity of such offence creating a
dent in the economic spine of the nation holds thus:
26. We are in respectful agreement with the aforesaid view.
Be it stated, that availing of money from a nationalized bank in
the manner, as alleged by the investigating agency, vividly
exposits fiscal impurity and, in a way, financial fraud. The
modus operandi as narrated in the chargesheet cannot be put in
the compartment of an individual or personal wrong. It is a
social wrong and it has immense societal impact. It is an
accepted principle of handling of finance that whenever there is
manipulation and cleverly conceived contrivance to avail of
these kind of benefits it cannot be regarded as a case having
overwhelmingly and predominantingly of civil character. The
ultimate victim is the collective. It creates a hazard in the
financial interest of the society. The gravity of the offence
creates a dent in the economic spine of the nation. The
cleverness which has been skillfully contrived, if the
allegations are true, has a serious consequence. A crime of this
nature, in our view, would definitely fall in the category of
offences which travel far ahead of personal or private wrong. It
has the potentiality to usher in economic crisis. Its implications
have its own seriousness, for it creates a concavity in the
solemnity that is expected in financial transactions. It is not
such a case where one can pay the amount and obtain a "no due
certificate" and enjoy the benefit of quashing of the criminal
proceeding on the hypostasis that nothing more remains to be
done. The collective interest of which the Court is the guardian
cannot be a silent or a mute spectator to allow the proceedings
to be withdrawn, or for that matter yield to the ingenuous
dexterity of the accused persons to invoke the jurisdiction
Under Article 226 of the Constitution or Under Section 482 of
the Code and quash the proceeding. It is not legally permissible.
The Court is expected to be on guard to these kinds of adroit
moves. The High Court, we humbly remind, should have dealt
with the matter keeping in mind that in these kind of litigations
the accused when perceives a tiny gleam of success, readily
invokes the inherent jurisdiction for quashing of the criminal
proceeding. The court's principal duty, at that juncture, should
be to scan the entire facts to find out the thrust of allegations
and the crux of the settlement. It is the experience of the Judge
comes to his aid and the said experience should be used with
care, caution, circumspection and courageous prudence. As we
find in the case at hand the learned Single Judge has not taken
pains to scrutinize the entire conspectus of facts in proper
perspective and quashed the criminal proceeding. The said
quashment neither helps to secure the ends of justice nor does
it prevent the abuse of the process of the Court nor can it be
also said that as there is a settlement no evidence will come on
record and there will be remote chance of conviction. Such a
finding in our view would be difficult to record. Be that as it
may, the fact remains that the social interest would be on peril
and the prosecuting agency, in these circumstances, cannot be
treated as an alien to the whole case. Ergo, we have no other
option but to hold that the order of the High Court is wholly
indefensible.
iv) The learned Public Prosecutor to fortify his submission
that the fact-situation in all these crimes necessarily warrant
invocation of doctrine of lifting veil as public interest demands,
places reliance in Gotan Lime Stone Khanij Udyog Private
Limited26. The ruling is quoted by the learned Public Prosecutor
to answer the submission of the learned senior counsel appearing
on behalf of the petitioners that vicarious liability does not arise so
far as the offences under the Penal Code are concerned and,
therefore, the crimes registered against the petitioners are liable to
be quashed. The learned Public Prosecutor mainly rests on the
principle laid down by the Honble Supreme Court in paragraph
No.27 thus:
27. It is thus clear that the doctrine of lifting the veil can be
invoked if the public interest so requires or if there is allegation
of violation of law by using the device of a corporate entity. In
the present case, the corporate entity has been used to conceal
the real transaction of transfer of mining lease to a third party
for consideration without statutory consent by terming it as two
separate transactions-the first of transforming a partnership
into a company and the second of sale of entire shareholding to
another company. The real transaction is sale of mining lease
which is not legally permitted. Thus, the doctrine of lifting the
veil has to be applied to give effect to law which is sought to be
circumvented.
v) To the very same effect, the learned Public Prosecutor
also relies on the ruling in Selvi J. Jayalalitha27, laying great stress
on what has been stated by the Honble Apex Court in paragraph
No.192 thus:
192. In State of Rajasthan and Ors. v. Gotan Lime Stone
Khanji Udyog Private Limited and Anr. (2016) 4 SCC 469, it
has propounded that the principle of lifting the corporate veil
was well recognized not only to unravel tax evasion but also
where protection of public interest was of paramount
importance and the corporate entity was only an attempt to
evade legal obligations and lifting of veil is necessary to
prevent a device to avoid any welfare legislation. It was
acknowledged that it was difficult to enumerate the classes of
cases where lifting the veil is permissible but it was stressed
upon that the same must necessarily depend on the relevant
statutory or other provisions, the object sought to be achieved,
the impugned conduct, the involvement of the element of the
public interest, the effect on parties who may be affected etc. It
was recorded that the doctrine of lifting the veil could be
invoked, if the public interest so required or if there was
violation of law by using the device of a corporate entity. In the
reported case, the corporate entity had been used to conceal the
real transaction of transfer of mining lease to a third party for
consideration without the statutory consent by terming it as two
separate transactions. The real transaction was the sale of
mining lease which was legally impermissible. That the doctrine
of lifting the veil has to be applied to give effect to law which is
sought to be circumvented, is thus the judicial precept.
vi) Concerning the proposition that powers possessed by
the High Court under Section 482 of the Code are very wide and
the very plenitude of the power requires great caution in its
exercise, and that the Court must be careful to see that its decision
in exercise of this power is based on sound principles, the learned
Public Prosecutor, refers to the observations of the Honble
Supreme Court in paragraph Nos.23 and 27 in Inder Mohan
Goswami23. In the same context, reference to the scope and ambit
of Courts power under Section 482 of the Code, explained by the
Honble Supreme Court in paragraph No.23, since useful, the
same is extracted as under:
23. This Court in a number of cases has laid down the scope
and ambit of courts' powers under Section 482 Cr.P.C. Every
High Court has inherent power to act ex debito justitiae to do
real and substantial justice, for the administration of which
alone it exists, or to prevent abuse of the process of the court.
Inherent power under Section 482 Cr.P.C. can be exercised:
(i) to give effect to an order under the Code;
(ii) to prevent abuse of the process of court, and
(iii) to otherwise secure the ends of justice.
24. Inherent powers under Section 482 Cr.P.C. though wide
have to be exercised sparingly, carefully and with great caution
and only when such exercise is justified by the tests
specifically laid down in this section itself. Authority of the
court exists for the advancement of justice. If any abuse of the
process leading to injustice is brought to the notice of the court,
then the Court would be justified in preventing injustice by
invoking inherent powers in absence of specific provisions in
the Statute.
Discussion of decided cases
25. Reference to the following cases would reveal that the
courts have consistently taken the view that they must use this
extraordinary power to prevent injustice and secure the ends of
justice. The English courts have also used inherent power to
achieve the same objective. It is generally agreed that the
Crown Court has inherent power to protect its process from
abuse. In Connelly v. DPP [1964] AC 1254, Lord Devlin stated
that where particular criminal proceedings constitute an abuse
of process, the court is empowered to refuse to allow the
indictment to proceed to trial. Lord Salmon in DPP v. Humphrys
[1977] AC 1 stressed the importance of the inherent power
when he observed that it is only if the prosecution amounts to
an abuse of the process of the court and is oppressive and
vexatious that the judge has the power to intervene. He further
mentioned that the court's power to prevent such abuse is of
great constitutional importance and should be jealously
preserved.
26. In R.P. Kapur v. State of Punjab 1960CriLJ1239 , this Court
summarized some categories of cases where inherent power can
and should be exercised to quash the proceedings:
(i) where it manifestly appears that there is a legal bar
against the institution or continuance of the proceedings;
(ii) where the allegations in the first information report or
complaint taken at their face value and accepted in their
entirety do not constitute the offence alleged;
(iii) where the allegations constitute an offence, but there
is no legal evidence adduced or the evidence adduced
clearly or manifestly fails to prove the charge.
27. The powers possessed by the High Court under Section
482 of the Code are very wide and the very plenitude of the
power requires great caution in its exercise. The court must be
careful to see that its decision in exercise of this power is based
on sound principles. The inherent power should not be
exercised to stifle a legitimate prosecution. The High Court
should normally refrain from giving a prima facie decision in a
case where all the facts are incomplete and hazy; more so, when
the evidence has not been collected and produced before the
court and the issues involved, whether factual or legal, are of
such magnitude that they cannot be seen in their true
perspective without sufficient material. Of course, no hard and
fast rule can be laid down in regard to cases in which the High
Court will exercise its extraordinary jurisdiction of quashing
the proceedings at any stage.
CONCLUSIONS TO BE DRAWN:
27. The present obtaining fact-situation requires
appreciation in the light of the submissions made by the learned
senior counsel for the petitioners and the learned Public
Prosecutor, and on the anvil of the authorities relied on by them
respectively.
i) The rulings, in Harshendra Kumar1 and Mrs. Anita
Malhothra2 referred to by the learned senior counsel, were in the
context of giving weight to Form No.32 showing the resignation of
a Director and its consequences on the offence alleged against Ex-
Director. As referred to hereinbefore, the offence alleged therein is
punishable under Section 138 read with 141 of the N.I. Act. But,
in the present case, it is not so. The offences alleged against the
petitioners have been the offences falling under IPC provisions and
the provisions of APPDFE Act, PC & MCSB Act and also
infraction of the provisions of the RBI Act. This apart, the main
ground is, that all the petitioners herein except the petitioner -
K.V.S. Sai Ram in Criminal Petition Nos.3080 and 3099 of 2017,
have been holding some post or other in the companies falling
under one or other of three categories, the relevant details have
already been referred to in the above so far as Avva Sita Ram Rao
alias Avva Seetha Ram, concerned with Crl.P. Nos.3276, 3277
and 3278 of 2017 arraigned as accused Nos.8, 6 and 7
respectively. The further relevant details would be mentioned in a
table at a later stage. Therefore, merely on the ground that the
petitioner in first three petitions resigned on 03.01.2011 and
worked as Director from the year 2004 to 03.01.2011 is no ground
to accede to his request, more particularly, the fact-situation in the
latter two criminal petitions clearly disclosing that the cause of
action commenced even during the directorship of petitioner in the
three core companies.
28. Concerning the submission that offence punishable
under Section 420 IPC and 406 IPC cannot co-exist and the
decisions relied on by the learned senior counsel, in Jalpa Parshad
Aggarwal10, the learned Single Judge of Punjab and Haryana High
Court quashed the FIR, basing on its earlier decision in Iqbal
Singh Randhawa28, holding that offence punishable under Section
406 IPC is an antithesis of offence under Section 420 IPC. But, in
the present case, investigation is yet to be completed and the
Investigating Officer has to arrive at a definite opinion, whether
the allegations would prima facie make out either of the offences.
This apart, as already mentioned hereinbefore not only the IPC
offences have been alleged, but also the offences under APPDFE
Act, PC & MCSB Act and the violations of the relevant provisions
of RBI Act have been alleged against the petitioners. The rulings
in Wolfgang Reim11 and R.S. Sodhi Manoranjan Pani12 are also
to the same effect.
29. On the third submission that concept of vicarious
liability is not available so far as IPC offences are concerned, in
S.K. Alagh5, the Honble Supreme Court in paragraph No.16, in
the opening words carves out an exception observing that the
Penal Code, save and except some provisions specifically
providing therefor, does not contemplate any vicarious liability
on the part of a party who is not charged directly for commission
of an offence. What is sought to be insisted by the learned senior
counsel referring to the rulings in S.K. Alagh5, Sharad Kumar
Sanghi13, Maksud Saiyed6 and GHCL Employees Stock Option
Trust14 is, when the complainant intends to rope in a Managing
Director or any Officer of the company, he is duty bound to make
a specific allegation to constitute vicarious liability and the said
ingredient is conspicuously absent in the complaints against the
petitioners. In S.K. Alagh5, where the offence punishable under
Section 406 IPC was alleged, it was a case based on a contract for
supply of goods. The complainant therein sent two demand drafts
for different amounts for supply of goods on a particular date,
despite the fact that his dealership had been terminated earlier and
he refused to receive the said demand drafts when they were sent
to him by the appellant company (Britannia Industries Limited).
Thereafter, the Company appointed a New Area Wholesale dealer
for Azamgarh. When the complainant made a demand to deliver
the goods by a letter, dated 24.09.2000, alleging that the Company
owes him a sum of Rs.1,00,000/-, the Company issued a letter
reiterating that his dealership had been terminated. When the
complainant lodged the complaint alleging the offence under
section 406 IPC against the company, in that context, it was held
that the Managing Director of the Company cannot be said to have
committed an offence under Section 406 IPC as the drafts were
drawn in the name of the company.
30. In Sharad Kumar Sanghi13, the fact-situation would
reflect that the complainant obtained a quotation from the Bhopal
Branch of M/s. Sanghi Brothers (Indore) Limited for purchase of a
TATA Diesel vehicle. The vehicle was delivered to him on
01.05.1998 on payment of the price deposited at Bhopal through
Bank Draft. The complainant faced difficulty with the vehicle and
eventually learnt that in the month of August 2000, there was a
discrepancy of the engine number in the invoice issued to him. On
his further enquiry, he found that the letter issued to Tata
Engineering and Locomotive Company (TELCO), dated
7.11.2000, that in the course of transit from the company to
Bhopal, the said vehicle had met with an accident, as a result of
which, the engine was replaced by another engine. He, therefore,
filed the complaint under Section 200 of the Code, for suppression
of information and deliberately cheating him. When cognizance
was taken and summons was issued, the same was challenged by a
revision before the learned Sessions Judge, Betul, which was
dismissed on 27.02.2002. Aggrieved over the same, when he
preferred an application under Section 482 of the Code, repelling
all the submissions, dismissed the application for quashment. The
Honble Supreme Court referring to the allegations, holding that
the allegations which found place against the Managing Director in
his personal capacity, were absolutely vague, and thereby allowed
the appeal. Thus, the fact-situation would reflect that it was based
on a contract and involvement of the Company was obvious.
31. In Sunil Bharti Mittal15 mainly the emphasis was on
the principle that the criminal intent of the alter ego of the
company, i.e., the person or group of persons that guide the
business of the company, would be imputed to the
company/corporation, referring to the legal proposition laid down
in Iridium India Telecom Ltd. v. Motorola Inc .
32. For the submission that the allegations in the complaint
do not disclose any dishonest intention and, in fact, the complaint
allegations ought to give an indication that dishonest intention was
from the beginning to sustain the offence alleged against the
petitioners, the learned senior counsel has placed reliance in Hira
Lal Hari Lal Bhagwati3, Suryalakshmi Cotton Mills Limited4,
R. Kalyani16, N.K. Wai7, Radhey Shyam Khemka9, Saroj
Kumar Poddar29 and G.N. Verma30. On the other hand, in
Pothani Chandrasekher22 relied on by the learned Public
Prosecutor, the learned Single Judge of this Court refers to the
expression of the Honble Supreme Court in Hridaya Ranjan
P.D. Verma32 that the intention of the accused at the time of
inducement can always be inferred by subsequent conduct
associated with other factors.
33. The relief sought for in all these petitions is to quash the
FIRs. Investigation is at the inceptive stage when the applications
have been filed and subsequent development has been that some of
the witnesses have been examined in each of the crimes and the
purport of statements made by some of the witnesses, referred to
in the above, when examined would definitely indicate that the
depositors were lured that they would be provided with double the
amount or in some occasions thrice the amount deposited, but no
amounts were paid as promised and instead cheques were issued
in some cases repeatedly in the names of one or the other bank
when the cheques presented in the first bank were dishonoured.
Thus, when the intention is inferential, certainly, it is not the stage
to record a positive finding just basing on the allegations made in
the complaint, more particularly, when viewed in the context of
huge number of depositors to the tune of 30-40 lakhs, that are
alleged to have been deceived involving huge amount to the tune of
more than Rs.6,000 Crores which are the crucial aspects occurring
in these crimes.
34. In the present context, it would be appropriate to refer
to the common order rendered by the Honble Division Bench of
this Court in Jakir Hussain Kosangi and others v. State of
Andhra Pradesh, represented by its Principal Secretary to
Government, Home . The petitioners therein, who were the
Directors and Managing Directors of the company, by name,
M/s. Akshaya Gold Farms and Villas India Limited, were also
petitioners in other five writ petitions appointed as whole-time
Director for five years in a company by name M/s. Agri Gold
Farms Estates India Private Limited, which is one of the core
companies in the present petitions. Similar relief as the one sought
for in the present Criminal Petitions was claimed by the petitioners
in all six writ petitions under Article 226 of the Constitution of
India for quashment of the First Information Reports. The
Honble Division Bench refers to the fact-situation therein in
paragraph No.4 thus:
4. The sum and substance of the grievance of the petitioners
is that FIRs are registered by different police in different parts
of several States alleging non-repayment of the deposits
collected by the company of which they were the Directors or
the Nominee Directors or sons of the Nominated Directors. As a
consequence, Prisoner Transit warrants are issued by various
courts making the petitioners run around, without any
redemption, seriously infringing their fundamental rights.
35. The issue agitated was that there can be only one First
Information Report under Section 154 of the Code and all
information that flows thereafter, could only be treated as material
in furtherance of the investigation. The Honble Division Bench
after projecting evolution of the law referring to a catena of
decisions rendered by the Honble Supreme Court, summarized
under sub-heading the analysis of the decisions of the Honble
Supreme Court thus:
S.NO
Decision
The dispute arose out
of
Whether the
Second (2nd) FIR
or Multiple FIRs
filed are Valid or
Invalid
1.
Ram Lal Narang Vs.
State(Delhi
Administration) and Om
Prakash Narang & Ors
Vs. State(Delhi
Administration), (1979)
2 SCC 322
Arose out of theft of
two sandstone pillars
of great antiquity.
Valid
2.
M. Krishna Vs. State of
Karnataka, (1999) 3 SCC
247
Arose out of amassing
wealth
disproportionate to
ones source of
income.
Valid
3.
V.K. Sharma Vs. Union
of India,
(2000)9SCC449
Arose out of swindling
a large number of
depositors on the false
pretext that their
deposits would be
returned with interest
on a subsequent date.
(White-Collar Crime)
Valid (Multiple
FIRs)
4.
Mohan Bhaitha Vs. State
of Bihar,
(2001)4SCC350
Arose out of a dowry
death.
Note: - The question
involved here is not
concerned about
whether there can be
more FIRs than one
but whether there can
be more trials than
one.
Held: -Offences
more than one
committed by the
same persons
could be tried at
one trial, if they
can be held to be
in one series of
facts so as to
form the same
transaction.
5.
T.T. Antony Vs. State of
Kerala, (2001) 6 SCC
350
Arose out of police
firing resulting into
deaths of few people
and injuries to a large
number of people.
Third (3rd) FIR
Invalid.
6.
Narinderjit Singh Shani
and another Vs. Union of
India, (2002)2SCC210
Arose out of swindling
of a large number of
depositors on the false
pretext that their
deposits would be
returned with interest
on a subsequent date.
Valid (Multiple
FIRs)
7.
Kari Chaudhary Vs.
Most. Sita Devi and Ors,
(2002) 1 SCC 714
Arose out of a murder
case.
Valid
8.
State of Punjab Vs.
Rajesh Syal ,
(2002)8SCC158
Arose out of swindling
of a large number of
depositors on the false
pretext that their
deposits would be
returned with interest
on a subsequent date.
(White-Collar Crime)
Valid (Multiple
FIRs)
9.
Upkar Singh v. Ved
Prakash, (2004) 13 SCC
292
Arose out of an
attempt to murder and
house-trespass cases
Valid
10.
RameshchandraNandlal
Parikh v. State of Gujarat
(2006) 1 SCC 732
Arose out of swindling
of a large number of
depositors on the false
pretext that their
deposits would be
returned with interest
on a subsequent date.
Valid (Multiple
FIRs)
11.
Vikram Vs. State of
Maharashtra, (2007) 12
SCC 332
Arose out of a murder
case.
Valid
12.
Pramod Kumar Saxena
Vs. Union of India and
Ors, (2008)9SCC685
Arose out of swindling
of a large number of
depositors on the false
pretext that their
deposits would be
returned with interest
on a subsequent date.
Valid (Multiple
FIRs)
13.
Nirmal Singh Kahlon Vs.
State of Punjab and
Others, (2009) 1 SCC
441
Arose out of scandal
involving selection of
Panchayat Secretaries.
Valid
14.
C. Muniappan and others
Vs. State of Tamil Nadu,
(2010) 9 SCC 567
Arose out of setting
fire to a university bus
and several public
buses.
Investigation of
the Second FIR
was clubbed with
the investigation
of the First FIR.
In essence, two
complaints/FIRs
are clubbed
together and
investigated
jointly.
15.
Bahubhai Vs. State of
Gujarat, (2010) 12 SCC
254
Arose out of
altercation that took
place between
members of the two
communities.
Invalid
16.
ChirraShivraj Vs. Sate of
AP, (2010) 14 SCC 444
Arose out of an
attempt to murder
case.
Second F.I.R.
held Valid
because SHO
made a mistake
by recording
information as a
fresh F.I.R. and
that this mistake
should not make
the case of
prosecution weak
especially when
no prejudice had
been caused.
17.
Shiv Shankar Singh Vs.
State of Bihar, (2012) 1
SCC 130
Arose out of dacoity
and murder.
Valid
18.
Surender Kaushik and
Others Vs. State of UP,
(2013) 5 SCC 148
Arose out of fake and
fraudulent documents
prepared by the
accused persons.
Invalid
19.
AmitbhaiAnilchandra
Shah Vs. CBI, (2013) 6
SCC 348
Arose out of murder
cases
Invalid
20.
Anju Chowdry Vs. State
of UP, (2013) 6 SCC 384
Arose out of a hate
speech.
Valid
21.
YanabSheikh@gagu Vs.
State of West Bengal,
(2013) 6 SCC 428
Arose out of a murder
case.
Invalid
It would be appropriate to refer to what has been observed by the
Honble Division Bench in paragraph No.64, which is relevant in
the present fact-scenario thus:
64. As we have pointed out earlier, in almost all the five
decisions of the Supreme Court where finance companies and its
directors were accused of collecting deposits and not repaying
them, the Supreme Court did not adopt the same view as adopted
in T.T Antony. Though in V.K Sharma and P.K Sharma the
Supreme Court granted a small reprieve, the Supreme Court did
not grant the reliefs that the petitioners have sought in these writ
petitions. It must be pointed out that a staggering amount of
nearly Rupees seven thousand crores was admittedly due, when
the first PIL was filed. The number of depositors to whom such a
huge amount was due from Agri Gold group of companies and
Akshaya Gold, was about 32 lakhs of people. These companies
had branches in several places. The depositors, who invested
money in various branches, have independent causes of action.
36. Thus, it is clear that the present group of companies in
all these crimes were also the group of companies and Akshaya
Gold in the aforesaid writ petitions. Though, not on the same
grounds that are occurring in the present petitions, but on a
different ground, the quashment was sought under Article 226 of
the Constitution of India, still, when viewed the factual matrix that
number of depositors to whom a staggering amount of more than
Rs.6,000 Crores was undisputedly due and the depositors, who
were deprived of their legitimate amount, was about 32.00 lakhs of
people, certainly, it is difficult to accede to the request in the
present petitions.
37. Certain relevant facts are also necessary to refer to that
emerge from the investigation so far done and the documents
submitted by the petitioner in Crl.P. No.3276 of 2017, to which
already advertence is made herein before, and similar statements
submitted by the learned Public Prosecutor so far as the petitioners
in Crl.P. Nos.3074 & 3075; 3076 & 3077; and 3078 & 3079 of
2017 are concerned.
38. In fact, the learned Public Prosecutor in resisting the
request made by the petitioners herein placed on record a
confessional statement said to have made by one Bejawada Veera
Venkata Babu Rao, son of Veera Raghavulu figuring as one of the
accused persons in all these crimes. The learned Public Prosecutor
would submit that the involvement of the petitioners have been
occurring in these statements. The probative value of these
statements requires examination during trial in case investigation
leads to laying charge sheets. However, as referred to in the
above, the statement regarding the details of the
Director/designated Partner maintained by the Ministry of
Corporate Affairs as on 23.04.2017 placed for perusal of this
Court by the learned Public Prosecutor would give enough
indication in viewing what has been stated by the learned Public
Prosecutor as to the three categories of the companies and the
petitioners holding one or other posts even as on 23.04.2017 is
correct and cannot at all be sidelined. It would be relevant to
project the statements which would reflect that the petitioner -
Avva Sita Ram Rao alias Seetha Ram in Criminal Petition
Nos.3276, 3277 and 3278 of 2017 is still working in some of the
Agri Gold group companies that fell in category Nos.2 and 3
referred to in the above as on 01.02.2015. The relevant entries
showing the details in the statement relating to the petitioner alone
are extracted as hereunder:
S.
No.
CIN/LLPIN
Name of the
Company/LLP
Current
designatio
n of the
Director/D
esignated
Partner
Date of
appointment
at current
designation
Original
date of
appointment
Date of
cessati
on
Compa
ny/LL
P
Status
Def
ault
ing
stat
us
4
U51219AP199
7PLC027851
AGRI GOLD
PROJECTS LIMITED
Whole-
time
director
01/01/2011
28/08/1997
-
Active
NO
10
U55101TN199
2PTC022889
VENKATADRI
HOTELS PRIVATE
LIMITED
Director
09/08/2006
09/08/2006
-
Active
NO
13
U01119AP200
7PTC055400
SIDDAVARAM
AGRO PROJECTS
PRIVATE LIMTIED
Director
04/09/2007
04/09/2007
-
Active
NO
15
U70102TG200
2PTC039346
SANCTUARY
HOMES PRIVATE
LIMITED
Director
30/08/2008
02/01/2008
-
Active
NO
16
U40101KA200
4PTC035205
NORTH
KARNATAKA
POWERGEN
PRIVATE LIMITED
Whole-
time
Director
25/09/2008
08/01/2008
-
Active
NO
17
U70200TG200
8PTC058195
KAMALATMIKA
ESTAETS PRIVATE
LIMITED
Director
17/03/2008
17/03/2008
-
Active
NO
27
U02005TG200
7PTC055637
SHAKTI TIMBER
ESTAES PRIVATE
LIMITED
Director
28/08/008
27/03/2008
-
Active
NO
28
U01403AP200
7PTC053425
SWARNA SIRI
PLANTERS
PRIVATE LIMITED
Director
26/08/2008
27/03/2008
-
Active
NO
31
U45209TG200
8PTC061100
SUSLA INFRA
DEVELOPERS
PRIVATE LIMITED
Director
18/09/2008
18/09/2008
-
Active
NO
33.
U70101TN200
8PTC070121
BILLIYARD FARMS
PRIVATE LIMITED
Director
11/12/2008
11/12/2008
-
Active
NO
35
U45200TN200
8PTC070126
BANDHO REAL
ESTATES PRIVATE
LIMITED
Director
24/09/2009
02/01/2009
-
Active
NO
36
U40109TG200
0PTC035120
SAI RENEWABLE
POWER PRIVATE
LIMITED
Director
27/01/2009
27/01/2009
-
Active
NO
37
U40109TG199
6PLC022967
CLARON POWER
CORPORATION
LIMITED
Director
31/08/2009
06/04/2009
-
Active
NO
38
U45200AP200
8PTC57993
AVANINDRA
INFRA VENTURES
PRIVATE LIMITED
Director
21/08/2010
10/08/2010
-
Active
NO
39
U70100AP200
8TC058011
RAJA SYAMALA
REALTORS
PRIVATE LIMITED
Director
20/08/2010
10/08/2010
-
Active
NO
40
U45400AP200
8PTC057777
MOTHERLAND
REALTORS
PRIVATE LIMITED
Director
20/08/2010
10/08/2010
-
Active
NO
41
U92120TG201
0PTC071623
PUSHPA
TELEVISION
PRIVATE LIMITED
Director
13/12/2010
13/12/2010
-
Active
NO
42
U63020AP201
0PTC069270
SRI
VENKATESWARA
WAREHOUSING
PRIVATRE LIMITED
Additional
Director
15/03/2011
15/03/2011
-
Active
NO
43
U22190TG201
0PTC068200
ASPRATION MEDIA
PRIVATE LIMITED
Director
14/09/2012
11/11/2011
-
Active
NO
44
U45209TG201
2PTC083953
KRYSTAL VISION
PROJECTS PRIVATE
LIMITED
Additional
Director
01/12/2014
01/11/2012
2009
-
Active
NO
i) Like-wise, Sri Avva Udaya Bhaskar Rao, petitioner in
Criminal Petition Nos.3074 and 3075 of 2017, was holding the
office of the company in the following companies as on
23.04.2017.
S.
No.
CIN/LLPIN
Name of the
Company/LLP
Current
designation
of the
Director/De
signated
Partner
Date of
appointment
at current
designation
Original
date of
appointment
Date of
cessati
on
Compa
ny/LL
P
Status
Def
ault
ing
stat
us
4
U13200AP200
8PTC061741
ABHI MINERALS
PRIVATE LIMITED
Director
29/11/2008
29/11/2008
-
Active
-
5
U15209AP200
1PTC038236
AMRUTHA
VARSHINI DAIRY
FARMS PRIVATE
LIMITED
Director
29/09/2003
29/09/2003
-
Active
-
6
U24100TN198
6PTC013669
MIRA ORGANICS
AND CHEMICALS
PRIVATE LIMITED
Director
18/10/2006
18/10/2006
-
Active
-
7
U24119TN200
5PTC055351
UNIPHASE
CHEMICASL
PRIVATE LIMITED
Director
18/06/2007
18/06/2007
-
Active
-
8
U24120AP199
9PTC031354
AGRI GOLD
ORGANICS
PRIVATE LIMITED
Director
27/09/2003
27/09/2003
-
Active
-
9
U25111PN200
3PLC051447
CHANDI
TECHNOLOGIES
AND INDUSTRIES
LIMITED
Director
18/11/2004
18/11/2004
-
Active
-
10
U31909TG199
9PLC033104
RITHWIK ENERGY
SYSTEMS
LIMITED
Director
31/08/2009
06/04/2009
-
Active
-
11
U40101KA200
04PTC035205
NORTH
KARANTAKA
POWERGEN
PRIVATE LIMITED
Whole-time
Director
02/04/2008
08/01/2008
-
Active
-
12
U40105AP200
2PTC038328
SINGARAYA
HILLS GREEN
POWER GENCO
PRIVATE LIMITED
Managing
Director
04/08/2005
04/08/2005
-
Active
-
13
U40109TG199
6PLC022967
CLARION POWER
CORPORATION
LIMITED
Director
31/08/2009
06/04/2009
-
Active
-
14
U40109TG200
0PTC035120
SAI RENEWABLE
POWER PRIVATE
LIMITED
Director
03/11/2011
27/01/2009
-
Active
-
18
U45209AP200
8PTC058079
AKHILENDRA
INFRA AND AGRO
VENTURES
PRIVATE LIMITED
Director
25/07/2013
18/06/2013
-
Active
-
19
U45209TG201
2PTC083953
KRYSTAL VISION
PROJECTS
PRIVATE LIMITED
Additional
Director
01/12/2014
01/12/2014
-
Active
-
20
U51219AP199
7PLC027851
AGRI GOLD
PROJECTS
LIMITED
Managing
Director
30/11/2002
30/11/2002
-
Active
-
24
U63020AP201
0PTC069270
SRI
VENKATESWARA
WARE HOUSING
PRIVATE LIMITED
Additional
Director
08/04/2011
08/04/2011
-
Active
-
29
U92199TG200
2PTC039047
ARKA LEISURE
AND
ENTERTAINMENT
S PRIVATE
LIMITED
Director
30/05/2002
30/05/2002
-
Active
-
ii) Sri Avva Venkata Subrahmanyeswara Sarma, petitioner
in Criminal Petition Nos.3076 and 3077 of 2017 is holding the
office in the following companies as on 23.04.2017.
S.
No.
CIN/LLPIN
Name of the
Company/LLP
Current
designation
of the
Director/De
signated
Partner
Date of
appointment
at current
designation
Original
date of
appointment
Date of
cessati
on
Compa
ny/LL
P
Status
Def
ault
ing
stat
us
3
U01120AP199
5PLC022211
AGRI GOLD
FOODS AND
FARM PRODUCTS
LIMITED
Director
27/08/2013
29/11/2008
-
Active
-
8
U24231TN200
8PTC067409
MIRAGEL CHEM
PRODUCTS
PRIVATE LIMITED
Director
21/04/2008
21/04/2008
-
Active
-
9
U32109KA200
7PTC042635
AVVAS INFOTECH
PRIVATE LIMITED
Managing
Director
15/07/2013
09/06/2008
-
Active
-
16
U45400AP200
8PTC057777
MOTHERLAND
REALTERS
PRIVATE LIMITED
Director
27/08/2011
03/01/2011
-
Active
-
19
U51909AP199
6PLC025600
AGRI GOLD
EXIMS LIMITED
Managing
Director
04/05/2006
04/05/2006
-
Active
-
20
U55101KA200
4PTC035044
RAAM AVVAS
RESORTS AND
HOTELS PRIVATE
LIMITED
Director
20/05/2009
20/05/2009
-
Active
-
23
U72200KA201
5PTC084594
AVVAS
CONSULTANCY
SERCIES PRIVATE
LIMITED
Director
09/12/2015
09/12/2015
-
Active
-
25
U72300TN200
5PTC056820
COMMUNICATIO
N NEXT
CONSULTANCY
PRIVATE LIMITED
Director
02/09/2011
03/01/2011
-
Active
-
26
U74999TG200
7PTC053696
RETAIL SMART
GLOBAL
SHOPPING
PRIVATE LIMITED
Director
01/06/2007
01/06/2007
-
Active
-
27
U92199TG200
2PTC039047
ARKA LEISURE
AND
ENTERTINMENTS
PRIVATE LIMITED
Director
14/09/2010
08/03/2010
-
Active
-
iii) Sri Avva Venkata Siva Ram alias Siva Rama Krishna,
petitioner in Criminal Petition Nos.3078 and 3079 of 2017, is
holding the office in the following companies as on 23.04.2017:
S.
No.
CIN/LLPIN
Name of the
Company/LLP
Current
designation
of the
Director/De
signated
Partner
Date of
appointment
at current
designation
Original
date of
appointment
Date of
cessati
on
Compa
ny/LL
P
Status
Def
ault
ing
stat
us
1
U01120AP199
5PLC022211
AGRI GOLD
FOODS AND
FARM PRODUCTS
LIMITED
Additional
Director
30/12/2013
30/12/2013
-
Active
-
4
U15209AP200
1PTC038236
AMRUTHA
VARSHINI DAIRY
FARMS PRIVATE
LIMITED
Director
19/12/2001
19/12/2001
-
Active
-
5
U24231TN198
8PTC016307
CLINCHEM
PHARMACEUTICA
LS PRIVATE
LIMITED
Director
06/08/2001
06/08/2001
-
Active
-
6
U31909TG199
9PLC033104
RITHWIK ENERGY
SYSTEMS
LIMITED
Director
31/08/2009
06/04/2009
-
Active
-
7
U32109KA200
7PTC042635
AVVAS
INFORTECH
PRIVATE LIMITED
Director
09/06/2007
09/06/2007
-
Active
-
8
U40105AP200
2PTC038328
SINGARAYA
HILLS GREEN
POWER GENCO
PRIVATE LIMITED
Additional
Director
27/07/2013
27/07/2013
-
Active
-
9
U40108AP201
2PTC080246
BIOMASS
DEVELOPMENT
COOPERATION
PRIVATE LIMITED
Director
12/04/2012
12/04/2012
-
Active
-
10
U40109TG199
6PLC022967
CLARION POWER
CORPORATION
LIMITED
Managing
Director
06/04/2009
06/04/2009
-
Active
-
24
U55101KA200
4PTC035044
RAAM AVVAS
RESORTRS AND
HOTELS PRIVATE
LIMITED
Director
20/05/2009
20/05/2009
-
Active
-
25
U60200TG200
8PTC060760
TOURISM AND
TRAVEL MEDIA
ENTERTAINMENT
PRIVATE LIMITED
Managing
Director
10/01/2012
24/10/2008
-
Active
-
28
U72200KA201
5PTC084594
AVVAS
CONSULTANCY
SERVICES
PRIVATE LIMITED
Director
09/12/2015
09/12/2015
-
Active
-
30
U74920TG200
9PTC065232
ANVI SECURITY
AND SERVICES
PRIVATE LIMITED
Director
30/09/2009
30/09/2009
-
Active
-
32
U74999TG200
7PTC053696
RETAIL SMART
GLOBAL
SHOPPING
PRIVATE LIMITED
Director
01/06/2007
01/06/2007
-
Active
-
39. In the present context, it would be appropriate to refer
to the ruling in Narinderjit Singh Sahni and another v. Union of
India and others . The appellants therein moved the writ
petitions under Article 32 of the Constitution of India by reason of
supposed infraction of Article 21 seeking grant of an order for bail
in the nature as prescribed under Section 438 of the Code, in line
with the orders passed in earlier two writ petitions by the Honble
Supreme Court. The said writ petitions were requested to refer to
the larger Bench and, therefore, they were taken up by the Three-
Judge Bench of the Honble Supreme Court. The offence alleged
to have committed by the appellants relate to the white collar
crime. A large number of cases of cheating against the appellants
were pending in different States. It was held that virtual
impossibility of release owing to pendency of cases in various
States itself not sufficient to establish infraction of Article 21.
Thus, in almost akin to the factual matrix in the present crimes,
even relief sought for by the appellants therein was refused, which
is a smaller relief when compared with the larger relief sought for
in the cases at hand.
40. On quashment of FIRs while holding that it would be a
misplaced sympathy of the Court on such white-collared accused
persons whose acts of commission and omission has ruined a vast
majority of poor citizens of the country, the expression of the
Honble Supreme Court in paragraph N.61 in Narinderjit Singh
Sahni35 is very apt to refer to thus:
61. It is no doubt true that this Court earlier on two occasions
in Writ Petition (Crl.) No.256/99 and Writ Petition (Crl.)
Nos.72-75/2000, has granted the relief that in the event of the
arrest of the petitioner in connection with any criminal case in
his capacity as Managing Director/Director of the Group of
companies, the arresting officer shall release him on bail on his
executing a bond to the satisfaction of the arresting officer.
This order obviously tantamounts to an order, invoking the
provisions of Section 438 of the Code of Criminal Procedure.
The Court adopted the aforesaid procedure to find out a
solution in the peculiar situation and being of the opinion that
even though the accused is able to get orders for bail from
different Courts, where cases are pending, but in view of the
large number of cases against the accused throughout the
country , it has physically not become possible to release the
accused from the custody. If an accused facing a charge under
Sections 406 409 420 and 120B is ordinarily not entitled to
invoke the provisions of Section 438 of the Criminal Procedure
Code unless it is established that such criminal accusation is
not a bone fide one it is difficult, to conceive that an accused
who is involved in thousands of cases in different parts of the
country by cheating millions of countrymen, can be given
benefit of the privilege of anticipatory bails as a matter of
routine, as was done in the two cases, on the basis of which the
present batch of cases have been field. In the manner in which
these white-collared crimes are committed and the extent to
which it has pervaded the society at large, we are of the
considered opinion that the two cases decided by this Court
earlier would not be of universal application and cannot be
used as a precedent for availing of the privilege in the nature of
an anticipatory bail. The Court itself was conscious of the
peculiar situation and, therefore, noticed that the Court is
exercising it discretion in the peculiar nature and facts of the
cases. We don not agree with the proposition that an accused
being involved in large number of criminal cases in different
parts of the country, if is not able to be released from custody
even on getting bail orders in some cases, itself would
tantamount of violation of the right of a citizen under Article 21
of the Constitution. The object of Article 21 is to prevent
encroachment upon personal liberty by the Executive save in
accordance with law, and in conformity with the provisions
thereof. It is therefore, imperative that before a person is
deprived of his life or personal liberty, the procedure
established by law must strictly be followed and must not be
departed from, to the disadvantage of the person affected. In
each case where a person complains of the deprivation of his
life or personal liberty, the Court, in exercise of its
constitutional power, of judicial review, has to decide whether
there is a law authorising such deprivation and whether in the
given case, the procedure prescribed by such law is reasonable,
fair and just and not arbitrary, whimsical and fanciful. On
account of liberal interpretation of the words 'life' and 'liberty'
in Article 21, the said Article has now come to be invoked
almost as a residuary right, even to an extent which the
founding fathers of the Constitution never dreamt of. In a
country like ours, if an accused is alleged to have deceived
millions of countrymen, who have invested their entire life's
saving in such fictitious and frivolous companies promoted by
the accused and when thousands of cases are pending against
an accused in different parts of the country, can an accused at
all complain of infraction of Article 21, on the ground that he is
not being able to be released out of jail custody in view of
different production warrants issued by different Courts.
Issuance of production warrants by the Court and the
production of accused in Court, in cases where he is involved is
a procedure established by law and consequently, the accused
cannot be permitted to make a complaint of infraction of his
rights under Article 21. In our considered opinion, it would be a
misplaced sympathy of the Court on such white-collared
accused persons whose acts of commission and omission has
ruined a vast majority of poor citizens of this country. Though
we agree that in given case, Court may be justified in directing
release of the accused, taking a stock of the entire situation in
the case. While, therefore, we agree with the submissions of the
counsel for the petitioners-accused that an accused could
maintain a petition under Article 32, but the Court would not be
justified in directing the release of such accused under a
blanket order like the one, which has been relied upon by the
counsel for the accused persons and such a course of action
would perpetrate gross injustice.
41. Though, not on such large scale as the one occurring in
the present crimes, still, on smaller scale, where the fact-situation
is identical, the Honble Supreme Court while setting aside the
order of quashment passed by the High Court of Judicature at
Madras in
K. Boodanathan v. S. Natarajan & others , held in paragraph
Nos.4, 5 and 6 thus:
4. The basis of the order of the High Court appears to be that
the respondent accused - S. Natarajan (Accused No.12) was a
Director of M/s PNL Nidhi Limited during the period between
1995 and 2000 and the default in repayment of dues to the
depositors by the Company - M/s PNL Nidhi Limited occurred
in the year 2004. IN this regard, we have taken note of two
relevant facts which appear from the record. The first is that
during the period when the respondent accused was a Director
of M/s PNL Nidhi Limited the funds of M/s PNL Nidhi Limited
were diverted in different corporate entities and such diversion
resulted in consequential default in repayment of money to the
depositors.
5. Another fact that emanates from the record is that the
respondent accused held the controlling interest in a private
limited company, i.e. Calfin Credit Holdings Pondicherry
Limited, Chennai, which was one of the beneficiaries of the
diverted funds and he had transferred the said Company (Calfin
Credit holdings Pondicherry Limited, Chennai) to the other co-
accused in the year 1993.
6. In the light of the above facts and circumstances of the case
we do not think that the High Court was right in quashing the
criminal proceedings against the respondent accused who was
accused No.12 in the said criminal proceedings.
42. In a recent ruling, Parbatbhai Aahir @ Parbatbhai
Bhimsinhbhai Karmur and others v. State of Gujarat and
another , rendered on 04.10.2017, referring to judicial precedents
in Gian Singh v. State of Punjab [(2012) 10 SCC 303], Narinder
Singh v. State of Punjab [(2014) 6 SCC 466], Vikram Anantrai
Doshi25, Central Bureau of Investigation v. Mahinder Singh
[(2016) 1 SCC 389], and State of Tamil Nadu v. R. Vasanthi
Stanley [(2016) 1 SCC 376], the Honble Supreme Court
summarized the propositions in regard to exercise of extraordinary
power under Section 482 of the Code.
i) Propositions (viii) and (ix) in paragraph No.15 are
absolutely relevant in the context of deciding the present request.
They are thus:
15. The broad principles which emerge from the precedents
on the subject, may be summarised in the following
propositions:
(i) xxx
(ii) xxx
(iii) xxx
(iv) xxx
(v) xxx
(vi) xxx
(vii) xxx
(viii) Criminal cases involving offences which arise from
commercial, financial, mercantile, partnership or
similar transactions with an essentially civil flavour
may in appropriate situations fall for quashing where
parties have settled the dispute;
(ix) In such a case, the High Court may quash the criminal
proceeding if in view of the compromise between the
disputants, the possibility of a conviction is remote and
the continuation of a criminal proceeding would cause
oppression and prejudice; and
ii) Concerning financial or economic fraud or
misdemeanour, the Honble Supreme Court laid down
proposition (x) thus:
(x) There is yet an exception to the principle set out in
propositions (viii) and (ix) above. Economic offences
involving the financial and economic well-being of the state
have implications which lie beyond the domain of a mere
dispute between private disputants. The High Court would be
justified in declining to quash where the offender is involved in
an activity akin to a financial or economic fraud or
misdemeanour. The consequences of the act complained of
upon the financial or economic system will weigh in the
balance.
iii) The offences alleged against the appellants therein were
punishable under Sections 384, 467, 468, 471, 120-B and 506 (2)
IPC. On the complaint of respondent No.2 therein, the FIR was
lodged, wherein the complainant and his siblings deprived of
landed property valued at Rs.12.50 Crores on account of a
conspiracy hatched by the appellants and by other co-accused.
When the appellants made a request for quashing the FIR, the
Coordinate Bench of Honble High Court of Gujarat rejected the
application under Section 482 of the Code. Aggrieved over the
rejection order, when the appellants preferred the aforesaid
Criminal Appeal, the Honble Supreme Court summarized the
propositions in paragraph No.15 (i) to (x) and upheld the rejection
order agreeing with the observation of the Honble High Court that
it was a case involving extortion, forgery and conspiracy where all
the appellants were acting as a team and it was not in the interest
of society to quash the FIR on the ground that a settlement had
been arrived at with the complainant.
43. Adverting to the submission made by the learned senior
counsel in one of the sets of these criminal petitions that a Division
Bench of this Court has seized the Agri Gold Group of
Companies Public Interests Litigation Petition and, therefore, it
may not be appropriate for this Court to decide the present
petitions, it is to state that the Public Interests Litigation mostly
concerns with the seizure of properties and return of amounts
deposited by the depositors. It is no doubt true, some of the
respondents in the aforesaid Public Interests Litigation filed writ
petitions under Article 226 of the Constitution of India requesting
to quash the FIRs, and the common order was passed rejecting the
request in the said writ petitions was adverted to in the above.
But, the question therein was that there cannot be multiple FIRs
concerning one and the same transaction besides, the petitioners
herein being not the petitioners to the writ petitions. That ground
was rejected and consequently the writ petitions were dismissed by
the Honble Division Bench.
44. In the present Criminal Petitions the grounds agitated
are different from the grounds raised in the writ petitions. The
grounds have been substantially adverted to in the above.
Therefore, that submission does not merit acceptance.
CONCLUSION:
45. Incidentally, it is relevant to state that, initially, the
learned senior counsel in all these petitions placed reliance in an
unreported decision in Criminal Petition No.14164 of 2016, dated
29.09.2016, where a learned Single Judge of this Court while
dismissing the criminal petition, directed the Investigating Officer
not to arrest the accused till filing charge sheet. The learned senior
counsel would submit that the Honble Supreme Court in Habib
Abdullah Jeelani19 has not prohibited granting interim order, but
held that in exercise of jurisdiction under Article 226 of the
Constitution of India or Section 482 of the Code, and Court if it
thinks fit, regard being had to the parameters of quashing and the
self-restraint imposed by law, has the jurisdiction to quash the
investigation and may pass appropriate interim orders as thought
apposite in law, but it is absolutely inconceivable and unthinkable
to pass an order of the present nature while declining to interfere
or expressing opinion that it is not appropriate to stay the
investigation. The fact-situation therein would show that a learned
Single Judge of this Court while rejecting the quashment of FIR
and consequential investigation, directed the police not to arrest
the petitioner till completion of investigation.
46. It is pertinent to mention that the petitioners in all these
criminal petitions have resorted to invoking the jurisdiction under
Section 438 of the Code by filing appropriate petitions on the file
of this Court and they were coming up for disposal. That was the
ground, on which the request for grant of interim order was not
acceded to. It is also relevant to mention that during the pendency
of these petitions in the last week of April, 2017, two of the
petitioners have been arrested, and in that connection, when
arguments were advanced, to direct the police to release them as
the Investigating Officer, in utter disregard to the pendency of
these petitions did effect the arrest, was not acceded to by passing
appropriate orders on 28.04.2017.
47. The learned Public Prosecutor has submitted various
Government Orders in relation to seizure of the properties of the
petitioners in all these crime. Perused the Government Orders, but
it is unnecessary to advert to them, at this stage, in deciding the
requests herein in these petitions.
48. The learned Public Prosecutor has also submitted
Forensic Audit of Agri Gold Group of Companies and some of the
Annexures thereto in a sealed cover. Perused the Forensic Audit
Report and the Annexures thereto. The entire material placed on
record would clearly indicate that a huge amount of about
Rs.6,380 Crores was collected from the depositors, but did not
pay the depositors the amounts promised on maturity. This apart,
the Core Companies of Agri Gold Group of Companies have
issued cheques to the depositors, and when they were submitted
with the banks, they were dishonoured. When the depositors
again approached, again cheques were issued in the name of a
different bank, but when they were presented again by the
depositors, they were also dishonoured. Added insult to the
injury, the depositors were also issued bonds by the Group of
Companies, but unfortunately, they were also collected back from
the depositors by the concerned authorities of the local branches
promising to pay the amounts asking them to wait for a month or
two and ultimately the every attempt made by the depositors to
get back the amounts proved totally abortive. This has been the
fact-scenario at the substratum level. When examined in the light
of these facts, even at this stage, the invariable conclusion is that
there is strong prima facie material to reject the requests made by
the petitioners herein.
49. Thus, when kept in view, the statements relating to the
details of the petitioners in all these crimes, Avva Sita Ram Rao
alias Seetha Ram, Avva Uday Bhaskar Rao, Avva Venkata
Subramanyeswara Sarma, Avva Venkata Siva Ram / Siva Rama
Krishan and K.V.S. Sai Ram alias Avva Sai Ram, maintained by
the Ministry of Corporate Affairs.
50. The submission of the learned Senior Counsel is that
Avva Sita Ram Rao alias Seetha Ram in first three Criminal
Petitions, since resigned from the directorship of the three core
comapneis, as evidenced by Form - 32, cannot be prosecuted and
is entitled to quashment of FIRs, is without merit for the reason,
the petitioner is found to hold the controlling interest in other
companies falling either under Category I or II as could be seen
from the statement relating to which companies, as per the
prosecution case, the depositors amount has been diverted and in
the second and the third criminal petitions, the complaint
allegations would clearly show that he was holding the post of
director when the depositors started depositing the amounts even
way back in 2007 and 2004 years.
51. Even concerning vicarious liability, the decisions relied
on by the learned senior counsel, mainly, relate to the offences
punishable under Sections 138 and 141 of IPC, as has already
adverted to hereinbefore, where a special provision is enacted
under Section 141 of the Negotiable Instruments Act therefor.
But, unless, the investigation is completed, at this stage, it is
difficult to hold that the petitioners cannot be held liable
vicariously, more particularly, when kept in view, the authorities
relied on by the learned Public Prosecutor referred to in the above,
in the context of alter ego. Further, the complaints filed in all
these criminal petitions were lodged by the depositors, who are
absolutely unaware of the relevant details, such as, who have been
the directors or managing directors of the companies or
wholesome directors of which of the companies. The same can
only be unravalled, when a thorough probe is made by the
investigating agency into the allegations, and, therefore, the
submission that all the complaints herein suffer from specific
allegations against the petitioners, and, therefore, the FIRs are
liable to be quashed is of no avail, at this stage.
52. The rulings relied on by the learned Public Prosecutor
have got direct bearing on the allegations in the complaints. The
decisions in Pothani Chandrasekher22, Soma Suresh Kumar24,
would reflect that the depositors amounts were swindled away by
creating false documents amounting to crores of rupees. In
Vikram Anantrai Doshi25 and Gotan Lime Stone Khanji Udyog
Pvt. Ltd26, invocation of doctrine of lifting the veil is open when
public interest demands, and Selvi J. Jayalalitha27. Besides these
authorities, common order in W.P. Nos.29374 of 2016, 10185,
11201, 11245, 12943 and 13005 of 2017 dated 04.07.2017,
rendered by the Honble Division Bench of this Court referred to
herein above, rejecting the similar request made under Article 226
of the Constitution of India, where depositors money herein is
also subject matter therein and directly referred to by the Honble
Division Bench though, not in the present context, but in a
different context has bearing on the requests made herein.
53. This apart even the decisions in Narinderjit Singh
Sahni34 and K. Boodanathan v. S. Natarajan referred to in the
above would make it abundantly clear that in crimes of this nature,
more particularly, white collar cases, when numerous cases of
cheating in different States are occurring, quashment of the
proceedings cannot be resorted to.
54. The propositions summarized by the Honble Supreme
Court in Parbatbhai Aahir @ Parbatbhai Bhimsinhbhai
Karmur37, referred to in the above, are sufficient to reject the
request of quashment of FIRs pleaded by the petitioners in all
these criminal petitions. It is no doubt true, Avva Sai Ram, the
petitioner in Criminal Petition Nos.3080 and 3099 is concerned,
though, he claims that he is totally unconnected with the core
companies, but, investigation is to be completed to unearth his
acts in the companies falling under Categories - II and III floated
by the core companies.
55. Thus, summing up, when the entire conspectus of facts
occurring in the present crimes is scrutinized, it is difficult to find
that continuation of investigation in these crimes by the C.B.
C.I.D. would amount to abuse of process of law, as sought to be
viewed by the learned senior counsel in all these criminal petitions,
more particularly, when the financial fraud is the allegation in the
present crimes creating a hazard in the financial interest of the
society. Therefore, there is no other option except to reject the
requests in all these criminal petitions. Accordingly, all these
Criminal petitions are dismissed.
56. It is made clear that the observations in the present
common order ought not be treated as having any effect on the
investigation or during trial, in case, investigation leads to charge,
and, the investigating officer is directed to proceed with in
accordance with law, uninfluenced by any of the observations
made in this order.
As a sequel thereto, Miscellaneous Petitions, if any, pending
in these Criminal Petitions stands dismissed.
___________________________
A. SHANKAR NARAYANA, J
Date:09.10.2017
CRIMINAL PETITION Nos.3276 OF 2017 AND BATCH
09-10-2017
Avva Sita Ram Rao alias Seetha Ram & others .. Petitioners
The State of Andhra Pradesh & another..Respondents
Counsel for the Petitioner in : Sri Kapil Sibal, Senior Counsel,for Sri M. Prathap Reddy
Crl. Pet. Nos.3276, 3277 & 3278 of 2017
Counsel for the Petitioner in: Sri V. Pattabhi, learned Counsel,
Crl. Pet. Nos.3074 & 3075 of 2017for Ms. Thota Suneetha
Counsel for the Petitioner in : Sri Kanakamedala Ravindra Kumar,
Crl. Pet. Nos.3076 & 3077 of 2017 learned counsel, for Ms. Elipe Shantha
Sree
Counsel for the Petitioner in : Sri L. Ravichandran, Senior Counsel, for Sri K. Janakirami Reddy
Crl. Pet. Nos.3078& 3079 of 2017
Counsel for the Petitioner in: Sri V. Pattabhi, learned counsel,for Sri M.P. Kashyap
Crl. Pet. Nos.3080 & 3099 of 2017
Counsel for the respondents:Public Prosecutor for the State of A.P.
<GIST:
>HEAD NOTE:
?CASES REFERRED:
1. 2011 (3) SCC 351.
2. 2012 (1) SCC 520
3. 2003 (5) SCC 257
4. 2006 SC 1683
5. 2008 (5) SCC 662
6. 2008 (5) SCC 668
7. 2007 (9) SCC 481
8. 1992 Supp. (1) SCC 335
9. 1993 (3) SCC 54
10. 1987 2 RCR (Cri) 427
11. 2012 6 AD (Delhi) 568
12. 2009 151 CompCas 583 (Gauhati)
13. (2015) 12 SCC 781
14. (2013) 4 SCC 505
15. (2015) 4 SCC 609
16. (2009) 1 SCC 516
17. 1994 (4) SCC 260
18. 2014 (8) SCC 273
19. (2017) (2) SCC 779
20. 2009 (4) SCC 439
21. 2016 (11) SCC 703
22. (2005) 2 APLJ 374 (AP)
23. (2007) 12 SCC 1
24. (2013) 10 SCC 677
25. (2014) 15 SCC 29
26. (2016) 4 SCC 469
27. (2017) 6 SCC 263
28. 1977 C.L.R. (Pb. & Har) 134
29. (2007) 3 SCC 693
30. (2014) 4 SCC 282
31. (2010) 3 SCC 330
32. 2000 (1) ALT (Crl.) 349 (SC) : 2000 SCC (Cri) 786
33. (2011) 1 SCC 74
34. 2017 (3) ALT (Crl.) 30 (DB) (AP)
35. (2002) 2 SCC 210
36. Criminal Appeal No(s) 1660-1662 of 2017
[Arising out of Special Leave Petition (Criminal Nos.2875-2877 of 2016]
37. Criminal Appeal No.1723 of 2017
[ arising out of SLP (Crl) No.9549 of 2016), dated 04-10-2017]
38. Criminal Appeal Nos.1660-1662 of 2017 dated 15.09.2017
DATE OF JUDGMENT PRONOUNCED: 09-10-2017
HONOURABLE SRI JUSTICE A. SHANKAR NARAYANA
CRIMINAL PETITION Nos.3276, 3277 AND 3278 OF 2017,
CRIMINAL PETITION Nos.3074 AND 3075 OF 2017,
CRIMINAL PETITION Nos.3076 AND 3077 OF 2017,
CRIMINAL PETITION Nos.3078 AND 3079 OF 2017,
AND
CRIMINAL PETITION Nos.3080 AND 3099 OF 2017
COMMON ORDER:
Requests are made in these applications by the petitioners,
who are arraigned as accused in Crime No.6 of 2015 of
Madanapalle
II Town Police Station, Chittoor District, Andhra Pradesh; Crime
No.378 of 2014 of Nellore III Town Police Station, SPSR Nellore,
Andhra Pradesh; and Crime No.3 of 2015 of Peddapadu Police
Station, West Godavari District, Andhra Pradesh, to invoke the
inherent power under Section 482 of the Code of Criminal
Procedure, 1973 (for short Code), and to quash the First
Information Reports (FIR) in the said crimes.
2. The offences alleged against the petitioners are
punishable under Sections 406, 420 and 120-B of Indian Penal
Code 1860, 5 of Andhra Pradesh Protection of Depositors of
Financial Establishment Act, 1999 (APPDFE Act), 4 of Prize Chits
and Money Circulation Scheme (Banning) Act, 1978 (PC & MCSB
Act) and under the provisions of Reserve Bank of India Act, 1934
(RBI Act).
3. For convenience sake, the names of the petitioners in
these petitions, crime numbers, their status in the array of accused
in these crimes, names of the company with which they are
associated and the offences alleged against them are projected in a
tabular column, as hereunder:
Sl.
No.
Name of the Accused
Crimin
al
Petitio
n No.
Crime No. &
Police Station
Accused
No.
Name of the Company
1.
Avva Sita Ram Rao alias
Seetha Ram
3276
6 of 2015
Madanapalle
II Town
Police
Station,
Chittoor
District, A.P.
A-8
Agri Gold Farm Estates
India Private Limited
2.
Avva Sita Ram Rao alias
Avva Seetha Ram
3277
378 of 2014,
III Town
Police
Station,
SPSR Nellore,
A.P.
A-6
Agri Gold Estate Privaet
Limited
3.
Avva Sita Ram Rao alias
Avva Seetha Ram
3278
3 of 2015
A-7
Agri Gold Management
4.
Avva Uday Bhaskar Rao
3074
378 of 2014
Nellore III
Town Police
Station,
SPSR Nellore,
A.P.
A-9
Agri Gold Farm Estates
India Private Limited
Management
5.
Ava Udya Bhaskar Rao
3075
3 of 0215
Peddapadu
Police
Station, West
Godavari
District, A.P.
A-10
Agri Gold Farm Estates
India Private Limited
Management
6.
Ava Venkata
Subramanyeswara
Sarma 3076
3076
378 of 2014,
Nellore III
Town Police
Station,
SPSR Nellore,
A.P.
A-11
Agri Gold Farm Estates
India Private Limited
Management
7.
Avva Venkata
Subramanyeswara
Sarma
3077
3 of 2015,
Peddapadu
Police
Station, West
Godavari
District, A.P.
A-12
Agri Gold Farm Estates
India Private Limited
Management
8.
Avva Venkata Siva Ram
/ Siva Rama Krishna
3078
3 of 2015,
Peddapadu
Police
Station, West
Godavari
District, A.P.
A-11
Agri Gold Farm Estates
India Private Limited
Management
9.
Avva Venkata Siva Ram
/ Siva Rama Krishna
3079
378 of 2014
Nellore III
Town Police
Station,
SPSR Nellore,
A.P.
A-10
Agri Gold Farm Estates
India Private Limited
Management
7.
K.V.S. Sai Ram
3080
3 of 2015,
Peddapadu
Police
Station, West
Godavari
District, A.P.
A-9
Agri Gold Farm Estates
India Private Limited
Management
8.
KVS Sai Ram alias
Avva Sai Ram
3099
378 of 2014
Nellore III
Town Police
Station,
SPSR Nellore,
A.P.
A-8
Agri Gold Farm Estates
India Private Limited
Management.
CONTENTIONS/PLEAS RAISED IN THE PETITIONS:
Criminal Petition Nos.3276, 3277 and 3278 of 2017:
4. It would be convenient if these petitions are taken up
commonly since almost identical pleas have been set out in
requesting quashment of the FIRs.
5(i). One Avva Sita Ram Rao alias Seetha Ram is the
petitioner in these petitions. He is arraigned as accused Nos.8, 6
and 7 in Crime Nos.6 of 2015, 378 of 2014 and 3 of 2015
respectively. It is not in dispute that he worked as director from
the year 2004 to 03.01.2011, on which date, he retired from the
three companies viz., M/s. Agri gold Farm Estates India Private
Limited, Agri Gold Constructions Private Limited and Dreamland
Ventures Private Limited. On the basis of the complaints lodged
by respondent No.2 - de facto complainant viz., R.V. Subbareddy,
V. Venkat Ram Prasad and Gantasala Venkanna Babu,
respectively, in each of these crimes, the concerned Station House
Officers have registered the aforesaid crimes for the offences
referred to in the above.
(ii). Substantially, the allegations levelled in Crime No.6 of
2015 have been that the de facto complainant started investing an
amount of Rs.60/- per day with M/s. Agri Gold Farm Estates India
Private Limited in Madanapalle from 14.07.2014 which
cumulatively amounted to approximately Rs.20,000/-. He
complained that the investment returns were not paid to him by
the company after the due date was passed and the company was
closed. He learnt from the news channels that even other
customers/depositors have been duped and the officials of the
company refused to make payments.
(iii) He alleges that the cheques issued by the company,
when presented, were bounced and the companys sister concern,
M/s. Chandana Priya Ventures was even promoted by Mr. Sai
Kumar, cine actor, who used to propagate to promote the scheme.
He even alleged that the company was involved in milk business
and earned crores of money in benami names. The de facto
complainant also alleges that when he approached the 11 accused
persons requesting them to pay the amount, they refused, upon
which, he filed the complaint with the Station House Officer,
Madanapalle II Town Police Station, on 06.01.2015, which was
registered as Crime No.6 of 2015 and later investigation was taken
up by the Crime Investigation Department, Hyderabad (CID).
(iv) The de facto complainant in Criminal Petition No.3277
of 2017 states that he deposited an amount of Rs.25,000/- in Agri
Gold Scheme in the name of his daughter for a period of six and
half (6) years who promised him that he will get double the
amount or a plot upon maturity of the scheme. He believed and
deposited the said amount on 22.11.2007 and receipt was passed
with maturity date as 22.5.2014.
(v) Lured by another scheme started by the company that
within six (6) years, the deposit would be doubled, he invested an
amount of Rs.4,05,000/- in the year 2013. When he approached
the Agri Gold Office situated at Nellore on maturity of the first
deposit, the representatives of the company initially asked him to
come again and for sometime thereafter, he wandered around the
company, but the company did not return his deposit amount.
For the second deposit, he was given bonds by the company, but,
according to the de facto complainant, when he approached the
branch, the persons in the branch, illegally collected the deposit
bond receipts from him,
a month before the maturity date and gave acknowledgement
promising to repay the deposit amount on maturity, but failed to
keep up the promise. He named one G. Prabhakar Rao and
Suresh of Kovuru village, at whose instance, he joined the said
scheme and paid the amount at Brundavanam Office of Agri Gold
and that constrained him to file the complaint with the Nellore III
Town Police Station, SPSR Nellore District, Andhra Pradesh.
(vi) In Criminal Petition No.3278 of 2017, the de facto
complainant viz., Gantasala Venkanna Babu, belonging to
Vaddigudem village, Peddapadu Mandal, West Godavari District,
also met with the same fate having deposited Rs.10,000/- on
30.05.2004 through one Ghantasala Venkata Ranga Raju with
A/c. No.489721 and after ten years period, when the company was
supposed to give him Rs.40,000/- on maturity date 30.05.2014,
they did not pay the amount. The cheque for Rs.40,000/-, issued
in favour of his grandmother, when presented, was dishonoured
and the company issued yet another cheque dated 06.12.2014
drawn on Bank of India, Gajuwaka, Vizag Branch, but, it too met
with the same fate.
He was, therefore, constrained to lodge a complaint with the
Station House Officer, Peddapadu Police Station, West Godavari
District. The investigation was subsequently taken up by the CID.
(vii) These have been the allegations, based on which,
complaints were registered by the concerned Station House
Officers, and, of course, investigation was taken up by the CID.
6(i) Turning to the pleas put-forth in these three petitions,
as they are identical, reference to the details mentioned in Criminal
Petition No.3267 of 2017 would suffice.
(ii) The petitioner states that he is being roped in the present
crimes in his capacity as being the erstwhile director of the
companies, even though, he had resigned as the director of the
company on 03.01.2011 i.e., more than three years before the
investigation was commenced. He would state that based on his
designation, he had no interaction with the companies and was in
any way involved in the management or working of the companies
and the de facto complainant has deliberately suppressed the same
with a malicious intention who arraigned him as an accused in
order to arm-twist him to come into his illegal demands. The
investigating agency, without due application of mind and without
conducting preliminary enquiry, holding him vicariously liable for
the alleged offences on the basis of his former designation in the
company and by ignoring the settled principles of law that there is
no concept of vicarious liability in the jurisprudence.
(iii) Touching the incorporation of the company, he would
state that he was the erstwhile director of Agri Gold Farm Estates
India Private Limited, Agri Gold Constructions Private Limited
and Dreamland Ventures Private Limited. He had resigned from
the directorship of the said companies with effect from 03.01.2011
and Form - 32 was also submitted before the Registrar of
Companies (ROC) and, therefore, he has no relation with the
aforesaid companies subsequent to 2011. He would state that he
remained as director of the company from the year 2004 till
03.01.2011.
(iv) He states that a bare perusal of the FIR shows that it is
riddled with errors and registered in a rush rather than any sort of
analysis or investigation into the complaint. To substantiate this
ground, he would state that in the first line of the FIR, it is stated
that FIR number is 06/15 whereas the complaint itself was made
in 2015 and in column information received at the PS and in the
General Diary reference column, the date is given as 06.10.2015,
whereas the complaint clearly states that it was given on
06.01.2015 and, therefore, claims that some clarification is also
required from the appropriate authorities as to the correct details
of FIR No.6 of 2015.
(a) The first ground agitated by the petitioner is that the
alleged offence took place subsequent to 14.07.2014, when the de
facto complainant commenced investing Rs.60/- per day, that is
more than three years after he resigned on 03.01.2011. The
allegation levelled by the de facto complainant that he moved
towards him (present petitioner) for recovery of his dues, is false
as he (petitioner) never interacted with the de facto complainant,
and, therefore, no role can be attributed to him and he has been
made needlessly liable for the alleged offences on the basis of his
former designation in the company.
(b) Second, the police authorities, without following the due
procedure and on the basis of the false and baseless allegations
made by the de facto complainant, registered the FIR mechanically,
against him for the alleged offences which he has not committed
since he ceased to be the director in the company with effect from
03.01.2011, whereas the de facto complainant had began investing
the amount from 14.07.2014.
(c) Third, the aforesaid facts would leave no manner of
doubt that on the date of offence, if any, committed by the
company, he was not a director and he had nothing to do with the
affairs of the company and if the FIR is allowed to be proceeded
against him, it would result in gross injustice to him and
tantamount to abuse of process of Court. The petitioner refers to
the law declared by the Honble Supreme Court in Harshendra
Kumar D. v. Rebatilata Koley .
(d) Fourth, Form - 32 annexed to the petition as Annexure -
B will ascertain that it is an established fact that the petitioner had
resigned from the company as director on 03.01.2011, which is
well before the relevant date in the year 2014-15, when the cheques
may have been issued to the de facto complainant. The same has
been accepted by the Honble Supreme Court as a valid ground for
quashing the criminal proceedings in the cases of Mrs. Anita
Malhothra v. Apparel Export Promotion Council .
(e) Fifth, the allegations in the complaint are bald and
frivolous as the de facto complainant miserably failed to even
prima facie prove the essential ingredients of the offences
punishable under Sections 406 and 420 read with 34 of the Indian
Penal Code, 1860 (IPC), more particularly, the entrustment and
inducement respectively, therein qua the petitioner. Even the de
facto complainant failed to prima facie ascribe any role to him in
the entire alleged conspiracy and has failed to even remotely
ascribing any role to him.
(f) Sixth, it is settled law by a catena of decisions that for
establishing the offence of cheating, the de facto complainant is
required to show that the accused had fraudulent or dishonest
intention at the time of making promise of representation. But, in
the present case, firstly, there have never been any interaction
between the de facto complainant and himself (petitioner) and,
therefore, the question of any representation, which is one of the
main ingredients for constitution of an offence of cheating as
contended in Section 420 IPC, did not and could not arise. He
places reliance on the ruling in Hira Lal Hari Lal Bhagwati v.
CBI .
(g) Seventh, the present complaint fails to disclose as to
whether he was entrusted with or otherwise had dominion over the
property of the de facto complainant or he has committed any
criminal breach of trust and in order to bring the evidence of
breach of entrustment, proof of entrustment is essential and a
perusal of the complaint reveals that there is not even an iota of
proof of entrustment alleged against him and, therefore, the offence
punishable under Sections 406 IPC alleged against him is not made
out and the investigation ought to be quashed qua the petitioner.
(h) Eighth, while submitting that fraudulent or dishonest
intention on the part of the accused must be at the inception and
not at a subsequent stage and the present complaint is, therefore,
liable to be quashed for the offences punishable under Section 420
IPC, the petitioner refers to the ruling in Suryalakshmi Cotton
Mills Limited v. Rajvir Industries Limited and basing on the fact
that he resigned more than three years before the de facto
complainant had begun investing the amount of Rs.60/- per day
with effect from 14.07.2014, he would contend that he has been
made vicariously liable for the alleged offences and no specific role
has been assigned to him. He refers to the law declared by the
Honble Apex Court that there is no such concept of vicarious
liability under criminal law until and unless the same is specifically
provided for under a Legislation/Act, referring to the rulings in
S.K. Alagh v. State of Uttar Pradesh , Maksud Saiyed v. State
of Gujarat and N.K. Wai v. Shekar Singh .
(i) Tenth, that the police authorities ought to have
considered that the uncontroverted allegations made in the
complaint by the de facto complainant did not disclose
commission of any offence qua the petitioner and, as such, this
Court has jurisdiction under Section 482 of the Code to verify and
quash the FIR and investigation qua the petitioner. He placed
reliance on the ruling in State of Haryana v. Bhajan Lal . He
states that the complaint does not even mention or make out any
case against him and in the absence of any evidence, leave aside
the material evidence, qua the petitioner herein and, therefore,
requests the Court to exercise the inherent power under Section
482 of the Code in the interest of justice for quashing the
investigation against him in order to avoid and prevent him from
undergoing mental agony of a criminal trial in the absence of any
material against him.
7. In Criminal Petition No.3277 of 2017, the de facto
complainant besides raising the grounds agitated in Criminal
Petition No.3276 of 2017, adverted to in the above also agitates
the offence punishable under Section 5 of the APPDFE Act. The
petitioner in the said context would state that the said offences
cannot be imposed upon him as he was not a part of the
management of the company and he has extracted the provisions
of Section 5 in ground D.
8. In Criminal Petition No.3278 of 2017, besides adverting
to the grounds agitated in the aforesaid two petitions, the
petitioner would also refer to the ruling in Radhey Shyam
Khemka v. State of Bihar in the context of absence of specific
role ascribed to the petitioner.
Criminal Petition Nos.3074 and 3075 of 2016:
9(i). The petitioner viz., Avva Udaya Bhaskar Rao, in these
two petitions is arraigned as accused Nos.9 and 10 in Crime
Nos.378 of 2014 and 3 of 2015 respectively. The offences alleged
against him are punishable under Sections 120-B, 406 and 420
IPC and Section 5 of APPDFE Act besides the offence under the
provisions of the RBI Act. Since the substratum of the case is
substantially referred to in the first set of three petitions mentioned
hereinbefore, reference to his position, only to the extent of the
case set out by him would suffice. His main plea is that he is
unconnected with any of the three companies. He is a Technical
Diploma Engineer. He worked in a Cement Factory (India
Cements) at Chilamakuru, Kadapa District, for twenty four (24)
years from the year 1980 to 2004 as Technical In-charge and had
taken voluntary retirement in the month of April, 2004 due to ill
health of his wife, who got affected with severe heart disease in the
year 1988 and thus, he is neither a director nor consultant nor
employee in any of the companies.
(ii) He referred to the complaint allegations to the effect that
the de facto complainant, V. Venkata Rama Prasad, claimed that
he deposited an amount of Rs.25,000/- in the Agri Gold Scheme
for a period of six and half (6) years as the company promised to
pay double the amount or a plot after the maturity date and
believing the same, he has deposited such amount in the name of
Velapula Jhansi Lakshmi for which a receipt dated 22.11.2007,
was issued showing the maturity date as 22.05.2014, with the
value of double the amount. Again in the year 2013, when he
learnt that the very same Agri Gold Company making the double
amount within six (6) years only, he has deposited Rs.4,05,000/-
in various installments, and, when he visited the Agri Gold office
at Nellore on 22.05.2015, to collect the maturity amount, he was
asked to visit after a few days and, thereafter, though, he made
several visits to the office of the company, the company has not
returned the maturity amount. He made a specific allegation that
the company has collected crores of rupees from the public and
converted the same in benami names. Basing on the said
complaint, Crime No.378 of 2014 was registered for the offences
punishable under Sections 406 and 420 IPC and Section 5 of
APPDFE Act.
(iii) He would plead that a notice dated 08.04.2017, under
Section 41-A of the Code has been issued by the Investigating
Officer, Superintendent of Police, EOW, CID, A.P., Hyderabad,
directing him to appear before him at the office of the
Superintendent of Police EOW, CID, RTC Complex, Vijayawada,
on 11.04.2017 at 11.00 a.m., with a clear stipulation in the said
notice that failure to comply with the said notice amounts to
offence punishable under Section 174 of IPC. He filed the said
notice in the material papers. According to him, issue of such
notice is totally unwarranted and uncalled for and the same has to
be set aside in the interest of justice.
10. In Criminal Petition No.3075 of 2017, one Gantasala
Venkanna Babu is the de facto complainant. He deposited an
amount of Rs.10,000/- on 30.05.2004 to the Agri Gold Branch
No.1018, vide A/c. No.489721 through the agent viz., Gantasala
Venkata Ranga Raju, SMO - 223967. The scheme provided that
after ten years, four times over the said amount would be returned
by the date of its maturity as 30.05.2014, and, when he
approached the Branch people for return of the amount of
Rs.40,000/-, they did not pay the said amount and gave some
reasons; four months prior thereto, on 10.01.2014 a cheque
bearing No.728011014120 drawn on ING Vysya Bank,
Venkojipalem Branch, Visakhapatnam, for Rs.40,000/- was issued
by the branch, but, the said cheque stood dishonored and another
cheque issued by the branch on 06.12.2014, drawn on Bank of
India, Gajuwaka Branch, Vizag, was also dishonoured, and, when
he approached the company people, he was asked to go to
Vijayawada to take cheque or cash and, therefore, he lodged the
complaint alleging that the petitioner has committed the offences
under money circulation Act.
11 (i). In defence to the said allegations, the petitioner has
put-forth identical grounds stating that he is unconnected with any
of the companies. He never acted as Director or Consultant in any
capacity in the said three companies and never involved in any
kind of marketing/sales/promotion/ administration
activities/meetings of the accused companies and he never involved
in any kind of misappropriation of funds nor indulged in any kind
of misappropriation, embezzlements and conspiracies nor helped
anybody to do such
misappropriation/embezzlements/conspiracies.
(ii). He has pleaded the grounds raised by the petitioner in
Criminal Petition Nos.3276, 3277 and 3278 of 2017 referred to
hereinabove and also relied on the ruling in Hira Lal Hari Lal
Bagwathi3.
(iii) He would plead that a notice dated 06.04.2017, under
Section 41-A of the Code has been issued by the Investigating
Officer, Superintendent of Police, EOW, CID, A.P., Hyderabad,
directing him to appear before him at the office of the
Superintendent of Police EOW, CID, RTC Complex, Vijayawada,
on 07.04.2017 at 11.00 a.m. with a clear stipulation in the said
notice that failure to comply with the said notice amounts to
offence punishable under Section 174 of IPC. He filed the said
notice in the material papers. According to him, issue of such
notice is totally unwarranted and uncalled for and the same has to
be set aside in the interest of justice.
Criminal Petition Nos.3076 and 3077 of 2017:
12(i). The petitioner viz., Avva Venkata Subramanyeswara
Sarma is arraigned as accused Nos.11 and 12 in Crime Nos.378 of
2014 and 3 of 2015 respectively, in these two petitions. The
offences alleged against him in both the crimes are punishable
under Sections 120-B, 406 and 420 IPC, and Section 5 of
APPDFE Act. He refers to the allegations of the complaint lodged
by the de facto complainant, V. Venkat Ram Prasad, which have
been adverted to in Criminal Petition NNo.3075 of 2017.
Therefore, it is unnecessary to advert to them once again. Directly
turning to the pleas, he has put-forth that he worked in Indian
Army for about twelve (12) years and then for Central
Government in the Department of Stores for twelve (12) years and
took voluntary retirement in April, 2006. According to him, he is
neither a director nor consultant nor employee in any of the
accused companies. He states that he was never involved in any
kind of marketing/sales/ promotion/administration
activities/meetings of the accused companies, never involved in
any kind of misappropriation of funds, nor indulged in any kind of
embezzlements, and conspiracies nor helped anybody to do such
misappropriation/ embezzlements/ conspiracies. He has set up the
very same defence which the petitioner in Criminal Petition
Nos.3074 and 3075 of 2017 has raised and also relied on the
ruling in Hira Lal Hari Lal Bagwathi3. He has extracted the
order dated 29.09.2016, passed by this Court in Crime No.7 of
2015 while disposing of Criminal Petition No.14164 of 2016, thus:
Learned Senior Counsel appearing for the
petitioner contends that petitioner is not an employee
of Agri Gold Farm Estates India Private Limited and
further he is innocent and not committed any offence
and there are no specific allegations against the
petitioner. On the other hand, learned Additional
Public Prosecutor opposed the Criminal Petition
contending that, since the investigation is still going
on, the question of quashing investigation does not
arise. In view of the facts and circumstances of the
case, this Court is not inclined to interfere with
investigation. However, the Station House Officer,
C.I.D., Hyderabad is hereby directed not to arrest the
petitioner in connection with Crime No.7 of 2015 till
completion of investigation or filing of charge sheet or
final report. With the above direction, the Criminal
Petition is disposed of. Consequently, Miscellaneous
Petitions, if any, pending in this Criminal Petition shall
stand closed.
(ii) He would state that he is suffering from acute back pain
due to L-4 and L-5 disk slip, which had occurred in a road
accident, due to which he cannot sit or stand continuously for
longer period.
(iii) In Criminal petition No.3076 of 2017, he would state
that he was issued notice under Section 41-A of the Code dated
08.04.2017 by the very same Investigating Officer asking him to
appear on 11.04.2017 at 11.00 a.m., and he has annexed the said
notice as one of the material documents thereto.
13. In Criminal Petition No.3077 of 2017, he would state
that he was issued notice under Section 41-A of the Code dated
08.04.2017, by the very same Investigating Officer asking him to
appear on 11.04.2017 at 11.00 a.m., and he has annexed the said
notice as one of the material documents hereto.
Criminal Petition Nos.3078 and 3079 of 2017:
14 (i) The petitioner viz., Avva Venkata Siva Ram alias
Siva Ramakrsihna, in these two applications is arraigned as
accused Nos.11 and 10 in Crime Nos.3 of 2015 and 378 of 2014,
respectively, on the complaints of one Gantasala Venkanna Babu
and Venkata Ram Prasad, respectively. The allegations made by
both of them in the complaints have been adverted to in the above
petitions. Therefore, it is unnecessary to once again advert to
them.
(ii) The defence set out by him in Criminal Petition No.3078
of 2015 would suffice as the very same defence occurs in the latter
petition.
(iii) He claims that he never had any personal involvement
with Agri Gold Farms Estates Limited, Management either directly
or indirectly nor did he take any remuneration or fee nor involved
in any kind of marketing/sales/promotion/administrative
activities/meetings of the accused companies nor involved in any
kind of misappropriation of funds nor embezzlements and
conspiracies, or help from anybody to such misappropriation and
embezzlement conspiracies. He claims himself to be a prudent
citizen and had never faced any FIR, complaint, criminal or civil
case during his entire life time. According to him, he has been
doing his own business unconnected with the Agri Gold
Companies.
(iv) He referred to the complaint lodged by the de facto
complainants in both these criminal petitions which were hitherto
referred to.
(v) In Criminal Petition No.3078 of 2017, the petitioner
claims that a notice under Section 41-A of the Code dated
07.04.2017, has been issued in both these crimes directing him to
appear before the Investigation Officer, Superintendent of Police,
EOW, CID, A.P., Hyderabad, on 11.04.2017 at 11.00 a.m., with a
clear stipulation in the said notice that failure on his part to
comply with the said notice amounts to an offence punishable
under Section 174 of IPC. He has filed the said notice as one of
the material documents annexed thereto.
(v) In Criminal Petition No.3079 of 2017, he claims that a
notice under Section 41-A of the Code dated 07.04.2014 has been
issued in both these crimes directing him to appear before the
Investigation Officer, Superintendent of Police, EOW, CID, A.P.,
Hyderabad, on 11.04.2017 at 11.00 a.m. with a clear stipulation in
the said notice that failure on his part to comply with the said
notice amounts to an offence punishable under Section 174 of IPC.
He has filed the said notice as one of the material documents
annexed thereto.
Criminal Petition Nos.3080 and 3099 of 2017:
15(i). The petitioner viz., K.V.S. Sai Ram alias Avva Sai
Ram is arraigned as accused No.9 and accused No.8 in Crime
Nos.3 of 2015 and 378 of 2014 respectively. He alleged to have
committed the offences punishable under Sections 120-B and 420
IPC. The de facto complainants are Gantasala Venkanna Babu
and V. Venkat Ram Prasad. The allegations in the complaints in
these two crimes referred to by the petitioner have been already
adverted to in the above petitions.
(ii) Turning to the defence, the petitioner has taken in these
two petitions is, that he is innocent and he is unnecessarily roped
in the FIRs, that he has nothing to do with the family of Avva or
with the Agri Gold companies or its affairs, and, in fact,
according to him, thirty (30) years back, he had gone on adoption
to a family of Katamaraju and he has been living on his own by
doing small business. He denied his involvement in Agri Gold
Farm Estates India Private Limited Management. According to
him, he never had any personal involvement in Agri Gold Farm
Estates India Private Limiteds Management, either directly or
indirectly nor did he take any remuneration or fee nor involved in
any kind of marketing/sales/promotions/administrative
activities/meetings of the accused companies nor in any kind of
misappropriation of funds nor indulged in any kind of
embezzlements and conspiracies nor helped anybody to do such
misappropriation/embezzlements/conspiracies.
(iii) Raising the pleas put-forth by the other petitioners in
the afore referred applications, he has extracted the order dated
29.09.2016 passed by this court in Crime No.7 of 2015 in
Criminal Petition No.14164 of 2016 which was referred to in the
above.
(iv) In Criminal Petition No.3080 of 2017, the petitioner
claims that a notice under Section 41-A of the Code dated
06.04.2017, has been issued in both these crimes directing him to
appear before the Investigation Officer, Superintendent of Police,
EOW, CID, RTC Complex, Vijayawada, on 07.04.2017 at 11.00
a.m. with a clear stipulation in the said notice that failure on his
part to comply with the said notice amounts to an offence
punishable under Section 174 of IPC. He has filed the said notice
as one of the material documents annexed thereto.
16. In Criminal Petition No.3099 of 2017, he claims that a
notice under Section 41-A of the Code dated 08.04.2017 has been
issued in both these crimes directing him to appear before the
Investigation Officer, Superintendent of Police, EOW, CID, RTC
Complex, Vijayawada, on 11.04.2017 at 11.00 a.m. with a clear
stipulation in the said notice that failure on his part to comply
with the said notice amounts to an offence punishable under
Section 174 of IPC. He has filed the said notice as one of the
material documents annexed thereto.
17. Heard Sri Kapil Sibal, learned senior counsel assisted
by Sri M. Prathap Reddy, learned counsel for the petitioner in
Criminal Petition Nos.3276, 3277 and 3278 of 2017; Sri V.
Pattabhi, learned counsel, assisted by Ms. Thota Suneetha, learned
counsel for the petitioner in Criminal Petition Nos.3074 and 3075
of 2017; Sri Kanakamedala Ravindra Kumar, learned senior
counsel, assisted by Ms. Elipe Shantha Sree, learned counsel for
the petitioner in Criminal Petition Nos.3076 and 3077 of 2017; Sri
L. Ravichandran, learned senior counsel, assisted by Sri K.
Janakirami Reddy, learned counsel for the petitioner in Criminal
Petition Nos.3078 and 3079 of 2017; and Sri V. Pattabhi, learned
counsel, assisted by Sri M.P. Kashyap, learned counsel for the
petitioner in Criminal Petition Nos.3080 and 3099 of 2017; and
the learned Public Prosecutor for the State of Andhra Pradesh on
behalf of respondents.
SUBMISSIONS:
CRIMINAL PETITION Nos.3276, 3277 AND 3278 OF 2017:
18. The submissions, made by the learned Senior Counsel
for the Petitioner, have been:
i) The petitioner was the Director of Agri Gold Farm
Estates Indian Private Limited from 2004 to
03.01.2011, thus, he was roped in the present FIRs in
his capacity being the Erstwhile Director of Agri Gold
Farm Estates India Private Limited even though, he
had resigned on 03.01.2011.
ii) The learned Senior Counsel would submit that the
petitioner was not only the Director of the said
Company, but also the Director of Agri Gold
Constructions Private Limited, Dreamland Ventures
Private Limited during the said period and Form
No.32 shows that the petitioner made an application
to the Board of Directors of Agri Gold Farm Estates
India Private Limited on 03.01.2011, tendering his
resignation on the ground that he was unable to
continue as Board of Directors of the Company and
requests to accept and intimate the Registrar of
Companies by filing Form No.32 with MCA/ROC,
and even Form No.32, confirmation of resignation
w.e.f. 03.01.2011 was accepted.
iii) The learned senior counsel would submit that the
petitioner herein, in fact, commenced depositing the
amount of Rs.2,000/- per month in the month of July,
2014, by which time, the petitioner was not a Director
of any of the Companies and three years prior thereto
itself he resigned his post of Director of the Company
which was accepted by the Registrar of Companies.
iv) The learned senior counsel would submit that in Crime
No.3 of 2015, the de facto complainant lodged the
complaint alleging the offence of non-payment of
investment returns which was due on 30.05.2014, due
to a cheque issued by one of the Companies on
10.10.2014, which was dishonoured, thus, the offence
complained was more than three years after he ceased
to be the Director of the said Company.
v) In Crime No.378 of 2014, the learned senior counsel
would submit that the complaint lodged by the de
facto complainant was based on an alleged offence of
non-payment of investment returns which was due on
22.05.2014 and, thus, the petitioner had no connection
whatsoever with the Company as by which date, the
petitioner had ceased to be the Director of the same.
vi) The learned senior counsel would submit that the
offences punishable under Sections 406 IPC and 420
IPC cannot co-exist in view of the rulings in Jalpa
Parshad Aggarwal v. State of Haryana ; Wolfgang
Reim v. State ; R.S. Sodhi Manoranjan Pani v.
Partha Pratim Saikia .
vii) The learned senior counsel would submit that since the
complaint lodged would show that none of the
complainants did ascribe any role to the petitioner, no
dishonest intention as such can be attributed.
viii) Concerning the complaints in F.I.R. Nos.3 of 2015
and 6 of 2015, notices under Section 41A of the Code
were not issued, and only in FIR No.378 of 2014,
notices under Section 41A were issued by the
Investigating Agency.
ix) The learned senior counsel also would submit that the
concept of vicarious liability is not available in IPC
offences as the Penal Code does not contemplate any
vicarious liability on the part of party not charged
directly for the commission of offences, since the
petitioner ceased to be the Director of the Company
by virtue of his resignation on 03.01.2011, which was
accepted even according to Form No.32, the FIRs are
liable to be quashed. Touching the law declared by the
Honble Supreme Court on this aspect of the case, the
learned senior counsel places reliance on the rulings in
S.K. Alagh5; Sharad Kumar Sanghi v. Sangita
Rane Maksud Saiyed6; GHCL Employees Stock
Option Trust v. India Infoline Limited and Sunil
Bharti Mittal v. CBI .
x) The learned senior counsel would further submit that
to constitute an offence punishable under Section 420
IPC, a reading of Section 415 IPC with Section 420
IPC would clearly lead to the conclusion that
fraudulent or dishonest inducement on the part of the
petitioner must be at the inception and not at a
subsequent stage. Since nothing is attributed in that
direction in any of the complaints by the respondents
respectively, the FIR in these crimes are liable to be
quashed; To fortify his submission, he refers to the
rulings in Hira Lal Hari Lal Bhagwati3,
Suryalakshmi Cotton Mills Limited4; and R. Kalyani
v. Janak C. Mehta .
(xi) The learned senior counsel lastly would submit
that even if the First Information Report in these three
crimes if taken at face value, they do not prima facie
constitute any offence of making out a case against the
petitioner and, therefore, these FIRs are liable to be
quashed under Section 482 of the Code and relies on
the ruling in Bhajan Lal8.
Criminal Petition Nos.3074 and 3075 of 2017:
19(i) The petitioner viz., Avva Udaya Bhaskar Rao, in these
two Criminal Petitions, is shown as accused No.9 in Crime No.378
of 2014 of III Town Police Station, Chittoor District, Andhra
Pradesh, and accused No.10 in Crime No.3 of 2015 of Peddapadu
Police Station, West Godavari District, respectively.
(ii) Sri V. Pattabhi, learned Senior Counsel for the
petitioner, would submit that the petitioner worked as employee in
India Cements up to 2004 and quit the job. The Investigating
Officer projected him as director of the three core companies, but,
Form - 32 would not disclose that he was director of any of the
companies and that the three core companies, of which the
petitioner is shown as a director, are independent companies
without any subsidiaries.
(iii) The learned senior counsel would submit that the
complaints in these two crimes and even the Case Diary Part - I
dated 19.07.2003 in Crime No.378 of 2014, does not refer to the
name of the petitioner or to the companies and on what basis the
petitioner is shown as an accused is not forthcoming. The learned
Senior Counsel would submit that the petitioner is only the
brother of accused No.1 viz., Avva Venkat Ram Rao and,
therefore, the very issue of notice under Section 41-A of the Code
was unwarranted.
Criminal Petition Nos.3076 and 3077 of 2017:
20(i) The petitioner viz., Avva Venkata Subramanyeswara
Sarma, in both these petitions, is shown as accused Nos.11 in
Crime No.378 of 2014 of Nellore III Town Police Station, SPSR
Nellore, and accused No.12 in Crime No.3 of 2015 of Peddapadu
Police Station, West Godavari District, respectively.
(ii) The learned Senior counsel for the petitioner would
submit that the petitioner is not a director in any of the three
companies and he is only the brother of accused Nos.4, 5 6 and 7.
He is not concerned with the complaint allegations in these two
crimes. The petitioner, in fact, worked for twelve years from 1980
to 2004 in Indian Army and for another period of twelve years in
the Department of Stores altogether six (6) F.I.Rs. have been
registered and the name of the petitioner is not occurring in any of
them. Therefore, the very issue of notice under Section 41-A of
the Code is unwarranted. Hence, to quash the FIRs against the
petitioner.
(iii) The learned Senior counsel referred to the ruling in
Joginder Kumar v. State of U.P. (paragraph Nos.8, 9, 11 and
200) and Arnesh Kumar v. State of Bihar , in connection with
issue of notice under Section 41-A of the Code.
(iv) The learned Senior counsel in the context of exercise of
power under Section 482 of the Code by the Court places reliance
on the rulings in State of Telangana v. Habib Abdullah Jeelani
(paragraph No.23) and Mahesh Chaudhary v. State of
Rajasthan (paragraph No.18).
(v) Lastly, the learned Senior counsel would submit that
while adopting the arguments advanced by the learned senior
counsel in Criminal Petition Nos.3276, 3277, 3278, 3074 and
3075 of 2017 seek to quash the FIRs against the petitioner in these
two crimes.
Criminal Petition Nos.3078 & 3079 of 2017:
21(i) The petitioner herein viz., Avva Venkata Siva Ram /
Siva Rama Krishna, in both these petitions, is shown as accused
No.11 in Crime No.378 of 2014 of Nellore III Town Police Station,
SPSR Nellore, Andhra Pradesh, and accused No.10 in Crime No.3
of 2015 of Peddapadu Police Station, West Godavari District,
Andhra Pradesh.
(ii) Sri Ravi Chandran, learned senior counsel, while
adopting the arguments advanced by the learned senior counsel
appearing for the petitioners in Criminal Petition Nos.3276, 3277,
3278, 3074 and 3075 of 2017, would submit that the investigating
agency failed to establish any link between the petitioner and the
three core companies and the allegations are just based on
confessional statements said to have made by the other accused
and the alleged confessional statement cannot constitute basis for
involving the petitioner herein in the present crimes and places
reliance on a ruling rendered by the Honble Supreme Court in
Rini Johar v. State of Madhya Pradesh (paragraph No.16) and,
therefore, sought to quash the FIRs.
Criminal Petition Nos.3080 & 3099 of 2017:
22(i) The petitioner herein viz., K.V.S. Sai Ram alias Avva
Sai Ram is accused No.9 in Crime No.3 of 2015 of Peddapadu
Police Station West Godavari District, Andhra Pradesh, and
accused No.8 in Crime No.378 of 2014 of Nellore III Town Police
Station, SPSR Nellore, Andhra Pradesh.
(ii) The learned counsel while adopting the arguments
advanced by the learned senior counsel in the first three criminal
petitions, would attack the notice issued under Section 41-A of the
Code contending that when the petitioner is not at all a director,
the investigating officer cannot mention the name of the petitioner
as director of the company in the notice under Section 41-A of the
Code. It is his submission that there has been inordinate delay in
reporting the matter and registering the FIR; second submission is
that no specific role or allegation is attributed to the petitioner in
the complaint allegations; third submission is that the Honble
Division Bench of this Court has already seized the matter where
the Agri Gold Cases have been dealt with. Therefore, it is his
submission that the present crimes registered against the
petitioners are liable to be quashed.
SUBMISSIONS MADE BY THE LEARNED PUBLIC PROSECUTOR:
23. The learned Public Prosecutor for the State of Andhra
Pradesh, per contra, would submit that:
(i) The investigation done so far would unearth that
altogether 162 Companies have been floated by the accused
persons in all these crime.
(ii) He would categorize these 162 companies into three
categories; the first category, according to him, would constitute
Core Companies, they are, (i) M/s. Agri Gold Farm Estates India
Private Limited; (ii) Agri Gold Constructions Private Limited; and
(iii) Dreamland Ventures Private Limited. These three companies
were involved in introducing the Schemes, luring the Depositors
by appointing Agents in each of its branches in more than one
State and in each of the Districts percolating deeply to the Mandal
level and collection of amounts.
(iii) The second category consists of 13 companies.
These companies are floated from the moneys collected by the
Core Companies of first category, mostly investing the amounts
by syphoning the funds collected by the Core Companies.
(iv) Third category consists of 146 companies, which are
floated mostly in acquiring the properties in the names of the
Directors of the Companies who are no other than the kith and kin
of the Directors of the Core Companies and, thus, right from the
inception, there has been fraudulent motive of deception.
(v) The learned Public Prosecutor would submit that about
32 lakh depositors have invested the amounts and more than
Rs.6,000/- Crores have been syphoned to the companies under
second and third categories.
(vi) The learned Public Prosecutor would submit that the
petitioner herein though, resigned to his post of Directorship on
03.01.2011 in the Core Companies, but he continued to be the
whole-time Director or the Director, as the case may be, in the
second category of the Companies and the same is borne out by
the very documents filed by the petitioner himself which were
issued from Ministry of Corporate Affairs relating to the
petitioner showing his name as Sitaramarao Avva, and his status
as on 01.02.11. In fact, the date is shown as 01/02/115, and the
time is shown as 03:39:51 P.M.. The said document which
relates to the particulars of the Companies/LLPs in which a person
is/was a director/designated partner. It gives the details of serial
number, CIN/LLPIN, name of the Company/LLP, Current
designation of the Director/Designated Partner, Date of
appointment at current designation, original date of appointment,
date of cessation, Company/LLP Status and Defaulting status.
The learned Public Prosecutor would point out the companies at
serial Nos.4, 13, 16, 27, 28 and 31 are certain examples amongst
several, showing that the petitioner was holding the post of either
whole-time Director or Director in the Companies mentioned
against the serial numbers. Under vertical column intended to
show the date of cessation, the same is left blank indicating that he
was continuing as a member even in the year 2015-16. Thus, the
petitioner was still continuing even after 03.01.2011 as whole-time
director in Agri Gold Project Limited, as Director in Siddavaram
Agro Projects Private Limited, as whole-time Director in North
Karnataka PowerGen Private Limited, as Director in Shakti
Timber Estates Private Limited and Susila Infra Developers
Private Limited. There are further more companies, where his date
of cessation is not mentioned indicating that he has been
continuing as either as director or additional director of the
companies mentioned against serial Nos.35 to 44. Thus, as on
01.02.2015, the petitioner since was continuing as a whole-time
Director or Director or Additional Director in either category-II or
in category-III Companies, and the moneys collected from the Core
Companies have been utilized by syphoning the amounts
deposited by the depositors for floating these companies,
according to the learned Public Prosecutor, it cannot be said, at
this stage, that there was no dishonest intention and nothing is
attributed to him in the complaints.
(vii) It is according to the learned Public Prosecutor that the
complaints in these three crimes since laid by the depositors, they
do not contain the relevant details, and the details which are
necessary for them respectively, alone have been mentioned but, in
view of the serious allegations in each of these cases, it cannot be
concluded that the petitioner is innocent and roped in these crimes
without application of mind by the Investigating Officers, nor can
it be construed that there was no dishonest intention right from the
inception of these companies.
(viii) Concerning Crime No.6 of 2015, the learned Public
Prosecutor would submit that by the date of tendering his
arguments, 38 witnesses (depositors) were examined and their
statements were recorded by the Investigating Officer who have
deposited the amounts between 2004 and 2014 years. He has
given the numbers of some of the witnesses as LW.5, 9, 11, 17, 18
and 24, who deposited moneys from the year 2004.
(ix) In Crime No.378 of 2014, the learned Public Prosecutor
would submit that 180 witnesses were examined and, in fact, the
entire episode came into light by the arrest of accused Nos.18 and
19 having taken the custodial interrogation and when interrogated,
they spoke about the role of the petitioners in maintaining the
accounts. Thus, the statements they made, stand in the status of a
confession made by a co-accused and since relevant, cannot be
brushed aside, when investigation is in process.
(x) Concerning FIR No.3 of 2015, the learned Public
Prosecutor would submit that as many as 186 witnesses were
examined who are not only depositors, but also agents appointed
by the Core companies and the confessional statements of the
accused Nos.11 and 12 were recorded and they would show the
active role of the petitioners herein and the modus operandi on the
part of the petitioner, and, in consequence thereof, even the entire
record was retrieved and seized by the Investigating Officer.
(xi) The learned Public Prosecutor would submit that
altogether 10 Crimes were registered against the petitioners
involving huge money and the depositors deceived were huge in
number amounting to 30-40 lakhs.
(xii) Incidentally, the learned Public Prosecutor would
submit that a Public Interest Litigation (PIL) bearing No.193 of
2015 is pending before a Division Bench of this Court. The wife
of the petitioner - Pushpalatha, in fact, filed a petition not to arrest
them. According to the learned Public Prosecutor, the petitioners,
who filed those M.Ps. are the persons on whose names properties
have been purchased utilizing the amounts collected by the Core
Companies from the Depositors and an extent of 450 acres of land
was purchased in the name of Pushpalatha alone, wife of the
petitioner.
(xiii) The learned Public Prosecutor, while referring to the
rulings in Jalpa Parshad Aggarwal10; Wolfgang Reim11; R.S.
Sodhi Manoranjan Pani12 would submit that the fact-situation
would show that charge-sheets were filed in all these cases. But,
investigation in the present crimes is still pending, and though,
number of witnesses were examined in these crimes, still
examination of many a witness either depositors or the agents or
the employees of the branches or the officers where the branches
are located or maintained by the Core Companies and the
companies falling under other two categories, is absolutely
indispensable and, therefore, exercise of extraordinary power
under Section 482 of the Code as requested by the petitioners does
not arise.
(xiv). The learned Public Prosecutor refers to the rulings of
the Honble Supreme Court in the context of: (i) invocation of
doctrine of lifting the veil where protection of public interests is of
paramount importance and to prevent a device to avoid any
welfare legislation by a corporate entity in an attempt to evade
legal obligation; (ii) concerning the principle that power under
Section 482 of the Code should be exercised sparingly with judicial
restraint and circumspection; and (iii) that the intention of the
accused at the time of inducement can always be inferred by
subsequent conduct associated with other factors.
(xv) The rulings relied on by the learned Public Prosecutor
have been: (i) Pothani Chandrasekher v. State of Andhra
Pradesh ; (ii) Inder Mohan Goswami and another v. State of
Uttaranchal and Others ; (iii) Soma Suresh Kumar v.
Government of Andhra Pradesh and Others ; (iv) State of
Maharashtra v. Vikram Anantrai Doshi ; (v) State of
Rajasthan and Others v. Gotan Lime Stone Khanji Udyog Pvt.
Ltd. and Others ; and (vi) State of Karnataka v. Selvi J.
Jayalalitha and others .
ANALYSIS OF SUBMISSIONS:
24. Since the submissions made by the learned senior
counsel in Criminal Petition Nos.3276, 3277 and 3278 of 2017
have been adopted by the learned counsel for the petitioners in
other Criminal Petitions, it would suffice to take up the
submissions made in the first three Criminal Petitions in the light
of the arguments advanced by the learned Public Prosecutor with
reference to the rulings relied on by both sides and contextually to
refer to other submissions made by the learned senior counsel in
the remaining eight Criminal Petitions.
(i) The first submission is, that the petitioner - Avva Sita
Rama Rao alias Avva Seetha Ram was erstwhile Director holding
the office from the year 2004 to 3rd January, 2011. As already
mentioned hereinbefore, that his resignation was accepted and
Form No.32 was also approved, and since the complainant alleged
the non-payment of investment returns due on 30.05.2014 and
even the cheque issued therefor by one of the companies on
10.10.2014 was dishonoured, the offence complained was more
than three years after the petitioner ceased to be the director of the
said company, the petitioner cannot be roped in.
(ii) In Harshendra Kumar1 relied on by the learned senior
counsel, the appellant before the Honble Supreme Court resigned
from the post of Director on 02.03.2004 and the dishonoured
cheques were issued by the Company on 30.04.2004. The
acceptance of the appellants resignation was duly reflected in the
resolution, dated 02.03.2004 and the same was informed to the
Registrar of Companies on 04.03.2004, and opining that it was
not even the case of the complainants that the dishonoured
cheques were issued by the appellant, opining that the offence was
committed by the Company when the appellant was not the
Director, held that it would result in gross injustice to the
appellant and tantamount to an abuse of process of the Courts if
the criminal complaints are ready to proceed against the appellant
therein. The learned senior counsel relies on the expression of the
Honble Apex Court contained in paragraph Nos.26 and 27 thus:
26. Criminal prosecution is a serious matter; it affects the
liberty of a person. No greater damage can be done to the
reputation of a person than dragging him in a criminal case. In
our opinion, the High Court fell into grave error in not taking
into consideration the uncontroverted documents relating to
Appellant's resignation from the post of Director of the
Company. Had these documents been considered by the High
Court, it would have been apparent that the Appellant has
resigned much before the cheques were issued by the Company.
27. As noticed above, the Appellant resigned from the post of
Director on March 2, 2004. The dishonoured cheques were
issued by the Company on April 30, 2004, i.e., much after the
Appellant had resigned from the post of Director of the
Company. The acceptance of Appellant's resignation is duly
reflected in the resolution dated March 2, 2004. Then in the
prescribed form (Form No. 32), the Company informed to the
Registrar of Companies on March 4, 2004 about Appellant's
resignation. It is not even the case of the complainants that the
dishonoured cheques were issued by the Appellant. These facts
leave no manner of doubt that on the date the offence was
committed by the Company, the Appellant was not the Director;
he had nothing to do with the affairs of the Company. In this
view of the matter, if the criminal complaints are allowed to
proceed against the Appellant, it would result in gross injustice
to the Appellant and tantamount to an abuse of process of the
court.
The fact-situation therein would reflect that a company, by name
Rifa Health care (India) Pvt. Ltd, which was doing business for
sale of bio-ceramic products, having received demand drafts from
the purchasers for the orders, they had placed, not delivered the
products ordered by the complainants, and when they demanded
for return of their money, eighteen (18) cheques were issued by the
Company, and the cheques were dishnoured. Aggrieved over the
same, the complainants filed 18 complaint cases under Section 138
read with 141 of N.I. Act. In the said context, the Honble
Supreme Court held as in the above.
(iii) In Mrs. Anita Malhothra2, the Honble Supreme Court
while re-stating that in case of a Director, the complaint should
specifically spell out how and in what manner the Director was In-
charge of or was responsible to the accused Company for conduct
of its business, and mere bald statement that he or she was in
charge of and was responsible to the company for conduct of its
business is insufficient, held in paragraph Nos.22 and 23, on
which reliance is placed by the learned senior counsel, thus:
22. This Court has repeatedly held that in case of a Director,
complaint should specifically spell out how and in what manner
the Director was in charge of or was responsible to the accused
Company for conduct of its business and mere bald statement
that he or she was in charge of and was responsible to the
company for conduct of its business is not sufficient. (Vide
National Small Industries Corporation Limited v. Harmeet
Singh Paintal and Anr. (2010) 3 SCC 330). In the case on hand,
particularly, in para 4 of the complaint, except the mere bald
and cursory statement with regard to the Appellant, the
complainant has not specified her role in the day to day affairs
of the Company. We have verified the averments as regard to
the same and we agree with the contention of Mr. Akhil Sibal
that except reproduction of the statutory requirements the
complainant has not specified or elaborated the role of the
appellant in the day to day affairs of the Company. On this
ground also, the Appellant is entitled to succeed.
23. In the light of the above discussion and of the fact that the
appellant has established that she had resigned from the
Company as a Director in 1998, well before the relevant date,
namely, in the year 2004, when the cheques were issued, the
High Court, in the light of the acceptable materials such as
certified copy of annual return dated 30.09.1999 and Form 32
ought to have exercised its jurisdiction under Section 482 and
quashed the criminal proceedings. We are unable to accept the
reasoning of the High Court and we are satisfied that the
Appellant has made out a case for quashing the criminal
proceedings. Consequently, the criminal complaint No. 993/1
of 2005 on the file of ACMM, New Delhi, insofar as the
appellant herein (A3) is quashed and the appeal is allowed.
Again, the fact-situation reflects that it was a case where offence
punishable under Section 138 read with 141 of the N.I. Act was
alleged.
(iv) These two decisions have been relied on by the learned
senior counsel in the context of giving weight to the documents,
such as Form No.32 showing the resignation of a Director and its
consequences on the offences alleged against Ex-Director.
(v) On the second ground that the offences punishable under
Section 406 IPC and 420 IPC cannot co-exist, in Jalpa Parshad
Aggarwal10, a learned Single Judge of the Punjab and Haryana
High Court, referring to its earlier decision in Iqbal Singh
Randhawa v. Doctor Satpaul Goyal where it was ruled that an
offence under Section 406 IPC is, an, antithesis of offence under
Section 420 of IPC held in paragraph No.3 thus:
3. At the very outset it may be mentioned that this Court held
in Iqbal Singh Randhawa v. Doctor Satpaul Goyal, 1977 C.L.R.
(Pb. & Har.) 134, that an offence under Section 406, Indian
Penal Code, is, an antithesis of offence under section 420,
Indian Penal Code. In a case of criminal misappropriation the
property is voluntarily kept in the custody of an accused
whereas in a case of cheating, the accused, by adoptinig
deceitful means, induces the complainant to part with the
property. Thus, an accused cannot be tried for these two
offences simultaneously. Either he is committed an offence
under Section 406, Indian Penal Code or under Section 420,
Indian Penal Code.
(vi) In Wolfgang Reim11, explaining the reason why the
offence of cheating and criminal breach of trust cannot co-exist, a
learned Single Judge of Delhi High Court held in paragraph No.33
thus:
33. Further, a person cannot be charged with the offence of
cheating and criminal breach of trust simultaneously for the
same transaction because for the offence of cheating, it is a
prerequisite that dishonest intention must exist at the inception
of any transaction whereas in case of criminal breach of trust,
there must exist a relationship between the parties whereby one
party entrusts another with property as per law, therefore, for
commission of criminal breach of trust, the dishonest intention
comes later, i.e., after obtaining dominion over the property by
the accused person whereas for commission of cheating,
dishonest intention of the accused has to be present at the
inception of the transaction.
(vii) In R.S. Sodhi Manoranjan Pani12, detailed further, the
very same proposition in paragraph Nos.13 to 15 by a learned
Single Judge of Gauhati High Court thus:
3. Before entering into the discussion as to whether the
impugned order taking cognizance of offences aforementioned
and directing issuance of processes against the accused-
petitioners is sustainable in law or not, one needs to point out
the principal distinction between "criminal breach of trust" and
"cheating". In "criminal breach of trust", the accused comes into
possession of the property or acquires dominion over the
property honestly and bona fide, but he develops dishonest
intention subsequent to the taking possession of, or subsequent
to having acquired the dominion over, the property and, having
developed such dishonest intention, he dishonestly
misappropriates or converts to his own use the property or
dishonestly uses or disposes of the property in violation of any
direction of law prescribing the mode in which such trust is to
be discharged, or of any legal contract, express or implied,
which he has made touching the discharge of such trust, or
willfully suffers any other person so to do.
14. Thus, in "criminal breach of trust", the intention of the
accused cannot be dishonest or mala fide at the time, when he
comes into possession of the property or comes to acquire
dominion over the property; but, having come into possession
of, or having acquired dominion over the property, the accused
develops dishonest intention and actuated by such mens rea, he
converts to his own use the property or dishonestly uses or
disposes of the property in violation of any direction of law
prescribing the mode in which such trust is to be discharged, or
of any legal contract, express or implied, which he has made
touching the discharge of such trust, or willfully suffers any
other person so to do.
15. Contrary to what happens in '"criminal breach of trust",
the intention of the accused, in a case of "cheating", is
dishonest from the very commencement of the transaction.
There is really no consent by the person, who is intentionally
induced by deception to deliver the property or allow any
person to retain the property or is intentionally induced, as a
result of deception, to do or omit to do anything, which he
would not do or omit to do if he were not so deceived, and
which act or omission causes or is likely to cause damage or
harm to that person in body, mind, reputation or property. In
short, thus, while in "criminal breach of trust", the accused
comes into possession of the property without dishonest
intention and develops dishonest intention subsequent to his
coming into possession of the property, the offence of cheating
is one, wherein the accused has dishonest intention from the
very commencement of the transaction.
(viii) At this stage itself, it would be relevant to mention
that the relief sought for, is quashment of FIR and the crimes are
under investigation and if both the offences do not co-exist, but,
either of the two would have to be examined by the Investigating
Agency. Further, the offences alleged in all these crimes are not
just the offences punishable under Sections 406 and 420 IPC
alone, but the allegations are in regard to the other offences under
IPC, APPDFE Act, PC & MCSB Act and infraction of provisions
of RBI Act.
(ix) On the submission that the concept of vicarious liability
is not available in IPC offences and also in the context of the
petitioner in first three Criminal Petitions ceased to be the Director
of the Company by virtue of his resignation on 03.10.2011, the
learned senior counsel refers to the relevant expressions of the
Honble Supreme Court in the following rulings:
(x) In S.K. Alagh5, the Honble Supreme Court while
holding that except some provisions specifically providing
vicarious liability, the Penal Code does not contemplate any
vicarious law on the part of a party, who is not charged directly
for the commission of offence, held in paragraph Nos.16 and 19
thus:
16. Indian Penal Code, save and except some provisions
specifically providing therefore, does not contemplate any
vicarious liability on the part of a party who is not charged
directly for commission of an offence.
19. 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
therefore. 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. {See Sabitha Ramamurthy v. R.B.S.
Channabasavaradhya [ (2006) 10 SCC 581].
(xi) In Sharad Kumar Sanghi13, while insisting that when a
complainant intends to rope in a Managing Director or any officer
of the company, it is essential to make requisite allegation to
constitute the vicarious liability, held in paragraph No.9 thus:
9. The allegations which find place against the Managing
Director in his personal capacity, as we notice, are absolutely
vague. When a complainant intends to proceed against the
Managing Director or any officer of a company, it is essential to
make requisite allegation to constitute the vicarious liability. In
Maksud Sajyad v. State of Gujarat [(2008) 5 SCC 668], it has
been held, thus:
13. Where a jurisdiction is exercised on a complaint petition
filed in terms of Section 156(3) or Section 200 of the Code of
Criminal Procedure, the Magistrate is required to apply his mind.
The Penal Code does not contain any provision for attaching
vicarious liability on the part of the Managing Director or the
Directors of the Company when the accused is the Company.
The learned Magistrate failed to pose unto himself the correct
question viz. as to whether the complaint petition, even if given
face value and taken to be correct in its entirety, would lead to
the conclusion that the Respondents herein were personally
liable for any offence. 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 obligator on
the part of the complainant to make requisite allegations which
would attract the provisions constituting vicarious liability.
xii) Though, the learned senior counsel refers to the ruling in
Maksud Saiyed6, it is unnecessary to advert to since the
expression contained in paragraph No.16 therein has been referred
to by extracting the same in Sharad Kumar Sanghi13. In the same
context is the decision rendered by the Honble Apex Court in
GHCL Employees Stock Option Trust14. The learned senior
counsel refers to the expression of the Honble Supreme Court in
paragraph Nos.12 to 14 thus:
12. From bare perusal of the complaint and the allegations
made therein, we do not find in any of the paragraphs that the
complainant has made specific allegations against Respondent
Nos. 2 to 7. In paragraph 2 of the complaint, it is alleged that
Respondent Nos. 2 to 6 are looking after the day-to-day affairs
of the Company. With whom the complainant or its authorized
representative interacted has also not been specified. Although
in paragraph 11 of the complaint it is alleged that the
complainant on numerous occasions met accused Nos. 2 to 7
and requested to refund the amount, but again the complainant
has not made specific allegation about the date of meeting and
whether it was an individual meeting or collective meeting.
Similarly, in paragraph 17 of the complaint, there is no
allegation that a particular Director or Managing Director
fabricated debit note. In the entire complaint there are bald and
vague allegations against Respondent Nos. 2 to 7.
13. There is no dispute with regard to the legal proposition
that the case of breach of trust or cheating are both a civil
wrong and a criminal offence, but under certain situations
where the act alleged would predominantly be a civil wrong,
such an act does not constitute a criminal offence.
14. Be that as it may, as held by this Court, summoning of
accused in a criminal case is a serious matter. Hence, criminal
law cannot be set into motion as a matter of course. The order
of Magistrate summoning the accused must reflect that he has
applied his mind to the facts of the case and the law applicable
thereto. The Magistrate has to record his satisfaction with
regard to the existence of a prima facie case on the basis of
specific allegations made in the complaint supported by
satisfactory evidence and other material on record.
xiii) In Sunil Bharti Mittal15, while referring to the principle
that criminal intent of person (s) controlling the company can be
imputed to the company based on principle of of "alter ego", but
reverse application of principle is impermissible, held in paragraph
Nos.40 to 55 thus:
40. 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.
41. In the present case, however, this principle is applied in
an exactly reverse scenario. Here, company is the accused
person and the learned Special Magistrate has observed in the
impugned order that since the Appellants represent the
directing mind and will of each company, their state of mind is
the state of mind of the company and, therefore, on this
premise, acts of the company is attributed and imputed to the
Appellants. It is difficult to accept it as the correct principle of
law. As demonstrated hereinafter, this proposition would run
contrary to the principle of vicarious liability detailing the
circumstances under which a direction of a company can be
held liable.
(iii) Circumstances when Director/Person in charge of the
affairs of the company can also be prosecuted, when the
company is an accused person:
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 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.
44. 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. One such example is
Section 141 of the Negotiable Instruments Act, 1881. In
Aneeta Hada [ (2012) 5 SCC 661], the Court noted that if a
group of persons that guide the business of the company have
the criminal intent, that would be imputed to the body
corporate and it is in this backdrop, Section 141 of the
Negotiable Instruments Act has to be understood. Such a
position is, therefore, because of statutory intendment making
it a deeming fiction. Here also, the principle of "alter ego", was
applied only in one direction namely where a group of persons
that guide the business had criminal intent, that is to be
imputed to the body corporate and not the vice versa.
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. This very principle is elaborated in various other
judgments. We have already taken note of Maharashtra State
Electricity Distribution Company Ltd.. [ (2010) 10 SCC 479]
and S.K. Alagh [ (2008) 5 SCC 662]. Few other judgments
reiterating this principle are the following:
45.1. Jethsur Surangbhai v. State of Gujarat [(1984) Supp. SCC
207, (SCC pp.210-11, para 9):
9. . With due respect what the High Court seems to
have missed is that in a case like this where there was serious
defalcation of the properties of the Sangh, unless the
prosecution proved that there was a close cohesion and collusion
between all the accused which formed the subject matter of a
conspiracy, it would be difficult to prove the dual charges
particularly against the Appellant (A-1). The charge of
conspiracy having failed, the most material and integral part of
the prosecution story against the Appellant disappears. The only
ground on the basis of which the High Court has convicted him
is that as he was the Chairman of the Managing Committee, he
must be held to be vicariously liable for any order given or
misappropriation committed by the other accused. The High
Court, however, has not referred to the concept of vicarious
liability but the findings of the High Court seem to indicate that
this was the central idea in the mind of the High Court for
convicting the Appellant. In a criminal case of such a serious
nature mens rea cannot be excluded and once the charge of
conspiracy failed the onus lay on the prosecution to prove
affirmatively that the Appellant was directly and personally
connected with acts or omissions pertaining to Items 2, 3 and 4.
It is conceded by Mr. Phadke that no such direct evidence is
forthcoming and he tried to argue that as the Appellant was
Chairman of the Sangh and used to sign papers and approve
various tenders, even as a matter of routine he should have acted
with care and caution and his negligence would be a positive
proof of his intention to commit the offence. We are however
unable to agree with this somewhat broad statement of the law.
In the absence of a charge of conspiracy the mere fact that the
Appellant happened to be the Chairman of the Committee
would not make him criminally liable in a vicarious sense for
items 2 to 4. There is no evidence either direct or circumstantial
to show that apart from approving the purchase of fertilisers he
knew that the firms from which the fertilisers were purchased
did not exist. Similar is the case with the other two items.
Indeed, if the Chairman was to be made liable then all members
of the Committee viz. Tehsildar and other nominated members,
would be equally liable because all of them participated in the
deliberations of the meetings of the Committee, a conclusion
which has not even been suggested by the prosecution. As
Chairman of the Sangh the Appellant had to deal with a large
variety of matters and it would not be humanly possible for him
to analyse and go into the details of every small matter in order
to find out whether there has been any criminal breach of trust.
In fact, the hero of the entire show seems to be A-3 who had so
stage-managed the drama as to shield his guilt and bring the
Appellant in the forefront. But that by itself would not be
conclusive evidence against the Appellant. There is nothing to
show that A-3 had either directly or indirectly informed the
Appellant regarding the illegal purchase of fertilisers or the
missing of the five oil engines which came to light much later
during the course of the audit. Far from proving the intention
the prosecution has failed to prove that the Appellant had any
knowledge of defalcation of Items 2 to 4. In fact, so far as item
3 is concerned, even Mr. Phadke conceded that there is no
direct evidence to connect the Appellant. (emphasis
supplied)
45.2. Sham Sunder v. State of Haryana [(1989) 4 SCC 630, SCC
p.632, para 9]
9. But we are concerned with a criminal liability under
penal provision and not a civil liability. The penal provision must
be strictly construed in the first place. Secondly, there is no
vicarious liability in criminal law unless the statute takes that
also within its fold. Section 10 does not provide for such
liability. It does not make all the partners liable for the offence
whether they do business or not. (emphasis supplied)
45.3. Hira Lal Hari Lal Bhagwati v. CBI [ (2003) 5 SCC 257,
SCC p.277, para 30]
30. In our view, under the penal law, there is no concept
of vicarious liability unless the said statute covers the same
within its ambit. In the instant case, the said law which prevails
in the field i.e. the Customs Act, 1962 the Appellants have been
thereinunder wholly discharged and the GCS granted immunity
from prosecution. (emphasis supplied)
45.4. Maksud Saiyed v. State of Gujarat [(2008) 5 SCC
668, SCC p.674, para 13]
13. Where a jurisdiction is exercised on a complaint
petition filed in terms of Section 156(3) or Section 200 of the
Code of Criminal Procedure, the Magistrate is required to apply
his mind. The Penal Code does not contain any provision for
attaching vicarious liability on the part of the Managing Director
or the Directors of the Company when the accused is the
Company. The learned Magistrate failed to pose unto himself
the correct question viz. as to whether the complaint petition,
even if given face value and taken to be correct in its entirety,
would lead to the conclusion that the Respondents herein were
personally liable for any offence. 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.
(emphasis supplied)
45.5 R. Kalyani v. Janak C. Mehta [(2009) 1 SCC 516, SCC
p.527, para 32)
32. Allegations contained in the FIR are for commission of
offences under a general statute. A vicarious liability can be
fastened only by reason of a provision of a statute and not
otherwise. For the said purpose, a legal fiction has to be created.
Even under a special statute when the vicarious criminal liability
is fastened on a person on the premise that he was in charge of
the affairs of the company and responsible to it, all the
ingredients laid down under the statute must be fulfilled. A
legal fiction must be confined to the object and purport for
which it has been created.
45.6. Sharon Michael v. State of T.N. [(2009) 3 SCC 375, SCC
p. 383, para 16)
16. The first information report contains details of the terms of
contract entered into by and between the parties as also the
mode and manner in which they were implemented. Allegations
have been made against the Appellants in relation to execution
of the contract. No case of criminal misconduct on their part has
been made out before the formation of the contract. There is
nothing to show that the Appellants herein who hold different
positions in the Appellant Company made any representation in
their personal capacities and, thus, they cannot be made
vicariously liable only because they are employees of the
Company. (emphasis supplied)
45.7. Keki Hormusji Gharda v. Mehervan Rustom Irani
[(2009) 6 SCC 475, SCC pp. 480-81, paras 16-19)
16. We have noticed hereinbefore that despite of the said road
being under construction, the first Respondent went to the
police station thrice. He, therefore, was not obstructed from
going to the police station. In fact, a firm action had been taken
by the authorities. The workers were asked not to do any work
on the road. We, therefore, fail to appreciate that how, in a
situation of this nature, the Managing Director and the Directors
of the Company as also the Architect can be said to have
committed an offence Under Section 341 Indian Penal Code.
17. The Penal Code, 1860 save and except in some matters does
not contemplate any vicarious liability on the part of 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.
The learned Additional Chief Metropolitan Magistrate,
therefore, in our opinion, was not correct in issuing summons
without taking into consideration this aspect of the matter. The
Managing Director and the Directors of the Company should
not have been summoned only because some allegations were
made against the Company.
18. In Pepsi Foods Ltd. v. Special Judicial Magistrate [(1998) 5
SCC 749] this Court held as under: (SCC p. 760, para 28)
28. Summoning of an accused in a criminal case is a
serious matter. Criminal law cannot be set into motion as a
matter of course. It is not that the complainant has to bring
only two witnesses to support his allegations in the
complaint to have the criminal law set into motion. The
order of the Magistrate summoning the accused must
reflect that he has applied his mind to the facts of the case
and the law applicable thereto. He has to examine the
nature of allegations made in the complaint and the
evidence both oral and documentary in support thereof
and would that be sufficient for the complainant to
succeed in bringing charge home to the accused. It is not
that the Magistrate is a silent spectator at the time of
recording of preliminary evidence before summoning of
the accused. The Magistrate has to carefully scrutinise the
evidence brought on record and may even himself put
questions to the complainant and his witnesses to elicit
answers to find out the truthfulness of the allegations or
otherwise and then examine if any offence is prima facie
committed by all or any of the accused.
19. Even as regards the availability of the remedy of filing an
application for discharge, the same would not mean that
although the allegations made in the complaint petition even if
given face value and taken to be correct in its entirety, do not
disclose an offence or it is found to be otherwise an abuse of the
process of the court, still the High Court would refuse to
exercise its discretionary jurisdiction Under Section 482 of the
Code of Criminal Procedure.
46. It is stated at the cost of repetition that in the present case,
while issuing summons against the Appellants, the Special
Magistrate has taken shelter under a so-called legal principle,
which has turned out to be incorrect in law. He has not recorded
his satisfaction by mentioning the role played by the Appellants
which would bring them within criminal net. In this behalf, it
would be apt to note that the following observations of this
Court in the case of GHCL Employees Stock Option Trust v.
India Infoline Ltd. [(2013) 4 SCC 505, SCC p.516, paras 19 &
21]:
19. In the order issuing summons, the learned Magistrate has not
recorded his satisfaction about the prima facie case as against
Respondents 2 to 7 and the role played by them in the capacity
of Managing Director, Company Secretary or Directors which is
sine qua non for initiating criminal action against them.
(Thermax Ltd. v. K.M. Johny followed)
xxx
21. In the instant case the High Court has correctly noted that
issuance of summons against Respondents 2 to 7 is illegal and
amounts to abuse of process of law. The order of the High
Court, therefore, needs no interference by this Court.
47. We have already mentioned above that even if the CBI did
not implicate the Appellants, if there was/is sufficient material
on record to proceed against these persons as well, the Special
Judge is duly empowered to take cognizance against these
persons as well. Under Section 190 of the Code, any Magistrate
of first class (and in those cases where Magistrate of the second
class is specially empowered to do so) may take cognizance of
any offence under the following three eventualities:
(a) upon receiving a complaint of facts which constitute such
offence;
(b) upon a police report of such facts; and
(c) upon information received from any person other than a
police officer, or upon his own knowledge, that such offence
has been committed.
42. This Section which is the starting section of Chapter XIV is
subject to the provisions of the said Chapter. The expression
"taking cognizance" has not been defined in the Code.
However, when the Magistrate applies his mind for proceeding
Under Sections 200-203 of the Code, he is said to have taken
cognizance of an offence. This legal position is explained by
this Court in S.K. Sinha, Chief Enforcement Officer v. Videocon
International Ltd. and Ors. [(2008) 2 SCC 492] in the following
words:
19. The expression "cognizance" has not been defined in the
Code. But the word (cognizance) is of indefinite import. It has
no esoteric or mystic significance in criminal law. It merely
means "become aware of: and when used with reference to a
court or a Judge, it connoted "to take notice of judicially". It
indicates the point when a court or a Magistrate takes judicial
notice of an offence with a view to initiating proceedings in
respect of such offence said to have been committed by
someone.
20. Taking Cognizance" does not involve any formal action of
any kind. It occurs as soon as a Magistrate applies his mind to
the suspected commission of an offence....
48. Sine Qua Non for taking cognizance of the offence is the
application of mind by the Magistrate and his satisfaction that
the allegations, if proved, would constitute an offence. It is,
therefore, imperative that on a complaint or on a police report,
the Magistrate is bound to consider the question as to whether
the same discloses commission of an offence and is required to
form such an opinion in this respect. When he does so and
decides to issue process, he shall be said to have taken
cognizance. At the stage of taking cognizance, the only
consideration before the Court remains to consider judiciously
whether the material on which the prosecution proposes to
prosecute the accused brings out a prima facie case or not.
49. Cognizance of an offence and prosecution of an offender
are two different things. Section 190 of the Code empowered
taking cognizance of an offence and not to deal with offenders.
Therefore, cognizance can be taken even if offender is not
known or named when the complaint is filed or FIR registered.
Their names may transpire during investigation or afterwards.
50. Person who has not joined as accused in the charge-sheet
can be summoned at the stage of taking cognizance Under
Section 190 of the Code. There is no question of applicability
of Section 319 of the Code at this stage (See SWIL Ltd.. v. State
of Delhi [(2001) 6 SCC 670)]. It is also trite that even if a
person is not named as an accused by the police in the final
report submitted, the Court would be justified in taking
cognizance of the offence and to summon the accused if it feels
that the evidence and material collected during investigation
justifies prosecution of the accused (See Union of India v.
Prakash P. Hinduja and Anr. [(2003) 6 SCC 195)]. Thus, the
Magistrate is empowered to issue process against some other
person, who has not been charge-sheeted, but there has to be
sufficient material in the police report showing his
involvement. In that case, the Magistrate is empowered to
ignore the conclusion arrived at by the investigating officer and
apply his mind independently on the facts emerging from the
investigation and take cognizance of the case. At the same time,
it is not permissible at this stage to consider any material other
than that collected by the investigating officer.
51. On the other hand, Section 204 of the Code deals with the
issue of process, if in the opinion of the Magistrate taking
cognizance of an offence, there is sufficient ground for
proceeding. This Section relates to commencement of a
criminal proceeding. If the Magistrate taking cognizance of a
case (it may be the Magistrate receiving the complaint or to
whom it has been transferred Under Section 192), upon a
consideration of the materials before him (i.e., the complaint,
examination of the complainant and his witnesses if present, or
report of inquiry, if any), thinks that there is a prima facie case
for proceeding in respect of an offence, he shall issue process
against the accused.
52. A wide discretion has been given as to grant or refusal of
process and it must be judicially exercised. A person ought not
to be dragged into Court merely because a complaint has been
filed. If a prima facie case has been made out, the Magistrate
ought to issue process and it cannot be refused merely because
he thinks that it is unlikely to result in a conviction.
53. However, the words "sufficient grounds for proceeding"
appearing in the Section are of immense importance. It is these
words which amply suggest that an opinion is to be formed only
after due application of mind that there is sufficient basis for
proceeding against the said accused and formation of such an
opinion is to be stated in the order itself. The order is liable to
be set aside if no reason is given therein while coming to the
conclusion that there is prima facie case against accused,
though the order need not contain detailed reasons. A fortiori,
the order would be bad in law if the reason given turns out to be
ex facie incorrect.
54. However, there has to be a proper satisfaction in this
behalf which should be duly recorded by the Special Judge on
the basis of material on record. No such exercise is done. In this
scenario, having regard to the aforesaid aspects coupled with
the legal position explained above, it is difficult to sustain the
impugned order dated 19.03.2013 in its present form insofar as
it relates to implicating the Appellants and summoning them as
accused persons. The appeals arising out of SLP (Crl.) No. 2961
of 2013 and SLP (Crl.) No. 3161 of 2013 filed by Mr. Sunil
Bharti Mittal and Ravi Ruia respectively are, accordingly,
allowed and order summoning these Appellants is set aside. The
appeals arising out of SLP (Crl.) Nos. 3326-3327 of 2013 filed
by Telecom Watchdog are dismissed.
55. While parting, we make it clear that since on an erroneous
presumption in law, the Special Magistrate has issued the
summons to the Appellants, it will always be open to the
Special Magistrate to undertake the exercise of going through
the material on record and on that basis, if he is satisfied that
there is enough incriminating material on record to proceed
against the Appellants as well, he may pass appropriate orders
in this behalf. We also make it clear that even if at this stage, no
such prima facie material is found, but during the trial,
sufficient incriminating material against these Appellants
surfaces in the form of evidence, the Special Judge shall be at
liberty to exercise his powers Under Section 319 of the Code to
rope in the Appellants by passing appropriate orders in
accordance with law at that stage.
These have been the submissions made by the learned senior
counsel relying on the aforesaid rulings requesting to quash the
FIR on the main ground that the Company is not the accused in
any of the First Information Reports herein.
25. In order to fortify the submission that it is difficult to
cull out dishonest intention from the inception is to constitute
offence of cheating, the learned senior counsel refers to the
following rulings:
i) In Hira Lal Hari Lal Bhagwati3, which ruling has been
consistently referred to by the learned senior counsel in all these
criminal petitions, the Honble Supreme Court while insisting that
the complainant is required to show that the accused had
fraudulent or dishonest intention at the time of making promise or
representation, held in paragraph No.40 thus:
40. It is settled law, by catena of decisions, that for
establishing the offence of cheating, the complainant is
required to show that the accused had fraudulent or dishonest
intention at the time of making promise of representation. From
his making failure to keep up promise subsequently, such a
culpable intention right at the beginning that is at the time when
the promise was made cannot be presumed. It is seen from the
records that the exemption certificate contained necessary
conditions which were required to be complied with after
importation of the machine. Since the GCS could not comply
with it and, therefore, it rightly paid the necessary duties
without taking advantages of the exemption certificate. The
conduct of the GCS or the appellant in their capacities as office
bearers right at the time of making application for exemption.
As there was absence of dishonest and fraudulent intention, the
question of committing offence under Section 420 of the Indian
Penal Code does not arise. We have read the charge sheet as a
whole. There is no allegation in the First Information Report or
the Charge sheet indicating expressly or impliedly any
intentional deception or fraudulent/dishonest intention on the
part of the appellants right from the time of making the promise
or misrepresentation. Nothing has been said on what those
misrepresentations were and how the Ministry of Health was
duped and what where the roles played by the appellants in the
alleged offence. The appellants, in our view, could not be
attributed any mens rea of evasion of customs duty or cheating
the Government of India as the cancer society is a non profit
organization and, therefore, the allegation against the
appellants leveled by the prosecution are unsustainable. Kar
Vivad Samadhan Scheme Certificate along with the Duncan's
and Sushila Rani's judgments clearly absolve the appellants
herein from all charges and allegations under any other law
once the duty so demanded has been paid and the alleged
offence has been compounded. It is also settled law that once a
civil case has been compromised and the alleged offence has
been compounded, to continue the criminal proceedings
thereafter would be an abuse of the judicial process.
ii) On the same principle, the learned senior counsel relies
on the expression of the Honble Supreme Court in paragraph
No.26 in Suryalakshmi Cotton Mills Limited4 thus:
26. A bare perusal of Section 415 read with Section 420 of
the Indian Penal Code would clearly lead to the conclusion that
fraudulent or dishonest inducement on the part of the accused
must be at the inception and not at a subsequent stage.
iii) In R. Kalyani v. Janak C. Mehta16, the Honble
Supreme Court observing that in the absence of allegation that the
accused were entrusted with or otherwise had dominion over the
property to have committed breach of trust, held in paragraph
Nos.29 and 30 thus:
29. The allegations contained in the First Information
Report, therefore, do not disclose an offence against the
respondent Nos 1 and 2. They have in their individual capacity
been charged for commission of offences of cheating, criminal
breach of trust and forgery. As there had never been any
interaction between the appellant and them, the question of any
representation which is one of the main ingredients for
constituting an offence of cheating, as contained in Section 415
of the Indian Penal Code, did not and could not arise.
30. Similarly, it has not been alleged that they were entrusted
with or otherwise had dominion over the property of the
appellant or they have committed any criminal breach of trust.
iv) In the context of absence of specific allegation regarding
role of Directors in the present complaints, the learned senior
counsel places reliance in N.K. Wai7. The Honble Supreme Court
observing that if the offence is committed by a Company, every
person who is a Director or employee of the company is not liable,
and only such person would be held liable if at the time when
offence is committed he was in charge and was responsible for the
company for the conduct of the business of the company as well as
the company, held in paragraph Nos.7 and 8 thus:
7. This provision clearly shows that so far as the companies
are concerned if any offence is committed by it then every
person who is a Director or employee of the company is not
liable. Only such person would be held liable if at the time
when offence is committed he was in charge and was
responsible to the company for the conduct of the business of
the company as well as the company. Merely being a Director
of the company in the absence of above factors will not make
him liable.
8. To launch a prosecution, therefore, against the alleged
Directors there must be a specific allegation in the complaint as
to the part played by them in the transaction. There should be
clear and unambiguous allegation as to how the Directors are
incharge and responsible for the conduct of the business of the
company. The description should be clear. It is true that precise
words from the provisions of the Act need not be reproduced
and the court can always come to a conclusion in facts of each
case. But still in the absence of any averment or specific
evidence the net result would be that complaint would not be
entertainable.
The said proposition was rendered by the Honble Apex Court in
the context of the offence punishable under Section 138 read with
141 of N.I. Act, where there is a specific provision occurring in the
N.I. Act.
v) In Radhey Shyam Khemka9, the Honble Supreme
Court while cautioning the Courts at the time of taking cognizance
that the Court must be satisfied that prima facie an offence under
the Penal Code disclosed on the material produced before the
Court, at the time of taking cognizance of the alleged offence in
connection with the registration, issuance of prospectus, collection
of moneys from the Investors and the misappropriation of the
funds collected from the shareholders which constitute one offence
or the other under the Penal Code, held in paragraph No.6 thus:
6. But, at the same time, while taking cognizance of alleged
offences in connection with the registration, issuance of
prospectus, collection of moneys from the investors and the
misappropriation of the fund collected from the share-holders
which constitute one offence or other under the Penal Code,
court must be satisfied that prima facie and offence under the
Penal Code has been disclosed on the materials produced
before the court. If the screening on this question is not done
properly at the stage of initiation of the criminal proceeding, in
many cases, some disgruntled share-holders may launch
prosecutions against the promotors, directors and those in
charge of the management of the company concerned and can
paralyse the functioning of such company. It need not be
impressed that for prosecution for offences 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.
vi) In Saroj Kumar Poddar v. State , where the petitioner
therein had resigned from the Directorship of the company at the
time when the dishonoured cheque was issued, the Honble
Supreme Court while observing that the complaint - petitions were
silent as to how and in what manner, the appellant was
responsible for the conduct of the business of the company or
otherwise responsible to it in regard to its functioning, held in
paragraph No.14 thus:
14. Apart from the Company and the appellant, as noticed
hereinbefore, the Managing Director and all other Directors
were also made accused. The appellant did not issue any
cheque. He, as noticed hereinbefore, had resigned from the
directorship of the Company. It may be true that as to exactly
on what date the said resignation was accepted by the Company
is not known, but, even otherwise, there is no averment in the
complaint petitions as to how and in what manner the appellant
was responsible for the conduct of the business of the Company
or otherwise responsible to it in regard to the functioning. He
had not issued any cheque. How he is responsible for dishonor
of the cheque has not been stated. The allegations made in para
3, thus, in our opinion do not satisfy the requirements of
Section 141 of the Act.
vii) In G.N. Verma v. State of Jharkhand and another ,
the Honble Supreme Court while observing that Section 141 of
N.I. Act is a Penal provision creating a vicarious liability and
referring to the earlier ruling in National Small Industries Corpn.
Ltd. V. Harmeet Singh Paintal , in the context of absence of
specific allegation against the Director that he was In charge of and
responsible to the company for the conduct of the business of the
company without anything more as to the role of the Director, held
in paragraph Nos.19 and 20 thus:
19. It has been laid down, in the context of Sections 138 and 141
of the Negotiable Instruments Act, 1881 in National Small Industries
Corporation Ltd. v. Harmeet Singh Paintal [(2010) 3 SCC 330 that
Section 141 is a penal provision creating a vicarious liability. It was
held as follows: (SCC p.336, para 13)
13. . It is therefore, not sufficient to make a bald
cursory statement in a complaint that the Director (arrayed as an
accused) is in charge of and responsible to the company for the
conduct of the business of the company without anything more as
to the role of the Director. But the complaint should spell out as to
how and in what manner Respondent 1 was in charge of or was
responsible to the accused Company for the conduct of its
business. This is in consonance with strict interpretation of penal
statutes, especially, where such statutes create vicarious liability.
(emphasis in original)
It was then concluded: (SCC p.345, para 39)
39. (i) The primary responsibility is on the complainant to
make specific averments as are required under the law in the
complaint so as to make the accused vicariously liable. For
fastening the criminal liability, there is no presumption that every
Director knows about the transaction.
20. Insofar as the criminal complaint is concerned, it does not
contain any allegation against G.N. Verma. The only statement
concerning him is that he was the Chief General Manager/deemed
Agent of the mine and was exercising supervision, management and
control of the mine and in that capacity was bound to see that all
mining operations were conducted in accordance with the Act, the
rules, regulations, orders made thereunder. In the face of such a
general statement, which does not contain any allegation, specific or
otherwise, it is difficult to hold that the Chief Judicial Magistrate
rightly took cognizance of the complaint and issued summons to G.N.
Verma. The law laid down by this Court in Harmeet Singh Paintal
(though in another context) would be squarely applicable. Under the
circumstances, we are of the opinion that on the facts of this case and
given the absence of any allegation in the complaint filed against him
no case for proceeding against G.N. Verma has been made out.
26. The learned Public Prosecutor refers to the ruling in
Pothani Chandrasekher22 rendered by a learned Single Judge of
this Court. In answering the proposition that in an offence under
Section 420 of IPC, deception at inception is not absolutely
indispensable but the subsequent conduct of a person receiving the
property should furnish some indication of his original intention,
the learned Single Judge referred to the ruling of the Honble
Supreme Court in Hridaya Ranjan p.d. Verma v. State of
Bihar , relied on by the learned counsel for the petitioner therein
(Pothani Chandrasekher22). The factual matrix would reflect that
the petitioner therein floated a finance institution called Koratla
Permanent Fund Limited inviting deposits from the general public
promising to give twice the amount or thrice the amount after
expiry of five years, a large number of people were attracted by the
said promise, deposited the amounts, but as usual, such companies
would do, after expiry of the period, did not return the redeemable
value of deposit receipt amounting to Rs.15,000/-. Thus,
complaints came to be filed for the offences of cheating and
misappropriation punishable under Sections 420 and 406 IPC.
i) Thus, the facts are almost alike occurring in the present
cases, though not, on such huge scale as is available in the present
petitions. It is forthcoming that even the petitioner filed a
company petition before the Company Court and the said
company was in liquidation. Certain submissions were made by
the learned counsel therein including the submission that the
deception from inception is not occurring and there was no
intention at the inceptive stage for the petitioner to act dishonestly.
This apart, even the submission was that the complaints were
registered by the concerned police station and other police stations
in gross violation of the provisions of Section 220 (1) of the Code
urging that by reason of the definition Financial Establishments
under Section 2 (c) of the Act, a company registered under the
Companies Act, 1956 is not liable for prosecution for an alleged
offence under Section 5 of the Act. While answering the
submissions, the learned Single Judge referred to the amendment
effected to the definition financial establishments with effect from
14.07.2003 by amendment Act No.12 of 2003, extracting the
definition and observing that the amended definition of financial
establishments would belie the submission made by the learned
counsel for the petitioner therein and held that as per law, a
person, or group of individuals accepting deposits under any
scheme or arrangement is liable for punishment for a term which
may extend to ten years, if such person or group of persons
defaults in return of the deposit either in cash or in kind. Since
paragraph Nos.5, 6, 10, 11 and 12 are relevant, it would be useful
to extract them as to what has been observed by the learned Single
Judge therein thus:
5. The above definition did not permit the police to take
action against the companies registered under Companies Act,
1956. Therefore, Andhra Pradesh Legislature by Amendment
Act No.12 of 2003 amended the definition of Financial
Establishmentwith effect from 14-7-2003. After amendment,
the definition reads as under.
[2(c)Financial Establishments means any person or group of
individuals accepting deposit under any scheme or arrangement
or in any other manner but does not include a corporation or a
co-operative society owned or controlled by any State
Government or the Central Government or a banking company
as defined under clause (c) of Section 5 of the Banking
Regulation Act, 1949 (Central Act 10 of 1949]
6. A reading of the definition of Financial Establishments
as it stands in the Statute would belie the submission of the
learned counsel for the petitioner that the Act has no
application. As per law, a person or group of individuals
accepting the deposits under any scheme or arrangement is
liable for punishment for a term which may extend to ten years,
if such person or group of persons defaults in return of the
deposit either in cash or in kind. (See Section 5 read with
Section 2 (c) of the Act). Therefore, the submission is rejected.
7.
8.
9.
10. The learned counsel for the petitioner has placed strong
reliance on the oft-quoted judgment of the Supreme Court in
Hridaya Ranjan p.d. Verma v. State of Bihar, 2000 (1) Alt (Crl.)
349 (SC): 2000 SCC (Cri) 786 in support of the submission that
the petitioner cannot be said to have deceived the depositors by
fraudulently and dishonestly inducing and that he had no
intention to deceive anybody initially. He placed reliance on
paragraph-14 of the said judgment, which reads as under.
On a reading of the section it is manifest that in the
definition there are set forth two separate classes of acts which
the person deceived may be induced to do. In the first place he
may be induced fraudulently or dishonestly to deliver any
property to any person. The second class of acts set forth in the
section is the doing or omitting to do anything which the person
deceived would not do or omit to do if he were not so deceived.
In the first class of cases the inducing must be fraudulent or
dishonest. In the second class of acts, the inducing must be
intentional but not fraudulent or dishonest.
11. In the same judgment, in paragraph-15, the Supreme Court
made the following observations.
In determining the question it has to be kept in mind that
the distinction between mere breach of contract and the offence
of cheating is a fine one. It depends upon the intention of the
accused at the time of inducement which may be judged by
his subsequent conduct but for this subsequent conduct is
not the sole test. Mere breach of contract cannot give rise to
criminal prosecution for cheating unless fraudulent or dishonest
intention is shown right at the beginning of the transaction, that
is the time when the offence is said to have been committed.
Therefore, it is the intention which is the gist of the offence. To
hold a person guilty of cheating it is necessary to show that he
had fraudulent or dishonest intention at the time of making the
promise. From his mere failure to keep up promise subsequently
such a culpable intention right at the beginning that is, when he
made the promise cannot be presumed.
12. It is no doubt true that textually the offence of cheating
requires fraudulent dishonest intention to cheat on the part of
the accused at the very beginning when the deceived person
delivered property or valuable security. If the same were
interpreted textually, the same would result in a situation where
no person can be accused of cheating and can be made
punishable under Section 420 I.P.C. It may not require a big
logical argument to conclude that, a person, however, gullible
the deceived may be, would not reveal his true intention before
making the deceived person to part with valuable property. It is
always done by some inducement of making false promises or
making to believe the other person to deliver the property in the
existence of certain facts, which are nonexistent. For instance,
no depositor would deposit money in any Non-Banking.
Financial Company, if such company were to announce that the
chance of returning the deposit made by a person with interest
would be remote or would be doubtful. Therefore, every
financial company would certainly induce persons to part with
the money by promising attractive rates of interest as well as
attractive benefits by way of gifts. Therefore, the subsequent
conduct of a person receiving the property should furnish some
indication of his original intention. Indeed, as observed by the
Supreme Court in the above case, the intention of the accused
at the time of inducement can always be inferred by subsequent
conduct associated with other factors.
ii) In Soma Suresh Kumar24 relied on by the learned Public
Prosecutor, the Honble Supreme Court while holding that Section
2 (c) of Andhra Pradesh Protection of Depositors of Financial
Establishments Act, 1999 (17 of 1999) does not exclude
cooperative banks from penal action and attachment of property
provisions, and only excludes company registered under the
Companies Act or a corporation or a cooperative society owned
and controlled by any State Government or the Central
Government, rejected the request seeking mandamus to direct the
respondents not to arrest them or attach the properties of
Directors of alleged cooperative banks. The learned Public
Prosecutor places reliance on the observations of the Honble
Apex Court contained in paragraph Nos.8, 9, 10 and 17 thus:
8. We notice that the State of Andhra Pradesh was
contemplating a legislation similar to one enacted in the State
of Tamil Nadu, for a long time. On many occasions, the State's
attention was drawn, to the large scale diversion of money by
many financial institutions in the State, by cheating the
depositors of their hard-earned savings, misappropriating the
same and then later vanishing from the scene. Several cases
were booked against the persons responsible for the same, but
the presence of a comprehensive legislation to curb such unfair
practice was lacking. This was the reason for the State of
Andhra Pradesh to enact the Andhra Act.
9. The Statement of Objects and Reasons of the Act read as
under:
Instances have come to the notice of the State
Government, wherein a number of unscrupulous financial
establishments in the State are cheating innocent, gullible
depositors by offering very attractive rates of interest, collecting
huge deposits and then vanishing suddenly. The depositors are
being cheated and are put to grave hardship by losing their hard
earned savings. To curb these malpractices, the State
Government has decided to bring a law to protect the interests
of depositors of the financial establishment in the State and for
matters connected therewith or incidental thereto. The above
issue was also discussed in a conference of the State Chief
Ministers and Finance Ministers presided by the Union Finance
Minister on 14.9.1998 at Vigyan Bhavan, New Delhi. The
Union Finance Minister also desired that States should take
expeditious steps for enacting legislation on the lines of "Tamil
Nadu Protection of Depositors (in Financial Establishments)
Act, 1997, "to restore the confidence amongst the innocent
depositors and also to serve as a deterrent against malpractices
by such establishments during the course of acceptance of public
deposits.
To achieve the above object, the Government has decided
to make separate law by undertaking legislation.
10. The above mentioned Act was reserved by the Governor
on 13th April, 1999 for consideration and assent of the
President and on 23rd June, 1999, the same was granted and the
Act was published on 1st July, 1999, in the Andhra Pradesh
Gazette for general information.
and
17. Learned Counsel for the Petitioner raised a further
contention that Vasavi Cooperative Bank Ltd. does not come
within the definition of "financial establishment" Under Section
2(c) of the Andhra Act. We find it difficult to accept that
contention. What has been excluded from that definition is a
Company registered under the Companies Act or a Corporation
or a Cooperative Society owned and controlled by any State
Government or the Central Government. The Society in
question does not fall in that category. Consequently, the Co-
operative Bank in question is also governed by the provisions
of the Andhra Act.
It was a case where the Board of Directors of Vasavi Cooperative
Urban Bank Limited had swindled away the money of the
depositors by creating false documents, amounting to crores of
rupees.
iii) In the context of serious consequences that flow from a
financial fraud, the ruling in Vikram Anantrai Doshi25 is relied on
by the learned Public Prosecutor. The learned Public Prosecutor
would rely on the catastrophic effect of financial frauds as the one
occurring in the present cases creating a hazard in the financial
interest of the society, relies on paragraph No.26. The Honble
Supreme Court referring to the gravity of such offence creating a
dent in the economic spine of the nation holds thus:
26. We are in respectful agreement with the aforesaid view.
Be it stated, that availing of money from a nationalized bank in
the manner, as alleged by the investigating agency, vividly
exposits fiscal impurity and, in a way, financial fraud. The
modus operandi as narrated in the chargesheet cannot be put in
the compartment of an individual or personal wrong. It is a
social wrong and it has immense societal impact. It is an
accepted principle of handling of finance that whenever there is
manipulation and cleverly conceived contrivance to avail of
these kind of benefits it cannot be regarded as a case having
overwhelmingly and predominantingly of civil character. The
ultimate victim is the collective. It creates a hazard in the
financial interest of the society. The gravity of the offence
creates a dent in the economic spine of the nation. The
cleverness which has been skillfully contrived, if the
allegations are true, has a serious consequence. A crime of this
nature, in our view, would definitely fall in the category of
offences which travel far ahead of personal or private wrong. It
has the potentiality to usher in economic crisis. Its implications
have its own seriousness, for it creates a concavity in the
solemnity that is expected in financial transactions. It is not
such a case where one can pay the amount and obtain a "no due
certificate" and enjoy the benefit of quashing of the criminal
proceeding on the hypostasis that nothing more remains to be
done. The collective interest of which the Court is the guardian
cannot be a silent or a mute spectator to allow the proceedings
to be withdrawn, or for that matter yield to the ingenuous
dexterity of the accused persons to invoke the jurisdiction
Under Article 226 of the Constitution or Under Section 482 of
the Code and quash the proceeding. It is not legally permissible.
The Court is expected to be on guard to these kinds of adroit
moves. The High Court, we humbly remind, should have dealt
with the matter keeping in mind that in these kind of litigations
the accused when perceives a tiny gleam of success, readily
invokes the inherent jurisdiction for quashing of the criminal
proceeding. The court's principal duty, at that juncture, should
be to scan the entire facts to find out the thrust of allegations
and the crux of the settlement. It is the experience of the Judge
comes to his aid and the said experience should be used with
care, caution, circumspection and courageous prudence. As we
find in the case at hand the learned Single Judge has not taken
pains to scrutinize the entire conspectus of facts in proper
perspective and quashed the criminal proceeding. The said
quashment neither helps to secure the ends of justice nor does
it prevent the abuse of the process of the Court nor can it be
also said that as there is a settlement no evidence will come on
record and there will be remote chance of conviction. Such a
finding in our view would be difficult to record. Be that as it
may, the fact remains that the social interest would be on peril
and the prosecuting agency, in these circumstances, cannot be
treated as an alien to the whole case. Ergo, we have no other
option but to hold that the order of the High Court is wholly
indefensible.
iv) The learned Public Prosecutor to fortify his submission
that the fact-situation in all these crimes necessarily warrant
invocation of doctrine of lifting veil as public interest demands,
places reliance in Gotan Lime Stone Khanij Udyog Private
Limited26. The ruling is quoted by the learned Public Prosecutor
to answer the submission of the learned senior counsel appearing
on behalf of the petitioners that vicarious liability does not arise so
far as the offences under the Penal Code are concerned and,
therefore, the crimes registered against the petitioners are liable to
be quashed. The learned Public Prosecutor mainly rests on the
principle laid down by the Honble Supreme Court in paragraph
No.27 thus:
27. It is thus clear that the doctrine of lifting the veil can be
invoked if the public interest so requires or if there is allegation
of violation of law by using the device of a corporate entity. In
the present case, the corporate entity has been used to conceal
the real transaction of transfer of mining lease to a third party
for consideration without statutory consent by terming it as two
separate transactions-the first of transforming a partnership
into a company and the second of sale of entire shareholding to
another company. The real transaction is sale of mining lease
which is not legally permitted. Thus, the doctrine of lifting the
veil has to be applied to give effect to law which is sought to be
circumvented.
v) To the very same effect, the learned Public Prosecutor
also relies on the ruling in Selvi J. Jayalalitha27, laying great stress
on what has been stated by the Honble Apex Court in paragraph
No.192 thus:
192. In State of Rajasthan and Ors. v. Gotan Lime Stone
Khanji Udyog Private Limited and Anr. (2016) 4 SCC 469, it
has propounded that the principle of lifting the corporate veil
was well recognized not only to unravel tax evasion but also
where protection of public interest was of paramount
importance and the corporate entity was only an attempt to
evade legal obligations and lifting of veil is necessary to
prevent a device to avoid any welfare legislation. It was
acknowledged that it was difficult to enumerate the classes of
cases where lifting the veil is permissible but it was stressed
upon that the same must necessarily depend on the relevant
statutory or other provisions, the object sought to be achieved,
the impugned conduct, the involvement of the element of the
public interest, the effect on parties who may be affected etc. It
was recorded that the doctrine of lifting the veil could be
invoked, if the public interest so required or if there was
violation of law by using the device of a corporate entity. In the
reported case, the corporate entity had been used to conceal the
real transaction of transfer of mining lease to a third party for
consideration without the statutory consent by terming it as two
separate transactions. The real transaction was the sale of
mining lease which was legally impermissible. That the doctrine
of lifting the veil has to be applied to give effect to law which is
sought to be circumvented, is thus the judicial precept.
vi) Concerning the proposition that powers possessed by
the High Court under Section 482 of the Code are very wide and
the very plenitude of the power requires great caution in its
exercise, and that the Court must be careful to see that its decision
in exercise of this power is based on sound principles, the learned
Public Prosecutor, refers to the observations of the Honble
Supreme Court in paragraph Nos.23 and 27 in Inder Mohan
Goswami23. In the same context, reference to the scope and ambit
of Courts power under Section 482 of the Code, explained by the
Honble Supreme Court in paragraph No.23, since useful, the
same is extracted as under:
23. This Court in a number of cases has laid down the scope
and ambit of courts' powers under Section 482 Cr.P.C. Every
High Court has inherent power to act ex debito justitiae to do
real and substantial justice, for the administration of which
alone it exists, or to prevent abuse of the process of the court.
Inherent power under Section 482 Cr.P.C. can be exercised:
(i) to give effect to an order under the Code;
(ii) to prevent abuse of the process of court, and
(iii) to otherwise secure the ends of justice.
24. Inherent powers under Section 482 Cr.P.C. though wide
have to be exercised sparingly, carefully and with great caution
and only when such exercise is justified by the tests
specifically laid down in this section itself. Authority of the
court exists for the advancement of justice. If any abuse of the
process leading to injustice is brought to the notice of the court,
then the Court would be justified in preventing injustice by
invoking inherent powers in absence of specific provisions in
the Statute.
Discussion of decided cases
25. Reference to the following cases would reveal that the
courts have consistently taken the view that they must use this
extraordinary power to prevent injustice and secure the ends of
justice. The English courts have also used inherent power to
achieve the same objective. It is generally agreed that the
Crown Court has inherent power to protect its process from
abuse. In Connelly v. DPP [1964] AC 1254, Lord Devlin stated
that where particular criminal proceedings constitute an abuse
of process, the court is empowered to refuse to allow the
indictment to proceed to trial. Lord Salmon in DPP v. Humphrys
[1977] AC 1 stressed the importance of the inherent power
when he observed that it is only if the prosecution amounts to
an abuse of the process of the court and is oppressive and
vexatious that the judge has the power to intervene. He further
mentioned that the court's power to prevent such abuse is of
great constitutional importance and should be jealously
preserved.
26. In R.P. Kapur v. State of Punjab 1960CriLJ1239 , this Court
summarized some categories of cases where inherent power can
and should be exercised to quash the proceedings:
(i) where it manifestly appears that there is a legal bar
against the institution or continuance of the proceedings;
(ii) where the allegations in the first information report or
complaint taken at their face value and accepted in their
entirety do not constitute the offence alleged;
(iii) where the allegations constitute an offence, but there
is no legal evidence adduced or the evidence adduced
clearly or manifestly fails to prove the charge.
27. The powers possessed by the High Court under Section
482 of the Code are very wide and the very plenitude of the
power requires great caution in its exercise. The court must be
careful to see that its decision in exercise of this power is based
on sound principles. The inherent power should not be
exercised to stifle a legitimate prosecution. The High Court
should normally refrain from giving a prima facie decision in a
case where all the facts are incomplete and hazy; more so, when
the evidence has not been collected and produced before the
court and the issues involved, whether factual or legal, are of
such magnitude that they cannot be seen in their true
perspective without sufficient material. Of course, no hard and
fast rule can be laid down in regard to cases in which the High
Court will exercise its extraordinary jurisdiction of quashing
the proceedings at any stage.
CONCLUSIONS TO BE DRAWN:
27. The present obtaining fact-situation requires
appreciation in the light of the submissions made by the learned
senior counsel for the petitioners and the learned Public
Prosecutor, and on the anvil of the authorities relied on by them
respectively.
i) The rulings, in Harshendra Kumar1 and Mrs. Anita
Malhothra2 referred to by the learned senior counsel, were in the
context of giving weight to Form No.32 showing the resignation of
a Director and its consequences on the offence alleged against Ex-
Director. As referred to hereinbefore, the offence alleged therein is
punishable under Section 138 read with 141 of the N.I. Act. But,
in the present case, it is not so. The offences alleged against the
petitioners have been the offences falling under IPC provisions and
the provisions of APPDFE Act, PC & MCSB Act and also
infraction of the provisions of the RBI Act. This apart, the main
ground is, that all the petitioners herein except the petitioner -
K.V.S. Sai Ram in Criminal Petition Nos.3080 and 3099 of 2017,
have been holding some post or other in the companies falling
under one or other of three categories, the relevant details have
already been referred to in the above so far as Avva Sita Ram Rao
alias Avva Seetha Ram, concerned with Crl.P. Nos.3276, 3277
and 3278 of 2017 arraigned as accused Nos.8, 6 and 7
respectively. The further relevant details would be mentioned in a
table at a later stage. Therefore, merely on the ground that the
petitioner in first three petitions resigned on 03.01.2011 and
worked as Director from the year 2004 to 03.01.2011 is no ground
to accede to his request, more particularly, the fact-situation in the
latter two criminal petitions clearly disclosing that the cause of
action commenced even during the directorship of petitioner in the
three core companies.
28. Concerning the submission that offence punishable
under Section 420 IPC and 406 IPC cannot co-exist and the
decisions relied on by the learned senior counsel, in Jalpa Parshad
Aggarwal10, the learned Single Judge of Punjab and Haryana High
Court quashed the FIR, basing on its earlier decision in Iqbal
Singh Randhawa28, holding that offence punishable under Section
406 IPC is an antithesis of offence under Section 420 IPC. But, in
the present case, investigation is yet to be completed and the
Investigating Officer has to arrive at a definite opinion, whether
the allegations would prima facie make out either of the offences.
This apart, as already mentioned hereinbefore not only the IPC
offences have been alleged, but also the offences under APPDFE
Act, PC & MCSB Act and the violations of the relevant provisions
of RBI Act have been alleged against the petitioners. The rulings
in Wolfgang Reim11 and R.S. Sodhi Manoranjan Pani12 are also
to the same effect.
29. On the third submission that concept of vicarious
liability is not available so far as IPC offences are concerned, in
S.K. Alagh5, the Honble Supreme Court in paragraph No.16, in
the opening words carves out an exception observing that the
Penal Code, save and except some provisions specifically
providing therefor, does not contemplate any vicarious liability
on the part of a party who is not charged directly for commission
of an offence. What is sought to be insisted by the learned senior
counsel referring to the rulings in S.K. Alagh5, Sharad Kumar
Sanghi13, Maksud Saiyed6 and GHCL Employees Stock Option
Trust14 is, when the complainant intends to rope in a Managing
Director or any Officer of the company, he is duty bound to make
a specific allegation to constitute vicarious liability and the said
ingredient is conspicuously absent in the complaints against the
petitioners. In S.K. Alagh5, where the offence punishable under
Section 406 IPC was alleged, it was a case based on a contract for
supply of goods. The complainant therein sent two demand drafts
for different amounts for supply of goods on a particular date,
despite the fact that his dealership had been terminated earlier and
he refused to receive the said demand drafts when they were sent
to him by the appellant company (Britannia Industries Limited).
Thereafter, the Company appointed a New Area Wholesale dealer
for Azamgarh. When the complainant made a demand to deliver
the goods by a letter, dated 24.09.2000, alleging that the Company
owes him a sum of Rs.1,00,000/-, the Company issued a letter
reiterating that his dealership had been terminated. When the
complainant lodged the complaint alleging the offence under
section 406 IPC against the company, in that context, it was held
that the Managing Director of the Company cannot be said to have
committed an offence under Section 406 IPC as the drafts were
drawn in the name of the company.
30. In Sharad Kumar Sanghi13, the fact-situation would
reflect that the complainant obtained a quotation from the Bhopal
Branch of M/s. Sanghi Brothers (Indore) Limited for purchase of a
TATA Diesel vehicle. The vehicle was delivered to him on
01.05.1998 on payment of the price deposited at Bhopal through
Bank Draft. The complainant faced difficulty with the vehicle and
eventually learnt that in the month of August 2000, there was a
discrepancy of the engine number in the invoice issued to him. On
his further enquiry, he found that the letter issued to Tata
Engineering and Locomotive Company (TELCO), dated
7.11.2000, that in the course of transit from the company to
Bhopal, the said vehicle had met with an accident, as a result of
which, the engine was replaced by another engine. He, therefore,
filed the complaint under Section 200 of the Code, for suppression
of information and deliberately cheating him. When cognizance
was taken and summons was issued, the same was challenged by a
revision before the learned Sessions Judge, Betul, which was
dismissed on 27.02.2002. Aggrieved over the same, when he
preferred an application under Section 482 of the Code, repelling
all the submissions, dismissed the application for quashment. The
Honble Supreme Court referring to the allegations, holding that
the allegations which found place against the Managing Director in
his personal capacity, were absolutely vague, and thereby allowed
the appeal. Thus, the fact-situation would reflect that it was based
on a contract and involvement of the Company was obvious.
31. In Sunil Bharti Mittal15 mainly the emphasis was on
the principle that the criminal intent of the alter ego of the
company, i.e., the person or group of persons that guide the
business of the company, would be imputed to the
company/corporation, referring to the legal proposition laid down
in Iridium India Telecom Ltd. v. Motorola Inc .
32. For the submission that the allegations in the complaint
do not disclose any dishonest intention and, in fact, the complaint
allegations ought to give an indication that dishonest intention was
from the beginning to sustain the offence alleged against the
petitioners, the learned senior counsel has placed reliance in Hira
Lal Hari Lal Bhagwati3, Suryalakshmi Cotton Mills Limited4,
R. Kalyani16, N.K. Wai7, Radhey Shyam Khemka9, Saroj
Kumar Poddar29 and G.N. Verma30. On the other hand, in
Pothani Chandrasekher22 relied on by the learned Public
Prosecutor, the learned Single Judge of this Court refers to the
expression of the Honble Supreme Court in Hridaya Ranjan
P.D. Verma32 that the intention of the accused at the time of
inducement can always be inferred by subsequent conduct
associated with other factors.
33. The relief sought for in all these petitions is to quash the
FIRs. Investigation is at the inceptive stage when the applications
have been filed and subsequent development has been that some of
the witnesses have been examined in each of the crimes and the
purport of statements made by some of the witnesses, referred to
in the above, when examined would definitely indicate that the
depositors were lured that they would be provided with double the
amount or in some occasions thrice the amount deposited, but no
amounts were paid as promised and instead cheques were issued
in some cases repeatedly in the names of one or the other bank
when the cheques presented in the first bank were dishonoured.
Thus, when the intention is inferential, certainly, it is not the stage
to record a positive finding just basing on the allegations made in
the complaint, more particularly, when viewed in the context of
huge number of depositors to the tune of 30-40 lakhs, that are
alleged to have been deceived involving huge amount to the tune of
more than Rs.6,000 Crores which are the crucial aspects occurring
in these crimes.
34. In the present context, it would be appropriate to refer
to the common order rendered by the Honble Division Bench of
this Court in Jakir Hussain Kosangi and others v. State of
Andhra Pradesh, represented by its Principal Secretary to
Government, Home . The petitioners therein, who were the
Directors and Managing Directors of the company, by name,
M/s. Akshaya Gold Farms and Villas India Limited, were also
petitioners in other five writ petitions appointed as whole-time
Director for five years in a company by name M/s. Agri Gold
Farms Estates India Private Limited, which is one of the core
companies in the present petitions. Similar relief as the one sought
for in the present Criminal Petitions was claimed by the petitioners
in all six writ petitions under Article 226 of the Constitution of
India for quashment of the First Information Reports. The
Honble Division Bench refers to the fact-situation therein in
paragraph No.4 thus:
4. The sum and substance of the grievance of the petitioners
is that FIRs are registered by different police in different parts
of several States alleging non-repayment of the deposits
collected by the company of which they were the Directors or
the Nominee Directors or sons of the Nominated Directors. As a
consequence, Prisoner Transit warrants are issued by various
courts making the petitioners run around, without any
redemption, seriously infringing their fundamental rights.
35. The issue agitated was that there can be only one First
Information Report under Section 154 of the Code and all
information that flows thereafter, could only be treated as material
in furtherance of the investigation. The Honble Division Bench
after projecting evolution of the law referring to a catena of
decisions rendered by the Honble Supreme Court, summarized
under sub-heading the analysis of the decisions of the Honble
Supreme Court thus:
S.NO
Decision
The dispute arose out
of
Whether the
Second (2nd) FIR
or Multiple FIRs
filed are Valid or
Invalid
1.
Ram Lal Narang Vs.
State(Delhi
Administration) and Om
Prakash Narang & Ors
Vs. State(Delhi
Administration), (1979)
2 SCC 322
Arose out of theft of
two sandstone pillars
of great antiquity.
Valid
2.
M. Krishna Vs. State of
Karnataka, (1999) 3 SCC
247
Arose out of amassing
wealth
disproportionate to
ones source of
income.
Valid
3.
V.K. Sharma Vs. Union
of India,
(2000)9SCC449
Arose out of swindling
a large number of
depositors on the false
pretext that their
deposits would be
returned with interest
on a subsequent date.
(White-Collar Crime)
Valid (Multiple
FIRs)
4.
Mohan Bhaitha Vs. State
of Bihar,
(2001)4SCC350
Arose out of a dowry
death.
Note: - The question
involved here is not
concerned about
whether there can be
more FIRs than one
but whether there can
be more trials than
one.
Held: -Offences
more than one
committed by the
same persons
could be tried at
one trial, if they
can be held to be
in one series of
facts so as to
form the same
transaction.
5.
T.T. Antony Vs. State of
Kerala, (2001) 6 SCC
350
Arose out of police
firing resulting into
deaths of few people
and injuries to a large
number of people.
Third (3rd) FIR
Invalid.
6.
Narinderjit Singh Shani
and another Vs. Union of
India, (2002)2SCC210
Arose out of swindling
of a large number of
depositors on the false
pretext that their
deposits would be
returned with interest
on a subsequent date.
Valid (Multiple
FIRs)
7.
Kari Chaudhary Vs.
Most. Sita Devi and Ors,
(2002) 1 SCC 714
Arose out of a murder
case.
Valid
8.
State of Punjab Vs.
Rajesh Syal ,
(2002)8SCC158
Arose out of swindling
of a large number of
depositors on the false
pretext that their
deposits would be
returned with interest
on a subsequent date.
(White-Collar Crime)
Valid (Multiple
FIRs)
9.
Upkar Singh v. Ved
Prakash, (2004) 13 SCC
292
Arose out of an
attempt to murder and
house-trespass cases
Valid
10.
RameshchandraNandlal
Parikh v. State of Gujarat
(2006) 1 SCC 732
Arose out of swindling
of a large number of
depositors on the false
pretext that their
deposits would be
returned with interest
on a subsequent date.
Valid (Multiple
FIRs)
11.
Vikram Vs. State of
Maharashtra, (2007) 12
SCC 332
Arose out of a murder
case.
Valid
12.
Pramod Kumar Saxena
Vs. Union of India and
Ors, (2008)9SCC685
Arose out of swindling
of a large number of
depositors on the false
pretext that their
deposits would be
returned with interest
on a subsequent date.
Valid (Multiple
FIRs)
13.
Nirmal Singh Kahlon Vs.
State of Punjab and
Others, (2009) 1 SCC
441
Arose out of scandal
involving selection of
Panchayat Secretaries.
Valid
14.
C. Muniappan and others
Vs. State of Tamil Nadu,
(2010) 9 SCC 567
Arose out of setting
fire to a university bus
and several public
buses.
Investigation of
the Second FIR
was clubbed with
the investigation
of the First FIR.
In essence, two
complaints/FIRs
are clubbed
together and
investigated
jointly.
15.
Bahubhai Vs. State of
Gujarat, (2010) 12 SCC
254
Arose out of
altercation that took
place between
members of the two
communities.
Invalid
16.
ChirraShivraj Vs. Sate of
AP, (2010) 14 SCC 444
Arose out of an
attempt to murder
case.
Second F.I.R.
held Valid
because SHO
made a mistake
by recording
information as a
fresh F.I.R. and
that this mistake
should not make
the case of
prosecution weak
especially when
no prejudice had
been caused.
17.
Shiv Shankar Singh Vs.
State of Bihar, (2012) 1
SCC 130
Arose out of dacoity
and murder.
Valid
18.
Surender Kaushik and
Others Vs. State of UP,
(2013) 5 SCC 148
Arose out of fake and
fraudulent documents
prepared by the
accused persons.
Invalid
19.
AmitbhaiAnilchandra
Shah Vs. CBI, (2013) 6
SCC 348
Arose out of murder
cases
Invalid
20.
Anju Chowdry Vs. State
of UP, (2013) 6 SCC 384
Arose out of a hate
speech.
Valid
21.
YanabSheikh@gagu Vs.
State of West Bengal,
(2013) 6 SCC 428
Arose out of a murder
case.
Invalid
It would be appropriate to refer to what has been observed by the
Honble Division Bench in paragraph No.64, which is relevant in
the present fact-scenario thus:
64. As we have pointed out earlier, in almost all the five
decisions of the Supreme Court where finance companies and its
directors were accused of collecting deposits and not repaying
them, the Supreme Court did not adopt the same view as adopted
in T.T Antony. Though in V.K Sharma and P.K Sharma the
Supreme Court granted a small reprieve, the Supreme Court did
not grant the reliefs that the petitioners have sought in these writ
petitions. It must be pointed out that a staggering amount of
nearly Rupees seven thousand crores was admittedly due, when
the first PIL was filed. The number of depositors to whom such a
huge amount was due from Agri Gold group of companies and
Akshaya Gold, was about 32 lakhs of people. These companies
had branches in several places. The depositors, who invested
money in various branches, have independent causes of action.
36. Thus, it is clear that the present group of companies in
all these crimes were also the group of companies and Akshaya
Gold in the aforesaid writ petitions. Though, not on the same
grounds that are occurring in the present petitions, but on a
different ground, the quashment was sought under Article 226 of
the Constitution of India, still, when viewed the factual matrix that
number of depositors to whom a staggering amount of more than
Rs.6,000 Crores was undisputedly due and the depositors, who
were deprived of their legitimate amount, was about 32.00 lakhs of
people, certainly, it is difficult to accede to the request in the
present petitions.
37. Certain relevant facts are also necessary to refer to that
emerge from the investigation so far done and the documents
submitted by the petitioner in Crl.P. No.3276 of 2017, to which
already advertence is made herein before, and similar statements
submitted by the learned Public Prosecutor so far as the petitioners
in Crl.P. Nos.3074 & 3075; 3076 & 3077; and 3078 & 3079 of
2017 are concerned.
38. In fact, the learned Public Prosecutor in resisting the
request made by the petitioners herein placed on record a
confessional statement said to have made by one Bejawada Veera
Venkata Babu Rao, son of Veera Raghavulu figuring as one of the
accused persons in all these crimes. The learned Public Prosecutor
would submit that the involvement of the petitioners have been
occurring in these statements. The probative value of these
statements requires examination during trial in case investigation
leads to laying charge sheets. However, as referred to in the
above, the statement regarding the details of the
Director/designated Partner maintained by the Ministry of
Corporate Affairs as on 23.04.2017 placed for perusal of this
Court by the learned Public Prosecutor would give enough
indication in viewing what has been stated by the learned Public
Prosecutor as to the three categories of the companies and the
petitioners holding one or other posts even as on 23.04.2017 is
correct and cannot at all be sidelined. It would be relevant to
project the statements which would reflect that the petitioner -
Avva Sita Ram Rao alias Seetha Ram in Criminal Petition
Nos.3276, 3277 and 3278 of 2017 is still working in some of the
Agri Gold group companies that fell in category Nos.2 and 3
referred to in the above as on 01.02.2015. The relevant entries
showing the details in the statement relating to the petitioner alone
are extracted as hereunder:
S.
No.
CIN/LLPIN
Name of the
Company/LLP
Current
designatio
n of the
Director/D
esignated
Partner
Date of
appointment
at current
designation
Original
date of
appointment
Date of
cessati
on
Compa
ny/LL
P
Status
Def
ault
ing
stat
us
4
U51219AP199
7PLC027851
AGRI GOLD
PROJECTS LIMITED
Whole-
time
director
01/01/2011
28/08/1997
-
Active
NO
10
U55101TN199
2PTC022889
VENKATADRI
HOTELS PRIVATE
LIMITED
Director
09/08/2006
09/08/2006
-
Active
NO
13
U01119AP200
7PTC055400
SIDDAVARAM
AGRO PROJECTS
PRIVATE LIMTIED
Director
04/09/2007
04/09/2007
-
Active
NO
15
U70102TG200
2PTC039346
SANCTUARY
HOMES PRIVATE
LIMITED
Director
30/08/2008
02/01/2008
-
Active
NO
16
U40101KA200
4PTC035205
NORTH
KARNATAKA
POWERGEN
PRIVATE LIMITED
Whole-
time
Director
25/09/2008
08/01/2008
-
Active
NO
17
U70200TG200
8PTC058195
KAMALATMIKA
ESTAETS PRIVATE
LIMITED
Director
17/03/2008
17/03/2008
-
Active
NO
27
U02005TG200
7PTC055637
SHAKTI TIMBER
ESTAES PRIVATE
LIMITED
Director
28/08/008
27/03/2008
-
Active
NO
28
U01403AP200
7PTC053425
SWARNA SIRI
PLANTERS
PRIVATE LIMITED
Director
26/08/2008
27/03/2008
-
Active
NO
31
U45209TG200
8PTC061100
SUSLA INFRA
DEVELOPERS
PRIVATE LIMITED
Director
18/09/2008
18/09/2008
-
Active
NO
33.
U70101TN200
8PTC070121
BILLIYARD FARMS
PRIVATE LIMITED
Director
11/12/2008
11/12/2008
-
Active
NO
35
U45200TN200
8PTC070126
BANDHO REAL
ESTATES PRIVATE
LIMITED
Director
24/09/2009
02/01/2009
-
Active
NO
36
U40109TG200
0PTC035120
SAI RENEWABLE
POWER PRIVATE
LIMITED
Director
27/01/2009
27/01/2009
-
Active
NO
37
U40109TG199
6PLC022967
CLARON POWER
CORPORATION
LIMITED
Director
31/08/2009
06/04/2009
-
Active
NO
38
U45200AP200
8PTC57993
AVANINDRA
INFRA VENTURES
PRIVATE LIMITED
Director
21/08/2010
10/08/2010
-
Active
NO
39
U70100AP200
8TC058011
RAJA SYAMALA
REALTORS
PRIVATE LIMITED
Director
20/08/2010
10/08/2010
-
Active
NO
40
U45400AP200
8PTC057777
MOTHERLAND
REALTORS
PRIVATE LIMITED
Director
20/08/2010
10/08/2010
-
Active
NO
41
U92120TG201
0PTC071623
PUSHPA
TELEVISION
PRIVATE LIMITED
Director
13/12/2010
13/12/2010
-
Active
NO
42
U63020AP201
0PTC069270
SRI
VENKATESWARA
WAREHOUSING
PRIVATRE LIMITED
Additional
Director
15/03/2011
15/03/2011
-
Active
NO
43
U22190TG201
0PTC068200
ASPRATION MEDIA
PRIVATE LIMITED
Director
14/09/2012
11/11/2011
-
Active
NO
44
U45209TG201
2PTC083953
KRYSTAL VISION
PROJECTS PRIVATE
LIMITED
Additional
Director
01/12/2014
01/11/2012
2009
-
Active
NO
i) Like-wise, Sri Avva Udaya Bhaskar Rao, petitioner in
Criminal Petition Nos.3074 and 3075 of 2017, was holding the
office of the company in the following companies as on
23.04.2017.
S.
No.
CIN/LLPIN
Name of the
Company/LLP
Current
designation
of the
Director/De
signated
Partner
Date of
appointment
at current
designation
Original
date of
appointment
Date of
cessati
on
Compa
ny/LL
P
Status
Def
ault
ing
stat
us
4
U13200AP200
8PTC061741
ABHI MINERALS
PRIVATE LIMITED
Director
29/11/2008
29/11/2008
-
Active
-
5
U15209AP200
1PTC038236
AMRUTHA
VARSHINI DAIRY
FARMS PRIVATE
LIMITED
Director
29/09/2003
29/09/2003
-
Active
-
6
U24100TN198
6PTC013669
MIRA ORGANICS
AND CHEMICALS
PRIVATE LIMITED
Director
18/10/2006
18/10/2006
-
Active
-
7
U24119TN200
5PTC055351
UNIPHASE
CHEMICASL
PRIVATE LIMITED
Director
18/06/2007
18/06/2007
-
Active
-
8
U24120AP199
9PTC031354
AGRI GOLD
ORGANICS
PRIVATE LIMITED
Director
27/09/2003
27/09/2003
-
Active
-
9
U25111PN200
3PLC051447
CHANDI
TECHNOLOGIES
AND INDUSTRIES
LIMITED
Director
18/11/2004
18/11/2004
-
Active
-
10
U31909TG199
9PLC033104
RITHWIK ENERGY
SYSTEMS
LIMITED
Director
31/08/2009
06/04/2009
-
Active
-
11
U40101KA200
04PTC035205
NORTH
KARANTAKA
POWERGEN
PRIVATE LIMITED
Whole-time
Director
02/04/2008
08/01/2008
-
Active
-
12
U40105AP200
2PTC038328
SINGARAYA
HILLS GREEN
POWER GENCO
PRIVATE LIMITED
Managing
Director
04/08/2005
04/08/2005
-
Active
-
13
U40109TG199
6PLC022967
CLARION POWER
CORPORATION
LIMITED
Director
31/08/2009
06/04/2009
-
Active
-
14
U40109TG200
0PTC035120
SAI RENEWABLE
POWER PRIVATE
LIMITED
Director
03/11/2011
27/01/2009
-
Active
-
18
U45209AP200
8PTC058079
AKHILENDRA
INFRA AND AGRO
VENTURES
PRIVATE LIMITED
Director
25/07/2013
18/06/2013
-
Active
-
19
U45209TG201
2PTC083953
KRYSTAL VISION
PROJECTS
PRIVATE LIMITED
Additional
Director
01/12/2014
01/12/2014
-
Active
-
20
U51219AP199
7PLC027851
AGRI GOLD
PROJECTS
LIMITED
Managing
Director
30/11/2002
30/11/2002
-
Active
-
24
U63020AP201
0PTC069270
SRI
VENKATESWARA
WARE HOUSING
PRIVATE LIMITED
Additional
Director
08/04/2011
08/04/2011
-
Active
-
29
U92199TG200
2PTC039047
ARKA LEISURE
AND
ENTERTAINMENT
S PRIVATE
LIMITED
Director
30/05/2002
30/05/2002
-
Active
-
ii) Sri Avva Venkata Subrahmanyeswara Sarma, petitioner
in Criminal Petition Nos.3076 and 3077 of 2017 is holding the
office in the following companies as on 23.04.2017.
S.
No.
CIN/LLPIN
Name of the
Company/LLP
Current
designation
of the
Director/De
signated
Partner
Date of
appointment
at current
designation
Original
date of
appointment
Date of
cessati
on
Compa
ny/LL
P
Status
Def
ault
ing
stat
us
3
U01120AP199
5PLC022211
AGRI GOLD
FOODS AND
FARM PRODUCTS
LIMITED
Director
27/08/2013
29/11/2008
-
Active
-
8
U24231TN200
8PTC067409
MIRAGEL CHEM
PRODUCTS
PRIVATE LIMITED
Director
21/04/2008
21/04/2008
-
Active
-
9
U32109KA200
7PTC042635
AVVAS INFOTECH
PRIVATE LIMITED
Managing
Director
15/07/2013
09/06/2008
-
Active
-
16
U45400AP200
8PTC057777
MOTHERLAND
REALTERS
PRIVATE LIMITED
Director
27/08/2011
03/01/2011
-
Active
-
19
U51909AP199
6PLC025600
AGRI GOLD
EXIMS LIMITED
Managing
Director
04/05/2006
04/05/2006
-
Active
-
20
U55101KA200
4PTC035044
RAAM AVVAS
RESORTS AND
HOTELS PRIVATE
LIMITED
Director
20/05/2009
20/05/2009
-
Active
-
23
U72200KA201
5PTC084594
AVVAS
CONSULTANCY
SERCIES PRIVATE
LIMITED
Director
09/12/2015
09/12/2015
-
Active
-
25
U72300TN200
5PTC056820
COMMUNICATIO
N NEXT
CONSULTANCY
PRIVATE LIMITED
Director
02/09/2011
03/01/2011
-
Active
-
26
U74999TG200
7PTC053696
RETAIL SMART
GLOBAL
SHOPPING
PRIVATE LIMITED
Director
01/06/2007
01/06/2007
-
Active
-
27
U92199TG200
2PTC039047
ARKA LEISURE
AND
ENTERTINMENTS
PRIVATE LIMITED
Director
14/09/2010
08/03/2010
-
Active
-
iii) Sri Avva Venkata Siva Ram alias Siva Rama Krishna,
petitioner in Criminal Petition Nos.3078 and 3079 of 2017, is
holding the office in the following companies as on 23.04.2017:
S.
No.
CIN/LLPIN
Name of the
Company/LLP
Current
designation
of the
Director/De
signated
Partner
Date of
appointment
at current
designation
Original
date of
appointment
Date of
cessati
on
Compa
ny/LL
P
Status
Def
ault
ing
stat
us
1
U01120AP199
5PLC022211
AGRI GOLD
FOODS AND
FARM PRODUCTS
LIMITED
Additional
Director
30/12/2013
30/12/2013
-
Active
-
4
U15209AP200
1PTC038236
AMRUTHA
VARSHINI DAIRY
FARMS PRIVATE
LIMITED
Director
19/12/2001
19/12/2001
-
Active
-
5
U24231TN198
8PTC016307
CLINCHEM
PHARMACEUTICA
LS PRIVATE
LIMITED
Director
06/08/2001
06/08/2001
-
Active
-
6
U31909TG199
9PLC033104
RITHWIK ENERGY
SYSTEMS
LIMITED
Director
31/08/2009
06/04/2009
-
Active
-
7
U32109KA200
7PTC042635
AVVAS
INFORTECH
PRIVATE LIMITED
Director
09/06/2007
09/06/2007
-
Active
-
8
U40105AP200
2PTC038328
SINGARAYA
HILLS GREEN
POWER GENCO
PRIVATE LIMITED
Additional
Director
27/07/2013
27/07/2013
-
Active
-
9
U40108AP201
2PTC080246
BIOMASS
DEVELOPMENT
COOPERATION
PRIVATE LIMITED
Director
12/04/2012
12/04/2012
-
Active
-
10
U40109TG199
6PLC022967
CLARION POWER
CORPORATION
LIMITED
Managing
Director
06/04/2009
06/04/2009
-
Active
-
24
U55101KA200
4PTC035044
RAAM AVVAS
RESORTRS AND
HOTELS PRIVATE
LIMITED
Director
20/05/2009
20/05/2009
-
Active
-
25
U60200TG200
8PTC060760
TOURISM AND
TRAVEL MEDIA
ENTERTAINMENT
PRIVATE LIMITED
Managing
Director
10/01/2012
24/10/2008
-
Active
-
28
U72200KA201
5PTC084594
AVVAS
CONSULTANCY
SERVICES
PRIVATE LIMITED
Director
09/12/2015
09/12/2015
-
Active
-
30
U74920TG200
9PTC065232
ANVI SECURITY
AND SERVICES
PRIVATE LIMITED
Director
30/09/2009
30/09/2009
-
Active
-
32
U74999TG200
7PTC053696
RETAIL SMART
GLOBAL
SHOPPING
PRIVATE LIMITED
Director
01/06/2007
01/06/2007
-
Active
-
39. In the present context, it would be appropriate to refer
to the ruling in Narinderjit Singh Sahni and another v. Union of
India and others . The appellants therein moved the writ
petitions under Article 32 of the Constitution of India by reason of
supposed infraction of Article 21 seeking grant of an order for bail
in the nature as prescribed under Section 438 of the Code, in line
with the orders passed in earlier two writ petitions by the Honble
Supreme Court. The said writ petitions were requested to refer to
the larger Bench and, therefore, they were taken up by the Three-
Judge Bench of the Honble Supreme Court. The offence alleged
to have committed by the appellants relate to the white collar
crime. A large number of cases of cheating against the appellants
were pending in different States. It was held that virtual
impossibility of release owing to pendency of cases in various
States itself not sufficient to establish infraction of Article 21.
Thus, in almost akin to the factual matrix in the present crimes,
even relief sought for by the appellants therein was refused, which
is a smaller relief when compared with the larger relief sought for
in the cases at hand.
40. On quashment of FIRs while holding that it would be a
misplaced sympathy of the Court on such white-collared accused
persons whose acts of commission and omission has ruined a vast
majority of poor citizens of the country, the expression of the
Honble Supreme Court in paragraph N.61 in Narinderjit Singh
Sahni35 is very apt to refer to thus:
61. It is no doubt true that this Court earlier on two occasions
in Writ Petition (Crl.) No.256/99 and Writ Petition (Crl.)
Nos.72-75/2000, has granted the relief that in the event of the
arrest of the petitioner in connection with any criminal case in
his capacity as Managing Director/Director of the Group of
companies, the arresting officer shall release him on bail on his
executing a bond to the satisfaction of the arresting officer.
This order obviously tantamounts to an order, invoking the
provisions of Section 438 of the Code of Criminal Procedure.
The Court adopted the aforesaid procedure to find out a
solution in the peculiar situation and being of the opinion that
even though the accused is able to get orders for bail from
different Courts, where cases are pending, but in view of the
large number of cases against the accused throughout the
country , it has physically not become possible to release the
accused from the custody. If an accused facing a charge under
Sections 406 409 420 and 120B is ordinarily not entitled to
invoke the provisions of Section 438 of the Criminal Procedure
Code unless it is established that such criminal accusation is
not a bone fide one it is difficult, to conceive that an accused
who is involved in thousands of cases in different parts of the
country by cheating millions of countrymen, can be given
benefit of the privilege of anticipatory bails as a matter of
routine, as was done in the two cases, on the basis of which the
present batch of cases have been field. In the manner in which
these white-collared crimes are committed and the extent to
which it has pervaded the society at large, we are of the
considered opinion that the two cases decided by this Court
earlier would not be of universal application and cannot be
used as a precedent for availing of the privilege in the nature of
an anticipatory bail. The Court itself was conscious of the
peculiar situation and, therefore, noticed that the Court is
exercising it discretion in the peculiar nature and facts of the
cases. We don not agree with the proposition that an accused
being involved in large number of criminal cases in different
parts of the country, if is not able to be released from custody
even on getting bail orders in some cases, itself would
tantamount of violation of the right of a citizen under Article 21
of the Constitution. The object of Article 21 is to prevent
encroachment upon personal liberty by the Executive save in
accordance with law, and in conformity with the provisions
thereof. It is therefore, imperative that before a person is
deprived of his life or personal liberty, the procedure
established by law must strictly be followed and must not be
departed from, to the disadvantage of the person affected. In
each case where a person complains of the deprivation of his
life or personal liberty, the Court, in exercise of its
constitutional power, of judicial review, has to decide whether
there is a law authorising such deprivation and whether in the
given case, the procedure prescribed by such law is reasonable,
fair and just and not arbitrary, whimsical and fanciful. On
account of liberal interpretation of the words 'life' and 'liberty'
in Article 21, the said Article has now come to be invoked
almost as a residuary right, even to an extent which the
founding fathers of the Constitution never dreamt of. In a
country like ours, if an accused is alleged to have deceived
millions of countrymen, who have invested their entire life's
saving in such fictitious and frivolous companies promoted by
the accused and when thousands of cases are pending against
an accused in different parts of the country, can an accused at
all complain of infraction of Article 21, on the ground that he is
not being able to be released out of jail custody in view of
different production warrants issued by different Courts.
Issuance of production warrants by the Court and the
production of accused in Court, in cases where he is involved is
a procedure established by law and consequently, the accused
cannot be permitted to make a complaint of infraction of his
rights under Article 21. In our considered opinion, it would be a
misplaced sympathy of the Court on such white-collared
accused persons whose acts of commission and omission has
ruined a vast majority of poor citizens of this country. Though
we agree that in given case, Court may be justified in directing
release of the accused, taking a stock of the entire situation in
the case. While, therefore, we agree with the submissions of the
counsel for the petitioners-accused that an accused could
maintain a petition under Article 32, but the Court would not be
justified in directing the release of such accused under a
blanket order like the one, which has been relied upon by the
counsel for the accused persons and such a course of action
would perpetrate gross injustice.
41. Though, not on such large scale as the one occurring in
the present crimes, still, on smaller scale, where the fact-situation
is identical, the Honble Supreme Court while setting aside the
order of quashment passed by the High Court of Judicature at
Madras in
K. Boodanathan v. S. Natarajan & others , held in paragraph
Nos.4, 5 and 6 thus:
4. The basis of the order of the High Court appears to be that
the respondent accused - S. Natarajan (Accused No.12) was a
Director of M/s PNL Nidhi Limited during the period between
1995 and 2000 and the default in repayment of dues to the
depositors by the Company - M/s PNL Nidhi Limited occurred
in the year 2004. IN this regard, we have taken note of two
relevant facts which appear from the record. The first is that
during the period when the respondent accused was a Director
of M/s PNL Nidhi Limited the funds of M/s PNL Nidhi Limited
were diverted in different corporate entities and such diversion
resulted in consequential default in repayment of money to the
depositors.
5. Another fact that emanates from the record is that the
respondent accused held the controlling interest in a private
limited company, i.e. Calfin Credit Holdings Pondicherry
Limited, Chennai, which was one of the beneficiaries of the
diverted funds and he had transferred the said Company (Calfin
Credit holdings Pondicherry Limited, Chennai) to the other co-
accused in the year 1993.
6. In the light of the above facts and circumstances of the case
we do not think that the High Court was right in quashing the
criminal proceedings against the respondent accused who was
accused No.12 in the said criminal proceedings.
42. In a recent ruling, Parbatbhai Aahir @ Parbatbhai
Bhimsinhbhai Karmur and others v. State of Gujarat and
another , rendered on 04.10.2017, referring to judicial precedents
in Gian Singh v. State of Punjab [(2012) 10 SCC 303], Narinder
Singh v. State of Punjab [(2014) 6 SCC 466], Vikram Anantrai
Doshi25, Central Bureau of Investigation v. Mahinder Singh
[(2016) 1 SCC 389], and State of Tamil Nadu v. R. Vasanthi
Stanley [(2016) 1 SCC 376], the Honble Supreme Court
summarized the propositions in regard to exercise of extraordinary
power under Section 482 of the Code.
i) Propositions (viii) and (ix) in paragraph No.15 are
absolutely relevant in the context of deciding the present request.
They are thus:
15. The broad principles which emerge from the precedents
on the subject, may be summarised in the following
propositions:
(i) xxx
(ii) xxx
(iii) xxx
(iv) xxx
(v) xxx
(vi) xxx
(vii) xxx
(viii) Criminal cases involving offences which arise from
commercial, financial, mercantile, partnership or
similar transactions with an essentially civil flavour
may in appropriate situations fall for quashing where
parties have settled the dispute;
(ix) In such a case, the High Court may quash the criminal
proceeding if in view of the compromise between the
disputants, the possibility of a conviction is remote and
the continuation of a criminal proceeding would cause
oppression and prejudice; and
ii) Concerning financial or economic fraud or
misdemeanour, the Honble Supreme Court laid down
proposition (x) thus:
(x) There is yet an exception to the principle set out in
propositions (viii) and (ix) above. Economic offences
involving the financial and economic well-being of the state
have implications which lie beyond the domain of a mere
dispute between private disputants. The High Court would be
justified in declining to quash where the offender is involved in
an activity akin to a financial or economic fraud or
misdemeanour. The consequences of the act complained of
upon the financial or economic system will weigh in the
balance.
iii) The offences alleged against the appellants therein were
punishable under Sections 384, 467, 468, 471, 120-B and 506 (2)
IPC. On the complaint of respondent No.2 therein, the FIR was
lodged, wherein the complainant and his siblings deprived of
landed property valued at Rs.12.50 Crores on account of a
conspiracy hatched by the appellants and by other co-accused.
When the appellants made a request for quashing the FIR, the
Coordinate Bench of Honble High Court of Gujarat rejected the
application under Section 482 of the Code. Aggrieved over the
rejection order, when the appellants preferred the aforesaid
Criminal Appeal, the Honble Supreme Court summarized the
propositions in paragraph No.15 (i) to (x) and upheld the rejection
order agreeing with the observation of the Honble High Court that
it was a case involving extortion, forgery and conspiracy where all
the appellants were acting as a team and it was not in the interest
of society to quash the FIR on the ground that a settlement had
been arrived at with the complainant.
43. Adverting to the submission made by the learned senior
counsel in one of the sets of these criminal petitions that a Division
Bench of this Court has seized the Agri Gold Group of
Companies Public Interests Litigation Petition and, therefore, it
may not be appropriate for this Court to decide the present
petitions, it is to state that the Public Interests Litigation mostly
concerns with the seizure of properties and return of amounts
deposited by the depositors. It is no doubt true, some of the
respondents in the aforesaid Public Interests Litigation filed writ
petitions under Article 226 of the Constitution of India requesting
to quash the FIRs, and the common order was passed rejecting the
request in the said writ petitions was adverted to in the above.
But, the question therein was that there cannot be multiple FIRs
concerning one and the same transaction besides, the petitioners
herein being not the petitioners to the writ petitions. That ground
was rejected and consequently the writ petitions were dismissed by
the Honble Division Bench.
44. In the present Criminal Petitions the grounds agitated
are different from the grounds raised in the writ petitions. The
grounds have been substantially adverted to in the above.
Therefore, that submission does not merit acceptance.
CONCLUSION:
45. Incidentally, it is relevant to state that, initially, the
learned senior counsel in all these petitions placed reliance in an
unreported decision in Criminal Petition No.14164 of 2016, dated
29.09.2016, where a learned Single Judge of this Court while
dismissing the criminal petition, directed the Investigating Officer
not to arrest the accused till filing charge sheet. The learned senior
counsel would submit that the Honble Supreme Court in Habib
Abdullah Jeelani19 has not prohibited granting interim order, but
held that in exercise of jurisdiction under Article 226 of the
Constitution of India or Section 482 of the Code, and Court if it
thinks fit, regard being had to the parameters of quashing and the
self-restraint imposed by law, has the jurisdiction to quash the
investigation and may pass appropriate interim orders as thought
apposite in law, but it is absolutely inconceivable and unthinkable
to pass an order of the present nature while declining to interfere
or expressing opinion that it is not appropriate to stay the
investigation. The fact-situation therein would show that a learned
Single Judge of this Court while rejecting the quashment of FIR
and consequential investigation, directed the police not to arrest
the petitioner till completion of investigation.
46. It is pertinent to mention that the petitioners in all these
criminal petitions have resorted to invoking the jurisdiction under
Section 438 of the Code by filing appropriate petitions on the file
of this Court and they were coming up for disposal. That was the
ground, on which the request for grant of interim order was not
acceded to. It is also relevant to mention that during the pendency
of these petitions in the last week of April, 2017, two of the
petitioners have been arrested, and in that connection, when
arguments were advanced, to direct the police to release them as
the Investigating Officer, in utter disregard to the pendency of
these petitions did effect the arrest, was not acceded to by passing
appropriate orders on 28.04.2017.
47. The learned Public Prosecutor has submitted various
Government Orders in relation to seizure of the properties of the
petitioners in all these crime. Perused the Government Orders, but
it is unnecessary to advert to them, at this stage, in deciding the
requests herein in these petitions.
48. The learned Public Prosecutor has also submitted
Forensic Audit of Agri Gold Group of Companies and some of the
Annexures thereto in a sealed cover. Perused the Forensic Audit
Report and the Annexures thereto. The entire material placed on
record would clearly indicate that a huge amount of about
Rs.6,380 Crores was collected from the depositors, but did not
pay the depositors the amounts promised on maturity. This apart,
the Core Companies of Agri Gold Group of Companies have
issued cheques to the depositors, and when they were submitted
with the banks, they were dishonoured. When the depositors
again approached, again cheques were issued in the name of a
different bank, but when they were presented again by the
depositors, they were also dishonoured. Added insult to the
injury, the depositors were also issued bonds by the Group of
Companies, but unfortunately, they were also collected back from
the depositors by the concerned authorities of the local branches
promising to pay the amounts asking them to wait for a month or
two and ultimately the every attempt made by the depositors to
get back the amounts proved totally abortive. This has been the
fact-scenario at the substratum level. When examined in the light
of these facts, even at this stage, the invariable conclusion is that
there is strong prima facie material to reject the requests made by
the petitioners herein.
49. Thus, when kept in view, the statements relating to the
details of the petitioners in all these crimes, Avva Sita Ram Rao
alias Seetha Ram, Avva Uday Bhaskar Rao, Avva Venkata
Subramanyeswara Sarma, Avva Venkata Siva Ram / Siva Rama
Krishan and K.V.S. Sai Ram alias Avva Sai Ram, maintained by
the Ministry of Corporate Affairs.
50. The submission of the learned Senior Counsel is that
Avva Sita Ram Rao alias Seetha Ram in first three Criminal
Petitions, since resigned from the directorship of the three core
comapneis, as evidenced by Form - 32, cannot be prosecuted and
is entitled to quashment of FIRs, is without merit for the reason,
the petitioner is found to hold the controlling interest in other
companies falling either under Category I or II as could be seen
from the statement relating to which companies, as per the
prosecution case, the depositors amount has been diverted and in
the second and the third criminal petitions, the complaint
allegations would clearly show that he was holding the post of
director when the depositors started depositing the amounts even
way back in 2007 and 2004 years.
51. Even concerning vicarious liability, the decisions relied
on by the learned senior counsel, mainly, relate to the offences
punishable under Sections 138 and 141 of IPC, as has already
adverted to hereinbefore, where a special provision is enacted
under Section 141 of the Negotiable Instruments Act therefor.
But, unless, the investigation is completed, at this stage, it is
difficult to hold that the petitioners cannot be held liable
vicariously, more particularly, when kept in view, the authorities
relied on by the learned Public Prosecutor referred to in the above,
in the context of alter ego. Further, the complaints filed in all
these criminal petitions were lodged by the depositors, who are
absolutely unaware of the relevant details, such as, who have been
the directors or managing directors of the companies or
wholesome directors of which of the companies. The same can
only be unravalled, when a thorough probe is made by the
investigating agency into the allegations, and, therefore, the
submission that all the complaints herein suffer from specific
allegations against the petitioners, and, therefore, the FIRs are
liable to be quashed is of no avail, at this stage.
52. The rulings relied on by the learned Public Prosecutor
have got direct bearing on the allegations in the complaints. The
decisions in Pothani Chandrasekher22, Soma Suresh Kumar24,
would reflect that the depositors amounts were swindled away by
creating false documents amounting to crores of rupees. In
Vikram Anantrai Doshi25 and Gotan Lime Stone Khanji Udyog
Pvt. Ltd26, invocation of doctrine of lifting the veil is open when
public interest demands, and Selvi J. Jayalalitha27. Besides these
authorities, common order in W.P. Nos.29374 of 2016, 10185,
11201, 11245, 12943 and 13005 of 2017 dated 04.07.2017,
rendered by the Honble Division Bench of this Court referred to
herein above, rejecting the similar request made under Article 226
of the Constitution of India, where depositors money herein is
also subject matter therein and directly referred to by the Honble
Division Bench though, not in the present context, but in a
different context has bearing on the requests made herein.
53. This apart even the decisions in Narinderjit Singh
Sahni34 and K. Boodanathan v. S. Natarajan referred to in the
above would make it abundantly clear that in crimes of this nature,
more particularly, white collar cases, when numerous cases of
cheating in different States are occurring, quashment of the
proceedings cannot be resorted to.
54. The propositions summarized by the Honble Supreme
Court in Parbatbhai Aahir @ Parbatbhai Bhimsinhbhai
Karmur37, referred to in the above, are sufficient to reject the
request of quashment of FIRs pleaded by the petitioners in all
these criminal petitions. It is no doubt true, Avva Sai Ram, the
petitioner in Criminal Petition Nos.3080 and 3099 is concerned,
though, he claims that he is totally unconnected with the core
companies, but, investigation is to be completed to unearth his
acts in the companies falling under Categories - II and III floated
by the core companies.
55. Thus, summing up, when the entire conspectus of facts
occurring in the present crimes is scrutinized, it is difficult to find
that continuation of investigation in these crimes by the C.B.
C.I.D. would amount to abuse of process of law, as sought to be
viewed by the learned senior counsel in all these criminal petitions,
more particularly, when the financial fraud is the allegation in the
present crimes creating a hazard in the financial interest of the
society. Therefore, there is no other option except to reject the
requests in all these criminal petitions. Accordingly, all these
Criminal petitions are dismissed.
56. It is made clear that the observations in the present
common order ought not be treated as having any effect on the
investigation or during trial, in case, investigation leads to charge,
and, the investigating officer is directed to proceed with in
accordance with law, uninfluenced by any of the observations
made in this order.
As a sequel thereto, Miscellaneous Petitions, if any, pending
in these Criminal Petitions stands dismissed.
___________________________
A. SHANKAR NARAYANA, J
Date:09.10.2017
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