2009 (11) TMI 1027 - HC - Indian Laws

Summary

Issues Involved:
1. Quashing of proceedings on Private Complaint bearing No. 4/2009, converted to C.C No. 309/2009.
2. Alleged contravention of the Sugar Cane (Control) Order, 1966, and the Essential Commodities Act, 1955.
3. Vicarious liability of the Directors and Managing Director of M/s. Shree Renuka Sugars Limited.
4. Legal applicability of Sections 403, 405, 424, and 420 of IPC.
5. Applicability of Section 10 of the Essential Commodities Act, 1955.

Issue-wise Detailed Analysis:

1. Quashing of Proceedings:
The petitioners, who are the Chairperson, Managing Director, and Directors of M/s. Shree Renuka Sugars Limited, sought to quash the proceedings initiated by the first respondent for contravention of the Sugar Cane (Control) Order, 1966, punishable under Section 3 of the Essential Commodities Act, 1955. The complaint transformed into a criminal prosecution, but the company itself was not included in the party array.

2. Alleged Contravention of Sugar Cane (Control) Order, 1966, and Essential Commodities Act, 1955:
The first respondent, a company engaged in sugar manufacturing, alleged that the petitioners induced sugar cane growers to sell their produce to M/s. Shree Renuka Sugars Limited at a higher rate, in violation of the reserved procurement rights and the minimum price fixed under the Sugar Cane (Control) Order, 1966. The complainant claimed this caused them a loss and amounted to criminal breach of trust and fraud.

3. Vicarious Liability of Directors and Managing Director:
The petitioners argued that no cause was made out to initiate action under Sections 403, 405, 424, and 420 of IPC. They contended that the complaint lacked specific allegations against them, and under Section 10 of the E.C Act, only those in charge of and responsible for the company's conduct could be held liable. The court examined whether the Directors and Managing Director could be proceeded against based on the principle of vicarious liability.

4. Legal Applicability of Sections 403, 405, 424, and 420 of IPC:
The court analyzed the allegations under Sections 403 and 405 of IPC, which pertain to dishonest misappropriation and criminal breach of trust. The complaint alleged that the petitioners induced the farmers to sell sugar cane at a higher price, but failed to specify the overt acts of each petitioner, which is necessary to establish a prima facie case under these sections.

5. Applicability of Section 10 of the Essential Commodities Act, 1955:
Section 10(1) of the E.C Act presumes guilt against those in charge of and responsible for the company's conduct, whereas Section 10(2) requires proof of consent, connivance, or neglect for other officers like Directors. The court found that the complaint lacked specific allegations against the Directors (petitioners 3 to 11) to hold them liable under Section 10(2). However, the Chairman and Managing Director (petitioners 1 and 2) could be presumed responsible under Section 10(1) due to their roles.

Judgment:
The court quashed the proceedings against petitioners 3 to 11 due to the absence of specific allegations showing their involvement. For petitioners 1 and 2, the court set aside the impugned order and remanded the matter to the Trial Court to reconsider the complaint and other documents to ascertain a prima facie case under Sections 403, 405, 424, 420 of IPC, and Sections 7 and 8 of the Essential Commodities Act, 1955.