2009 (12) TMI 1028 - HC - Income Tax

Summary

Issues Involved:
1. Summoning of petitioners to face trial u/s 415/409/34/120B IPC.
2. Allegations of criminal breach of trust and cheating.
3. Disputed letter dated 1st March, 2008.
4. Vicarious liability of company directors and employees.
5. Prima facie case against individual petitioners.

Summary:

1. Summoning of Petitioners to Face Trial u/s 415/409/34/120B IPC:
The petitions challenge the order of the learned Metropolitan Magistrate dated 27th September, 2008, summoning the petitioners to face trial u/s 415/409/34/120B IPC based on a complaint alleging criminal breach of trust and cheating.

2. Allegations of Criminal Breach of Trust and Cheating:
The respondent alleged that after opening a Demat account with India Infoline Ltd., the company falsely claimed an outstanding debit of Rs. 10.48 crores, whereas the correct amount was Rs. 10,22,77,522/-. The company allegedly misappropriated Rs. 25,22,477.53 by making a false demand and failed to transfer shares to the complainant's Demat account, instead selling the shares and misappropriating the proceeds.

3. Disputed Letter Dated 1st March, 2008:
The bone of contention is a letter dated 1st March, 2008, purportedly written by Shri Bhuwneshwar Mishra, Trustee of the respondent, requesting the company to clear a debit balance by selling shares. The respondent denies the authenticity of this letter, claiming it was neither written by Mishra nor authorized by the Trust.

4. Vicarious Liability of Company Directors and Employees:
The court noted that the complaint did not allege that any specific director or officer of India Infoline Ltd. forged the letter or conspired to commit the alleged offences. The entrustment of shares was to the company, not to individual directors or officers. The court emphasized that the Penal Code does not contemplate vicarious liability for directors or employees unless explicitly provided by statute.

5. Prima Facie Case Against Individual Petitioners:
The court found that the complaint lacked specific allegations or factual evidence against individual petitioners constituting offences u/s 406 and/or 415/420 IPC. General allegations without factual foundation are insufficient to prosecute directors or employees. The court cited precedents emphasizing the need for definite allegations and statutory provisions for vicarious liability.

Conclusion:
The court set aside the impugned order summoning the individual petitioners for offences u/s 415/409/34/120B IPC, but allowed the trial to proceed against India Infoline Ltd. under other sections of IPC. The parties were directed to appear before the learned Magistrate on 21st December, 2009.