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Rajasthan High Court · body

2011 DIGILAW 1614 (RAJ)

N. K. Berwa v. Prakash R. Bharadiya

2011-08-05

SANDEEP MEHTA

body2011
Hon'ble MEHTA, J.—Heard learned counsel for the parties. 2. The present misc. petition has been filed by the petitioners who have been directed vide order dated 12.11.2001 to be summoned as accused in the complaint filed by respondent Prakash for the offences under Sections 406, 420 and 120-B I.P.C. 3. The allegations made in the complaint were that the complainant/ respondent No.1 owned a unit on which he was given a loan by the R.F.C. Since the loan amount was not repaid, the R.F.C. took possession of the unit and ultimately sold the unit by way of auction. It is said that out of the sale proceeds of auction, a sum of Rs. 2,32,000/- and odd was appropriated by way of dues of R.F.C. and a sum of Rs. 1,68,000/- and odd was due to District Industries Centre (D.I.C.) of the State Government and as such, the aforesaid sum was directed to be paid to the D.I.C. and the remaining amount of Rs. 1,40,000/- was paid to the complaint on 24.6.1998. It was, therefore, alleged that the payment which was made to the D.I.C. was wrongly made because the whole remaining amount was to be paid to the complainant and the D.I.C. was to be reimbursed by the auction purchasers. 4. This complaint was forwarded to the police for investigation under Section 156(3) Cr.P.C. The investigation resulted into a F.R. The complaint filed a protest petition on which the Court below directed to take cognizance against the accused petitioners - Mr. N.K. Berwa & Mr. S.L. Oswal for the offence under Section 409 IPC and as against co-accused respondent No.2 Mr. K.K. Agarwal for offence under Section 409 read with Section 120-B I.P.C. 5. Assailing the impugned order, counsel for the petitioners submitted that there is no material on the record of the case to show that the petitioners were concerned officials of R.F.C. at the time when the disputed amount was disbursed to D.I.C. It is further submitted that no wrongful loss was caused to the complainant as Rs. 1,68,000/- was paid to D.I.C. which is an instrumentality of the State. The said amount was due in the complainant's account. 6. Per contra, counsel for the respondents have opposed the petition and have submitted that by making payment of Rs. 1,68,000/- was paid to D.I.C. which is an instrumentality of the State. The said amount was due in the complainant's account. 6. Per contra, counsel for the respondents have opposed the petition and have submitted that by making payment of Rs. 1,68,000/- to D.I.C., the complainant has been put to loss because the said amount was to be paid by the auction purchasers. 7. I have perused the order impugned. A bare reading of the order impugned clearly reveals that the trial judge has not even addressed itself to the aspect as regards the responsibility of the petitioners as on the day when the alleged offence is said to have taken place. The Hon'ble Apex Court in the case of Punjab National Bank and Others vs. Surendra Prasad Sinha reported in AIR 1992 SC 1815 has held as under : "5. It is also salutary to note that judicial process should not be an instrument of oppression or needles harassment. The complaint was laid impleading the Chairman, the Managing Director of the Bank by name and a host of officers. There lies responsibility and duty on the Magistracy to find whether the concerned accused should be legally responsible for the offence against the juristic person or the persons impleaded then only process would be issued. At that stage the Court would be circumspect and judicious in exercising discretion and should take all the relevant facts and circumstances into consideration before issuing process lest it would be an instrument in the hands of the private complaint as vendetta to harass the persons needlessly. Vindication of majesty of justice and maintenance of law and order in the society are the prime objects of criminal justice but it would not be the means to wreak personal vengeance. 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." 8. Thus, before proceeding to issue process against the petitioners, it was the bounden duty of the trial judge to have found out as to how the petitioners were responsible for the alleged offence or whether at all, the petitioners were officiating on the post of Chairman and Branch Manager respectively of the R.F.C. when the alleged offence is said to have taken place. That apart, the act of the officers of the R.F.C. in adjusting the amount of auction sale to D.I.C. cannot be said to be an act of misappropriation. The act was simply intended to have recovered the amount due to the instrumentality of the State. Thus, even assuming for the arguments sake, that the petitioners had indulged into any such an act, then the said act was done by the accused in the discharge of their official duty. 9. Another aspect of the matter is that the petitioners were the officers of the R.F.C. which is a Corporation. The prosecution of the directors of the company or an incorporated person under the provisions of Indian Penal Code is not permissible because the concept of vicarious liability of the directors of the company or an incorporated person is foreign to the principles governing the prosecution under the offences punishable under the Indian Penal Code. The Hon'ble Apex Court in the case of S.K. Alagh vs. State of U.P. & ors. reported in AIR 2008 SC 1731 has held as under : "14. Section 405 defines 'criminal breach of trust' to mean : Section 405.#Criminal breach of trust" whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or willfully suffers any other person so to do, commits "criminal breach of trust". 17. Indian Penal Code, save and except some provisions specifically providing therefor, does not contemplate any vicarious liability on the part of a party who is not charged directly for commission of an offence. 18. A criminal breach of trust is an offence committed by a person to whom the property is entrusted. 19. 17. Indian Penal Code, save and except some provisions specifically providing therefor, does not contemplate any vicarious liability on the part of a party who is not charged directly for commission of an offence. 18. A criminal breach of trust is an offence committed by a person to whom the property is entrusted. 19. Ingredients of the offence under Section 406 are : "(1) a person should have been entrusted with property, or entrusted with dominion over property; (2) that person should dishonestly misappropriate or convert to his own use that property, or dishonestly use or dispose of that property or willfully suffer any other person to do so; (3) that such misappropriation, conversion, use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of such trust. 20. As, admittedly, drafts were drawn in the name of the company, even if appellant was its Managing Director, he cannot be said to have committed an offence under Section 406 of the Indian Penal Code. If and when a statute contemplates creation of such a legal fiction, it provides specifically therefore. In absence of any provision laid down under the statute, a Director of a Company or an employee cannot be held to be vicariously liable for any offence committed by the company itself. (See Sabitha Ramamurthy and Anr. vs. R.B.S. Channabasavaradhya (2006) 10 SCC 581 ). 21. We may, in this regard, notice that the provisions of the Essential Commodities Act, Negotiable Instruments Act, Employees Provident Fund (Miscellaneous Provision) ct, 1952 etc. have created such vicarious liability. It is interesting to note that Section 14A of the 1952 Act specifically creates an offence of criminal breach of trust in respect of the amount deducted from the employees by the company. In terms of the explanations appended to Section 405 of the Indian Penal Code, a legal fiction has been created to the effect that the employer shall be deemed to have committed an offence of criminal breach of trust. In terms of the explanations appended to Section 405 of the Indian Penal Code, a legal fiction has been created to the effect that the employer shall be deemed to have committed an offence of criminal breach of trust. Whereas a person in charge of the affairs of the company and in control thereof has been made vicariously liable for the offence committed by the company along with the company but even in a case falling under Section 406 of the Indian Penal Code vicarious liability has been held to be not extendable to the Directors or Officers of the Company. (See Maksud Saiyed vs. State of Gujarat and Ors. (2007(11) SCALE 318))". 10. The facts of the case of Punjab National Bank (supra) are almost identical to the case at hand. Accordingly, this Court is of the view that the order taking cognizance against the petitioners in this case amount to an abuse of process of the Court. The allegations made by the complainant ex-facie disclose no offence whatsoever and there was no justification for the trial Judge to have taken cognizance against the petitioners. 11. Though co-accused Mr. K.K. Agarwal, who was the auction purchaser, has not challenged the process issued against him and has been impleaded as a proforma respondent No.2, but in view of the fact that this court has arrived at a conclusion that no prima facie offence is made out from the allegations of the powers, therefore, while exercising the powers under Section 482 Cr.P.C., the proceedings as against Mr. K.K. Agarwal are also hereby quashed. 12. In view of the above discussion, the present misc. petition succeeds and the same is hereby allowed and the order dated 12.11.2011 and all the proceedings sought to be taken against the petitioners and co-accused Mr. K.K. Agarwal pursuant to the impugned order are hereby quashed. Stay petitions also stands disposed of.