TMI Blog2021 (4) TMI 1138X X X X Extracts X X X X X X X X Extracts X X X X ..... cogent and plausible evidence in that behalf. The aforestated deliberation leads to draw an irresistible conclusion that, the accused No.1 company is a necessary and relevant party to the said complaint and it cannot be dropped from the present proceedings at its inception. The accused with dishonest intention have committed criminal breach of trust, deceived the complainant and have committed the act of cheating against it. In view thereof, the complainant succeeds. In view of the statement made by the complainant in the present proceedings that, the complainant hereinafter will not pursue application of Section 15-HA of the SEBI Act in the said complaint, Section 15-HA of SEBI Act is dropped from the Order dated 22nd March, 2017 passed below Exh-1 in CC No.56/SW/2011. The Order dated 22nd March, 2017 passed by the learned Magistrate is modified to that extent only. In view of the above, Writ Petition filed by the complainant are allowed. The present complaint filed in the month of February, 2011 by the complainant, is pending on the file of learned Metropolitan Magistrate, Railway Mobile Court, Andheri, Mumbai for last more than 10 years. In view thereof, learned Mag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /w Section 15-HA of the SEBI Act, 1992, by the learned Metropolitan Magistrate, Railway Mobile Court, Andheri, Mumbai, below Exh-1, in CC No.56/SW/2011, by its Order dated 22nd March, 2017. 2.1) Writ Petition No.127 of 2020 filed by the complainant impugns Judgment and Order passed in Criminal Revision Application No.128 of 2017 by the Revisional Court, thereby completely exonerating accused No.1, Morgan Securities Pvt. Ltd.. The Criminal Writ Petition Nos.128 of 2020, 129 of 2020 and 130 of 2020 impugn Orders of the Revisional Court to the extent, it exonerated accused Nos.2 to 4 from the offences under Sec. 420 of IPC and under Sec. 15-HA of the SEBI Act. 2.2) Writ Petition Nos.348 of 2020 and 349 of 2020 and 357 of 2020 are filed by accused Nos.3,4 and 2 respectively challenging the impugned Orders to the extent, it upheld issuance of process Order under Section 406 r/w Section 34 of the IPC against them, being Directors of accused No.1-company. 2.3) As common questions of facts and law are involved in all the aforestated Petitions, the same are decided and disposed off by this common Judgment. 3) Heard Mr. Aabad Ponda, learned Senior Advocate for the Petitioners in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -fall of ₹ 75,50,000/- from the agreed security cover i.e. 200% of the ICD amount. At that relevant time, the value of shares was ₹ 8.30 to 8.50 per share. 4.3) Complainant Ganesh faced acute financial hardship due to global recession and could not repay the ICD and therefore, on the due date of said ICD i.e. on 5th June, 2000 asked Morgan to recover ICD dues by selling the pledged shares and remitting the balance sale proceeds to the complainant. At that time, the accused No.1 Morgan assured that, as and when they would sale Security then they will inform accordingly and give credit balance amount of sale proceeds. That, the accused despite sending notice kept assuring that, they will give details of shares in due course and kept on recovering interest on ICD and asked complainant not to mix the issue of sale of shares with interest on ICD. The complainant paid interest on ICD from time to time i.e. between 28th September, 2000 to 6th August, 2001. Morgan issued notice on 2nd August, 2001 to Ganesh (complainant) as the value of pledged shares had fallen to ₹ 44,25,000/- and demanded repayment of ICD of ₹ 50 lakhs, failing which the pledged shares would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 3rd May, 2000, the market price of the shares was ₹ 8.50 per share. That means total price of 15 lakh shares was ₹ 1,27,50,000/-. That, the accused in order to acquire more shares of complainant, waited for further fall in the share price and sold them only in August/September, 2001 for ₹ 24,67,531/-. The accused thus, jointly and severally by fraudulent means not only committed criminal breach of trust but also committed the act of cheating against the complainant. That, by indulging into circular trading, the accused also committed violation of Sec.15 of SEBI Act. In this brief premise, the present complaint is filed before the learned Magistrate. 5) The record indicates that, learned Magistrate by its Order dated 6th August, 2011 had directed the Police Inspector of Andheri Police Station, Mumbai to make an inquiry under Section 202 of Code of Criminal Procedure, 1973 in the matter and to submit a report. Accordingly, on 16 th March, 2012, the Senior Inspector of Police, Andheri Police Station, Mumbai, submitted his Inquiry Report before the learned Magistrate. The learned Magistrate by its Order dated 11th September, 2012 had earlier issued process agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.3,4 2) have filed aforestated Criminal Writ Petition Nos.348, 349 and 357 of 2020, challenging the impugned Order to the extent it upheld the summoning Order under Section 406 read with 34 of the IPC against them. The complainant Ganesh has filed aforestated Writ Petition No.127 of 2020 challenging complete exoneration of Morgan (A-No.1) vide impugned Order dated 2nd December, 2019. The complainant Ganesh has also filed aforestated Criminal Writ Petition Nos.128, 129 and 130 of 2020 challenging the impugned Orders to the extent it exonerated the Directors of Morgan for the offences under Section 420 of IPC and under Section 15HA of SEBI Act. 9) It is to be noted here that, at the outset Mr. Shukla the learned counsel for the complainant on instructions from its authorized representative, submitted that, the complainant is not pressing for application of Section 15-HA of SEBI Act and the allegations made in the complaint to that extent will not be hereinafter further pursued. The said statement is accepted. 10) Mr. Ponda, learned Senior counsel appearing for the accused pointed out various clauses from the Letter of Pledge (Agreement) dated 7th March, 2000 executed between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal case is a serious matter. Criminal law cannot be set into motion, as a matter of course. That, the allegations made in the complaint even if given face value and taken to be correct in its entirety, does not disclose an offence. He submitted that, the present complaint filed by the accused, is filed for causing harassment to the accused. He submitted that, there is no legal evidence connecting the accused with any crime, much less the offences alleged as the materials are not capable of being converted into legal evidence and therefore, the proceedings against the accused are also liable to be quashed. He submitted that, a perusal of complaint would indicate that, the complainant has not made specific allegations against accused Nos.2 to 4 and therefore, also the present complaint is not maintainable. In support of these contentions, Mr. Ponda relied on the following decisions of the Hon ble Supreme Court. 1 Charanjit Singh Chadha Ors. Vs. Sudhir Mehra, MANU/SC/0514/2001 : AIR 2001 SC 3721; 2 International Advanced Research Centre for Powder Metallurgy and New Materials (ARCI) Ors. Vs. Nimra Cerglass Technics (P) Ltd. Ors., MANU/SC/1063/2015 : (2016) 1 SCC 34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : AIR 2008 SC 1731; 3 R. Kalyani Vs. Janak C. Mehta Ors., MANU/SC/8183/2008 :(2009) 1 SCC 516; 4 Sharon Michael Ors. Vs. State of Tamil Nadu Ors. MANU/SC/8454/2008 : (2009) 3 SCC 375; 5 Keki Hormusji Gharda Ors. Vs. Mehervan Rustom Irani Ors., MANU/SC/0798/2009 : AIR 2009 SC 2594 : (2009) 7 SCC 475; 6 Sunil Bharti Mittal Vs. Central Bureau of Investigation, MANU/SC/0016/2015 : AIR 2015 SC 923; 7 Shiv Kumar Jatia Vs. State of NCT of Delhi, MANU/SC/1154/2019 : AIR 2019 SC 4463 : (2019) 17 SCC 193. 10.5) Two contrary submissions were advanced by the learned counsel for the Accused i.e. (i) Company cannot be held liable for the acts of its Directors and (ii) Directors cannot be held responsible for the act of company as the Letter of Pledge dated 7th March, 2000 was executed in favour of Accused No.1-company. He inter-alia contended that, none of the accused persons herein have committed any offence as alleged by the complainant. 10.6) He submitted that, the present complaint is filed in February, 2011 for the alleged offence which took place in the year 2001 and therefore it is hit by delay. He submitted that, before issuing the Ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany cannot be held vicariously liable, Mr. Shukla submitted that, the companies and corporate houses can no longer claim immunity from criminal prosecution on the ground that, they are incapable of possessing the necessary mens-rea for the commission of criminal offences. That, a company is liable to be prosecuted and punished for criminal offences. That, there is no immunity to the company from prosecution merely because the prosecution in respect of the offences for which the punishment prescribed is mandatory imprisonment. In support of his contention, he relied on a decision of the Hon ble Supreme Court in the case of Iridium India Telecom Ltd. Vs. Motorola Incorporated Ors., reported in (2011) 1 SCC 74 : LAWS(SC) 2010 10 13. He submitted that, the Revisional Court has committed an error, by not taking into consideration the ratio laid down by the Hon ble Supreme Court in the case of Iridium India Telecom Ltd. (supra) while allowing the Revision Application No.128 of 2017 filed by the accused No.1-Morgan. He submitted that, Morgan is equally responsible for the offence committed by other accused persons as the complainant has also alleged conspiracy. That the Trial Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plaint/FIR/charge-sheet and other documentary evidence if any, on record. It is further held that, it is thus settled that the exercise of inherent power of the High Court is an extra-ordinary power which has to be exercised with a great care and circumspection in deciding whether the case is rarest of rare case, to scuttle the prosecution at its inception. That, in the matter of exercise of inherent power by the High Court, the only requirement is to see whether continuance of the proceedings would be a total abuse of the process of the Court. The Cr.P.C. contains a detailed procedure for investigation, framing of charge and trial, and in the event when the High Court is desirous of putting a halt to the known procedure of law, it must use proper circumspection with great care and caution to interfere in the complaint/FIR/charge-sheet in exercise of its inherent jurisdiction. The Hon'ble Supreme Court has further observed that, we would like to add that, whether the allegations in the complaint are otherwise correct or not has to be decided on a basis of the evidence to be led during the course of trial. Simply because, there is a remedy provided for breach of contract or arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious documents also executed a Letter of Pledge (Agreement) dated 7th March, 2000. In pursuance of the said Letter of Pledge (Agreement) dated 7th March, 2000, the complainant pledged 15 lakhs equity shares in demat form owned by it in favour of Morgan. The accused No.1-Morgan issued notice dated 3rd May, 2000 to complainant asking it to pledge additional shares as the value of pledged shares had decreased to ₹ 1,24,50,000/- from the agreed security cover i.e. 200% of the ICD amount. At that relevant time, the value of shares was ₹ 8.30 to 8.50 per share. The complainant faced acute financial hardship due to global recession and could not repay the ICD and therefore, on its due date i.e. on 5th June, 2000 asked Morgan to recover ICD dues by selling the pledged shares and remitting the balance sale proceeds to the complainant. The record clearly indicates that, by a letter/communication dated 14th August, 2001 the complainant informed Morgan, thereby proposing to repay initially ₹ 25 lakhs in five equal monthly installments at ₹ 5 lakhs in cash starting from August, 2001. It was also informed to Morgan that, the first installment of ₹ 5 lakhs will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of trust of the complainant and have deceived it thereby committing an act of cheating. As a matter of fact, the complainant has made out a strong prima facie case against the accused for issuance of process. Taking into consideration the aforestated facts, it clearly appears to this Court that, the learned Magistrate has not committed any error while passing the impugned Order dated 22nd March, 2017 below Exh-1 in the said complaint. 15) As far as the contention of learned counsel for the accused that, before passing Order dated 23rd March, 2017 below Exh-1, thereby issuing process against the accused the learned Magistrate did not call for fresh report under Section 202 of Cr.P.C. is concerned, it is to be noted here that, by an Order dated 6th August, 2011, the predecessor in title of the present Magistrate, had directed the Police Inspector of Andheri Police station, Mumbai to make an inquiry into the matter under Section 202 of Cr.P.C. and to submit report in that behalf. The record indicates that, accordingly on 16th March, 2012, the Senior Police Inspector, Andheri Police Station, Mumbai has submitted an Inquiry Report before the learned Magistrate. As per the inquiry conduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it can sue or can be sued. No doubt, a corporate entity is an artificial person which acts through its officers, Directors, Managing Director, Chairman etc.. It s affairs are governed by or conducted by its Directors. If the offence alleged against the accused is proved, then the accused-Directors will have to be sentenced as the Company though being a juristic person, cannot be sentenced with corporal punishment. 18) The Hon ble Apex Court in Iridium India Telecom Ltd. (Supra), while considering the issue of criminal liability of a Company/Corporation in para Nos.63 to 66 has held as under :- 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f serious nature whereunder a corporate body also may be found guilty, and the punishment prescribed is mandatory custodial sentence. There are a series of other offences under various statutes where the accused are also liable to be punished with custodial sentence and fine. 30. As the company cannot be sentenced to imprisonment, the court has to resort to punishment of imposition of fine which is also a prescribed punishment. As per the scheme of various enactments and also the Penal Code, mandatory custodial sentence is prescribed for graver offences. If the appellants' plea is accepted, no company or corporate bodies could be prosecuted for the graver offences whereas they could be prosecuted for minor offences as the sentence prescribed therein is custodial sentence or fine. ... 31. As the company cannot be sentenced to imprisonment, the court cannot impose that punishment, but when imprisonment and fine is the prescribed punishment the court can impose the punishment of fine which could be enforced against the company. Such a discretion is to be read into the section so far as the juristic person is concerned. Of course, the court cannot exercise the same discre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it, in favour of the accused No.1 company and therefore also impleadment of Morgan (A-No.1) is necessary for proper adjudication of the present complaint. The contention that, the accused No.1 is being foisted with vicarious liability, is the defence and a specious plea raised by the said accused. The accused No.1 will have to prove the said defence at the time of trial by leading cogent and plausible evidence in that behalf. The aforestated deliberation leads to draw an irresistible conclusion that, the accused No.1 company is a necessary and relevant party to the said complaint and it cannot be dropped from the present proceedings at its inception. 20) That, the accused with dishonest intention have committed criminal breach of trust, deceived the complainant and have committed the act of cheating against it. In view thereof, the complainant succeeds. The impugned Orders dated 2nd December, 2019 passed in Criminal Revision Application Nos.128 of 2017, 167 of 2017, 168 of 2017 and 166 of 2017 filed by the accused are quashed and set aside and the Order dated 22nd March, 2017 passed by the learned Metropolitan Magistrate, Railway Mobile Court, Andheri, Mumbai, below Exh-1 in CC ..... X X X X Extracts X X X X X X X X Extracts X X X X
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