R IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13TH DAY OF DECEMBER, 2019 BEFORE THE HON’BLE MR. JUSTICE R. DEVDAS CRIMINAL PETITION No.3166 OF 2016 BETWEEN:
M/s. J.M. Financial Asset Management Ltd., Corporate Office, 5th floor, Laxmi Towers, Bandra Kurla Complex, Bandra (East), Mumbai-400 051 Represented by it’s Chief Executive Officer Sri. Bhanu Katoch ... Petitioner (By Sri. Kuloor Arvind Kamath, Senior Advocate for Smt. Veena J. Kamath for Sri.K.J. Kamath and Sri. D.C.Prakash, Advocate) AND:
1. Sri. Channegowda, S/o late Veerannagowda, Residing at Chikkamalur Village, Kodigenahalli Hobli, Madhugiri -572 175 Tumkur District.
(Since dead amendment carried out as per Court order vide dated 28.08.2019) 1(a) Smt. Girijamma W/o Late Chennegowda Aged about 58 years, Chikkamalur, Madhugiri Tumkur District-572 175.
1(b) Smt. Suma D/o Late Chennegowda, Aged about 40 years, Chikkamalur, Madhugiri, Tumkur District-572 175.
1(c) Smt. Shubha D/o Late Chennegowda, Aged abut 36 years, Chikkamalur, Madhugiri, Tumkur District-572 175.
2. Sri. Gangaraju, Manager (for the year 2007) ING Vysya Bank Ltd., (now known as Kotak Mahindra Bank) Kodigehalli Hobli, Madhugiri-572 175 Tumkur District.
... Respondents (By Sri. Vivek S. Advocate for R1; Sri. K.V. Satish, Advocate for R2;
Sri. Harish Kumar H.C, Advocate for R-1(a-c) This Criminal Petition is filed under Section 482 of Cr.P.C. praying to quash the order dated 22.03.2016 passed by the IV Additional District and Sessions Judge at Madhugiri who confirmed the issuance of summons as against the petitioner by the order dated 7.7.2012 in (PCR No.56/2011) C.C.No.760/2012 on the file of the Additional Civil Judge and JMFC, Madhugiri and allow this petition.
This petition coming on for Admission, this day, the Court made the following:
ORDER This Criminal petition is filed under Section 482 of Cr.P.C., seeking to quash the order dated 22.3.2016 passed by the IV Additional Senior Judge, Madhugiri, who confirmed the issuance of summons as against the petitioner by the order dated 7.7.2012 in (PCR.NO.56/2011) C.C.No.760/2012 on the file of the Additional Civil Judge and JMFC, Madhugiri.
2. Learned Senior counsel appearing for the Petitioner-Company submits that respondent No.1 – Complainant filed a private complaint in P.C.R.No.56/2011 before the Judicial Magistrate First Class, Madhugiri on 26.08.2011 alleging offences under Section 418, 420 read with 34 of IPC wherein respondent No.2 – The Manager of ING Vysya Bank Limited was arraigned as accused No.1 The accused No.2 and 3 are the Managing Director, Chief Executive of M/s J.M. Financial Asset Management Limited (Petitioner herein) and the Investment Manager of the Company. Learned Senior Counsel submits that in the complaint the complainant has stated that he had deposited a sum of Rs.5,00,000 (Rupees Five Lakhs Only) with ING Vysya Bank Limited, Kodigehalli Branch, Madhugiri Taluk, in the year 2008. It is contended by the complainant that the respondent No.2 – The Manager of ING Vysya Bank, recommended to the complainant that if he were to invest the said amount with the Petitioner-Company by way of shares, the complainant would be reaping huge dividends. On the recommendation of the respondent No.2, the complainant invested the said sum of Rs.5,00,000/- (Rupees Five Lakhs Only) with the petitioner – accused for purchasing shares. It is contended that in the year 2011, when particulars were sought by the complainant from the petitioner – accused regarding share value, the complainant was informed that his share value had come down to Rs.50,000/- (Rupees Fifty Thousand Rupees only). It is in the light of this reduction in the share value that a private complaint was lodged by the complainant making allegations against the Manager of ING Vysya Bank, The Managing Director and Investment Manager of the Petitioner – Company, alleging that the accused were aware of the statutory duty and obligations to give true and actual facts of the share business and having not discharged those duties and obligations and without giving any actual and true particulars about the investment of money of Rs.5,00,000/- (Rupees Five Lakhs Only) to the complainant, on the shares of the Company, once in a month atleast, and without disclosing the loss incurred in spite of receiving legal notice dated 18.03.2011, the accused persons have committed wrongful loss to the complainant and are guilty of wrongful gain to themselves.
3. The learned Senior Counsel submits that learned Magistrate, who was required to apply his mind as to whether the complaint constitutes any criminal offence, has proceeded to record sworn statement of respondent No.1 and took cognizance and registered the case in C.C. Register and issued process to the accused persons. Being aggrieved, the petitioner – Company filed a Criminal petition invoking Section 482 of the Code of Criminal Procedure in Crl.P.No.7399/2013 seeking quashing of the proceedings before the trial Court. This Court by order dated 16.07.2015, directed the petitioner to seek remedy before the Sessions Court under Section 397 of Cr.P.C., This Court had directed the petitioner to file Revision Petition on or before 14.08.2015. However, the Revision Petition was filed with a delay of 14 days, after the time granted by this Court. The Revisional Court dismissed the petition on merits while declining to condone the delay. Being aggrieved by the order passed by the Revisional Court, this petition is filed with a prayer to quash the order dated 22.03.2016 passed by the Revisional Court as well as the order dated 07.07.2012 in C.C.No.760/2012 arising out of P.C.R.No.56/2011 and for further relief.
4. Learned Senior Counsel, while taking this Court to two decisions of Apex Court in the case of SHIV KUMAR JATIA V. STATE (NCT OF DELHI) reported in 2019 SCC ONLINE SC 1090 and SHARATH KUMAR SANGHI V. SANGITA RANE reported in (2015) 12 SCC 781, would submit that it is settled position of law that in criminal jurisprudence there is no vicarious liability unless statute specifically provides for it. It is pointed out that the Apex Court has held that, an individual who has perpetrated an offence on behalf of the company can be made an accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. The learned Senior Counsel further submits that it was the duty of the Magistrate to pose unto himself the correct question 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 petitioners herein were personally liable for any offence. The learned Senior counsel, while taking this Court through the complaint, would submit that in the entire complaint, except for stating that it was the duty of the Company to disclose the actual and true position of the share business and its fate and future, no other allegation is made which would disclose any criminal intent as against the Company or Directors of the Company. The learned Senior Counsel submits that it is common knowledge that in the share business there would be a disclaimer that the shares and investments would be subject to market risks. According to learned Senior Counsel, the complainant did not disclose any criminal offence or intent or mens rea as against the Company or the Directors of the Company and therefore the Magistrate could not have taken cognizance of the complaint.
5. Heard the learned Senior Counsel for the petitioner – Company and perused the petition papers.
6. In SHIV KUMAR JATIA (Supra), the allegation in the complaint was that the complainant therein was a guest in the hotel belonging to the appellant, the terrace was dark, with no light and hotel staff did not stop him from going there. Precisely it is the allegation that there was a lapse on the part of the hotel management in not taking safety measures for the guests and they allowed the guests to terrace area which was not safe. The complainant herein, while walking into the terrace, fell down and sustained injury. It is in this regard that a complaint was made alleging that the owner of the hotel and the Manager were responsible for every act done in the hotel. Their Lordships, while referring to another decision of the Apex Court in the case of SUNIL BHARTHI MITTAL V. CENTRAL BUREAU OF INVESTIGATION reported in (2015) 4 SCC 609, observed that when the Company is an accused person, the corporate entity is an artificial person which acts through its officers, Directors, Managing Director, Chairman, etc., If such 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. At the same time it was observed that it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute specifically provides for. It was further held that an individual who has perpetrated the offence on behalf of the company can be made an accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. It was further held that an individual can be implicated in those cases where statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision. By applying the ratio laid down in a SUNIL BHARTHI MITTAL (supra), it was held that an individual either as a Director or a Managing Director or Chairman of the Company can be made a accused along with the Company, only if there is sufficient material to prove the active role coupled with the criminal intent. Further the criminal intent alleged must have direct nexus with the accused.
7. In MAKSUD SAIYED V. STATE OF GUJARAT reported in (2008) 5 SCC 668, the Apex Court had examined the vicarious liability of Directors for the charges leveled against Company. In the said judgment, the Apex Court had held that the Penal Code does not contain any provision for attracting vicarious liability on the part of the Managing Director or the Directors of the Company, when the accused is a Company. It was further held that vicarious liability of the Managing Director would arise provided any provision exists in that behalf in the statute. It was further held that statutes indisputably must provide fixing such vicarious liability. It is also held that, 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.
8. In the very same Judgment, the Apex Court also noticed the decision of SHARAD KUMAR SINGH (Supra), while examining the allegations made against the Managing Director of a Company, in which, Company was not made a party, Apex Court held that when the allegations made against the Managing Director are vague in nature, same can be a ground for quashing the proceedings under Section 482 of Cr.P.C.
9. In view of the said decision, when this Court perused the complaint made by the respondent No.1 – Complainant, this Court finds that no such specific allegation is made either against the Managing Director or the Investment Manager of the Company. The allegation is plain and simple, that the Company should have disclosed the actual and true position of the share business and its fate and future to the complainant. Therefore, the only allegation against the Managing Director and the Investment Manager of the Company was that fate and future and true position of the share business was not disclosed to the complainant. Thus, in the considered opinion of this Court, the complaint does not disclose any offence under Section 418, 420 or under Section 34 of IPC. It is common knowledge that the business of investment in shares is always open to risks and subject to market fluctuations. It is in this regard that disclaimer is always made by the Companies while calling for investments and while offering shares of the Company. The reduction in the share value of the Company cannot in any way constitute criminal offence on the part of the Managing Director, Directors or the Managers of the Company. A plain reading of the complaint shows that there is no specific allegation either against the Managing Director or Investment Manager with regard to the criminal intent or mens rea which is one of the primary requirements, even according to the decisions referred herein above.
10. As rightly submitted by the learned Senior Counsel, the complaint would reflect allegation against the Company, the Company was not made a party and therefore, the allegation are restricted to the Managing Director and the Investment Manager. In paragraph 11 of SHARADH KUMAR SANGHI V. SANGITA RANE Apex Court has held that as the allegations are vague and in fact, principally the allegations are made against the Company and there being no specific allegation against the Managing Director, when a Company has not been arrayed as a party, no proceeding could have been initiated against the Company, even where vicarious liability is fastened under certain statutes. Their Lordships have referred to the decision in ANEETA HADA V. GODFATHER TRAVELS AND TOURS (P) LTD. Reported in (2012) 5 SCC 661, where, in the context of Negotiable Instruments Act, 1881, it was held that when allegations are made against the Managing Director or Directors of the Company, if the Company is not arrayed as an accused, then the complaint is not maintainable. In the present case, the company is not arrayed as a party in the complaint.
11. For the reasons stated above, this Court is of the considered opinion that the petition is required to be allowed and it is accordingly allowed. The impugned orders dated 22.03.2016 passed by the IV Additional District and Sessions Judge, Madhugiri, in Crl.R.P.No.5018/2015 and order dated 07.07.2012 in C.C.No.760/2012 arising out of P.C.R.No.56/2011 on the file of Additional Civil Judge, JMFC Madhugiri are hereby quashed and set aside. Consequently all further proceedings in C.C.No.760/2012 arising out of P.C.R.No.56/2011 on the file of Additional Civil Judge, JMFC Madhugiri, are hereby quashed and set aside.
It is ordered accordingly.
SD/- JUDGE ag