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TMI Blog1973 (1) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 4, and (5) one C. B. Thomas, general manager of the company, described as accused No. 5, committed offences under sections 420, 417 read with sections 34, 109 and 114 of the Indian Penal Code. The learned Magistrate issued summonses on a perusal of the complaint and hearing the complainant. The complaint is numbered as Case No. 18/S of 1972. It is common ground that accused Nos. 1 to 3 were served with summonses but accused Nos. 4 and 5 who are residing in the United States are not yet served. On July 3, 1972, respondent No. 1 moved the Magistrate for extradition proceedings being taken against accused Nos. 4 and 5. The above application is filed by Esso Company contending that the continuation of the proceedings before the Magistrate is a gross abuse of the court's process and praying that in exercise of the powers of this court under section 561-A of the Criminal Procedure Code the proceedings in Case No. 18/3 of 1972 pending in the court of the Presidency Magistrate, 28th Court, Esplanade, Bombay, should be quashed and the complaint dismissed, or, in the alternative, the process issued by the learned Magistrate be set aside and the complaint required to be disposed of after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awn after issuing process on December 8, 1971, and was, therefore, dismissed by the learned Magistrate. He submitted that even on the allegations of the complainant it was obvious that the alleged offences took place in the year 1963 and it was discovered by the complainant on February 8, 1968, and the learned Presidency Magistrate had not exercised his discretion properly in issuing process without even making an enquiry under section 202 on a stale complaint filed in 1972. Mr. Jethmalani argued that although there is reference in the complaint to both section 417 and section 420, section 420 is the more serious section which will be attracted if the complaint wants to suggest cheating as the offence by the allegations made in the case; and the complaint would be barred against the applicant-company in view of the decision of this court in State of Maharashtra v. Syndicate Transport Co. Ltd. AIR 1964 Bom 195 Further relying on the principles enunciated regarding the liability by a corporation or company in Tesco Supermarkets Ltd. v. Nattrass [1972] AC 153 (HL), he submitted that the complaint was liable to be dismissed against the applicant- company on the ground that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e manufactured by the complainant on a royalty basis of Rs. 3 per dozen. The said Neff had assured the complainant that this agreement, though mentioned to be for one year, should be taken for ever, and even if he was not in office representing Standard Vacuum Oil Co., the complainant should contact and convey his assurances to his successors in office who were bound to honour the assurances given by him. As desired by the company, a separate concern, viz ., James Laboratory, Post Bag No. 10115, Bombay-1, was started by the complainant. Standard Vacuum Oil Co. was converted into Esso Standard Eastern Incorporated Co., in or about March, 1962. In accordance with clause 13 of the agreement with Standard Vacuum Oil Co., the company was bound to reimburse the complainant's company with the actual cost of all empty and all filled containers surrendered by the complainant's company on the expiry of the agreement because of the change in the name of the company. The complainant, therefore, lodged a claim of Rs. 50,000 against the applicant-company for 20,000 tins most of which were filled and became unsaleable because of the change of name of the applicant-company. Accused No. 2, Z. A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an amount of about Rs. 40,000 which the complainant was not prepared to invest until he was assured of the continuance of the agreement for 50 years. Accused No. 3 told him that he had no reason to worry and that the agreement for 50 years would definitely be executed. He asked the complainant to give him the old original agreement with Standard Vacuum Oil Co. which would enable him to have a fresh agreement prepared. The complainant told accused No. 3 that he was not sure where the original was but he would send a copy which was lying in his office file. Accused No. 3 said that that would do but asked the complainant to proceed with the printing of the tins at once. Relying on this assurance the complainant invested Rs. 35,000 by getting 75,000 tins prepared with new design and name. In spite of this, accused No. 3 did not prepare the agreement for 50 years. On the contrary, he insisted on the complainant signing a one-year agreement and asked the complainant to cancel the proposed para. 13 of the agreement which entitled the complainant to be reimbursed in respect of the actual cost of all empty and all filled containers surrendered by the complainant's company. Surprised at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one year. The complainant got upset. He searched for Patel. He could not find Patel or accused No. 4. He insisted on a mention of 50 years in the agreement and refused to sign the agreement and demanded Rs. 85,000. Both accused No. 3 and accused No. 2 told him that the legal department of the applicant-company had said that they could not take the agreement for 50 years and instead they had suggested the mention of the words " the agreement is renewable every year". Accused Nos. 2 and 3 told the complainant that these words were in substance intended to give effect to the agreement for 50 years as the agreement was renewable automatically every year and the complainant was in possession of the letter dated June 27, 1962, incorporating the arrangement for 50 years. They also said that only if there was any breach of the agreement that the company could exercise option of termination by referring to para. 14 of the said agreement. In view of these assurances and representations made by accused Nos. 2 and 3 and similar representations made by them and accused No. 4 earlier and without suspecting that they were making false representations and giving the complainant false assurances, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... free enamel plate. The complainant also agreed to give 200 dozen polishes free to the dealers suggested by the company for free polishing of customer's cars on Esso pumps. The complainant made preparation for the entire goods but the campaign did not start. On January 4, 1968, the complainant wrote a letter informing them how a large amount had been blocked in the goods and requested the company to start the campaign. In December, 1967, when the complainant had gone to the applicant-company and met accused No. 3, he wanted the original agreement made with the complainant dated February 7, 1963, for sanction of the compaign. The complainant gave a copy of the agreement as the original was not traceable. The officer insisted on having the original agreement. On January 4, 1968, the complainant informed accused No. 3 that the original agreement was misplaced. Soon thereafter by their letter dated April 3, 1968, the accused informed the complainant that their agreement was for one year renewable at their option and that as the agreement was not renewed "it stands terminated". They also asked the complainant to hand over to them all the empty tins. This made the complainant to send a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their discovery that I had misplaced my original agreement and, therefore, was helpless in the matter of taking any action against them. All the accused have in committing this offence of cheating me acted in furtherance of common intention of each other and have aided and abetted each other. I, therefore, charge them under sections 417 and 420 read with sections 34, 109 and 114 of the Indian Penal Code and I request that this honourable court may proceed against them according to law for the offence committed by them". It is manifest that but for the averments that the claim of the complainant was time-barred and process should be issued against the accused the complaint sounds almost like a plaint in a civil suit. As far as we can see, what is alleged is nothing more than a breach of an assurance or undertaking or representation made by accused Nos. 2, 3 and 4 to the complainant that even though the agreement was not an agreement for 50 years as it was automatically renewable every year it amounted to an automatic agreement renewable for 50 years and, hence, when they wrote on April 3, 1968, that the agreement was terminated, the said accused Nos. 2, 3 and 4 and the company c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sufficient to show deception of the complainant. He cannot say that he was deceived when he signed the agreement because the officers assured him that if he did not commit breach of the agreement the agreement would be renewed. He did not give up this claim under any deception. He gave it up because he wanted a further agreement as admitted in the complaint itself. Distinction between mere breach of contract and cheating depends upon the intention of the accused at the time of the alleged inducement which may be judged by his subsequent act of which the subsequent act is not the sole criteria. The complainant has inferred a dishonest intention on the part of the officers by their subsequent declaration that the agreement was already terminated as one year had expired. This inference is not open to him because on his own allegations he had signed the agreement renewable every year believing that it was renewable for a period of 50 years. He need not have signed the agreement. He has said in the complaint itself that the legal department of the applicant-company had said that the officers could not put in 50 years in the agreement. Hence it is clear that the complainant knew that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion of whether the mental state of the directors or other officers, collectively or individually, can be attributed to the company as its own act must "depend on the nature of the charge, the relative position of the officer or agent and other relevant facts and circumstances of the case". This test applies both as to whether there is evidence to go to the jury on the issue and as to how the jury should satisfy themselves that mens rea on the part of the company has been proved. On this basis companies have been convicted of crime involving dishonesty whether created by statute or by common law. The court will investigate as a question of fact how the management of the company has in reality been conducted so as to determine who is the responsible officer in the area of activity in which the offence occurred. The "directing mind and will" of the company need not, in an appropriate case, be in the exalted position of the board of directors or the managing director. Thus, in Moore v. I. Bresler Ltd. [1944] 2 All ER 515 (KB) , a company was convicted of an offence requiring proof of an intention to deceive where those responsible were its secretary and branch manager. Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lord Pearson stated : "A company may have an alter ego, if those persons who are or have its ego delegate to some other person the control and management, with full discretionary powers, of some section of the company's business. In the case of a company, it may be difficult, and in most cases for practical purposes unnecessary, to draw the distinction between its ego and its alter ego, but theoretically there is that distinction. Mr. Clement, being the manager of one of the company's several hundreds of shops, could not be identified with the company's ego nor was he an alter ego of the company. He was an employee in a relatively subordinate post. In the company's hierarchy there were a branch inspector and an area controller and a regional director interposed between him and the board of directors". Lord Diplock, with respect, made the most valuable observations which run as follows : "In my view, therefore, the question : what natural persons are to be treated in law as being the company for the purpose of acts done in the course of its business, including the taking of precautions and the exercise of due diligence to avoid the commission of a criminal offence, is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a or not, provided they have acted or have purported to act under authority of the corporate body or in pursuance of the aims or objects of the corporate body and that the question whether a corporate body should or should not be liable for criminal action resulting from the acts of some individual must depend on the nature of the offence disclosed by the allegations in the complaint or in the charge-sheet, the relative position of the officer or agent, vis-a-vis , the corporate body and the other relevant facts and circumstances which could show that the corporate body, as such, meant or intended to commit that act". and further that each case will have necessarily to depend on its own facts, must be considered as propositions which ignore the constitution of corporate bodies under the memorandum of association and articles of association. This criticism appears to us to be justified having regard to what Lord Diplock has stated in his speech but the remarks of L. M. Paranjpe J. were obiter as the case was decided in the context of the question of liability of a company under section 420 of the Indian Penal Code alone and it was rightly held by L. M. Paranjpe J. that as sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Syndicate Transport Co. AIR 1964 Bom 195 would also apply and no indictment could be made against the company under section 420, Indian Penal Code. If no indictment could be made against the company the allegations of the complainant that the accused had common intention with the company also will fall to the ground and the complaint must be dismissed against all the accused. Mr. Paranjpe, learned counsel for the complainant, fairly stated that he could not submit that this court had no jurisdiction under section 561-A read with section 439 of the Criminal Procedure Code to quash the proceedings against all the accused on an application filed by the applicant-company if this court found, as it has found, that the allegations made in the complaint did not constitute any offence and the complaint was not maintainable as it involves a civil dispute. It is, therefore, unnecessary for us to discuss the question any further. Mr. Jethmalani submitted that as the present complaint was filed on the same allegations on the basis of which the earlier complaint was filed and withdrawn, it was clear that the complainant's motive in filing this complaint was not to vindicate the law ..... X X X X Extracts X X X X X X X X Extracts X X X X
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