2010 (10) TMI 85 - SC - Indian Laws

Offences - allegations of cheating under section 420 read with section 120B of the Indian Penal Code, 1860.

Summary

Issues Involved:
1. Quashing of the criminal complaint for cheating and conspiracy.
2. Jurisdiction of the High Court under Section 482 of the Cr.P.C.
3. Corporate criminal liability and mens rea.
4. Examination of the complaint's allegations and supporting documents.
5. Evaluation of the representations made by the respondent.

Detailed Analysis:

1. Quashing of the Criminal Complaint for Cheating and Conspiracy:
The original complainant filed a criminal complaint against the respondent alleging cheating under Section 420 read with Section 120B of the IPC. The Judicial Magistrate issued process against the respondents, which was later quashed by the Bombay High Court. The Supreme Court examined whether the High Court was correct in quashing the proceedings at the initial stage.

2. Jurisdiction of the High Court under Section 482 of the Cr.P.C.:
The Supreme Court reiterated that the power to quash a criminal complaint at the stage of cognizance is an extreme power, to be exercised sparingly and with abundant caution. The High Court should not indulge in a detailed analysis of the merits of the case at this stage. The Court emphasized that the inherent power under Section 482 should be used to prevent abuse of the process of any court or to secure the ends of justice, but not to stifle a legitimate prosecution.

3. Corporate Criminal Liability and Mens Rea:
The High Court had concluded that a corporation cannot have the mens rea required for the offence of cheating. However, the Supreme Court rejected this view, stating that companies can be prosecuted for criminal offences, including those requiring mens rea. The Court cited the case of Standard Chartered Bank v. Directorate of Enforcement, which established that companies could be held criminally liable and that the mens rea of the company's directors or managers could be imputed to the company.

4. Examination of the Complaint's Allegations and Supporting Documents:
The Supreme Court found that the High Court had erred in conducting a detailed analysis of the complaint and supporting documents. The High Court should have accepted the allegations in the complaint on their face value without examining the merits. The Court emphasized that the complaint should not be quashed unless it is so bereft of basic facts that it would be a miscarriage of justice to permit the proceedings to continue.

5. Evaluation of the Representations Made by the Respondent:
The complaint alleged that the respondent made false and fraudulent representations to induce the complainant to invest in the Iridium project. The Supreme Court noted that the High Court had improperly evaluated the representations and the risk factors disclosed in the 1992 PPM. The Court emphasized that the complainant should be given an opportunity to prove that the representations were false and made with dishonest intent.

Conclusion:
The Supreme Court allowed the appeal and set aside the judgment of the Bombay High Court, reinstating the criminal proceedings. The Court emphasized that the High Court had exceeded its jurisdiction and should not have quashed the complaint at the initial stage. The complainant was entitled to an opportunity to prove the allegations of cheating and fraudulent misrepresentation against the respondent.