TMI Blog2010 (8) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... ut by any stretch of imagination. Even assuming that there could have been a vicarious liability thrust on the appellant; even then there cannot be any such vicarious liability in absence of any allegations and material to show that the appellant was in charge of or responsible for the conduct of the company's business which had given rise to the offence. From any angle of the matter, the appellant cannot be compelled to face the criminal trial in this case. The inherent power should not be exercised to stifle the legitimate prosecution but at the same time no person be compelled to face criminal prosecution if basic ingredients of the alleged offence against him are altogether absent. Thus the impugned judgment of the High Court is set aside and the appeal is allowed and the proceedings initiated against the appellant on the basis of the complaint registered. - CRIMINAL APPEAL NO. 1504 OF 2010 - - - Dated:- 12-8-2010 - DALVEER BHANDARI AND A.K. PATNAIK, JJ. C.A. Sundaram, Ms. Rohini Musa, Abhishek Gupta, Zafar Inayat, Annandh Kannan and Ms. Binu Tamta for the Appellant. Sanjay R. Hegde for the Respondent. JUDGMENT Dalveer Bhandari, J. Leave gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... June 10, 2004, directed quashing of the entire proceedings in Criminal Petition No. 4007 of 2002 regarding the erstwhile directors of the company. The proceedings before the Xth Additional Chief Metropolitan Magistrate were based on the complaint filed by respondent No. 2 stating that he and his wife had invested in the short-term deposit scheme with the company. 10. The High Court held that some of the directors of the company had retired in April, 1999 and that the non-payment of matured funds and non payment of interest amount had taken place after April, 1999. According to the appellant, he is in no manner responsible for company's non payment of either the mature funds and interest amount. The appellant submitted that the petition had been filed for some collateral purposes for unnecessarily exerting the pressure on the former directors. 11. The learned judge also held that material ingredients of the offence of cheating had not been made out. The appellant filed a petition before the High Court of Karnataka under section 482 of the Code of Criminal Procedure, 1973, seeking to quash the proceedings initiated on the basis of the complaint registered as C. C. No. 22656 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t justified in refusing to quash the complaint against the appellant and compelling him to go to the trial court for seeking an order of discharge. 17. We have heard learned counsel for the parties. Learned counsel appearing for the State has failed to point out any specific allegation or averment against the appellant. Admittedly, the appellant had resigned from the board of directors of the company with effect from December 27, 1997 and therefore, cannot be held responsible for any activities of the company after he ceased to be a director of the company. Even, according to the allegation of respondent No. 2, no criminal case can be made out against the appellant. 18. It may be pertinent to mention that a letter has been placed on record which was sent by respondent No. 2, R. Narayanamurthy to the Inspector of Police, Indranagar Police Station, Indranagar, Bangalore which reads as under : "From R. Narayanamurthy, S/o. Late N. A. Ramaswamy, 105, Second Main Road, 4th Cross, Sadanandnagar, NGEF Layout, Bangalore-560 038. To The Inspector of Police, Indranagar Police Station, Indranagar, Bangalore-560 033. Dear Sir, Sub : Complaint against RPS B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case under section 420 of the Indian Penal Code, 1860, is made out against the appellant. The primary requirement to make out an offence of cheating under section 415 punishable under section 420 of the Indian Penal Code, 1860, is dishonest/fraudulent intention at the time of inducement is made. In order to appreciate the controversy in proper perspective, we deem it appropriate to reproduce section 415 of the Indian Penal Code. The same reads as under : "415. Cheating. Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit 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, is said to cheat ." 22. Two main ingredients of section 420 of the IPC are dishonest and fraudulent intention. The Indian Penal Code has defined the word "dishonestly" in section 24 of the IPC. Section 24 of the IPC reads as under : "24. Dishonestly. Whoever does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany having been wound up. 27. The appellant submitted that a complaint under section 420 of the IPC stands on a different footing than a complaint under a special statute. Unlike special statutes, like the Negotiable Instruments Act, 1881, which casts a vicarious liability on officers in charge of and responsible for the company in an offence under the Indian Penal Code, there is no role for vicarious liability. The appellant has also alleged that even assuming that the company can be said to have committed an offence, this would not be enough to sustain a complaint against any officer of the company for an offence under the Indian Penal Code unless an allegation or material of the said officer having been involved in the commission of the offence is made out. Any special provision like section 141 of the Negotiable Instruments Act, 1881, a deemed provision is included where if the offence is committed by a company, the officers responsible for the conduct of the business of the company are deemed to be liable and a presumption of their liability arise unless duly discharged by them. There is no such presumption under the Indian Penal Code and while so necessary allegation/ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on played at the very inception. If the intention to cheat has developed later on, the same cannot amount to cheating. 31. Learned counsel for the appellant also relied on the case of S. V. L. Murthy v. State [2009] 6 SCC 77, in which this court observed as under (page 94) : "41. An offence of cheating cannot be said to have been made out unless the following ingredients are satisfied : ( i )deception of a person either by making a false or misleading representation or by other action or omission ; ( ii )fraudulently or dishonestly inducing any person to deliver any property ; or ( iii )to consent that any person shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit.' For the purpose of constituting an offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. Even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in the absence of a culpable intention at the time of making initial promise being absent, no offence under section 42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that too in the rarest of rare cases ; that the court will not be justified in embarking upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR or the complaint and that the extraordinary or inherent powers do not confer an arbitrary jurisdiction on the court to act accordingly to its whim or caprice." 35. Learned counsel for the State also submitted that, in the instant case, the FIR was not only registered under section 420 of the IPC but under sections 3, 4, 5 and 6 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. 36. He also placed reliance on the case of Rajesh Bajaj v. State NCT of Delhi [1999] 3 SCC 259, in which this court, while dealing with section 482 of the Code of Criminal Procedure has held as under (page 262) : "It is not necessary that a complainant should verbatim reproduce in the body of his complaint all the ingredients of the offence he is alleging. Nor is it necessary that the complainant should state in so many words that the intention of the accused was dishonest or fraudulent. Splitting up of the definition into different components of the offence to make a meticulous scruti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efined in clause ( c ) which reads as under : 2 ( c ) "money circulation scheme" means any scheme, by whatever name called, for the making of quick or easy money, or for the receipt of any money or valuable thing as the consideration for a promise to pay money, on any event or contingency relative or applicable to the enrolment of members into the scheme, whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscriptions ;." 41. In this case, it was further held that (page 720) : "39. We are unable to agree with learned counsel. The courts below rightly held that prima facie case had been made out against the accused. Both the ingredients necessary for application of section 2( c ) of the Act are present in the case on hand. The trial court, for coming to that conclusion, referred to certain documents. The advertisement clearly declared that a member would get double the amount when after his enrolment, two members were enrolled under him and thereafter, 4 other persons were enrolled and after the enrolled 4 persons, 8 persons were enrolled under them. Thus, only after 14 persons under the first enrolled person ..... X X X X Extracts X X X X X X X X Extracts X X X X
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