TaxTMI 
TaxTMI 
2015 (9) TMI 1339
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....mation was disclosed to the Central Bureau of Investigation (CBI) alleging various forms of irregularities committed in connection with the grant of the said UASL which resulted in huge losses to the public exchequer. On the basis of such source information, the CBI registered a case bearing RC DAI 2009 A 0045 on 21st October, 2009. It is now widely known as "2G Spectrum Scam Case". The case was registered against unknown officers of the Department of Telecommunications (DOT) as well as unknown private persons and companies. 3. While the investigation into the said case was still on, a writ petition was filed by an NGO known as Center for Public Interest Litigation (CPIL) before the High Court of Delhi seeking directions for a Court monitored investigation. Apprehension of the petitioner was that without such a monitoring by the Court, there may not be a fair and impartial investigation. Delhi High Court dismissed the petition. 4. Challenging the order of the Delhi High Court, CPIL filed Special Leave Petition before this Court under Article 136 of the Constitution of India. At that time, another petitioner, Dr.Subramanian Swamy, directly approached the Supreme Court by way of a ....
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..... It was also specifically clarified that the observations in the said judgment would not, in any manner, affect the pending investigation by the CBI, Directorate of Enforcement and other agencies or cause prejudice to those who are facing prosecution in the cases registered by the CBI or who may face prosecution on the basis of charge-sheet(s) which may be filed by the CBI in future. The Court also made it clear that the Special Judge, CBI would decide the matter uninfluenced by the judgment dated February 02, 2012. Thereafter, order dated 11.04.2011 was passed in that very appeal, making its intention manifest that this Court would be monitoring the investigation by CBI in larger public interest. Special Court was set up for trial of the 2G case and a Senior Advocate was nominated as the Special Public Prosecutor by the Court itself, who also agreed with his appointment in that capacity. The Court also made it clear that no other Court would stay or impede trial conducted by the Special Court and the aggrieved person could approach this Court for any grievance. In the present proceedings, we are not concerned with the subject matter of the said trial. However, the aforesaid narra....
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....e views expressed by the Director, CBI on the issue of prosecution of public servants and the companies in connection with the said case. The report produced by Shri Venugopal shall be put in sealed cover and handed over to the counsel instructing Shri Venugopal. The needful has been done. List the case on 05.12.2012. To be taken up at 3.30 P.M." 7. On completion of the investigation, charge-sheet was filed by the CBI in the Court of Shri O.P. Saini, the learned Special Judge, on 21st December, 2012. 8. Before proceeding further, it would be prudent to mention in brief the case set up by the CBI in the charge-sheet to have the flavour of the prosecution case. Though we are not much concerned about the merits of the allegations in these proceedings, a brief account thereof will facilitate in understanding the background leading to the roping in of the appellants in these proceedings. During monitoring of the investigation of CBI Case No. RC-DAI- 2009-A-0045 (2G Spectrum Case), this Court vide its order dated 16.12.2010 directed CBI to investigate the irregularities committed in the grant of licences from 2001 to 2007 with partial emphasis on the loss caused to the public excheq....
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.... then Minister of Communications and Information Technology on the same day i.e. 31.01.2002 itself. It resulted in issuance and circulation of General Order on 01.02.2002 to all Cellular Mobile Telecom Service (CMTS) Operators. As per the allegations in the FIR, the accused public servants entered into a criminal conspiracy with the accused beneficiary companies in taking the aforesaid decision which caused undue cumulative pecuniary advantage of Rs. 846.44 crores to the beneficiary companies and corresponding loss to the Government Exchequer, by charging an additional 1% AGR only for allotting additional spectrum from 6.2 MHz upto 10 MHz (paired) instead of charging 2% AGR, as per the existing norms. 10. Thus, the allegation, in nutshell, is for grant of additional spectrum by lowering the condition of 9 lacs subscribers to 4/5 lacs subscribers, by only charging additional 1% AGR instead of charging additional 2% AGR which has caused losses to the Government Revenue. It is further the case of the prosecution that this was the result of conspiracy hatched between Mr.Shyamal Ghosh and the then Minister as well as the accused Cellular Operator Companies. The decision was taken in ha....
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.... case, he decided to issue summons not only to the four accused named in the charge-sheet but the aforesaid three persons as well. 13. Two of the aforesaid three persons are before us in these appeals. Feeling aggrieved, they have challenged the order insofar as it proceeds to implicate them as accused persons in the said charge-sheet. 14. Before proceeding to record the submissions of the learned counsel for the appellants as well as the counsel opposite, it becomes necessary to take note of the brief order dated 19th March, 2013, as this order was read and re-read time and again by each counsel with an attempt to give their own interpretation to the same. Therefore, we deem it apposite to reproduce the said order in its entirety as it would facilitate understanding the arguments of counsel on either side, with more clarity. The impugned order dated 19th March, 2003 reads as under: "I have heard the arguments at the bar and have carefully gone through the file and relevant case law. 2. It is submitted by the learned PP that accused Shyamal Ghosh was a public servant, who has since retired. It is further submitted that remaining three accused are companies, namely M/s Bharti Ce....
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....013 challenging another order of the even date namely 19th March, 2013 passed by the Special Judge whereby protest application filed by this appellant has been dismissed. 17. Leading the attack from the front, Mr. Harish Salve opened his submission by arguing that the impugned order was in two parts. Paras 1 to 3 pertain to the charge-sheet which was filed by the CBI naming four accused persons namely, Mr. Shyamal Ghosh and the three Cellular Companies. This fact is noted in para 2. He pointed out that in respect of these four accused persons named in the charge-sheet, after going through the copy of the FIR, charge-sheet, statement of witnesses and documents on record, the learned Judge was satisfied that there was enough incriminating material on record to proceed against them. However, in the second part of the order, which was contained in para 4, the Court also found that the three persons (including the two appellants) were, prima facie, controlling the affairs of the said three companies and, therefore, they represented the directing mind and will of each company. On that basis, these three persons are treated as "alter ego" of their respective companies and in the opinion ....
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....nder their control and management. It bears repetition that the only averment made against Appellant 2 is that Appellant 1 i.e. MSEB was acting under the control and management of Appellant 2 along with other three accused. There is no denying the fact that Appellant 2 happened to be the Chairman of MSEB at the relevant time but it is a settled proposition of law that one cannot draw a presumption that a Chairman of a company is responsible for all acts committed by or on behalf of the company. In the entire body of the complaint there is no allegation that Appellant 2 had personally participated in the arbitration proceedings or was monitoring them in his capacity as the Chairman of MSEB and it was at his instance that the subject interpolation was made in Ext. C-64. xx xx xx 29. In this regard, it would be useful to advert to the observations made by a three-Judge Bench of this Court in S.M.S. Pharmaceuticals (2005)8 SCC 89: (SCC p. 98, para 8) "8. ... There is no universal rule that a Director of a company is in charge of its everyday affairs. We have discussed about the position of a Director in a company in order to illustrate the point that there is no magic as such in a p....
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....ked into and investigated by the CBI and an opinion was formed that there was no material to implicate him. Since the appellant was consciously omitted from the array of the accused persons after thorough discussions and deliberations by the investigating agency at the appropriate level, and it was specifically so stated in the charge-sheet itself, in a situation like this even if the learned Judge wanted to differ from the investigating agency and decided to take cognizance against the appellant, he should have given valid reasons for proceeding against the appellant which could include his opinion that there was sufficient material against the appellant to be proceeded against. However, reasons given in the impugned order, according to the learned senior counsel, are totally extraneous amounting to wrong approach in law. 20. His further submission was that even at a later stage if any evidence surfaces against the appellant, the Court is not powerless as any person can be summoned as accused under Section 319 of the Code at any stage of the trial. 21. Mr. Viswanathan who appeared for the appellant Mr. Ravi Ruia, while adopting the aforesaid arguments and reiterating them briefl....
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....h for the same purpose during the same period which would constitute the circumstantial evidence to implicate these persons. The thrust of his submission, thus, is that it is the "human agency" in the accused companies who was responsible as it was a mens rea offence and such an agency/person has to be the top person, going by the circumstantial evidence. Therefore, even if in the chargesheet, names of these appellants were not included, the Special Judge was within his powers to look into the matter in its entirety as the charge-sheet along with documents spanning over 25000 pages was submitted to him. 23. Mr. Venugopal joined issue on the interpretation given by the appellants to the impugned order. According to him, the order could not be bifurcated into two parts. Para 3 of the order wherein the Special Judge has observed that he had perused the FIR, charge-sheet, statement of witnesses and documents on record was relatable to the three individuals, including the two appellants as well. He even submitted that in the absence of individual accused persons, who were in charge of the affairs of the three accused companies, it may become difficult to proceed against the accused com....
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.... taken it becomes the Court's duty 'to find out who the offenders really are' and if the Court finds 'that apart from the persons sent up by the police some other persons are involved, it is its duty to proceed against those persons' by summoning them because 'the summoning of the additional accused is part of the proceeding initiated by its taking cognizance of an offence'. Even after the present Code came into force, the legal position has not undergone a change; on the contrary the ratio of Dubey case was affirmed in Hareram Satpathy v. Tikaram Agarwala. (1978) 4 SCC 58 Thus far there is no difficulty. 3. Dharam Pal v. State of Haryana (2014) 3 SCC 306 "40. In that view of the matter, we have no hesitation in agreeing with the views expressed in Kishun Singh case (1993) 2 SCC 16 that the Sessions Court has jurisdiction on committal of a case to it, to take cognizance of the offences of the persons not named as offenders but whose complicity in the case would be evident from the materials available on record. Hence, even without recording evidence, upon committal under Section 209, the Sessions Judge may summon those persons shown in column 2 of the police report to stand....
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.... of the learned counsel for the appellants was aimed at demonstrating; firstly, that the charges, as have been depicted in the summoning order, were not made out; secondly, that the appellants herein were functionaries of a company, and therefore, per se could not be made vicariously liable for offences emerging out of actions allegedly taken in furtherance of the discharge of their responsibilities towards the company; and thirdly, that none of the appellants had any concern whatsoever (even as functionaries of the company concerned), with the allegations levelled by the complainant. xx xx xx 57. In paras 24 to 30, this Court in Iridium India Telecom Ltd. case (2011) 1 SCC 74 noticed the facts pertaining to the controversy, and the emerging legal technicalities canvassed at the hands of the appellants. In paras 31 to 37, this Court recorded the response thereto, at the behest of the accused. Thereupon, this Court in Iridium India Telecom Ltd. case made the following observations in para 38: (SCC p. 89) "38. We have considered the submissions made by the learned Senior Counsel. A bare perusal of the submissions would be sufficient to amply demonstrate that this cannot be said to ....
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....tervene in the criminal proceedings at the preliminary stage/when the investigation/enquiry is pending. 30. Interference by the High Court in exercise of its jurisdiction under Section 482 of the Code of Criminal Procedure can only be where a clear case for such interference is made out. Frequent and uncalled for interference even at the preliminary stage by the High Court may result in causing obstruction in the progress of the inquiry in a criminal case which may not be in the public interest. But at the same time the High Court cannot refuse to exercise its jurisdiction if the interest of justice so required where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no fair-minded and informed observer can ever reach a just and proper conclusion as to the existence of sufficient grounds for proceeding. In such cases refusal to exercise the jurisdiction may equally result in injustice more particularly in cases where the complainant sets the criminal law in motion with a view to exert pressure and harass the persons arrayed as accused in the complaint." 63. As of now we are satisfied, that the factual foundation/background o....
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....As such, it is submitted, that the respondents have per se repudiated all the submissions advanced on behalf of the appellant, obviously subject to the evidence which rival parties will be at liberty to adduce before the trial court. xx xx xx 74. It would not be appropriate for us to delve into the culpability of the appellants at the present juncture on the basis of the factual position projected by the rival parties before us. The culpability (if at all) would emerge only after evidence is adduced by the rival parties before the trial court. The only conclusion that needs to be drawn at the present juncture is that even on the basis of the last submission canvassed on behalf of the appellants it is not possible to quash the summoning order at this stage. In the aforesaid view of the matter, it is left open to the appellants to raise their objections, if they are so advised, before the trial court. The trial court shall, as it ought to, adjudicate upon the same in consonance with law after allowing the rival parties to lead evidence to substantiate their respective positions." 25. He concluded his submission by reiterating that when it was a case of circumstantial evidence whic....
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....ons and argued that it was not a case of erroneous omission by CBI. It was also argued at length that the allegations were in the domain of the policy decision taken by the Government to charge 4% of AGR whereas it was realised much later in the year 2010 when the TRAI has passed orders that it should have been 5% AGR. According to them, it was merely a bona fide policy decision which could not be subject matter of criminal proceedings, in the absence of intent of criminality therein. More so, when benefit of the said decision was not confined to the appellant's company, namely M/s Bharti Cellular Limited, but was extended to all others as well including public sector telecom companies like MTNL and BSNL. Therefore, there cannot be a criminal intent behind such a decision. Mr. K.K. Venugopal and others, appearing for the other side, had tried to demonstrate that the aforesaid submission of the learned counsel for the appellant was totally erroneous and contrary to records. He tried to project that it was a conspiracy of major level with sole intention to benefit the accused companies at the cost of the public exchequer and for this purpose, criminal conspiracy was hatched up be....
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....ecorded in this para that there is enough incriminating material on record against them and they be proceeded against, as per law. Immediately thereafter in para 3, the learned Special Judge records his satisfaction on the perusal of the records namely FIR, charge-sheet, statement of witnesses and documents and states that he is satisfied that there is enough incriminating material on record to proceed against the "accused persons". Para 3 is clearly relatable to para 2. Here, the "accused persons" referred to are those four persons whose names are mentioned in para 2. Obviously, till that stage, appellants were not the accused persons as they are not named as such in the charge-sheet. After recording his satisfaction qua the four said accused persons, discussion about other three individuals (including the two appellants) starts from para 4 where the Special Judge "also" finds and refers to the positions which these three persons hold/held in the three companies respectively. In para 4, the learned Special Judge does not mention about any incriminating material against them in the statement of witnesses or documents etc. On the other hand, the reason for summoning these persons an....
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....needing a particular state of mind. The aforesaid notion has been rejected by adopting the doctrine of attribution and imputation. In other words, the criminal intent of the "alter ego" of the company/body corporate i.e. the person or group of persons that guide the business of the company, would be imputed to the corporation. 60. It may be appropriate at this stage to notice the observations made by MacNaghten, J. in Director of Public Prosecutions v. Kent and Sussex Contractors Ltd. 1972 AC 153: (AC p. 156): "A body corporate is a "person" to whom, amongst the various attributes it may have, there should be imputed the attribute of a mind capable of knowing and forming an intention - indeed it is much too late in the day to suggest the contrary. It can only know or form an intention through its human agents, but circumstances may be such that the knowledge of the agent must be imputed to the body corporate. Counsel for the respondents says that, although a body corporate may be capable of having an intention, it is not capable of having a criminal intention. In this particular case the intention was the intention to deceive. If, as in this case, the responsible agent of a body....
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....rvant, representative, agent or delegate. He is an embodiment of the company or, one could say, he hears and speaks through the persona of the company, within his appropriate sphere, and his mind is the mind of the company. If it is a guilty mind then that guilt is the guilt of the company. It must be a question of law whether, once the facts have been ascertained, a person in doing particular things is to be regarded as the company or merely as the company's servant or agent. In that case any liability of the company can only be a statutory or vicarious liability." 63. From the above it becomes evident that a corporation is virtually in the same position as any individual and may be convicted of common law as well as statutory offences including those requiring mens rea. The criminal liability of a corporation would arise when an offence is committed in relation to the business of the corporation by a person or body of persons in control of its affairs. In such circumstances, it would be necessary to ascertain that the degree and control of the person or body of persons is so intense that a corporation may be said to think and act through the person or the body of persons. The po....
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....accused person: 37. 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. 38. 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. 39. When the company is the offendor, 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 ....
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.... 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 12 (1984) Supp. SCC 207 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....
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....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." 5. R. Kalyani v. Janak C. Mehta (2009) 1 SCC 516 "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 bee....
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.... 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....
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.... is explained by this Court in S.K. Sinha, Chief Enforcement Officer v. Videocon International Ltd & 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...." 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....
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....nt, 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. 46. 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. 47. 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 rea....