2017 (7) TMI 1090 - SC - Indian Laws

Maintainability of petition - it was pointed out that the accused has no right to address at this stage and the High Court is right in refusing to entertain the petition filed under Section 482 of the Code - alleged offence on the hidden principle of vicarious liability - Held that - It is settled law that the essential ingredients for an offence under Section 420, which we have already extracted, is that there has to be dishonest intention to deceive another person. We have already quoted the relevant allegations in the complaint and perusal of the same clearly shows that no such dishonest intention can be seen or even inferred inasmuch as the entire dispute pertains to contractual obligations between the parties. Since the very ingredients of Section 420 are not attracted, the prosecution initiated is wholly untenable. Even if we admit that allegations in the complaint do make out a dispute, still it ought to be considered that the same is merely a breach of contract and the same cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right from the beginning of the transaction. Apart from the fact that the complaint lacks necessary ingredients of Sections 405, 406, 420 read with Section 34 IPC, it is to be noted that the concept of vicarious liability' is unknown to criminal law. As observed earlier, there is no specific allegation made against any person but the members of the Board and senior executives are joined as the persons looking after the management and business of the appellant-Company. Time limitation - Held that - The Courts below failed to appreciate an important aspect that the complaint came to be filed in the year 2002 when the alleged disputes pertain to the period from 1993-1995. As rightly pointed out, the Courts below ought to have appreciated that respondent No.1 was trying to circumvent the jurisdiction of the Civil Courts which estopped him from proceeding on account of the law of limitation. The entire analysis of the complaints with reference to the principles enunciated above and the ingredients of Sections 405, 406, 420 read with Section 34 IPC clearly show that there was inordinate delay and laches, the complaint itself is inherently improbable contains the flavour of civil nature and taking note of the closure of earlier three complaints that too after thorough investigation by the police, we are of the view that the Magistrate committed a grave error in calling for a report under Section 156(3) of the Code from the Crime Branch, Pune - impugned order set aside - appeal allowed.

Issues Involved:
1. Whether the dispute is civil in nature or involves criminal liability under Sections 405, 406, 420 read with Section 34 IPC.
2. Whether the delay in filing the complaint affects its maintainability.
3. Whether the complaint discloses the essential ingredients of the alleged offenses.
4. Whether the Magistrate was justified in calling for a report under Section 156(3) of the Code.
5. Whether the High Court erred in dismissing the writ petition as misconceived.
6. Whether the concept of vicarious liability applies to the accused individuals in this case.

Issue-wise Detailed Analysis:

1. Nature of Dispute:
The Court emphasized that the dispute arose out of a contractual agreement between the parties. The appellant-Company argued that the matter was purely civil in nature and should be adjudicated by a civil court. The Court noted that similar claims had previously been investigated and categorized as civil in nature, and the essential ingredients for an offense under Sections 405 and 420 IPC were not made out as there was no evidence of dishonest intention at the inception of the contract.

2. Delay in Filing the Complaint:
The Court observed that the complaint was filed in 2002 for disputes pertaining to the period from 1993-1995, indicating a delay of about nine years. It was held that such a long delay without satisfactory explanation amounts to an abuse of the process of law, and the complaint could not be maintained due to inordinate delay and laches.

3. Essential Ingredients of Alleged Offenses:
The Court examined whether the complaint disclosed the necessary ingredients for offenses under Sections 405, 406, and 420 IPC. It was concluded that no dishonest intention could be inferred from the facts presented, as the entire dispute pertained to contractual obligations. The Court reiterated that a breach of contract does not automatically lead to criminal prosecution unless fraudulent or dishonest intention is evident from the beginning of the transaction.

4. Justification for Report under Section 156(3) of the Code:
The Court found that the Magistrate erred in calling for a report under Section 156(3) of the Code from the Crime Branch, Pune. The complaint lacked the necessary ingredients for criminal offenses and was inherently civil in nature. The Court also noted that previous complaints with similar allegations had been closed after thorough investigations, further supporting the civil nature of the dispute.

5. High Court's Dismissal of the Writ Petition:
The High Court dismissed the writ petition as misconceived, stating that the Magistrate had adhered to the directions and provided reasons for his conclusion. However, the Supreme Court held that the High Court failed to exercise its power and jurisdiction under Section 482 of the Code to quash the proceedings, which were found to be unjustified and an abuse of the legal process.

6. Vicarious Liability:
The Court highlighted that the concept of vicarious liability is unknown to criminal law unless specifically provided by statute. The complaint did not specify the roles of the individual accused (appellant Nos. 2-8), who were senior managerial personnel of the appellant-Company. The Court concluded that without specific allegations against these individuals, they could not be held criminally liable under the alleged offenses.

Conclusion:
The Supreme Court allowed the appeal, set aside the order of the Judicial Magistrate First Class, Pimpri, and the judgment of the High Court. The complaint filed by Respondent No.1 was quashed, and the Court reiterated the importance of distinguishing between civil disputes and criminal offenses, emphasizing that criminal proceedings should not be used to settle civil disputes.

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