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2025 DIGILAW 397 (KER)

RAMAN SHARMA S/o M. P. SHARMA v. STATE OF KERALA

2025-02-27

V.G.ARUN

body2025
ORDER : The petitioners in Crl.M.C.No.1711 of 2024 are accused numbers 1,11,12,14,15 and the petitioners in Crl.M.C.No.3255 of 2024 are accused numbers 6,7,8,9 and 10 in C.C.No.1816 of 2017 pending in the Court of the JFCM-VIII, Ernakulam. The case originated from Crime No.238 of 2015 registered at the Maradu Police Station alleging commission of offences punishable under Sections 406 and 420 read with Section 34 of the Indian Penal Code against three companies namely; 1. Colossal Projects Pvt.Ltd, New Delhi, 2. Unitech Ltd., New Delhi and 3. Unitech Ltd., Kundannoor Branch. The police, after investigation, filed final report alleging commission of the offences under Sections 406 and 420 read with Section 34 of IPC against 15 named accused. Petitioners were arrayed as accused in their capacity as Directors and Officers of the two companies. 2. Crl.M.C.Nos.3230 and 1708 of 2024 are filed by accused numbers 5 to 9 and accused numbers 10,13 to 15 in C.C.No.27 of 2017, pending on the files of the JFCM VIII, Ernakulam. The case originated from Crime No.1664 of 2014 registered at the Ernakulam Town South Police Station. 3. The petitioner in Crl.M.C.No.875 of 2024 is the 2 nd accused and the petitioners in Crl.M.C. No.2898 of 2023 are accused numbers 9 and 10 in C.C.No.480 of 2017 pending before the same court, which originated from a private complaint filed by the party respondent against the petitioners and 12 others. 4. The tenor of the common allegations raised against the petitioners are as under; In the year 2010, Unitech India Ltd. launched a project with the aim of constructing a commercial complex in 7.06 Acres of freehold commercial plot in Maradu village possessed by its subsidiary company named Colossal Projects Pvt.Ltd. Attracted by the brochures and advertisements of the project named 'Great India Palace', complainants entered into Memorandums of Understanding and Agreements for Sale with M/s.Colossal Projects Private Ltd. (hereinafter described as "the Developer”), a wholly owned subsidiary of the Unitech Ltd. (hereinafter described as “the Promoter”), for assignment of specified built-up space in the proposed commercial mall. As per the terms of the MoU and the Agreement, the Mall was to be constructed in 30 months and the Developer also assured to pay rental return @12% of the total sale consideration to the purchasers, after 30 months of signing the MoU and/or the date when 90% of the total sale consideration is realised by the Developer, whichever is later. According to the complainants, contrary to the assurances and promises, neither was the construction completed within time nor the assured rental returns paid. Even the purchase price paid by the complainants was not refunded. Gradually the complainants realised that they had been deceived into paying huge amounts on the false assurance of assigning commercial space within 30 months and monthly returns till allotment of space. 5. Arguments for the petitioners was led by Senior Advocate S.Sreekumar and supplemented by Advocate T.R. Aswas. Public Prosecutors M.C. Ashi and M.K. Pushpalatha along with Advocate V.K. Balachandran advanced counter arguments. 6. Learned Senior Counsel appearing for the petitioners in Crl.M.C Nos. 3230 and 3255 of 2024, as instructed by Adv. Joju Kynady, put forth the following contentions; The Memorandum of Understanding (MoU) and Agreement for Sale were entered into between the de facto complainants and Colossal Projects Pvt. Ltd. Though Colossal Projects Pvt.Ltd. is a fully owned subsidiary of Unitech Ltd., it is a separate legal entity. As the petitioners are only Independent Directors of the Holding Company, they cannot be prosecuted for the offences alleged to have been committed by a subsidiary company. Even otherwise, Directors/officials of a company cannot be made vicariously liable for the offences committed by the company, without there being specific allegations against them with respect to their individual roles. Support for this argument is sought to be drawn from the Apex Court's decision in Ravindranatha Bajpe v. Mangalore Special Economic Zone Limited And Other [ (2022) 15 SCC 430 ] . The allegations, even if accepted in their entirety, will not constitute any criminal offence and the remedy is to approach the civil court/forum, particularly in view of the arbitration clause contained in the MoU and the Agreement for Sale. The allegations, even if accepted in their entirety, will not constitute any criminal offence and the remedy is to approach the civil court/forum, particularly in view of the arbitration clause contained in the MoU and the Agreement for Sale. The parties have resorted to such remedy by proceeding under the Arbitration and Conciliation Act and attaching the 7.06 Acres of land belonging to Colossal Projects Pvt.Ltd. Various issues relating to Unitech Ltd. is pending before the Supreme Court and efforts are being taken to resolve all the disputes between the various claimants and the company. In fact, party respondents have also approached the Supreme Court. 7. Adv.T.R.Aswas appearing for the petitioners in Crl.M.C.No.1711 of 2024 supported the arguments of the Senior Counsel and put forth the following additional contentions; The Magistrate grossly erred in taking cognizance of the offences in C.C.No.480 of 2017, against which Crl.M.C.Nos.875 of 2024 and 2898 of 2023 are filed, inasmuch as the complaint filed by the party respondents was not accompanied by affidavits of the complainants, as mandated by the Apex Court in Priyanka Srivastava and Another v. State of Uttar Pradesh and Others [ 2015 6 SCC 287 ] and Babu Venkatesh and Others v. State of Karnataka and Another [ (2022) 5 SCC 639 ] . This patent and incurable illegality has rendered the further proceedings void in the eye of law. Even though the petitioners are Officers and Directors of Colossal Projects Private Limited, in so far as the company is not made an accused in the final report, its Directors or Officers cannot be cast with vicarious liability for the acts of the company. In support of the contention, reliance is placed on the decision of the Apex Court in Sharad Kumar Sanghi v. Sangita Rane [ (2015) 12 SCC 781 ] . Referring to Annexure P8 order in Crl.M.C.No.3255 of 2024, it is pointed out that in the order granting anticipatory bail to the petitioners in Crime No.238 of 2015 of Maradu Police Station learned Sessions Judge had taken note of the fact that, in the claim for Rs.76,55,775/- raised by the de facto complainant, attachment of the properties of the Developer had been ordered and the same is under challenge before the High Court. 8. 8. Adv.V.K.Balachandran, learned counsel appearing for the party respondent in Crl.M.C.No.1711 of 2024, submitted that his clients have been duped of Rs.76,55,775/- by promising to provide them with built-up space within 30 months of executing the MoU. They were also assured rental at the rate of 12% of the sale consideration. Contrary to the promise, neither was the building constructed nor the rental paid. The argument of the petitioners that Unitech Ltd. and Colossal Projects Pvt.Ltd are separate entities is liable to be rejected, since the payments were made by the party respondents in favour of “Unitech- GIP Cochin Sales A/c. The contention that the petitioners cannot be proceeded against without the companies being arraigned as accused cannot also be countenanced since the FIR was registered against the companies and the mistake of the police in not arraying the companies as accused can be corrected by the trial court in exercise of the power under Section 319 of the Cr.P.C. Moreover, the MoU and the Agreement for Sale are signed by petitioners 1 and 4, which is clear proof of their complicity. 9. I heard the learned Public Prosecutor also. 10. Among the Crl.M.Cs, the hotly contested matter is Crl.M.C.No.1711 of 2024. Hence, that case is to be dealt with first. The allegation of the party respondent is that the accused had committed breach of trust and cheated him of Rs.76,55,775/- by promising to provide built up space within 30 months and rental value till then. In this context, 2 nd respondent's statement to the police that, after executing the MoU on 27.03.2010, he was paid assured rental up to 30.09.2013 assumes relevance. In order to constitute the offence of breach of trust, there should be entrustment of property and dishonest misappropriation of that property by the person so entrusted. The essential ingredient of cheating is fraudulent or dishonest inducement to deliver any property. Therefore, for both offences, dishonest intention should exist from the very inception. Payment of annual rental is indicative that the accused did not harbour such intention while entering into the agreement. The essential ingredient of cheating is fraudulent or dishonest inducement to deliver any property. Therefore, for both offences, dishonest intention should exist from the very inception. Payment of annual rental is indicative that the accused did not harbour such intention while entering into the agreement. As held by the Apex Court in International Advanced Research Centre for Powder Metallurgy and New Materials (ARCI) and Others v. Nimra Cerglass Technics Private Limited and Another [ (2016) 1 SCC 348 ] , even if an assurance given was subsequently not honoured, criminal liability cannot be foisted on the accused and the only right which the complainant acquires is to seek remedy for breach of contract before the civil court. Mere breach of contract cannot lead to criminal prosecution for cheating unless fraudulent or dishonest intention is shown at the beginning of the transaction. Here, it is pertinent to note that the 2 nd respondent has resorted to his civil remedy by initiating proceedings under the Arbitration and Conciliation Act and has obtained an order of attachment over the 7.06 Acres of land belonging to the Developer. It is also on record that the 2 nd respondent has approached the committee constituted by the Supreme Court to resolve the issues pertaining to the liabilities of Unitech Ltd. Learned counsel for the party respondent is right in his contention that criminal proceedings cannot be quashed merely for reason of the Company not being made an accused, since Section 319 of the Code confers the trial court with the power to proceed against any person appearing to be guilty of the offence. But, for the court to adopt such procedure, there should be specific allegations against the Directors and Officers of the Company. This legal position is explicitly laid down by the Apex Court in a plethora of decisions, including Ravindranatha Bajpe (supra). 11. In Crl.M.C.Nos.3230 and 3255 of 2024, petitioners have raised an additional ground that they were the independent Directors of Unitech Ltd., a separate legal entity and hence, no vicarious liability can be mulcted on them. 12. The challenge in Crl.M.C.Nos.875 of 2024 and 2898 of 2023 is against further proceedings against C.C.No.480 of 2017 which originated from a private complaint. In Crl.M.C.Nos.3230 and 3255 of 2024, petitioners have raised an additional ground that they were the independent Directors of Unitech Ltd., a separate legal entity and hence, no vicarious liability can be mulcted on them. 12. The challenge in Crl.M.C.Nos.875 of 2024 and 2898 of 2023 is against further proceedings against C.C.No.480 of 2017 which originated from a private complaint. Apart from the grounds discussed above, learned counsel for the petitioners have raised an additional contention that the complaint was not accompanied by an affidavit, which became mandatory after the declaration of law in that regard by the Apex Court in Priyanka Srivastava (supra). The above contention is liable to be upheld in view of the decision in Babu Venkatesh (supra), wherein, under similar circumstances, further proceedings based on a private complaint forwarded for investigation under Section 156(3) Cr.P.C, was quashed on the ground that the complaint was not accompanied by an affidavit of the complainant. The afore discussions lead to the definite conclusion that further prosecution of the petitioners will be an abuse of process of court. In the result the Crl.M.Cs are allowed and all further proceedings in C.C.Nos.480 of 2017, 27 of 2017 and 1816 of 2017 on the files of the Judicial Magistrate of First Class -VIII, Ernakulam, as against the petitioners, are quashed.