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TMI Blog2016 (3) TMI 1289X X X X Extracts X X X X X X X X Extracts X X X X ..... ken cognizance for the offences punishable under Sections 120-B read with 420 IPC and Section 12 of the Prevention of Corruption Act, 1988, in so far as against the petitioner/A3 concerned, leave about other 8 accused charged including A7-M/s. India Cements Limited, rep. by its Vice-Chairman and Managing Director (petitioner/A3-iV. Srinivasan). Brief allegations in the charge-sheet insofar against the petitioner/A3 concerned are the following: 2(i) The petitioner/A3 herein being the Vice-Chairman and Managing Director of M/s. India Cements Limited (A7) is in charge of the day-to-day management and functions of the A7-Company. 2(ii) Allegations against M/s. India Cements Limited (A7): (a) During the year 1990 M/s. India Cements Limited acquired Coromandel Cement plant at Kadapa, Kadapa District; in the year 1997 they acquired Cement plant of Visakha Cement Industry Limited at Tandur, Ranga Reddy District; in the year 1998 they acquired cement plant of Cement Corporation of India at Yerraguntla, Kadapa District and in the year 1998 they acquired M/s. Raasi Cement Limited of Nalgonda District (of the erstwhile State of Andhra Pradesh). (b) It is averred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod of lease should be for only five years and the maximum period of lease shall in no case exceed twenty five years. On receipt of the proposal, a circulation note was put by the then Joint Secretary (Sri N. Venkata Subbaiah), Revenue Department endorsed that "proposals at Para 43 may kindly be considered for approval, regarding the period, it is submitted that the present lease granted has been expired by 30.6.2003, extension of lease for further period 5 years from 1.7.2003 may be considered for approval". (d) Sri M. Samuel, IAS (A4) the then Principal Secretary, Revenue Department, Government of Andhra Pradesh, at the initial stage got the above note circulated for extension of lease of land for a period of five years from 1.7.2003 to 1.7.2008 by giving his assent. Said note was routed through Principal Secretary (Finance) and was approved by the Minister for Revenue-Sri Dharmana Prasada Rao and it was finally approved by the then Chief Minister, Late Dr. Y.S. Rajasekhara Reddy for placing before the Council of Ministers. The file was re-circulated to the then Chief Minister for obtaining specific orders to be placed before the Council of Ministers. The then Chief Minis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts Limited (A7) filed an application with Superintending Engineer, Irrigation Circle, Hyderabad requesting for additional allocation of 13 Mcft water from River Kagna in addition to the already allocated 10 Mcft water to M/s. Visaka Cements. The Chief Engineer, Minor Irrigation forwarded the request of India Cements Limited (A7) to the Irrigation Department for obtaining Government Orders for utilization of 13 Mcft water by India Cements Limited (A7) in addition to the existing utilization of 10 Mcft water accorded by G.O.Ms. No. 244, I & C Department, dated 19.12.1996. Sri N. Bhaskar Rao, Superintending Engineer having the knowledge about the payment of royalty, intentionally ignored and did not insist for payment of royalty by the entity before recommending for allocation of additional water and Sri B. Seetharamaiah, Chief Engineer merely forwarded the proposal received from Superintending Engineer to the Irrigation Department and on receipt of the proposal, Sri Alahari Subba Rao, the then Special Officer (Technical), Irrigation & Command Area Development (I & CAD) Department raised the following points to be ascertained: i. "As to the proposed enhancement regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sri Adithyanath Das (A5) was in the knowledge of all the intricacies relating to this issue in furtherance of criminal conspiracy got final approval of the then Chief Minister. Accordingly, G.O.Ms. No. 94, I & CAD dated 12.8.2009 was issued. India Cements Limited (A7) owed royalty to irrigation Department since May, 1997 and it has not complied one of the conditions of the earlier G.O.Ms. No. 244 of 1996. A5 was in the knowledge of the above fact raised by the Special Officer. The conditional clause No. 9 of G.O.Ms. No. 244 of 1996 warranted that violation of the any of the conditions mentioned in the G.O., shall entail the cancellation of the permission granted to India Cements Limited (A7) for drawl of water without any notice. This fact was intentionally omitted by Sri Adithyanath Das (A5) in abuse of his official position as part of the criminal conspiracy for favouring India Cements Limited (A7). M/s. India Cements Limited (A7) was owing water royalty since May, 1997 which was later calculated in 2011 after registration of the case by C.B.I., for an amount of Rs. 17,87,864/- (without penalty) towards outstanding water cess. (g). M/s. India Cements Limited (A7) acquire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter dated 23.2.2008. Sri Bhaskar Rao, Superintendent Engineer, Irrigation & Command Area Development, Irrigation Circle, Hyderabad vide letter No. DEEI/TS-2/7152, dated 12.3.2008 addressed to the Chief Engineer, Minor Irrigation, Hyderabad requesting the Chief Engineer to obtain and communicate necessary permission from the Government. Sri B. Seetha Ramaiah, Chief Engineer, Minor Irrigation addressed a letter No. DCE(MI)/OT3-T4/India Cements/2008, dated 28.3.2008 to the Principal Secretary, Irrigation & CAD, Department, Hyderabad stating that permission was accorded to India Cements Limited (A7) formerly M/s. Raasi Cement to draw water from Krishna River, downstream of Nagarjunasagar Dam near Wazirabad village at the rate of 3 lakh gallons per day as per G.O.Ms. No. 408, Irrigation & Power (Irrigation-II) Department dated 21.6.1979. The letter also stated that an agreement had been entered with the firm and royalty is being paid by the firm. The letter also contained that the firm has represented for enhancement of water drawl from 3 lakh gallons to 10 lakh gallons per day in view of their expansion of cement plant. On receipt of letter from Chief Engineer, dated 28.3.2008 by the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chief Engineer, ISWR has agreed to the proposal of the Chief Engineer, Minor and agreed to give additional 7 lakh gallons of water per day in addition to already 3 lakh gallon (total 10 lakh gallon in all) to India Cements Limited (A7). On 25.6.2008 the then Minister (M & MI) Sri Ponnala Lakshmaiah agreed to the proposal and finally the then Chief Minister late Sri Y.S. Rajasekhara Reddy, in furtherance of criminal conspiracy accorded his assent on 3.7.2008, in quid-pro-quo to the illegal gratification paid by India Cements Limited (A7). The draft G.O. was put up on 8.7.2008, the Special Officer (Technical) made an observation that the terms and conditions must be specified and he also observed that the period of permission to be specified as five years as there was no mention of the period in the earlier G.O.Ms. No. 408, that G.O.Ms. No. 146 dated 22.7.2008 was issued according permission to India Cements Limited (A7) to draw 10 lakh gallons of total quantity of water per day including 3 lakh gallons of water already permitted from Krishna River downstream of Nagarjunasagar Dam near Wazirabad for consumptive use of their expansion unit at Nalgonda. A5 by abusing his official posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... othing but a quid-pro-quo investment. In April, 2010 M/s. Pani & Associates, Bangalore evaluated the share price of M/s. Raghuram Cement Corporation Private Limited and arrived at the value of share at Rs. 221.17 Ps. That the Board Resolution of India Cements Limited (A7) dated 14.4.2010 resolved to invest upto Rs. 125 crores by way of Inter Corporate Loans/Advance/Investment in M/s. Bharathi Cement Group whereas on the same day India Cements Limited (A7) had sold their stake 1803973 shares of Rs. 10/- each in M/s. Bharathi Cements Corporation Limited at a total price of Rs. 121.00 crores to M/s. PARFICIM, SAS, FRANCE. 2(iii) There is no averment from the above of any role of the petitioner/A3-Srinivasan to make him liable. It is however averred in the charge-sheet as if therefrom, it is clearly establishing that Sri N. Srinivasan (A3) representing (A7) India Cements Ltd. proposed to give back the entire amount received by selling shares to PARFICIM, back to Sri Y.S. Jagan Mohan Reddy (A1) which was invested as a quid-pro-quo. 2(iv) It is averred in the charge-sheet further that during June, 2007 India Cements Limited (A7) gave inter corporate deposits to M/s. Sandur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited (AT) at the rate of Rs. 350/- per share. 2. From the above there is no specific role of petitioner/A3 to attribute, but for if at all he represented the India Cements Limited (A7) being its Vice-Chairman-cum-Managing Director. It discloses that the investigation proceeded on accusing the petitioner/A3 from his status to the India Cements Limited (A7) being its Vice-Chairman-cum-Managing Director and beyond that there is nothing of how personally and if not atleast by what provision or fiction of law by virtue of his status vicariously liable to charge for any of the offences. However, it is averred that in brief the charge-sheet filed by 2nd respondent reveals the role of petitioner/A3-Sri N. Srinivasan as follows: 3. A3 being the Managing Director of A7 Company conspired with A1 by entering into share subscription agreement dated 19.5.2007, that in pursuance of such agreement, A7 surrendered their rights in favour of M/s. Raghuram Cements Limited (A6) represented by A1 as a quid-pro-quo. For which A7 got the benefit of allocation of additional quantity of water, extension of lease of land for a period of 20 years and priority in supply of cement under Indiramma Scheme. A3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deprive another of any valuable security or other things while discharging his duties as Vice-Chairman and Managing Director of A7 company, when the basic ingredients of the offence charged against the petitioner/A3 are absent, the charge-sheet is liable to be quashed, that the learned Special Judge has committed a grave error in mechanically issuing process to the petitioner/A3 based upon the CBI/respondent's final report which does not any way point out the personal involvement of the petitioner/A3 for any personal benefits or obligations or in any conspiracy to bestow undue benefits on A7, a public company which is managed by a Board of Directors, that the learned Special Judge has not given any reasons in the order dated 25.9.2013 taking cognizance for inclusion of the alleged offence under Section 12 of the Prevention of Corruption Act, 1988. The impugned order suffers from clear legal infirmity without recording reasons why the Court felt compelled to include offence under the prevention of Corruption Act against the petitioner. When there is no averment in the charge-sheet of any criminal act attributed to the petitioner, the inclusion of a serious offence in the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st accused No. 3, that the charge-sheet is totally silent as to what false representation was made by accused No. 3 and to whom, it is also silent on the question whether any person was induced to part with any property by virtue of any false representation on the part of accused No. 3, that there is no suggestion of wrongful gain on the part of accused No. 3 and having caused wrongful loss to anybody and accordingly the substantive offence of Section 420 IPC is totally unsubstantiated against the petitioner and as regards the offence of conspiracy to cheat, the charge-sheet is totally silent as to who cheated whom. The criminal conspiracy charge can never be proved against the petitioner since each and every allegation that has been made against the petitioner in the charge-sheet pertains to the business activities of the Company (A7). There is not a single overt act which has been attributed to the petitioner/A3 suggesting any conspiracy in the making of investments by A7, that even assuming without admitting that the investments made by A7 were nothing but bribe amounts, even then the role played by the petitioner has to be necessarily spelt out as a specific item of charge, tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the actual loan/investment even the 0% dividend and 0% preference shares, though the Board resolution supra authorized him to finalize the terms of the said investment of Rs. 90.00 Crores with Raghuram Cements and he even surrendered 0% C.P.S. in the share subscription agreement dated 19.5.2007 with Raghuram Cements even he was not a signatory to it, it cannot be avoided for nothing out of his knowledge and said investment by diversion of funds of India Cements Limited to Raghuram Cements is by abusing his position in India Cements. The other contention of he played vital role in diverting money of India Cements without board approval of Rs. 5.00 crores each by cheque Nos. 022249, 039912 and 918273 dated 2.2.2007, 20.4.2007 and 8.5.2007 respectively before board approval dated 16.1.2008 and the Board resolution dated 16.1.2008 is also with no legal affect for violation of Sections 372-A(2) read with 9(b) of Companies Act and it is not enough of there is no loss of India Cements as the investments of quid-pro-quo for the water allocation and land lease etc., is nothing but a bribe under another device if considered the substance over the form even recorded in the books as investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icarious liability for the offences punishable under Sections 120-B read with 420 IPC and Section 12 of the Prevention of Corruption Act, by virtue of any statutory liability or legal fiction? II. If not, whether petitioner/A3-Srinivasan, other than of his status or position as Vice-Chairman and Managing Director of India Cements Limited, be made personally liable for any acts and if so on what basis for the final report to accuse and for the learned Special Judge to take cognizance without specifying as to on vicarious liability or personnel liability? III. Whether the cognizance taken by the learned Special Judge without specifying as to on vicarious liability or personnel liability, is outcome of non-application of judicial mind and same is otherwise unsustainable for not reflecting any reasons or otherwise and is liable to be quashed? IV. To what result? 9. Points I to III : As points 1 to 3 are interrelated and to avoid repetition by separate dealing, taken upto decide together for sake of convenience. 10. From the writ petition orders directing C.B.I. investigation though speak allegations showing quid-pro-quo investments made out of the benefits receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directly to show his role actively to make him personally liable for the accusation as to any participation or privy for any conspiracy muchless to commit the offence or to abet the offence under Prevention of Corruption Act. 12. Undisputedly, charges are not framed so far in the above calendar case at the post-cognizance stage from the appearance of the accused persons including against the petitioner/A3 or India Cements/A7. 13. It is but for contextually to mention that the writ petition supra among the directions of registration of crime to investigate, the direction is specific to protect the genuine investors who made in the State and that might be the reason though in the FIR there are more than 73 accused, the final report speaks against only 9 accused persons including A7/India Cements and the petitioner separately as A3 being its Vice-Chairman and Managing Director leave about other final reports against some others. 14. A7/India Cements from the material on record relied by both parties in support of their respective contentions, is a private limited company incorporated and in existence since 1946 and A3 is acting as its Vice-Chairman and Managing Director from 15.09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eport that was taken cognizance and if no material, the cognizance taken can be said by judicial non application of mind leave about reasons are required to be given or not though generally the application of mind shall reflect by reasons, even some of the expressions say mere non assigning of reasons will not entitle to quash the cognizance, once the cognizance taken reflects the judicial application of mind. It is also necessary to mention in this regard that in showing the benefits if at all said to have been conferred to A7/India Cements by the then Government some of the officials acted in privy or there were dereliction of duties in conferring favours to A7 entity as a quid-pro-quo for the investments made by A7 with A1 or any of his controlled or representing entities directly or indirectly. None of the Government Orders or proceedings of the alleged benefits were withdrawn or varied or revised by Government and in fact those were approved including by placing same of which in the Council of Ministers from the very averments in the final report referred supra. 17. Undisputedly India Cements Limited (A7) acquired the Coromandel cement plant of Kadapa only in 1990 and the cem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up the latest amendment to the lease rules to Finance Department, which in turn returned the file to Revenue Department with remarks to take action as per G.O.Ms. No. 1484, dated 15.11.1977 read with G.O.Ms. No. 840, dated 14.10.1996. On receipt of the proposal, a circulation note was put by the then Joint Secretary Revenue Department endorsed to consider for approval and placed before the Council of Ministers in the Cabinet meeting held on 30.6.2008 and approved for five years period from 1.7.2003 and would expire on 1.7.2008 vide its resolution No. 241/2008, dated 1.7.2008. Sri M. Samuel (A4)-Principal Secretary, in furtherance of the criminal conspiracy with other accused persons, by abusing his office as a public servant said to have issued orders vide G.O.Ms. No. 865, dated 11.07.2008 extending the lease of land in Sy. No. 657/2, Acs. 2-60 cents of Chowduru Village of Proddatur Mandal in favour of India Cements Limited (A7), Chilamkur for a period as prescribed under G.O.Ms. No. 1484, dated 15.11.1977 read with G.O.Ms. No. 840, dated 14.10.1996, thereby giving the lease for 25 years instead of only five years and M/s. India Cements Limited (A7) was unduly favoured through thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the lease rightly. Even coming to G.O.Ms. No. 865, dated 11.7.2008, same amended by G.O.Ms. No. 1000, dated 2.2.2010, it also reflects B.S.O. 24 and amended from five years to 25 years or so. As referred supra in none of the proceedings or material, there is anything to reflect any role or petitioner/A3 specifically as privy but for to say by virtue of his status in A7/India Cements which no way makes him vicariously liable for no statutory provision or legal fiction including on the principal of alterago. 19. So far as the water distribution or allotment of additional water component to any of the entities that were acquired by IC/A7 concerned and making of the provision concerned, M/s. Visaka Cement Industries Limited was undisputedly amalgamated with India Cements Limited (A7) only in the year 2007. In fact long prior to it, M/s. Visaka Cement Industries Limited was given permission undisputedly to draw 10 mcft of water vide G.O.Ms. No. 244 dated 19.12.1996, though the Government's order did not mention the period of permission and the rate of water royalty to be fixed by the Government. The India Cements Limited (A7) applied only on 10.3.2008 for additional allocation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsonal Manager of India Cements Limited (A7), Wazirabad entered into Article of Agreement for permission to draw 3 lakh gallons of water per day from Krishna River for cement factory for the period, from 20.9.2007 to 19.9.2008 for an amount of Rs. 1,62,000/- for 12 months and Sri P.R.K. Raju, Chief Manager of India Cements Limited (A7) vide letter dated 10.12.2007 addressed to the Executive Engineer, Irrigation Department, Nalgonda stating that they had taken permission to draw 3 lakh gallons of water per day from Krishna River earlier from Irrigation Department vide letter No. C/1, dated 12.10.1982 and that they were expanding their plant and require additional quantity of water to an extent of 7 lakhs gallons per day. Even therefrom, it is not A3-Srinivasan but local officers that were party to above agreement, based on which, the Superintendent Engineer requested Chief Engineer to obtain permission from the Government by alleged creation of agreement dated 20.9.2007 for a period of one year. The Executive Engineer, Nalgonda, recommended the request of India Cements Limited (A7) for enhancement of water to a tune of 10 lakh gallons per day by letter dated 23.2.2008 and the Superi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llons of total quantity of water per day including 3 lakh gallons of water already permitted from Krishna River unduly favouring the firm, by suppressing the facts pertaining to the terms and conditions mentioned in the earlier G.O.Ms. No. 408, during the period 2007 to 2008 apart from India Cements Limited (A7) other companies viz., M/s. Deccan Cements Limited, Hyderabad, M/s. Madhucon Sugar and Power Industries, M/s. Maruti Ispat and Energy Private Limited had also applied for allocation of water and whose proposals kept pending as there was quid-pro-quo investments by India Cements Limited (A7) into the companies of Sri Y.S. Jagan Mohan Reddy out of 12,50,000 preference shares at a premium of Rs. 110/- for a sum of Rs. 15,00,00,000/-, India Cements Limited (A7) invested Rs. 80.31 crores at a premium of Rs. 1440/- with no explanation available in the minutes of the meeting or the statements recorded from top management of the company with regard to the necessity to increase the premium from Rs. 110/- to Rs. 1440/- (sudden raise of almost 12 times within a small time span of 9 to 10 months), except a simple statement that it is a "bouquet of investments" and India Cements Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trial policy of the State mandates that 10% of the water will be reserved from existing and future reservoirs for industrial use which policy is in vogue since the year 2001 and as public interest will be better served more by timely utilization of water as it not only would accrue revenue through royalty to the Government but also facilitates industrial development and spurring economic growth besides employment generation and state water policy puts industrial use of water at third priority after drinking water and irrigation with subsidized price and the only way commercial use can be made of water is thereby through industrial use in order to subsidies atleast the O & M cost of said sources and if water is not used in the Run of the river then it assumes a perishable nature as it goes as waste to the sea or evaporates and it is from the field officers examined of availability interstate issues, upper and lower riparian rights, Run of the water and sources like run of the water or reservoir point of view, the recommendations were sent to the Government which examined the availability and the industrial use from the policy in issuing the G.Os. concerned, it also made clear from p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestment by A7 entity and its sister concern with Al, to make with liability for alleged cheating it must be to cheat the shareholders or Directors with investment for no proper returns and same to assume not even with any complaint by any shareholders or directors or debenture holders or others and when such is the case that may at best serve as one of the links or circumstances to say any privy of quid-pro-quo between A1 and A7 and nothing to make A3 liable personally. Even coming to the investment of Rs. 5.00 crores each by three cheques dated 2.2.2007, 20.4.2007 and 8.5.2007, by India Cements in Sandur power and R.R. Global concerned, the main accusation against A7/India Cements made the investments and it is A3/petitioner acting as its Managing Director and for the said investments there were no prior board resolutions of A7 or its sister concern as the case may be concerned, in fact there is a board resolution dated 16.1.2008, which is no doubt subsequently some months later to the respective three cheques. Once such is the case, a lack of prior board resolution for the investment, when even subsequently a board resolution ratified the investment as part of the business activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner of the claim of genuine investment with returns to it. Further, on taken preferential shares as per the company law particularly with reference to Section 82 to 87 in Chapter IV of the Act, the same can be converted into equity shares besides preference shares got priority in all respects of dividend and preference to claim if wound up though there is no voting rights like in equity shares and the Companies Act Section 85 clearly speaks two types of shares one is preferential and the other is only equity and the contention of Board resolution dated 16.1.2008 is void for non-application of exemption and non-obtaining of prior consent under Section 372-A(2) of the Act does not arise in the case on hand for the investment not impugned by any of the shareholders or Directors of the India Cements apart from any lapse of the Company, the Company is already arrayed as accused and there is nothing to show how A3 is personally liable in the absence of his any active role with specific averments and material in showing the same. In fact, there was earlier Board resolution even generally dated 20.11.1996 apart from specific Board resolution dated 28.10.2009 in respect of Carmel Asia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to discuss the legal position with further facts in this regard even at the cost of repetition subject to context requires, now coming to the sustainability of quash petition from the expressions relied and referred supra and those relied being referred hereunder. 24. From above facts, now coming to the scope of Section 482 Cr.P.C. and whether the same can be invoked in present facts to quash the proceedings, in R. Kalyani v. Janak C. Mehta, (2009) 1 SCC 516, it was held that for invoking the inherent power in discharge of paramount duties by the High Court, it is to see a person apparently is not subjected to persecution and humiliation on the basis of wholly untenable complaint/report. In Sunitha Jain v. Pavan Kumar Jain, (2008) 2 SCC 705 at Para No. 39 it was held that, inherent power of High Court would not embark upon an enquiry as to whether evidence is reliable or not which is a function of trial Magistrate to appreciate as to the accusation is not sustained or not ultimately. It was also held in State of Orissa v. Saroj Kumar Sahu, (2005) 13 SCC 540 Para Nos. 11 and 14 that though no hard and fast rale can be laid down in exercise of the extraordinary jurisdiction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngeance. Considered from any angle we find that the respondent had abused the process and laid complaint against all the appellants without any prima facie case of harass them for vendetta." 27. However, it is the contention of the learned counsel for C.B.I. that this is not a fit case to quash the proceedings invoking the inherent powers under Section 482 Cr.P.C. It is further contended that the petitioner/A3 can be made liable also by virtue of his status even under Company Law as per Sections 5 and 291, as for the offences under the Companies Act, the Managing Director of the Company can be prosecuted by virtue of his position. For more clarity on the scope of the provisions same incorporated below: "Section 5. Meaning of "Officer Who is in Default For the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any punishment or penalty, whether by way of imprisonment, fine or otherwise, the expression "officer who is in default" means all the following officers of the company, namely: (a) the managing director or managing directors; (b) the whole-time director or whole-time directors; (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the further contention of the learned counsel for C.B.I. to make A3/petitioner liable by virtue of his status, he placed reliance upon the three Judge Bench expression in R.K. Dalmia v. Delhi Administration, AIR 1962 SC 1821. In that expression, it was observed that a Director of a Company is not only an agent but is in the possession of a trustee and for that placed reliance on the expression in People Bank v. Hari Kishanlal, AIR 1936 Lah. 408, holding both Dalmia and Chokkani therefore had dominion over the assets of the Insurance Company, as in People's Bank it was observed Lal Hari Kishan is a trustee of all the monies in the Bank. In Palmar's Company Law 20th Edn., at page No. 517 it is stated, Directors are not only agents but they are in same sense and to some extent trustees are in the possession of trustees and Lord Selborne in G.E.R. 7 Company v. Turner, 1972 (2) Cha. 149, observed that the Directors are the mere trustees or agents of the Company and trustees of the Company money and principal agent in the transaction which they enter into or on behalf of the Company and concluded in R.K. Dalmia's case (supra), ultimately that Dalmia Chukkani were entru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y stray sentence without basis. None of the material discussed supra is suffice to say A3/petitioner is personally liable from his status as Vice-Chairman and Managing Director of India Cements Limited for no complaint muchless any of Directors or shareholders or debenture holders of he cheated India Cements or the share holders or Directors etc., by privy with A1 or with any others. The alleged lapse of investments prior to Board resolutions ratifying and once such is the case any imperfection or dereliction no way sufficient to implicate in a criminal offence by attributing mens rea to make the petitioner/A3 personally liable and there is nothing to show or attribute any dishonest or fraudulent intentions under Sections 24 and 25 I.P.C. or wrongful loss or wrongful gain there from as held by the Apex Court in Mohd. Ibrahim v. State of Bihar, 2009 (2) ALD (Crl.) 775 (SC) : (2009) 8 SCC 751, particularly at para Nos. 24 to 28 by relying upon earlier expressions. 31. In this regard, regarding the basic ingredients required to satisfy for attributing criminal conspiracy, the Apex Court in Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd., (2010) 10 SCC 479 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State of Bihar, (2006) 2 SCC (Crl.) 49, it was held that to constitute the offence of cheating, intention to cheat was shown existing from the inception and if such intention developed later that would not amount to cheating. In the other expression of the Apex Court in Ram Jas v. State of U.P., 1974 Crl. LJ 1261, also it is laid down on the ingredients required for cheating that, there should be fraudulent or dishonest inducement by deceiving from the inception which is lagging to say no offence made out. The other three Judges Bench expression of the Apex Court in Ajay Mitra v. State of M.P., 2003 (1) ALD (Crl.) 644 (SC) : 2003 Cri. LJ 1249, it was held that mens rea of inducing the persons deceived to deliver property is essential to constitute offence of cheating and in ultimately quashing the F.I.R. therein referred the other expressions of A.L., Panian Shanmugam v. State of Andhra Pradesh, (1991) SCC (Crl.) 84, of mercantile transactions consignments are delivered on credit and very often the payment cannot be made on due date that does not attract penal consequences. In Vimala v. Delhi Administration, AIR 1963 SC 1572 and State of U.P. v. Ranjit Singh,: 1999 (1) ALD (Crl.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill date on vicarious liability, in R. Kalyani v. Janak C. Mehta (supra), it was held that vicarious liability can be fastened only by reason of a conferment by a statute and not otherwise, and for said purpose a legal fiction has to be created thereby for the I.P.C. offences of cheating and forgery or breach of trust of the respondents charged in individual capacity in the absence of showing how personally liable, referring to several expressions and upholding the F.I.R. proceedings quashed by the High Court, by the Apex Court for no interference. 35. In S.K. Alagh v. State of U.P., 2008 (2) ALD (Crl.) 78 (SC) : (2008) 5 SCC 662, it was held that vicarious liability in I.P.C. offences does not cast on the party not directly charged for commission of offence unless specifically provided there for like under Sections 34 or 149 I.P.C. etc. The relevant Paras 20 & 21 read that: "20. Indian Penal Code save and except some provisions specifically providing there for, does not contemplate any vicarious liability on the part of a party who is not charged directly for commission of an offence. A criminal breach of trust is an offence committed by a person to whom the property is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icarious liability in IPC offences, the earlier expression of Apex Court in Saroj Kumar Poddar v. State, (2007) 3 SCC 693, that placed reliance on Everest Advertising Private Limited v. State Government of NCT of Delhi, (2007) 5 SCC 54 and S.M.S. Pharmaceuticals Limited v. Neeta Bhalla,: (2005) 4 SCC 70, in observing "The Penal Code does not contain any provision for attaching vicarious liability on the part of Managing Director or Director of a Company when the accused is the company. The learned Magistrate did not pose unto himself the correct question as to whether the complaint petition, even if given face value and taken to be correct in its entirety, would lead to the conclusion of the quash petitioners are personally liable for any offence. The bank is a body corporate. Vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. Even for the said purpose to fix vicarious liability from a statutory provision, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability ". 38. This Court in Pepsi Foods Limited v. Special J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onvicted for an offence which requires a minimum sentence of imprisonment, though not expressed any opinion on the question whether a Corporation could be attributed with requisite mens rea to prove the guilt, the same is later clarified by the subsequent three Judge bench expression in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and another, 2007 (3) Scale 245, of a Corporation could be attributed with requisite mens rea to prove the guilt and same is reiterated in several later expressions including in National Small Industries Corporation v. Harmeet Singh, (2010) 3 SCC 330 and subsequent expressions following it and mainly in Iridium India Telecom Ltd. v. Motorola Inc., 2011 (1) ALD (Crl.) 591 (SC) : (2011) 1 SCC 74, referring to the several expressions of the Apex Court and of American and England Courts in Paras 59 to 64 of the expression page Nos. 98 to 100 in nutshell that a Company in many ways be like a human body they have a brain and nerve centre which controls what they do. Some of the people in the Company are mere servants and agents who are nothing more than hands to do the work and cannot be said to represent the mind or will. Others are directors and managers who r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the appellant who became a party to the alleged conspiracy. 42. It was held further referring to the Section 141 of N.I. Act in particular as an example at para No. 44 of Sunil Bharti Mittal's case (supra) and also from the expression of the Apex Court in Aneeta Hada (II) v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661, that the group of persons that guide the business of the company if the criminal intent that would be imputed to the body corporate and in this back drop Section 141 of the N.I. Act has to be understood. Such a position is therefore because of statutory intendment making it a deemed fiction. In Sunil Bharti Mittal's case (supra), it also referred the observations in the three Judge Bench expression of the Apex Court in S.M.S. Pharmaceuticals's case (supra) at para No. 8 that there is no universal rule that a Director of a Company is in-charge of its every day affairs. It all depends upon the respective roles assigned. A company have managers or secretaries for different Departments and may have more than one Manager or Secretary. In Aneeta Hada's case (supra), it is observed with reference to Section 141 of N.I. Act that the deeming ficti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar with reference to section 141 of the N.I. Act that it is necessary to aver that at the time the offence was committed, the person accused was incharge of and responsible for conduct of business of the Company and without this averment being made in the complaint, the requirements of Section 141 of the N.I. Act cannot be said to be satisfied. A clear case should be spelled out in the complaint against the persons sought to be made liable to show as incharge of and responsible to the Company for the conduct of its business. Every person connected with the Company thereby shall not fall within the ambit of Section 141 of the N.I. Act but of those persons who were incharge of and responsible for the conduct of business of the Company at the time of commission of the offence. The liability arises on account of conduct or act or omission on the part of a person and not merely on account of holding an offence or a position in a Company. The complaint therefore must disclose the necessary facts which make a person liable, specifically aver that at the time of offence committed, the person accused was incharge of and responsible for conduct of the business of the company. A Director cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of trust or cheated the complainant except general and bald allegations made therein." 19. In the order issuing summons, the learned Magistrate has not recorded his satisfaction about the prima facie case as against respondent Nos. 2 to 7 and the role played by them in the capacity of Managing Director, Company Secretary or Directors which is sine qua non for initiating criminal action against them. Recently, in the case of M/s. Thermax Ltd. and others v. K.M. Johny and others, 2012 (1) ALD (Crl.) 655 (SC) : (2011) 13 SCC 412, while dealing with a similar case, this Court held at para Nos. 20 and 21 as under:- "20. Though respondent No. 1 has roped all the appellants in a criminal case without their specific role or participation in the alleged offence with the sole purpose of settling his dispute with appellant-Company by initiating the criminal prosecution, it is pointed out that appellant Nos. 2 to 8 are the Ex-Chairperson, Ex-Directors and Senior Managerial Personnel of appellant No. 1-Company, who do not have any personal role in the allegations and claims of respondent No. l. There is also no specific allegation with regard to their role. 21. Apart from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany are the acts of the Company under the principle of alter-ego. It is what is reaffirmed and detailed for the IPC offences and for offences under the prevention of corruption Act, in the latest expression of the Apex Court in Sunil Bharti Mittal's (supra), of the concept of 'vicarious liability' is unknown to criminal law. 47. In Sunil Bharti Mittal's case (supra), on facts, the C.B.I. registered the crime, investigated and filed final report. The person not named in the final report as accused by differing to the police Investigating officer's opinion, the learned Magistrate has taken cognizance under Section 190 Cr.P.C. after hearing public prosecutor and in issuing process against the non-accused of charge-sheet and the same was impugned and the matter reached before the Apex Court on the question when a person not named in the charge-sheet as accused though the trial court has adequate powers to take cognizance and summon if found from perusal of charge-sheet and documents and other material placed with the charge-sheet disclosed sufficient prima facie material to proceed against such person as well, however where there is sufficient material or not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record, done no such exercise and thereby the impugned order dated 19.3.2013 is held unsustainable so far as it relates to implicating the appellants and summoning them as accused. For that on facts observed, the allegation against the appellants is a ground of additional spectrum by luring condition of 9 lakhs subscribers to 4.50 lakhs subscribers be only charging additional 1% A.G.R. instead of charging 2% AGR which caused loss to government's revenue and further the case of prosecution that this was the result of conspiracy hatched between the then Minister concerned as well as the accused-cellular operator. The decision taken in haste on 31.1.2002 itself exchanges notes prepared by J.R. Gupta, the then Secretary telecom, on that day, which was agreed 2/5th and thereafter approved by the Minister on the same day. On that basis circular was issued on next day on 1.2.2002 as per the charge-sheet, investigation has also revealed that all this was done in haste to help M/s. Bharati Cellular Limited which had come out with Initial Public Offer (IPO) that was opened and it was not getting good response from the public as it had remained under-subscribed. The moment such a decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed in this paragraph which prima facie are these persons were in control of affairs of the respective companies, as such, they represent the directing mind and will of each company and their state of mind is the state of mind of the companies. Thus, they are described as 'alter ego' of their respective cases. It is on this basis these three persons are treated as alter ego of their respective companies and in the opinion of the learned Special Judge, the acts of the companies are "to be attributed and imputed to them". On the erroneous presumption in law the special Judge/'Magistrate issued summons. For the learned Magistrate/Special Judge, it is always open to invoke special exercise after going through the material on record, if he is satisfied that there is enough incriminating material on record to proceed against he may pass appropriate orders in this behalf. Even if at this stage no such prima facie material is found, if in future such evidence surpasses against the appellant, the special Judge got liberty to exercise his powers under Section 319 of Cr.P.C. to rope all or any of the appellants by passing orders in accordance with law. For that conclusion the expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the material on record in taking cognizance of the offences under Sections 420 & 120B IPC & Section 12 of the PC Act, so far as the petitioner/A3-Sri N. Srinivasan concerned, the cognizance taken by the special judge for CBI cases requires to be quashed for no basis to sustain the cognizance order from the material on record from what is elaborately discussed supra on facts and law. Thus, the proceedings so far as petitioner/A3 concerned are liable to be quashed for above material on its face when can be held not sufficient to accuse in the police final report or to take cognizance by the learned Special Judge there from against the petitioner/A3 personally, to say no prima facie material to make him liable to face the ordeal of trial or even to frame charge against him from the prosecution material placed reliance with the police final report that is the criterion for the charge to be framed as per the settled expression of the Apex Court more particularly from the three Judge bench expression in State of Orissa v. Debendranath Padhi, (2005) 1 SCC 568, though so far as the quash petition concerned, the accused is also entitled to bring any additional material in asking the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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