2016 (12) TMI 1855 - SC - Indian Laws

Maintainability of petition - application dismissed on the ground that the Appellants had applied before the stage of issuance of process so to be issued by the Metropolitan Magistrate Under Section 156(3) of the Code of Criminal Procedure - HELD THAT - In the present case a fact finding investigation was directed by the impugned order. Consequently, FIR was registered against Appellants No. 2 to 4 and against RM (Vinod Koper). The accused under Indian Criminal Legal System, unless proved guilty shall always be given a reasonable space and liberty to defend himself in accordance with the law. Further, it is always expected from a person accused of an offence pleading not guilty that he shall co-operate and participate in criminal proceedings or proceedings of that nature before a court of law, or other Tribunal before whom he may be accused of an 'offence' as defined in Section 3(38) of the General Clauses Act, i.e., an act punishable under the Penal Code or any special or local law. At the same time, courts, taking cognizance of the offence or conducting a trial while issuing any order, are expected to apply their mind and the order must be a well reasoned one. The Appellants approached the High Court even before the stage of issuance of process. In particular, the Appellants challenged the order dated 04.01.2011 passed by the learned Magistrate Under Section 156(3) of Code of Criminal Procedure. The learned Counsel appearing on behalf of the Appellants after summarizing their arguments in the matter have emphasized also in the context of the fundamental rights of the Appellants under the Constitution, that the order impugned has caused grave inequities to the Appellants. In the circumstances, it was submitted that the order is illegal and is an abuse of the process of law. However, it appears to us that this order Under Section 156(3) of Code of Criminal Procedure requiring investigation by the police, cannot be said to have caused an injury of irreparable nature which, at this stage, requires quashing of the investigation. There are no flaws in the impugned order or any illegality has been committed by the High Court in dismissing the petitions filed by the Appellants before the High Court - appeal dismissed.

Summary

Issues Involved:
1. Prematurity of the Writ Petition
2. Quashing of FIR and Magistrate’s Order
3. Application of Section 156(3) and 482 of CrPC
4. Allegations of Unauthorized Trading and Fraud
5. Vicarious Liability of Company Officials
6. Difference Between Civil and Criminal Proceedings

Detailed Analysis:

1. Prematurity of the Writ Petition:
The High Court dismissed the writ petitions on the ground that they were premature. The petitions were filed before the issuance of process by the Magistrate under Section 156(3) of the Code of Criminal Procedure (CrPC). The High Court held that the stage of cognizance would arise only after the investigation report is filed, making the petitions premature.

2. Quashing of FIR and Magistrate’s Order:
The main question was whether the order dated 04.01.2011 by the 10th Metropolitan Magistrate, Andheri, and the FIR registered at Juhu Police Station should be quashed. The Supreme Court noted that the order directed a fact-finding investigation, and the FIR was registered based on this order. The Court emphasized that criminal prosecution requires a higher standard of proof beyond reasonable doubt, unlike civil matters which require proof on the preponderance of probabilities.

3. Application of Section 156(3) and 482 of CrPC:
Section 156(3) allows a Magistrate to order an investigation by the police if a cognizable offense is disclosed. Section 482 preserves the inherent powers of the High Court to prevent abuse of process or to secure the ends of justice. The Supreme Court noted that the High Court correctly held that the inherent powers under Section 482 should be sparingly used and that the order under Section 156(3) did not cause irreparable injury requiring quashing of the investigation.

4. Allegations of Unauthorized Trading and Fraud:
The complaint alleged unauthorized and fraudulent trading in the respondent's account by the Relationship Manager (RM) and other officials of the company, causing significant financial losses. The Supreme Court observed that the allegations made in the complaint, even if taken at face value, must be scrutinized for truthfulness, and the investigation should proceed to ascertain the facts.

5. Vicarious Liability of Company Officials:
The Court highlighted that the Indian Penal Code does not provide for vicarious liability for offenses committed by a company unless specifically provided by statute. The Court referred to previous judgments, emphasizing that general and bald allegations against company officials are insufficient to establish vicarious liability. The complaint must make specific allegations that would attract provisions constituting vicarious liability.

6. Difference Between Civil and Criminal Proceedings:
The Supreme Court acknowledged the difference between civil arbitration proceedings and criminal prosecution. It noted that the criminal prosecution of the appellants could not be allowed to continue based on the same facts adjudicated in civil proceedings, as criminal prosecution requires a higher standard of proof. The Court also observed that the complaint's allegations did not amount to the disclosure of an offense and seemed to be made with the purpose of harassment.

Conclusion:
The Supreme Court affirmed the High Court's decision, dismissing the writ petitions as premature and holding that the inherent powers under Section 482 CrPC should be sparingly used. The appeal was dismissed, and the investigation was allowed to proceed to ascertain the facts and determine the truthfulness of the allegations.