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K.J. Samson, Managing Director, Inditrade Derivatives & Commodities Ltd, Kochi v/s T.M. Nazeer & Another

    Crl.MC. No. 6648 of 2016
    Decided On, 20 March 2020
    At, High Court of Kerala
    By, THE HONOURABLE MRS. JUSTICE MARY JOSEPH
    For the Petitioner: Joseph Sebastian Purayidam, Advocate. For the Respondents: R1, V.M. Kurian, Mathew B. Kurian, K.T. Thomas, Advocates.


Judgment Text

1. This is a petition filed by the 2nd accused seeking to quash the private complaint, pending on the files of Judicial First class Magistrate Court-III, Kottayam as C.C No.1649/2015 against him. The true copy of the private complaint is appended to the petition on hand as Annexure-D.

2. Annexure-D was lodged by one Mr.Nazeer T.M as complainant under Section 190 & 200 r/w Sub-Section (3) of Section 156 of the Code of Criminal Procedure, 1973 (for short, 'the Cr.P.C'). The complainant is allegedly engaged in a small scale business in rubber & petroleum products near Karukachal, Kottayam District and the 1st accused is a Public Limited Company registered under the Companies Act, 1956, having its registered Office at First Floor, MES Building, Ernakulam and Corporate Office at 36-202, JJ Complex, Diary Methanam Road, Kochi-682024. The Company is a financial service provider and is engaged in the business of equity and commodity broking. The 2nd accused, the petitioner herein was arrayed as the Managing Director of the 1st accused Company. The 3rd accused is the Branch Manager of the 1st accused Company and the 4 th accused is the commodity Dealer of the Company at Kottayam Branch. During the month of December 2013, the 1st accused Company through its representatives, including tele-marketing representatives, approached the complainant and made him believe that the 1st accused company, which was known earlier as JRG Securities Ltd, started in the year 1994 is a pioneer in equity and commodity trading business with international reputation. The representatives of the Company made the complainant believe that quality investment solutions and profits will be offered by the Company within a short span of time. Thus, they persuaded the complainant to invest money with the 1st accused Company and to start depository and trading account with the Company.

3. It was alleged that the company represented by the Managing Director, the Managing Director himself and the Branch Head of Inditrade Derivatives and Commodities Ltd. and the Commodity Dealer of the company aforesaid were responsible for the transactions done by the company and accordingly, they were also arrayed as accused in the complaint.

4. According to Sri.Joseph Sebastian Purayidam, the learned counsel, in Annexure D complaint all the officials of the company were implicated as accused alleging commission of offences punishable under Sections 120B, 403, 409 and 420 r/w Section 34 IPC. According to the learned counsel, though the petitioner was arrayed as 2nd accused, allegations or accusations of his involvement have not been raised against him in his capacity as the Managing Director of Inditrade Derivatives and Commodities Ltd in Annexure D, warranting such implication. According to him, criminal liability cannot be fastened on him for want of his participation individually in his capacity as the Managing Director in the commission of each of the offences. In the above context, it was pleaded by the learned counsel that the proceedings as against the petitioner initiated by Annexure D is liable to be quashed invoking the power under Section 482 Cr.P.C.

5. The learned counsel for the petitioner has also cited M/s.GHCL Employees Stock Option Trust v. M/s.India Infoline Limited (Crl. Appeal No.494/2013 arising out of SLP (Crl) No.3217 of 2010), an unreported decision of the Apex Court to strengthen his argument. The learned counsel has specifically relied on Paragraphs 18 to 20 of the decision supra and those are extracted hereunder:-

“18. From bare perusal of the order passed by the Magistrate, it reveals that two witnesses including one of the trustees were examined by the complainant but none of them specifically stated as to which of the accused committed breach of trust or cheated the complainant except general and bald allegations made therein. While ordering issuance of summons, the learned Magistrate concluded as under:- “The complainant has submitted that the accused Nos.2 to 6 are the directors of the company and accused No.7 is the secretary of the company and were looking after the day to day affairs of the company and were also responsible for conduct and business of the accused No.1 and some time or the other have interacted with the complainant. I have heard arguments on behalf of the complainant and perused the record. From the allegations raised, documents placed on record and the evidence led by the witnesses, prima facie an offence Under Section 415, 409/34/120B is made out. Let all the accused hence be summoned to face trial under the aforesaid sections on PF/RC/Speed Post/courier for 2.12.2008”.

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. & Ors. Vs. K.M Johny & Ors. 2011 (11) Scale 128 & Ors. While dealing with a similar case, this Court held 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.1. There is also no specific allegation with regard to their role.”

21. Apart from the fact that the complaint lacks necessary ingredients of Sections 405, 406, 420 read with Section 34 IPC, it is to be noted that the concept of 'vicarious liability' is unknown to criminal law. As observed earlier, there is no specific allegation made against any person but the members of the Board and senior executives are joined as the persons looking after the management and business of the appellant-company.”

20. As stated above, the decisions relied upon by the counsel for the appellant and the respondents need not be discussed as the law has been well settled by those decisions as to the power and duty of the Magistrate while issuing summons in a complaint case.”

6. Per contra, the learned counsel for the respondent has contended, with specific reference to Paragraph 12 of Annexure-D complaint that from the allegations incorporated therein, complicity of the petitioner in the alleged offences is disclosed. According to him, the allegations levelled against the petitioner are sufficient prima facie to derive his culpability in the offences, and therefore, Annexure-D complaint would sustain against the petitioner.

7. This Court has read Paragraph 12 of Annexure-D complaint to which specific reference is made by the learned counsel for the respondent during the course of his argument to see whether the allegations raised therein will serve the purpose intended by the prosecution. Paragraph 12 is also extracted for reference:-

“12.The 1st accused company have blatantly violated the rules, regulations, bye laws and guidelines of trading issued by the statutory authorities and bodies from time to time. The accused have conspired and fraudulently induced the complainant to part with his hard earned money and caused loss and thereby cheated the complainant. The Managing Director of the company is responsible and liable for the illegal acts done by the company and its staff members. After fraudulently inducing the complainant to invest huge amount by promising that they will invest the same in accordance with his direction, the accused have dishonestly misappropriated the same, resulting in huge loss to the complainant and wrongful gain to the accused. The amount deposited by the complainant with the accused company was misappropriated by the accused causing wrongful loss to the complainant.”

8. It is true that paragraph 12 incorporates a statement that the 1st accused Company have blatantly violated the rules, regulations, bye laws and guidelines of trading issued by statutory authorities and bodies from time to time. It is also stated that the Managing Director of the Company is responsible and liable for the illegal acts done by the Company and its staff members. But, either from Paragraph 12 particularly relied on by the learned counsel or from the complaint as a whole, any allegation that the petitioner in his capacity as Managing Director as such is involved in the commission of the offences is not revealed. It is true that accusations are levelled in the complaint against the company and being a legal entity, the company must be represented by the petitioner, who is its Managing Director. Therefore, the petitioner in his said capacity has been arrayed as 1st accused. No allegation in particular was levelled in Annexure-D against the petitioner to fasten criminal liability on him in his capacity as Managing Director. Only a general allegation is made in Paragraph No.12 and that is not sufficient to fasten criminal liability individually upon him. The Apex Court has observed in the decision referred to supra that a Managing Director of a Company will be vicariously liable but that shall not be a reason to fasten culpable liability on him. An allegation in the complaint that the petitioner is responsible for day to day affairs of the company, without specifying the exact role played by him in the transaction is inadequate to make him criminally liable.

9. Paragraph 12 to 14 of the decision cited supra being relevant in the context are extracted hereunder;

“12. From bare perusal of the complaint and the allegations made therein, we do not find in any of the paragraphs that the complainant has made specific allegations against respondent Nos. 2 to 7. In paragraph 2 of the complaint, it is alleged that respondent Nos.2 to 6 are looking after the day-to-day affairs of the Company. With whom the complainant or its authorized representative interacted has also not been specified. Although in paragraph 11 of the complaint it is alleged that the complaint on numerous occasions met accused Nos.2 to 7 and requested to refund the amount, but again the complainant has not made specific allegation about the date of meeting and whether it was an individual meeting or collective meeting. Similarly, in paragraph 17 of the complaint, there is no allegation that a particular Director or Managing Director fabricated debit note. In the entire complaint there are bald and vague allegations against respondent Nos.2 to 7.

13. There is no dispute with regard to the legal proposition that the case of breach of trust or cheating are both a civil wrong and a criminal offence, but under certain situations where the act alleged would predominantly be a civil wrong, such an act does not constitute a criminal offence.

14. Be that as it may, as held by this Court, summoning of accused in a criminal case is a serious matter. Hence, criminal law cannot be set into motion as a matter of course. The order of Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. The Magistrate has to record his satisfaction with regard to the existence of a prima facie case on the basis of specific allegations made in the complaint supported by satisfactory evidence and other material on record.”

10. It may be that being the Managing Director, the petitioner will have to be engaged in the day to day affairs of the Company he represents, and being a responsible officer will be vicariously liable for the offences, if any, committed by the company. But, for that reason alone, he as the Managing Driector, cannot be made criminally liable. For fastening criminal liability on the petitioner in his capacity as the Managing Director of the Company, allegations must be incorporated by the defacto complainant in the complaint referring to the specific instances of his involvement in that capacity and the mode of involvement. The allegations levelled must also be specific and sufficient to attract the offences. In the case on hand, the offences allegedly committed by the petitioner are those punishable under Sections 120B, 403, 409 and 420 IPC. Annexure-D comp

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laint is totally devoid of allegations to discern that the petitioner in his capacity as Managing Director of the Company had been involved in acts liable to constitute the above offences. When Annexure-D complaint is totally silent of such allegations to prima facie draw that the petitioner has also taken part in acts, involving culpability, prosecuting him for the offences will only be a futile exercise. 11. In view of the observations made by the Apex Court in the decision cited supra, this Court is convinced that without any specific role or participation in the alleged offences being assigned to him in the private complaint, the petitioner in his capacity as Managing Director cannot be implicated as an accused. There is no hard and fast rule that for being the Managing Director of the Company, a person will have to bear criminal liability, for offences committed by the Company. In the absence of any allegations made in the complaint on the role particularly played by the petitioner in his capacity as the Managing Director in the commission of the alleged offences, criminal liability cannot be imposed on him. For the reasons, Annexure-D complaint to prosecute him is liable to fail. In the above circumstances, Crl.M.C stands allowed and Annexure-D complaint to the extent it incorporates the Managing Director as the second accused is quashed forthwith.
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