ANIL KHANDELWAL ETC.versusPHOENIX INDIA AND ANR.

               [2025] 8 S.C.R. 2416 : 2025 INSC 1069

                          Anil Khandelwal Etc.
                                   v.
                         Phoenix India and Anr.
                (Criminal Appeal No(s). 1159-1160 of 2011)
                               28 August 2025
              [Sanjay Karol and Sandeep Mehta,* JJ.]


                           Issue for Consideration
       Whether the High Court erred in rejecting the quashing petition
       filed by the appellants-Officers of the Bank challenging the order
       passed by the Magistrate issuing process against them for the
       offences punishable u/ss.500 and 501, Penal Code, 1860.

                                 Headnotes†
       Penal Code, 1860 – ss.500, 501 – Securitization and
       Reconstruction of Financial Assets and Enforcement of
       Security Interest Act, 2002 – s.32, 13(2), (4) – Security Interest
       (Enforcement) Rules, 2002 – r.8 – Code of Criminal Procedure,
       1973 – s.482 – Loan accounts of respondent No.1-firm were
       classified as non-performing assets and it was notified to
       repay the overdue loans with interest – Repeated intimations
       and demands raised but, the outstanding amounts were not
       cleared – Eventually, Bank issued a possession notice u/s.13(4),
       SARFAESI Act r/w 2002 Rules, for taking symbolic possession
       of the immovable properties mortgaged by respondent No. 1
       to secure the credit facilities – Inadvertently, the outstanding
       amount quoted in the possession notice was mentioned as
       Rs.56,15,9,294/- instead of Rs.5,61,59,294/- – Respondent
       No. 1 issued notice to the appellants viz., the Chairman and
       Managing Director, the Deputy General Manager, and the Chief
       Manager of the Bank, alleging defamation stating that the
       Bank had maliciously issued the possession notices reflecting
       an unrealistic and false outstanding amount of more than
       Rs.50 crores – Respondent No. 1 filed criminal Complaint u/
       ss.499, 500 and 501, IPC – Magistrate issued process against
       the appellants – Quashing petition filed by the appellants,
       dismissed by High Court – Interference with:


* Author
[2025] 8 S.C.R.                                                               2417

             Anil Khandelwal Etc. v. Phoenix India and Anr.


     Held: The Bank is a body Corporate – Appellants were arraigned
     as accused on the principle of vicarious liability being the persons
     responsible for the day-to-day affairs of the Bank – However, the
     Bank itself, on whose behalf the alleged defamatory notice had
     been issued, was not arraigned as an accused in the complaint –
     Without impleading the company itself, the prosecution against
     directors or officers alone is impermissible. [Para 16]
     1.2 Thus, the prosecution of the appellants, without impleading the
     Bank as an accused in the proceedings, is ex-facie impermissible
     and cannot be sustained. [Para 18]
     1.3 The appellants were summoned in capacity of the officers of
     the Bank for the offences punishable under the IPC – However,
     there is no concept of vicarious liability of the officers or directors
     for the offences under the IPC as is provided under special Penal
     Statutes such as The Negotiable Instruments Act, 1881, The Food
     Safety and Standards Act, 2006, The Drugs and Cosmetics Act,
     1940, etc. which specifically creates such liability. [Para 20]
     1.4 Accordingly, before any officer of a Bank or a body corporate
     can be prosecuted for an offence under the IPC on the allegation
     of having acted on behalf of the institution, it is incumbent upon
     the complainant to produce unimpeachable material indicating
     the precise role of the officer in the commission of the alleged
     offence – Mere bald assertions of vicarious liability, without
     foundational facts to show active participation, authorization, or
     deliberate omission on the part of the officer, are insufficient to
     justify issuance of process in such a situation – The law does not
     permit automatic prosecution of directors or officers merely because
     of their designation or official status. [Para 22]
     1.5 Hence, in the absence of any specific statutory provision
     under the IPC creating vicarious liability, coupled with the lack of
     concrete allegations or material demonstrating the individual role
     or culpability of the appellants for the alleged defamatory notice,
     their prosecution cannot be sustained – Continuation of criminal
     proceedings merely on the basis of their official designation in
     the Bank would amount to a misuse of judicial process. [Para 24]
     1.6 Furthermore, the appellants are entitled to the statutory
     protection provided u/s.32 of the SARFAESI Act, which expressly
     prohibits any suit, prosecution, or other legal proceedings against
     the Reserve Bank, the Central Registry, any secured creditor,
     or their officers for anything done in good faith pursuant to the
     provisions of the Act. [Para 25]
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    1.7 Also, the possession notice was bona fide issued u/s.13(4) of
    the SARFAESI Act for taking symbolic possession of the mortgaged
    property on account of default in repayment of outstanding dues –
    Owing to a clerical error in the drafting of the notice, instead of
    reflecting the true outstanding amount as Rs.5,61,59,294/-, the
    recovery notice portrayed the amount as Rs.56,15,9,294/- – Upon
    realizing this inadvertent mistake, the Bank promptly issued a
    clarificatory letter expressing regret and rectifying the figure – This
    sequence of events clearly establishes that the acts/omissions
    of the Bank and its officials were bona fide, in due discharge of
    statutory duties under the SARFAESI Act, without any mala fide
    intention to defame respondent No.1- firm – The prosecution initiated
    against the appellants-officers of the Bank on the foundation of
    said clerical error is untenable both in facts as well as in law –
    Appellants were wrongly impleaded – Impugned order passed by
    the High Court and consequently, the order issuing process passed
    by the Magistrate are quashed and set aside – Proceedings of the
    Complaint quashed in entirety. [Paras 24, 26-28]

                              Case Law Cited
    Aneeta Hada v. Godfather Travels and Tours (P) Ltd. [2012] 5
    SCR 503 : (2012) 5 SCC 661; Maksud Saiyed v. State of Gujarat
    [2007] 9 SCR 1113 : (2008) 5 SCC 668; Punjab National Bank v.
    Surendra Prasad Sinha [1992] 2 SCR 528 : (1993) Supp. 1 SCC
    499 – relied on.

                                List of Acts
    Penal Code, 1860; SARFAESI Act, 2002; Security Interest
    (Enforcement) Rules, 2002; Code of Criminal Procedure, 1973;
    Negotiable Instruments Act, 1881; The Food Safety and Standards
    Act, 2006; The Drugs and Cosmetics Act, 1940.

                             List of Keywords
    Chairman and Managing Director, Deputy General Manager; Chief
    Manager of the Bank; Officers of the Bank; Defamation; Principle
    of vicarious liability; Arraigned as accused; Persons responsible for
    the day-to-day affairs of the Bank; Alleged defamatory notice; Bank
    not arraigned as an accused in the complaint; Possession notices;
    Bank maliciously issued the possession notices; Unrealistic and
    false outstanding amount; Exaggerated demand raised; Possession
[2025] 8 S.C.R.                                                           2419

              Anil Khandelwal Etc. v. Phoenix India and Anr.


     notice pasted; Fictitious outstanding amount; Reputation harmed;
     Future business prospects; Bank body Corporate; Clarification
     letter given by the Bank; Acts/omissions; Bona fide; Clerical error
     in the drafting of the notice; No concept of vicarious liability of
     the officers or directors for the offences under the IPC; Abuse
     of process of law; Company not impleaded, Prosecution against
     directors or officers alone not impermissible; Inadvertent error by
     the bank, Allegations of defamation; Wrongly impleaded; Statutory
     protection provided u/s.32 of the SARFAESI Act; Reserve Bank;
     Central Registry; Secured creditor; Loan accounts; Non-performing
     assets; Overdue loans.

                            Case Arising From
     CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No(s).
     1159-1160 of 2011
     From the Judgment and Order dated 03.12.2010 of the High Court
     of Judicature at Bombay in CRLA Nos. 1258 and 1429 of 2010
     With
     Criminal Appeal No(s). 1166 of 2011

                         Appearances for Parties
     Advs. for the Appellants:
     Pramod B. Agarwala, Aayush Agarwala, Vipul Singh.
     Advs. for the Respondents:
     Aaditya Aniruddha Pande, Siddharth Dharmadhikari, Shrirang B.
     Varma, Bharat Bagla, Sourav Singh, Aditya Krishna, Adarsh Dubey,
     Ms. Chitransha Singh Sikarwar.

                 Judgment / Order of the Supreme Court

                                Judgment

     Mehta, J.

     Criminal Appeal No(s). 1159-1160 of 2011
1.   Heard.
2.   The instant appeals are preferred against the judgment and order
     dated 3rd December, 2010 passed by the High Court of Judicature
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       at Bombay1 whereby the Criminal Application No. 1258 of 2010
       filed by the appellant – Dr. Anil Khandelwal and Criminal Application
       No. 1429 of 2010 filed by the appellants B.M. Sharma and Mukul
       Ranjan under Section 482 of Code of Criminal Procedure, 19732
       came to be rejected.
3.     By way of the said petition, the appellants had challenged the order
       dated 29th September, 2008 passed by the Judicial Magistrate
       First Class3, Bhiwandi in Complaint No. 6353 of 2007, wherein the
       Magistrate had issued process against the appellants for the offences
       punishable under Section 500 and 501 of the Indian Penal Code,
       18604.

       Brief Facts: -
4.     At the relevant time, the appellant Dr. Anil Khandelwal was serving
       as the Chairman and Managing Director of the Bank of Baroda5,
       whereas the appellants B.M. Sharma and Mukul Ranjan held the
       positions of Deputy General Manager and Chief Manager (BCMS)
       in the Bank, respectively.
5.     The respondent No.1-Phoenix India6 had taken credit facilities from
       the Bank to the tune of Rs.21.34 crores and had secured the same
       by mortgage of its immovable properties.
6.     The loan transactions pertain to a period prior to 2002. Respondent
       No. 1-firm defaulted in payment of the instalments of the term loan as
       well as the interest due on the outstanding amount from the quarter
       ending on 30th June, 2002. Consequently, the Bank classified the
       loan accounts of respondent No.1-firm as non-performing assets
       as on 31st December, 2002 and notified respondent No. 1-firm to
       repay the overdue loans along with the accrued interest. Despite
       the repeated intimations and demands, the outstanding amounts
       were not cleared whereupon the Bank initiated proceedings under
       the provisions of Securitization and Reconstruction of Financial


1    Hereinafter being referred to as the “High Court”
2    For short “CrPC”
3    Hereinafter being referred to as the “Magistrate”
4    For short “IPC”
5    Hereinafter being referred to as the “Bank”
6    Hereinafter being referred to as the “firm”
[2025] 8 S.C.R.                                                       2421

                 Anil Khandelwal Etc. v. Phoenix India and Anr.


      Assets and Enforcement of Security Interest Act, 20027. As per
      the Bank, the outstanding recoverable dues as on the date of
      initiation of proceedings under the SARFAESI Act were to the tune
      of Rs.5,09,31,422/- (Rupees Five Crores Nine Lakhs Thirty-One
      Thousand Four Hundred Twenty-Two only) along with interest.
7.    Notice dated 25th March, 2007 was issued to respondent No. 1-firm
      under Section 13(2) of SARFAESI Act calling upon it to pay the
      outstanding dues in full and discharge the liabilities towards the
      Bank within 60 days from the date of issuance of the said notice.
      Respondent No. 1-firm, in response to said notice addressed various
      correspondences to the Bank, claiming that the demand raised in
      the notice was exorbitant and incorrect and also offered variable
      solutions for settlement of outstanding dues and offered to give
      symbolic possession of the assets to the Bank. However, despite
      such assurances, respondent No. 1-firm failed to clear the outstanding
      dues, whereupon the Bank, on 13th June, 2007, issued a possession
      notice under Section 13(4) of the SARFAESI Act read with Rule 8 of
      the Security Interest (Enforcement) Rules, 2002, for taking symbolic
      possession of the immovable properties mortgaged by respondent
      No. 1-firm to secure the credit facilities.
8.    It appears that, inadvertently, the outstanding amount quoted in
      the possession notice came to be mentioned as Rs.56,15,9,294/-
      (Rupees Fifty-Six Crore Fifteen Lakh Nine Thousand Two Hundred
      Ninety-Four only) instead of Rs.5,61,59,294/- (Rupees Five Crore
      Sixty-One Lakh Fifty-Nine Thousand Two Hundred Ninety-Four only).
      The Bank claims that the said discrepancy arose solely on account
      of a clerical error. Without seeking any clarification from the Bank
      in regard to this discrepancy, respondent No. 1-firm issued a legal
      notice dated 23rd July, 2007 to the appellants herein, namely the
      Chairman and Managing Director, the Deputy General Manager,
      and the Chief Manager of the Bank, alleging defamation on the
      ground that the Bank had maliciously issued the possession notices
      reflecting an unrealistic and false outstanding amount of more than
      Rs. 50 crores.
9.    The Bank, in response, promptly issued a clarificatory letter dated
      7th August, 2007 expressing regret for the clerical error that occurred


7    For short “SARFAESI Act”
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     in mentioning the amount in the possession notice pasted on the
     premises of respondent No. 1-firm.
10. Respondent No. 1-firm, however, was not satisfied by the clarification
    letter and filed a criminal Complaint No. 6353 of 2007 before the
    Magistrate, Bhiwandi for the offences under Sections 499, 500 and 501
    of the IPC alleging inter-alia that, by raising the aforesaid exaggerated
    demand and pasting the possession notice on the premises of
    respondent No. 1-firm with fictitious outstanding amount, the Bank
    and its officials had defamed respondent No. 1-firm (complainant)
    thereby harming its reputation and future business prospects.
11. The Magistrate proceeded on the complaint and issued process
    against the appellants vide order dated 29th September, 2008 after
    adverting to the procedure provided under Sections 200 and 202
    CrPC.
12. Being aggrieved by the order issuing process dated 29th September,
    2008, the appellants herein filed two separate applications bearing
    Nos. 1258 of 2010 and 1429 of 2010 before the High Court seeking
    quashing of Complaint No. 6353 of 2007 filed by respondent No. 1-firm.
    The order dated 29th September, 2008 passed by the Magistrate,
    issuing process in Complaint No. 6353 of 2007 was impugned in the
    aforesaid petitions. The High Court, however, proceeded to dismiss
    the quashing petition observing that the averments in the complaint
    disclosed the necessary ingredients of the offences alleged against
    the appellants and that the appellants herein were in-charge of
    and looking after the day-to-day affairs of the Bank and thus, were
    prima facie responsible for issuance of the defamatory possession
    notice. With these conclusions, the quashing petitions came to be
    rejected. The aforesaid order of the High Court is subject to challenge
    in these appeals by special leave.
13. No one has entered appearance to represent respondent No. 1-firm
    (complainant) despite service of notice.

     Findings and Conclusion: -
14. We have heard learned counsel for the appellants and with their
    assistance, perused the material available on record.
15. We are of the firm opinion that the proceedings of the complaint
    lodged by respondent No. 1-firm (complainant) and the order
[2025] 8 S.C.R.                                                      2423

               Anil Khandelwal Etc. v. Phoenix India and Anr.


     issuing process against the appellants tantamount to gross abuse
     of process of law.
16. The Bank is a body Corporate. The appellants herein, being the
    Chairman and Managing Director as well as other Officers of the
    Bank, were arraigned as accused on the principle of vicarious liability
    being the persons responsible for the day-to-day affairs of the Bank.
    However, the Bank itself, on whose behalf the alleged defamatory
    notice had been issued, was not arraigned as an accused in the
    complaint. It is a settled position of law that without impleading the
    company itself, the prosecution against directors or officers alone
    is impermissible.
17. In this regard, we are benefitted of the judgment of this Court in the
    case of Aneeta Hada v. Godfather Travels and Tours (P) Ltd.8
    wherein it was held that prosecution of the directors or officers of
    a company can be maintained only when the company itself is
    arraigned as an accused and additionally, the directors or officers
    must have acted in a manner that directly connects his/her conduct
    to the company’s liability. In the absence of the company being
    impleaded as an accused, its directors or officers cannot be fastened
    with vicarious liability for offences attributable to the company.
18. Thus, the prosecution of the appellants, without impleading the Bank
    as an accused in the proceedings, is ex-facie impermissible and
    cannot be sustained.
19. We may further observe that the learned Magistrate as well as the
    High Court have assumed that the appellants herein were responsible
    for the day-to-day affairs of the Bank and thereby the process of
    issuance of the so-called defamatory notice can be attributed to the
    appellants.
20. Suffice it to say that the appellants have been summoned in capacity
    of the officers of the Bank for the offences punishable under the IPC.
    However, there is no concept of vicarious liability of the officers or
    directors for the offences under the IPC as is provided under special
    Penal Statutes such as The Negotiable Instruments Act, 1881, The
    Food Safety and Standards Act, 2006, The Drugs and Cosmetics
    Act, 1940, etc. which specifically creates such liability.


8   (2012) 5 SCC 661
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                         Supreme Court Reports


21. In Maksud Saiyed v. State of Gujarat9 similar situation arose where,
    due to an inadvertent error by the bank, allegations of defamation
    were made, and the Managing Director of the bank was arraigned
    as an accused, wherein this court observed the following:
            “13. Where a jurisdiction is exercised on a complaint
            petition filed in terms of Section 156(3) or Section 200
            of the Code of Criminal Procedure, the Magistrate is
            required to apply his mind. The Penal Code does not
            contain any provision for attaching vicarious liability
            on the part of the Managing Director or the Directors
            of the Company when the accused is the Company.
            The learned Magistrate failed to pose unto himself
            the correct question viz. as to whether the complaint
            petition, even if given face value and taken to be
            correct in its entirety, would lead to the conclusion
            that the respondents herein were 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. Statutes indisputably must contain provision
            fixing such vicarious liabilities. Even for the said
            purpose, it is obligatory on the part of the complainant
            to make requisite allegations which would attract the
            provisions constituting vicarious liability.”
                                               (Emphasis Supplied)

22. Accordingly, before any officer of a Bank or a body corporate can
    be prosecuted for an offence under the IPC on the allegation of
    having acted on behalf of the institution, it is incumbent upon the
    complainant to produce unimpeachable material indicating the precise
    role of the officer in the commission of the alleged offence. Mere bald
    assertions of vicarious liability, without foundational facts to show
    active participation, authorization, or deliberate omission on the part
    of the officer, are insufficient to justify issuance of process in such a
    situation. The law does not permit automatic prosecution of directors
    or officers merely because of their designation or official status.


9   (2008) 5 SCC 668
[2025] 8 S.C.R.                                                                2425

                Anil Khandelwal Etc. v. Phoenix India and Anr.


23. In this regard, we may refer to the following observations made by
    this Court in Punjab National Bank v. Surendra Prasad Sinha10 :-
             “6. It is also salutary to note that judicial process should not
             be an instrument of oppression or needless 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 charged
             for. Only on satisfying that the law casts liability or
             creates 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 to harass them for vendetta.”
                                                   (Emphasis Supplied)

24. Hence, in the absence of any specific statutory provision under the
    IPC creating vicarious liability, coupled with the lack of concrete
    allegations or material demonstrating the individual role or culpability
    of the appellants for the alleged defamatory notice, their prosecution
    cannot be sustained. To permit continuation of criminal proceedings
    merely on the basis of their official designation in the Bank would
    amount to a misuse of judicial process, contrary to the settled
    principles laid down by this Court. Accordingly, the appellants have
    been wrongly impleaded, and the proceedings against them are
    liable to be quashed.


10   (1993) Supp. 1 SCC 499
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                         Supreme Court Reports


25. Furthermore, the appellants are entitled to the statutory protection
    provided under Section 32 of the SARFAESI Act, which expressly
    prohibits any suit, prosecution, or other legal proceedings against
    the Reserve Bank, the Central Registry, any secured creditor, or their
    officers for anything done in good faith pursuant to the provisions
    of the Act.
26. Manifestly, the possession notice dated 13 th June, 2007 was
    bona fide issued under Section 13(4) of the SARFAESI Act for
    taking symbolic possession of the mortgaged property on account of
    default in repayment of outstanding dues. Owing to a clerical error
    in the drafting of the notice, instead of reflecting the true outstanding
    amount as Rs.5,61,59,294/- (Rupees Five Crore Sixty One lakh
    Fifty Nine Thousand Two Hundred Ninety Four only), the recovery
    notice portrayed the amount as Rs.56,15,9,294/- (Rupees Fifty Six
    Crore Fifteen Lakh Nine Thousand Two Hundred Ninety Four only).
    Upon realizing this inadvertent mistake, the Bank promptly issued
    a clarificatory letter on 7th August, 2007, expressing regret and
    rectifying the figure. This sequence of events clearly establishes that
    the acts/omissions of the Bank and its officials were bona fide, in
    due discharge of statutory duties under the SARFAESI Act, without
    any mala fide intention to defame respondent No.1- firm.
27. In such circumstances, the prosecution initiated against the officers
    of the Bank (appellants herein) on the foundation of said clerical
    error is untenable both in facts as well as in law.
28. As a result, the impugned order dated 3rd December, 2010 passed
    by the High Court and consequently, the order issuing process
    dated 29th September, 2008 passed by the Magistrate do not stand
    to scrutiny and are hereby quashed and set aside. Proceedings of
    the Complaint No. 6353 of 2007 are quashed in entirety.
29. The appeals are allowed in these terms.
30. Pending application(s), if any, shall stand disposed of.

     Criminal Appeal No. 1166 of 2011
31. In the identical facts in Criminal Appeal Nos. 1159-1160 of 2011,
    we have quashed the proceedings of Complaint No. 6353 of 2007
    filed by respondent No. 2-firm (complainant). Thus, the order issuing
    process dated 20th December, 2007 passed by the Additional Chief
[2025] 8 S.C.R.                                                 2427

                Anil Khandelwal Etc. v. Phoenix India and Anr.


     Metropolitan Magistrate, 8th Court, Esplanade, Mumbai in Criminal
     Complaint No. 804530/SS/2007 and all proceedings sought to be
     taken therein against the appellant, namely, Mukul Ranjan, also
     deserve to be and are hereby quashed.
32. This appeal is allowed accordingly.
33. Pending application(s), if any, shall stand disposed of.

     Result of the case: Appeals allowed.




     †
         Headnotes prepared by: Divya Pandey