Holding

A corporation can be held liable for offences requiring mens rea, and the High Court erred in quashing the criminal complaint; the appeal is allowed.

Summary

Iridium India Telecom Ltd. filed a criminal complaint alleging cheating by Motorola Inc. (respondent No.1) for misleading investors about the Iridium satellite system. The Bombay High Court, invoking Article 227 and Section 482 of the CrPC, quashed the magistrate's process, holding that a corporation cannot possess the mens rea required for cheating. On appeal, the Supreme Court rejected this view, emphasizing that modern jurisprudence holds corporations liable for crimes of intent and that the punishment of imprisonment does not shield a company from liability. The Court found that the complaint, on its face, disclosed the essential ingredients of cheating under Section 415 IPC and that the High Court exceeded its jurisdiction by analysing detailed commercial documents. Consequently, the Supreme Court set aside the High Court's order and allowed the appeal, restoring the criminal proceedings.

Issues considered

Can a corporation be held liable for the offence of cheating under Section 415 IPC, which requires mens rea?
Was the High Court justified in exercising its inherent power under Section 482 CrPC to quash the criminal complaint at the preliminary stage?
Does the complaint, taken on its face, disclose a prima facie case of cheating?
Does the fact that the prescribed punishment includes imprisonment preclude criminal liability of a corporate entity?
Should the High Court have examined the substantive commercial documents in deciding to quash the proceedings?

Legislation cited

Code of Criminal Procedure, 1973s. 482
Companies Act, 1956s. 3, s. 64
Indian Penal Code, 1860s. 1208, s. 415, s. 420

Subjects

corporate criminal liabilitymens reaSection 482 CrPCcheatingSection 415 IPCquashing criminal proceedingshigh court jurisdictionprospectus misrepresentationcorporate veilimprisonment and fine

Judgment

[201 0) 14 (ADDL.) S.C.R. 591.

IRIDIUM INDIA TE~ECOM LTD. A
v. . .
MOTOROLA INCORPORATED ~ . ORS.
(Criminal Appeal No.688 of 2005) .
OCTOBER 20, 2010
8
[B. SUDERSHAN REDDY AND SURIND.ER SINGH
NIJJAR, JJ.]

Code of Criminal Procedure, 1973 - s.482 :- Corporate .
liability for criminal offences - Criminal complaint against C
company alleging offence of cheating - Magistrate issued
process - Petition under s.482 CrPC rlw Article 227 of the
Constitution allowed by High Court - Justification of - Held:
Not justified - A company/corporation cannot escape liability
for a criminal offence, merely because the punishment D
prescribed is that of imprisonmen_t and fine .- The conclusion
reached by the High Court that respondent no) -company
could not have the necessary mens rea is cleariy erroneous
- The complainants were entitled to an dpportunity to prove
the averments made in the complaint - It was not appropriate E
for the High Court to exercise its jurisdiction under s.482 CrPC
to quash the proceedings at the stage when the Magistrate
had merely issued process against the respondents - The
High Courl ought to have refrained from indulging in detailed
analysis of very complicated commercial documents and F
reaching any definite conclusions - The High Court clearly
exceeded its jurisdiction in quashing the criminal proceedings
in the peculiar facts and circumstances of the case - Penal
Code, 1860- ss. 415, 420 r/w 1208 - Constitution of India,
1950 - Arlicle 227.
G
Criminal Law - Mens rea - Prosecution of corporations
- Held: A corporation will be liable for crimes of intent.

Penal Code, 1860 - s.415, Explanation - Ingredients of
591 H
592 SUPREME COURT REPORTS [2010) 14 (ADDL.) S.C.R.

A cheating - Held: Misleading statements which withhold vital
facts for intentionally inducing a person to do or to omit to do
something would amount to deception - In case, such a
misleading statement wrongfully causes damage to the person
deceived, it would amount to cheating.
B
Respondent no.1 conceived a wireless
communication system through a constellation of
satellites in low orbit to provide digital service to mobile .
phones and other subscriber equipment globally. In 1992 ·
a private placement memorandum (PPM) was floated to
C obtain funds/investment to finance the Project.

Relying on the representations of respondent no.1.,
the appellant as well as banks and institutions collectively
invested huge sums of money to purchase equity shares
0 in the said project and in setting up a gateway. The
project turned out to be commercially unviable, resulting
in significant loss to the investors.

Aggrieved, the appellant filed complaint against
E respondent no.1 before the Judicial Magistrate, First
Class inter alia on the allegations of cheating. The
Magistrate issued process against respondent no.1 under
Section 420 read with Section 1208 IPC. Respondent no.1
challenged the same before the High Court by way of a
petition under Article 227 of the Constitution and under
F Section 482 of CrPC. The High Court allowed the petition
and quashed the order issuing process passed by the
Judicial Magistrate on the ground that a company or
corporation does not have the mens rea tor committing
an offence of cheating under Section 415 of IPC.
G
Allowing the appeal, the Court
HELD:1.1. There is much substance in the
submission that virtually in all jurisdictions across the
H
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 593
INCORPORATED
world governed by the rule of law, the companies and A
corporate houses can no longer claim immunity from
criminal prosecution on the ground that they are
incapable of possessing the necessary mens rea for the
commission of criminal offences. The leyal position in
England and the United St.ates has now crystallized to B
leave no manner of doubt that a corporation would be
liable for crimes of intent. [Para 35] [628-C-0]

1.2. A corporation is virtually in the same position as
any individual and may be convicted of common law as
well as statutory offences including those requiring C
mens rea. The criminal liability of a corporatio!l would
arise when an offence is committed in relation to the
business of the corporation by a person or body of
persons in control of its affairs. In such circumstances,
it would be necessary to ascertain that the degree and D
control of the person or body of persons is so intense
that a corporation may be said to think and act through
the person or the body of persons. The position of law
on this issue in Canada is almost the same. Mens rea is
attributed to corporations on the principle of 'alter ego' E
of the company. [Para 38] [633-A-C]

1.3. A company I corporation cannot escape liability
for a criminal offence, merely because the punishment
prescribed is that of imprisonment and fine. The
F
conclusion reached by the High Court that the
respondent could not have the necessary mens rea is
clearly erroneous. (Para 40] [635-H; 636-A]

1.4. A bare perusal of section 415 IPC would show
that it can be conveniently divided into two parts. The G
first part makes it necessary that the deception by the
accused of the person deceived, must be fraudulent or
dishonest. Such deception must induce the person
deceived to: either (a) deliver property to any person; or
H
594 SUPREME COURT REPORTS [201 OJ 14 (ADDL.) S.C.R.

A (b) consent that any person shall retain any property. The
second part also requires that the accused must by
deception intentionally induce the person deceived either
to do or omit to do anything which he would not do or
omit, if he was not so deceived. Furthermore, such act
B or omission must cause or must be likely to cause
damage or harm to that person in body, mind, reputation
or property. Thus, it is evident that deception is a
necessary ingredient for the offences of cheating under
both parts of this section. The complainant, therefore,
C necessarily needs to prove that the inducement had been
caused by the deception exercised by the accused. Such
deception must necessarily produce the inducement to
part with or deliver property, which the complainant
would not have parted with or delivered, but for the
inducement resulting from deception. The Explanation to
0 the section would clearly indicate that there must be no
dishonest concealment of facts. In other words, non-
disclosure of relevant information would also be treated
as a mis-representation of facts leading to deception.
[Para 42] [636-F-H; 637-A-B]
E
1.5. It was necessary for the High Court to examine
the averments in the complaint in terms of s.41~ IPC. The
High Court upon detailed examination of the 1992 PPM,
the Stock Purchase Agreements and the 1995 PPM
F concluded that even if the averments made in the
complaint are accepted on their face value, it would only
disclose a civil dispute between the parties. According
to the High Court, respondent no. 1 did not keep the
investors in dark about the Iridium System and gave
G them all necessary information in respect of various
aspects of the system. In coming to the aforesaid
conclusion, the High Court observed that "a bare perusal
of the complaint shows that there is no reference to the
Stock Purchase Agreements of 1993 and 1994. In fact,
H these two important documents contain
IRIDIUM ·fNDIA TELECOM LTD. v. MOTOROLA 595
INCORPORATED
acknowledgments of the investors about their capability A
of evaluating the merits and risks of the purchase of the
shares and their relying upon their own advisors." The
High Court, therefore, negated the submission that there
has not been a complete and candid disclosure of the
entire material which has ~esulted in the deception I B
inducement of the appellant to make huge investment in
the Iridium. This conclusion reached by the High Court
did not take notice of the Explanation to Section 415,
which gives a statutory recognition to the legal principles
established through various judicial pronouncements c
that misleading statements which withhold the vital facts
for intentionally inducing a person to do or to omit to do
something would amount to deception. Further, in case
it is found that misleading statement has wrongfully
caused damage to the person deceived it would amount
to cheating. [Paras 42, 44] [637 -C-0; 638-E-H; 639-A-B] D

1.6. The appellants were entitled to an opportunity to
prove the averments made in the complaint. They were
entitled to establish that they have been deliberately
induced into making huge investments on the basis of E
representations made by respondent no. 1 and its
representatives, which representations subsequently
turned out to be completely false and fraudulent. The
appellants were entitled to an opportunity to establish
that respondent no. 1 and its representatives were aware F
of the falsity of the representations at the time when they
were made. The appellants have given elaborate details
of the positive assertions made by respondent no. 1
which were allegedly false to its knowledge. It is also
claimed by the appellants that respondent no. 1 and its G
representatives willfully concealed facts which were
material and ought to have been disclosed, but were
intentionally withheld so as to deceive the appellant into
advancing and expending a sum of Rs. 500 Crores. Both
the appellants and the respondents have much to say in · H
\

596 SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.

A support of their respective view points. Which of the
views is ultimately to be accepted, could only be ~ecided
when the parties have had the opportunities to place the
entire materials before the Court. The power to quash the
proceedings at the initial stage have to be exercised
s sparingly with circumspection and in the rarest of the rare
cases. The power is to be exercised ex debito justitiae.
Such power can be exercised where a criminal
proceeding is manifestly attended with malafide and have
been instituted maliciously with ulterior motive. This
c inherent power ought not to be exercised to stifle a
legitimate prosecution. [Para 44] [640-H; 641-A-E]

1.7. In the circumstances of the instant case, the High
Court ought to have refrained from indulging in detailed
analysis of very complicated commercial documents and
D reaching any definite conclusions. The High Court clearly
exceeded its jurisdiction in quashing the criminal
proceeding in the peculiar facts and circumstances of the
case. The High Court noticed that while exercising
jurisdiction under Section 482 CrPC 11the complaint in its
E entirety will have to be examined on the basis of the
allegations made therein. But the High Court has no
authority or jurisdiction to go into the matter or examine
its correctness. The allegations in the complaint will have
to be accepted on the face of it and the truth or falsity
F cannot be entered into by the Court at this stage." Having
said so, the High Court proceeded to do exactly the
opposite. The judgment of the High Court is set aside.
[Para 45 and 46] [641-G-H; 642-A-C]
.
Smt. Nagawwa v. Veeranna (1976) 3 SCC 736;
G Municipal Corporation of Delhi v: Ram Kishan Rohtagi (1983)
1 SCC 1; Dhanalakshmi v. R.Prasanna Kumar 1990 (Supp)
SCC 686; State of Haryana v.. Bhajan La/ (1992) Supp. (1)
SCC 335; Kalpnath Rai v. State (1997) 8 SCC 732; Asstt.
Commr. v. Velliappa Textiles Ltd. (2003) 11 SCC 405;
H
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 597
INCORPORATED
Standard Chartered Bank v. Directorate of Enforcement (2005) A
4 SCC 405; Trisuns Chemical Industry v. Rajesh_Agarwal
(1999) 8 SCC 686; Madhavrao Jiwajirao Scindia and Others
v. Sambhajirao Chandrojirao Angre and Others (1988) 1
SCC 692; State of Orissa v. Debendra Nath Padhi (2005) 1
SCC 568; M.N. Ojha and Others v. Alok Kumar Srivastav and 8
Another (2009) 9 SCC 682; Kurukshetra University v. State
of Haryana (1977) 4 SCC 451 ; Raj Kapoor and Others v.
State (1980) 1 SCC 43; Janata Oaf v. H. S. Chowdhary (1992)
4 SCC 305; State of Orissa v. Debendra Nath Padhi (2005)
1 sec S68; lnder Mohan Goswami and Anr. v. State of c
Uttarancha/ and Ors. (2007) 12 SCC 1; Indian Oil Corporation
v. NEPC India Ltd. and Ors. (2006) 6 SCC 736; Divine
Retreat Centre v. State of Kerala (2008) 3 SCC 542 ;
Kalpanath Rai v. State (1997) 8 SCC 732; M. V. Javali v.
Mahajan Borewe/1 & Co. (1997) 8 SCC 72 and A.K. ~Khosla D
v. T.S. Venkatesan 1992 Crl. L.J. 1448 -referred to.

The Directors & C., of the Central Railway Company of
Venezuela v. Joseph Kisch 1867 English and Irish Appeals
(Vol. II), 99; New Brunswick and Canada Railway Company
v. Muggeridge (1860)1 Dr. & Sm. 381 ; Redgrave v. Hurd E
(1881) 20 Ch. D at p.13; Aarons Reefs Limited v. Twiss 1896
Appeal Cases 273; (House of Lords); New York Central &
Hudson River Railroad Co. Vs. United States 53 L Ed 613;
Director of Public Prosecutions v. Kent and Sussex
Contractors Ltd. 1944 1 All ER 119; H.L. Bolton (Engg.) Co. F
Ltd. v. T.J. Graham & Sons 1956 3 All ER 6·2 4 and Tesco
Supermarkets Ltd. v. Nattrass 1971 All ER.127 - referred to.

Case Law Reference:
(1976) 3 sec 736 referred to Para 23 G
(1983) 1 sec 1 referred to Para 23
1990 (Supp) sec 686 referred to Para 23
(1992) Supp. (1) sec 335 referred to Para 23
H
598 SUPREME COURT REPORTS {2010] 14 (ADDL.) S.C.R.

A 1867 English and Irish referred to Para 24
Appeals (Vol. II), 99
(1860)1 Dr. & Sm. 381 referred to Para 24
(1881) 20 Ch. D at p.13 referred to Para 24
8
1896 Appeal Cases 273 referred to Para 24
(1997) 8 sec 732 referred to Para 26
(2003) 11 sec 405 referred to Para 26
c (2005) 4 sec 405 referred to Para 26
(1999) 8 sec 686 referred to Para 27
(1988) 1 sec 692 referred to Para 29
D (2005) 1 sec 568 referred to Para 29
(2009) 9 sec 682 referred to Para 29
(1977) 4 sec 451 referred to Para 32

E (1980) 1 sec 43 referred to Para 32
(1992) 4 sec 305 referred to Para 32
(2005) 1 sec 568 referred to Para 32
I (2007) 12 sec 1 referred to Para 32
F
(2006) 6 sec 736 referred to Para 32
2008) a sec 542 referred to Para 32
(1997) 8 sec 732 referred to Para 33
G (1997) 8 sec 12 referred to Para 33
1992 Crl. L.J. 1448 referred to Para 34
53 LEd 613 referred to Para 35

H
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 599
INCORPORATED
1944 1 All ER 119 referred to Para 36 A
1956 3 All ER 624 referred to Para 36

1971 All ER 127 referred to Para 37

CRIMINAL AP.PELLATE JURISDICTION : Criminal Appeal B
No. 688 of 2005.

From the Judgment & Order dated 08 .08.20Q3 of the High
Court of Bombay in Writ Petition No. 465 of 2002.

Ram Jethmalani, Mahesh Jethmalani, Gaurav Shah, c
Venkatesh Dhoud, Pranav Badheka, Mahesh Agarwal , Radhika
Gautam (for E.C. Agrawala) for the Appellant.

Parag Tripathi, ASG, Ashok H. Desai, Amit Desai, Jai
Munim, Banoo J. Kapadia , Mohit D. Ram . Poli Katarki ,
Meenaksi Arora , Kunal Bahri, Sadhana Sandhu, S.N. Terdal, D
Subhash Kaushik, Sushma Suri, Shankar Chillarge, Chinmoy
A . Khaladkar, Sanjay Kharde, Asha Gopalan Nair for the
Respondents.

The Judgment of the Court was delivered by E
SURINDER SINGH NIJJAR, J. 1. The original
complainant Iridium India Telecom Ltd. (hereinafter referred to
as the appellant) has preferred this appeal against the judgment
and order dated 8th August, 2003, passed by a learned single
F
judge of the Bombay High Court quashing the criminal
complaint dated 3rd October, 2001 filed by the appellant, inter
alia, against respondent no.1, namely, Motorola Incorporated.

2. The complaint pertained to allegations of cheating under
Section 420 read with Section 1208 of the Indian Penal Code. G
Although the complaint spread over thirty five pages elaborately
sets out the factual scenario, we may notice the foundational
facts.

3. Motorola Inc (respondent no. 1), Iridium LLC and Iridium H
600 SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.

A Inc. are a part of one group of corporations created through
mergers and takeovers. Respondent no. 1 was the founder
promoter of a corporation known as Iridium LLC incorporated
in the State of Delaware, U.S.A; Iridium LLC was incorporated
on 19th July, 1996 as a wholly owned subsidiary of respondent
B no. 1. Iridium LLC was the successor of another corporation
known as Iridium Inc. which was incorporated on 14th July, 1991
also a wholly owned subsidiary of respondent no.1. On or about,
19th July, 1996 Iridium Inc was merged into Iridium LLC.

4. Iridium System/Iridium Project (which expressions are
C used inter-changeably) was represented as being the world's
first commercial system designed to provide global digital hand
held telephone data, facsimile, paging, geo-location services
similar to today's cellular phone. It was further averred that
Iridium System was conceived by respondent no. 1 in the year
D 1987 and ft was intended to be a wireless communication
system through a constellation of 66 satellites in low orbit to
provide digital service to mobile phones and other subscriber
eql;lipment globally.

E 5. It was emphasized that Iridium Inc. was an instrumentality
of respondent no. 1; the corporate veil from behind which
respondent no . 1 operated. Respondent no.1 conceived,
orchestrated, directed and controlled Iridium and was at all
material times Iridium's dominant shareholder, supplier,
F financier, controller of its board, as well as the developer of
Iridium's business model and the creator of the Iridium system,
which was respondent no.1's proprietary space based Satellite
Communication system . Respondent no.1 also designed,
developed, sold, maintained and operated the hardware and
software of the Iridium System/Project. It was further alleged in
G the complaint that respondent no.1 initially held the entire equity
in Iridium . Although the equity of respondent no.1 was
subsequently diluted by sale to various investors and
shareholders through a series of private/public offerings,
respondent no.1 continued to hold, own and control a substantial
H
\- \

l
. r··,
/ /· '

· IRIDIUM INDIA TELECOM LTD~ v.. MOTOROLA>. 'i;. 601:-
INCORPORATED [SURINDER SINGH NIJJAR, J.] .
,. . _/ . ': . . -
part .(about19.6%) of the_e.quity of Iridium. From the inception A.
respondent no.1 exercised effective control over the Board of
Directors of. !'ridium; It was further alleged that most of the
pers-ons on the board of Iridium were either former em1ployees
or current employees of respondent no.1 who .were deputed or
seco.nded to Iridium. J ,_ · • ' '. _, · .' ·• ' '1: ·;_' ~~ · ·., ·· ..~·; .· ~ i B·
! '
• '· '•- ,__~'.· .. I ~ ~~ ;•I. ·.I • ; :..- • '" .- ' -~ .-.,

6. It was further alleged that respondent no.1 was the
primary ·contractor for Iridium system/project.\ As a(ready stated
above, this.com.prised of fiv~ segm·e!lts. Th.~s~ fiva_segments
were .supplied, sold;. maintained and operated by three
contracts viz~. (i) the space system contraCt; (ii) the operation . c '
and maintena!1ce contract and (iii) the terrestrial Network
Development Contract. Each of these contraCts was awarded
_ by Iridium., !~c?':tespon~e_n! ·~o.1.lh.e . ~a.id contrast~. ~ere
intentionally structured to ensure that although Iridium paid all
the development costs, res'pondent'no.fwciuld still the most D; awn'
vah.iable assets ofthe' Iridium system: It wa's.also 'alle'ged:that .
.re-spondent ho.1 providecf itself ~.vitt1 'excess'ive •'p rofits\vhile'.
saddling lridil.lm. With exorbitant costs: Substantially, ·all the initial -~
capital.raised by
.Iridium (form-.persons ·which inCluded Iridium· ..;
India ~elecom ltd)was'used to make payme'nts respondent~ E · · ·-- to
no.1~·Jr1 al(a.sum.of Rs:,-_19500 crores (6:5 billion u:s sft1as':.
been 'paid tili'date by Jii'dium'to respondent no.1 for' the li"idiu'm, .
system:·~---_<.:~-< :'·<i -: _, . ·.. " . , ::-: _. .',, .. ,·:.-__··:
.7. It was further mentioned in the Complaint that in August F
1992; a: PPM -'
was' floated
.- - - . ,I ' "
through
~.' -· _.
me'rchant
- . . -,
bankers;
,
'Goldman..
, . ~
I

Sachs.(who acted as placement agents).withthe i,ntention.oL
attracting investm'ents' from 'large 'an'd successful companies':I
• ' •- . . • • • ... ~ . • • - ' ., ' ' ·' ' ; . • . - . • • I

world wide., Copies. of. PPM .were distributed to and received, ,.
by severa·l prominent Indian companies; both in .the public .an·d·, G
private sector.- Promine.nt amongst'these were:. . . . . . ..... .· .

·'tai: ;·Jnf~as~ru~tur~· L~~~ing ~nd. Fin:ar1ciaYse~ic~s-~t~:;
' . (IL&FSL_ - ' - . ' I .. ' ';;'f_,., .,.·
'\.. .
• :. . . \ ... ~ •• : · • • • . ... . \ • - t- ! . ·.- ·. ', . ·' . •. . .; -. . - .. ~
[b) ' Industrial Development Bank of India (lOBI) H
602 SUPREME COURT REPQ~TS [2010) 14 (AODL.) S.C.R.

A [c) Industrial Credit and Investments Corporation of
India (ICICI)

[d) State Bank of India (SBI)

[e) Export Import Baf)k of India (EXIMP Bank)
B
[~ Housing Development Finance Corporation Ltd.
(HDFC)

[g] . Unit Trust of India (UTI)
c {h) General Insurance Corporation of India (GIC)

[i] Life Insurance Corporation of lndi~ _ (LIC)

8. The object of the said PPM was to obtain funds/
0 investments to finance the "Iridium projecr. The PPM set out
in deta.il the salient features of the Iridium project, its technical
suitability, commercial feasibility, risk factors. Thus it was
. Claimed that the said document was in the n~.ture of a
prospectus: If contained a positive invitation to offer~ The next
,. equity offering was made under the Private Placement
E Memorandum in 1995 [1995 PPM] wherein the original
representations and/or warranties and/or assurances were
substantially watered down and for the first time references were
made to the fact that the system niay not successfully operate.
F · 9. It .was also mentioned in the Complaint that certain
personal representations were made by the representatives of
·respondent no.1 to further induce the persons to invest in Iridium.
in the course ofthese presentations and meetings, promotional
video cassettes which depicted the progress of the project, the
G successful attainment of various project milestones well within
sch~dule and how the said project would actually function when
fully operational, were displayed. The representations made by
. respondent no. 1 are as under:

(a) The Iridium System would use technology which was
H
IRIDIUM INDIA TELECOM lTD. v. MOTOROLA 603
INCORPORATED [SURINDER SINGH NIJJAR, J .]
tried and tested and had been successfully applied A
in ·a number of operational systems including
systems used by NASA and the U.S Department
of Defence. In otlier words the technolog-y that
would be employed in the Iridium System, was not
untested or experimental, but was a proven and 8
tested technology with a past record of successful
operation:

(b) The Iridium System would provide a subscriber link
on a global basis, which would be accessible
virtually anywhere on the earth surface, save and
c
except cases where severe or unusual conditions
prevented the r~ception of signals. In normal
operating day-to day real life environment, the
Iridium System would , therefore offer a high quality
link. In particular Iridium phones would work in D
automobiles and buildings which were the most
common place where the professional traveler who
would represent the bulk of Iridium customers,
would use the same . Global coverage and
accessibility was therefore assured. E

(c) ' Subscribers would be able to access ·the Iridium
System through compact, hand held sm?ll sized
phones which were comparable in size and weight
..
to cellular phones. F
(d) The Iridium Sys~em would provide a high quality
signal and offer (i) voice (ii) data (iii) fax and (iv)
gee-location services. The System would provide
a strong signal with sufficient link margin (i.e. a
margin/allowance) in excess of the minimum G
technical requirement for desired voice quality.)

(e)' The Iridium System would be eminently viable and
the investors in the Iridium project would expect to
receive handsome financial gains. H
604 SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.

A (f) The Iridium System was a creation of respondent
no. 1 who was the world leader in cellular
technology. Backing of respondent no. 1 ensured
its success.

. B (g) In addition to the benefits of investing in the equity
of Iridium Inc. large investors would have the option
to purchase the gateway, which would be an inter-
connection point between the space based
segment of the Iridium System and land/terrestrial
network. Investment in gateway would be an
c extremely remunerative and profitable venture.

10. According to the appellant the aforesaid
representations were made to individual institutions and entities
handling public money so as to induce them to believe that
D Iridium was a company worth participating and investing in by
purchasing shares and operating a gateway. The officers of
respondent no.1 impressed upon the prospective investors that
Iridium Project venture was bound to succeed.

. E 11 . Relying upon the aforesaid representations the
appellant as well as the banks and institutions mentioned
hereinabove, in good faith , collectively invested a sum of US
$70 million for purchasing equity of Iridium Inc as well as spent
a sum of about Rs.150 crores in setting up a gateway at Deghi
in Pune . The complaint then proceeds to state that the
F representations made by respondent no.1 proved to be false,
dishonest, fraudulent and deceitful. It was discovered that
Iridium System was a complete failure and all the material
representations made, as aforesaid, were totally false ,
dishonest, fraudulent and deceitful, to the knowledge of
G respondent and in particular respondent no.1.

12. It is specifically pleaded that the System proved to be
a complete non starter and technological failure as is evident
from the followings:
H
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 605
INCORPORATED [SURINDER SINGH NIJJAR, J .}
[1] The phones did not work inside buildings or cars A
and even under trees. In real world operating
environments. therefore. they were useless.

[2] The Iridium phones were extremely bulky.

[3] The quality of the Iridium signals, even in open areas B
with no obstruction , was extremely poor with
frequent disconnections.

[4} The promised data and fax feature~ were not
provided. c
[5] The system was inferior to competing cellular
systems.

[6] The system could operate with a single gateway.
0
13. It was also alleged that respondent no.1 had full
knowledge about the un-viability of the Iridium system. This can
be best gauged from the fact that the board of directors of
respondent no.1 had in the early 1990's rejected a proposal
that respondent no.1 itself fund the billions of dollars needed E
to develop the Iridium system. Obviously, therefore, respondent
no.1 had no qualms about inducing others to invest their money.

14. It was further averred in the complaint that the entire
exercise of the respondent no. 1 besides generating money for
itself. was to experiment with others' money and at others' risk F
(including the appellant). The Iridium System and Iridium was
therefore used as a research and development tool in order to
facilitate and assist the respondent no. 1 to develop its
expertise in building satellite systems so that the said expertise
could be marketed by it to others. It was further alleged that G
market researchers who had been commissioned by
respondent no.1 had reported that Iridium's target market, the
professional business traveler would have little interest in using
the system. The research group characterized the product as
suitable only for oil rigs or the desert. It had been pointed out H
606 SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.

i
A that:lridium as then conceived may not address the needs of
many US based executives who t~aveled globally and/or have
offices in divergent or even in remote area. It was pointed out
that the system limitations of Iridium were too severe to sustain
interest.
B
15. The appellant company was further induced to part with
a sum of Rs. 126 crores for the gateway. The necessity for
installation of a gateway was a complete fraud . The respondent
no.1 knew that no gateway was necessary. The entire need for
a gateway was dishonestly created to get a license to operate
C the system in it. The Collusy Group is now operating the System
on a limited scale through one single gateway, which further
establishes the fact that there was no need for more than one
gateway.

D 16. The appellants subsequently learnt that within nine
months of the huge investment made in Iridium, it applied for
bankruptcy protection under Chapter 11 of the U.S. Bankruptcy
Code. Despite best efforts, Iridium could not be revived and
ultimately the much touted Iridium System, for which US$ 6.5
E billion had been paid to respondent No.1, was sold for a paltry
sum of US $ 25 million. This represented 0.4% of the amount
.which was paid .for by the appellant and other investors.
Consequently, the investment of the ·appellants and its
constituent shareholders of approximately Rs.500 crores was
F wiped out and/or completely lost.

17. The appellants, therefore, addressed a notice dated
12th April, 2001, respondent No.1 calling upon them to make
payment of a sum of US$ 250 million, being the loss suffered
by the appellant as also seeking ·punitive damages. In the
G aforesaid notice, it was clearly mentioned that in. the event
respondent No.1 failing to make the payment, criminal
prosecution would be instituted. The respondent No.1 by its
reply dated 2nd June, 2001 repudiated his liability and instead
made a claim of US$ 6,977,989 upon the appellant. Left with
H no other alternative, the appellants filed a criminal complaint
IRIDIUM INDIA TELECOM LTD. v, MOTOROLA 607
INCORPORATED [SURINDER SINGH NIJJAR, J.]
alleging that respondent no.1 has committed an offence of A
cheating as defined under Section 415 of the Indian Penal ·_ . · ·
Code. On the basis of the aforesaid allegatio_ns, the ~ppellants
have filed a complaint before the Judicial Magistrate; 1st-Class; . · · · · ·
Khadki Court, Pune charging that respondent No.1 are guilty
of the offence of criminal conspiracy for cheating the appellatif 8
and for the offence. of cheating committed pursuant to th~
conspiracy.

18. The ·entire material was placed before the Judicial
Magistrate. Upon consideration of the complaint and upon C
hearing the counsel for the ·appellant, by an order dated 6th
November, 2001 the Judicial Magistrate 1st Class, _Khadki
Court, Pune issued process against the respondent No.1 'to 7
for offences under section 420 read with Section 120 ·1PC. The
order reads as under :-
·D
"Read Complaint and verification. Perused documents.
Heard the advocate Nimbalkar for the complainant. It
reveals that complainant is a company of which the shares
are held by public financial institutions, nationalized banks .
and public insurance companies i.e. IDOl, ·tciCI, S81; UTI, E
GIC, LIC etc. The investments made._ by complainant ·
company was raised out of public savings and funds of
above noted public institutions. Therefore_ ; it reveals that .
this case involves issues regarding public mooey. It is: .
settled principle that at the stage of issuance of proce.ss F
prima facie case is to be considered. After giving anxious .
though to the averments in .the complaint and the
documents produced on record, it reveals that prima facie
case is made out to issue process. Hen~e. issue process .
against Accused No.1 to 7 for the offence under Section _ G
420 rlw 1208 of IPC."

19. Aggrieved by the aforesaid order, the respondents filed
a petition under Articl~ 227 of the Consti_tution of India and
under Section 482 Cr.P.C. seeking quashing of the order
issuing process, dated 6th November, 2001, passed by ~he · H
608 SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.

A . Judicial Magistrate 1st Class, Khadki Court, Pune. The grounds
as culled out from the petition can be summed up as under:-

(i) The complaint lacked the basic and essential
ingredients of the offence of cheating and
8 conspiracy.

(ii) At best the complaint had set out a civil dispute,
subject to mandatory arbitration which the appellant
herein (Iridium Telecom Pvt. Ltd.) was seeking to
settle by adopting a cheaper coercive method.
c
(iii) The complaint suppressed material facts which
would have nullified the claim of the appellant based
on the alleged misrepresentations. ·

(iv) The Complaint does not even prima facie show that
D
any of the representations made by the respondent
no. 1 herein (Motorola Inc/ petitioner before the
High Court) were false nor is there any material to
even prima facie establish any dishonest intention
ab intio on their part while making the open offer
E investment in Iridium Inc.

(v) The Court of JMFC, Pune did not have any territorial
jurisdiction to entertain the complaint.

(vi) The close association of respondent no. 1 with the
F
Iridium project was fully disclosed to all the potential
investors in the 1992 PPM prior to their investment.
The 1992 PPM also made it clear that each
prospective investor should consult its own counsel
and advisers and undertake such investigation as
G it deemed appropriate before inve·sting in the
shares of Iridium Inc.

(vii) The risk factors were very prominently highlighted
in the 1992 PPM. The 1992 PPM made it clear that
H there were many risks in the investment The entire
·<·
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 609
INCORPORATED [SURINDER SINGH NIJJAR, J.]
project was unique being the first of its kind. The A
representations were made to very select strategic
investors, who were experts in their own fields. The
appellant had the backing of some of the prominent
financial -institutions of the country with the best of
expertise in assessing the arrears of risk capital as B
well as with admitted technical advice, support and
expertise of Videsh Sanchar Nigam Limited
(VSNL).

(viii) It was stated that the service of summ·ons was
illegal, invalid and impr.oper. It was further averred C
that filing of the petition under Section 482 should
not be construed to be an admission of valid
service.

20. The High Court granted ad interim relief staying the D
proceeding of C.C. No. 81/2001 pending on the file of the
learned Magistrate, to the respondent no. 1 after the petition
under Article 227 and Section 482 Cr.P.C was filed . The
appellant had then filed a Special Leave Petition (Crt.) No.
2093/2003 wherein this Court observed as follows: E

"The order under challenge is an interlocutory order,
therefore we are not inclined to interfere with the same.
However, in the facts and circumstances of the case, we
think it appropriate that the petition pending before the High F
Court should be disposed of as early as possible .
Therefore, we request the High Court to dispose of the
pending petition of the respondent by the end of July, 2003
and while so deciding the High Court the High Court should
also decide whether such decision of the High Court will
bind those who have not approached the High Court G
challenging the summons issued by the Trial.Court to them.

With these observations this Special Leave Petition is
disposed off." ·
H
610 SUPREME COURT REPORTS [2010] 14 (ADDL) S.C.R.

A 21 . The High Court by order dated 8th August, 2003
allowed the petition and quashed the order issuing process
passed by the JMFC, Pune. Aggrieved by the said judgment,
the appellant have filed the present appeal before this Court.

8 22. We have heard Mr. Ram Jethmalani, learned senior
counsel, for the appellant, Mr. Ashok Desai, learned senior
counsel for the respondent no. 1 and Mr. Parag Tripathy for the
Union of India at considerable length.

23. The submissions made by Mr. Jethmalani although
c very elaborate, may be summed up as follows:-
(i) The power to quash a criminal complaint that too
at the stage of cognizance, is an extreme power,
which must be exercised very sparingly and with
D abundant caution; that too in the rarest or rare
cases.

(ii) In exercise of its power under Section 482, the High
Court has to consider the complaint as a whole,
without examining merits of the allegations i.e.
E genuineness of the allegations is not to be
examined at this stage.

(iii) The complaint is not required to verbatim reproduce
the legal ingredients of the offence. If the necessary
F factual foundation is laid in the complaint,
proceedings should not be quashed.

(iv) Quashing of a complaint is warranted only where
the complaint is so bereft of even basic facts which
are absolutely necessary for making out an offence;
G
that it would be a miscarriage of justice to permit
the proceedings to continue.

(v) In support of the aforesaid submissions, Mr
Jethmalani has relied on the following judgments of
H
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 611
INCORPORATED [SURINDER SINGH NIJJAR, J.]
this Court:- Smt. Nagawwa Vs. Veeranna 1, A
Municipal Corporation of Delhi Vs. Ram Kishan
Rohtagi2, Dhanalakshmi Vs. R.Prasanna KumafJ,
State of Haryana Vs. Bhajan Laf4 ·

24. Mr. Jethmalani further submitted that the judgment of
8
the High Court is contrary to all known principles on the basis
of which an order issuing process can be quashed. He invited
our attention to the detailed pleadings 'in the complaint; the
Stock Purchase Agreements, Gateway Equipment Purchase
Agreement and From S-1 etc. According to Mr. Jethmalani, the C
documents were subjected to meticulous analysis by the High
Court at the instance of the respondent. On a wholly erroneous
. interpretation of the aforesaid documents, the High Court
concluded that the allegations made· in the complaint even if
they are taken on the face value, disclosed only/ civil liability.
The High Court was unnecessarily influenced by the submission D
that the "Risk Factors" had been duly pointed out to the
prospective investors including the appellants. These matters
were to be examined by Court of competent jurisdiction at the
appropriate time. The allegations could be proved or disproved
on the basis of the evidence led by the parties. The High Court, E
according to Mr. Jethmalani, failed to appreciate that the 1992
PPM was in the nature of a deemed prospectus: Therefore
whilst issuing the aforesaid PPM, the promoter was required
to make a true and full disclosure of all the relevant facts. This
duty is imposed on the promoter under Section 3 and 64 of the F
Companies Act, 1956. The statements made in the PPM as
also in the representations made to the high ranking officials
of the prospective investors including the appellants, have been
proved to be incorrect and misleading. According to Mr.
Jethmalani, the legal position on this issue is quite cleai and G

1. [(1976) 3 sec 736)
2. [(1983) 1 sec 11
3. [1990 (Supp) sec 686]
4. [(1992) Supp. (1) sec 3351 H
612 SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.

A placed reliance on:- The Directors &c., of the Central Railway
Company of Venezuela Vs. Joseph Kisch 5, New Brunswick
and Canada Railway Company Vs. Muggeridge6, Redgrave
Vs. HurcF, Aarons Reefs Limited Vs. Twiss8 •

25. According to Mr. Jethmalani dishonest ·intention of the
8
respondent is evident from the fact that the proposal to invest
in the Iridium system which was taken to the Board of Directors
of the respondent Motorola, was not accepted. The market
researchers commissioned by Motorola had in fact clearly
stated that the professional business traveler would have little
C interest in the system. It had been characterized as suitable only
for oil rigs or deserts. Mr. Jethmalani reiterated that the
respondents deliberated painted a very rosy picture. They had
promised a global link from any place on earth. The falsity of
such tall claims is evident from the fact that the phone would
D not operate under a tree or in a building. It proved to be utterly
useless. Mr. Jethmatani then submitted that the value, which may
be placed on the disclaimers relied upon by the respondent,
could only be judged after a full fledged trial. At best, the
disclaimers would be a defence. They would not be sufficient
E to absolve the respondents from criminal liability.

26. It was then submitted by Mr. Jethmatani that the High
Court commi~ed a serious error of law in concluding that the
respondent being a corporation was incapable of committing
F the offence of cheating. He emphasised that by now, it is settled
in almost all jurisdictions of the world governed by the rule of
taw that companies can be prosecuted for certain criminal
offences. The offences for which companies can be criminally
prosecuted are not limited only to the specific provisions made
G in the Income Tax Act,· The Essential Commodities Act, The '
Prevention of Food Adulteration A-:t.
5. [1 867 English and Irish Appeals (Vol. II), 99)
6. [(1860) 1 Dr. & Sm. 381]
7. [(1881) 20 Ch. 0 at p. 13]
H 8. [1896 Appeal Cases 273 (House of Lords)]
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 613
INCORPORATED [SURINDER SINGH NIJJAR, J.}
Mr. Jethmalani relied on Kalpnath Rai Vs. State 9, Asstt. A
Commr. Vs. Ve/liappa Textiles Ltd10., and Standard Chartered
Bank Vs. Directorate of Enforcement11 • It was finally submitted
by Mr. Jethmalani that the High Court has converted itself into
the Court of a Judicial Magistrate and conducted an inquiry
under Section 202, 244 and 245. s
2.7. Mr. Parag Tripathi, the learned Add I. Solicitor General
submitted that the High Court was unnecessarily influenced by
the fact that the service has not been duly affected on the
respondent. This did not lead to the only conclusion that the C
defective service was a deliberate attempt to enable the
appellants to adopt coercive process against the respondent.
It is further submitted by Learned ASG that the High Court
wrongly concluded that the highlighting of the risk factors would
absolve the respondents of the criminal liability. According to
the ASG, the mere existence of an arbitration clause, does not D
lead to the conclusion that there can be no criminal liability in
such cases. In support of the submissions, the ASG relied on
Trisuns Chemical Industry Vs. Rajesh AgarwaJ12 , It is further
submitted that the respondent company cannot hide behind the
defence that the company is incapable of possessing the E
necessary mens rea for commission of the offence of cheating.
In support of the submissions, he relied upon the following
judgments:- Asstt. Commr. Vs. Ve/liappa Textiles Ltd 13 . ,
Standard Chartered Bank Vs. Directorate of Enforcement14•
F
28. We may now note the submission of Mr. Ashok Desai.
The learned senior counsel at the very out set, submitted that
even the basic facts have not been placed before this Court.

9. [(1997) s sec 7321
G
10. [(2003) 11 sec 405]
11. ((2005) 4 sec 405]
12. {(1999) 8SCC 6861
13. Supra
14. Supra
H
614 SUPREME COURT REPORTS [2010}14 (ADDL.) S.C.R.

A According to him there were three things which have to be
noted. Firstly, no representation was made by Motorola as
such. Secondly, Iridium Inc was a company controlled by
strategic investors. Thirdly, representations were not of existing
facts but future projections wherein every possible warning was
B given. According to the learned senior counsel, the most
important aspect of the case are that:-

(i) We are dealing with a prospectus.

(ii) We are dealing with technological development.
C Therefore, it can succeed or it can fail.

(iii) Then ag~in we are dealing with feasibility.

29. Mr. Desai submitted that the Iridium system was and
D is a technological success. It is being used in global aerospace
programmes and defence departments of different countries.
One of its major customers is the Indian Defence Forces. Merely
because the satellite mobile system is not a commercial
success is not sufficient to est~blish that the respondent
company had any dishonest intention. Mobile phones seem to
E have overtaken the entire market. Even the satellite phones and
used when the mobile phone service is not available, That is
particularly so in remote and inaccessible terrain. He then
submitted that while seeking investments from strategic
investors, the 1992 PPM contained all the necessary
F information. The statements in the PPM related to future
projections. They were based on certain assumptions. Merely
because the expectations of the appellant were not realized, it
would not be sufficient to establish dishonest intention of the
respondents. The representations were made to . strategic
G investors. These were individuals, firms and entities, who were
experts in their field. They had been duly forewarned of the risk
factors. Therefore, the High Court rightly concluded ..that .the
complaint even if it is accepted in toto, would not disclose the
necessary ingredients to establish criminal liabilitY. Mr. Desai
H reiterated that the risk factors had been prominently displayed .
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 615
INCORPORATED [SURINDER SINGH NIJJAR, J.]
at the commencement of the PPM. In order to ensure that the A
investors were well aware of the risks involved, they were invited
to be guided by the counsel or their own experts. Each investor
had therefore accepted and acknowledged that in making the
investments, they had relied only on the advice of their own
experts. Mr. Desai then submitted that the High Court correctly 8
relied upon the documents placed on record by the respondent.
These were documents which were required to be placed
before the Magistrate by the appellants. They were deliberately:
withheld to mislead the Magistrate into issuing process. This
according to him would amount to playing a fraud on court. He c
then submitted that in spite of the fact that the respondent had
not been duly served in order to avoid incalculable damage to
its image, reputation and business prospects. The respondent
was compelled to move to the High Court for nipping in the bud
a wholly frivolous and unjustified criminal prosecution. The High D
Court was also justified in relying on the documents as the
appellants had relied on the reply to the notice before the
Magistrate. They had, however not placed on the record the
notice, and the accompanying documents. The High Court also
correctly stated the legal position with regard to the inability of
a company to possess the necessary mens rea for the E
commission of a criminal offence. According ·to Mr. Desai, the
facts pleaded would. disclose only civil liability at best. It is
submitted by him that it was not necessary for the High Court'
to permit the matter to proceed any further. The High Court on
a correct interpretation of the various clauses of the 1992 PPM F
and the Stock Purchase Agreements of 1993 and 1994,
concluded that it was a case of pure and simple civil liability. It
was further submitted that the High Court was within its
jurisdiction to look at all the documents including the documents
which were not on record. The power of the High Court under G
Section 482 Cr.P.C is much wider than the revisional.
jurisdiction of the High Court Cr.P.C under Section 401 Cr.P.C.
In support of the submissions, the learned counsel has relied
on Madhavrao Jiwajirao Scindia and Others Vs. Sambhajirao
H
616 SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.

A Chandrojirao Angre and Others' 5 State of Orissa Vs.
Debendra Nath Padhi and M.N. Ojha 16 and Others Vs. Alok
Kumar Srivastav and Another17•

30. Mr. Desai also pointed out that the representations
8 were not made in the year 1992 as the appellant was not
incorporated till 1994, therefore, it was impossiple to have
made any representation to the complainant. Even otherwise,
the representations were accompanied by prominent risk
factors. The representations related to future projections and
C expectations. This is patent from the fact that although the
representations were made .in the year 1992-93, the system
itself was not commissioned till 1998. The High Court,
according to Mr. Desai, correctly relied on the risk factors. This
is especially important since one Mr. S.H. Khan had been
nominated by the appellant on the Board of Directors ·of the
D respondent. Apart from being a Director, he was a member of
the Finance Committee and Related Party Contracts
Committee of Iridium Inc. Therefore, the appellants were well
aware of the risk factors.

E 31 . We have considered the submissions made by the
learned senior counsel. A bare perusal ·of the submissions
would be sufficient to amply demonstrate that this cannot be
said to be an 'open and shut' cass for either of the parties.
There is much to be said on both sides. The entire scenario
F painted ·by both the sides is circumscribed by 'ifs' and 'buts'.
A mere reading of the 1992 PPM would not be sufficient to
conclude that the entire information has. been given to the
prospective investors. Similarly, merely because there may have
been some gaps in the information provided in the PPM would
G not be sufficient to conclude that the respondents have made
deliberate misrepresentations. In such circumstances, we have
to examine whether it was appropriate for the High Court to
sec 6921
15. [(1988) 1
16. [(2005) 1 sec 5681
H 11. [(2009) 9 sec 6821
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 617
INCORPORATED [SURINDER SINGH NIJJAR, J.]
exercise its jurisdiction under Section 482 Cr.P.C. to quash the A
proceedings at the stage when the. Magistrate had merely
issued process against the respondents .

32. The contours within which the High Court would
exercise its jurisdiction to quash the criminal proceeding has 8
.been dilated upon, and well defined by this Court in a catena
of judgments. We may make a reference here only to a few
representative cases.

ln·the case of Smt. Nagawwa Vs. Veeranna ~ 8 considering
the limits within which the Magistr~te is required to conduct ~n C
inquiry under Section 202 of the Cr.P.C., this Court observed
that the scope of such inquiry is (Para 4) "extremely limited - 1.
limited only to the ascertainment of the truth or falsehood of the
allegations made iri the complaint- (i~ on the materials placed
by the complainant before the Court; (ii) for the limited purpose · D
of finding out whether a prima facie case for issue of process ··
has been made out; and (iii) for deciding the question purely
from the point of view of the complainant without at all adverting
to any defence that the case may have. In fact it is well settled
that in proceedings ·under Section 202, the accused has got E
absolutely no locus standi and is not entitled to be heard on
the question whether the process should be issued against him
or not". It has been further held (Para 5) as follows:-

" ... .. ..... Once the Magistrate has exercised his discretion
F
it is not for the High Court, or even·this Court, to substitute
its own discretion for that of the Magistrate or to examine
the case on merits with a view to find out whether or not
the allegations in the complaint, if proved, would ultimately
end in conviction of the accused. These considerc;ltions,
in our opinion, are totally foreign to the scope and ambit G
of an inquiry under Section 202 of the Code of Criminal
Procedure which culminates into an order under Section
204 of the Code. Thus it may be safely held that in the

18. Supra H
618 SUPREME COURT REPORTS [2010] 14 (AOOL.) S.C.R.

A following cases an order of the Magistrate issuing process
against the accused can be quashed or set aside:

(1) where the allegations made in the complaint or the
statements of the witnesses recorded in support of the
B
· same taken at their face value make out absolutely no case
against the accused or the complaint does not disclose the
essential ingredients of an offence which is alleged against
the accused;

(2) where the allegations made in the complaint are
c patently absurd and inherently improbable so that no
prudent person can ever reach a conclusion that there is
sufficient ground for proceeding against the accused; .

(3) where the discretion exercised by the Magistrate in
D issuing process is capricious and arbitrary having been
based either on no evidence or on materials which are
wholly irrelevant or inadmissible; and

(4) where the complaint suffers from fundamental legal
defects, such as, want of sanction , or absence of a
E complaint by legally competent authority and the like."

The aforesaid examples are of course purely illustrative and
provide sufficient guidelines to indicate the contingencies where
the High Court can quash proceedings.
F
·This Court in the case of Kurukshetra University Vs. State of
Haryana, 19 again stated the principle regarding the exercise of
the inherent powers conferred by Section 482 Cr.P.C.
Chandrachud J. speaking for the Bench observed as follows:

G "It ought to be realised that inherent powers do not confer
an arbitrary jurisdiction on the High Court to act according
to whim or caprice. That statutory power has to be
exercised sparingly, with circumspection and in the rarest
of rare cases."
H 19. [(197Z) 4 sec 4511
l
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 619
INCORPORATED [SURINDER SINGH NIJJAR, J.]
In Municipal Corporation of Delhi Vs. Ram Kishan Rohtagi20 A
this Court reiterated the legal position with regard to the limits
of the power under Section 482, as stated in the case of Raj
Kapoor and Others Vs. State 21 wherein Krishna lyer, J. ,
observed as follows:-
B
"Even so, a general principle pervades this branch of law
when a specific provision is made : easy resort to inherent
power is not right except under compelling circumstances.
Not that there is absence of jurisdiction but that inherent
power should not invade areas set apart for specific power
under the same Code." C

This Court also reiterated the four propositions of law which
were said to be illustrative in the case of Smt. Nagawwa Vs.
Veeranna 22• It was further held as follows:-
D
"10. It is, therefore, manifestly clear that proceedings
·· against an accused in the initial stages can be quashed
only if on the face of the complaint or the papers
accompanying the same, no offence is constituted. In other
words, the test is that taking the allegations and the
complaint as they are, without adding or subtracting E
anything, if no offence is made out then the High Court will
be justified in quashing the proceedings in exercise of its ·
powers under Section 482 of the present Code.

The aforesaid proposition of law was again reiterated by this F
Court in the case of Madhavrao Jiwajirao Scindia and Others
Vs. Sambhajirao Chandrojirao Angre and Others 23in the
following words:-:

"The legal position is well settled that when a prosecution G
at the initial stage is asked to be quashed, the test to be
20. Supra
21 . [(1980) 1 sec 431
22. Supra
23. Supra H
620 SUPREME COURT REPORTS [201 0]14 (ADDL.) S.C.R.

A applied by the court is as to whether the uncontroverted
allegations as made prima facie establish the offence. It
is also for the court to take into consideration any special
features which appear in a particular case to consider
whether it is expedient and in the interest of justice to
permit a prosecution to continue. This is so on the basis
B
that the court cannot be utilised for any oblique purpose
and where in the opinion of the court chances of an
ultimate conviction are bleak and, therefore, no useful
purpose is likely to be served by allowing a criminal
prosecution to ·continue, the court may while taking into
c consideration the special facts of a case also quash the
proceeding even though it may be at a preliminary stage."

The aforesaid ratio of law was further elaborately
discussed in the case of State of Haryana Vs. Bhajan Laf24,
D wherein this court had formulated certain principles pertaining
to the exercise of such power in the following words:-

·''102. In the backdrop of the interpretation of the various
relevant provisions of the Code under Chapter XIV and of
E . the principles of law enunciated by this Court in a series
of decisions relating to the exercise of the extraordinary
power under Article 226 or the inherent powers under.
Section 482 of the Code which we have extracted and
reproduced above, we give the following categories of
cases by way of illustration wherein such power could be
F exercised eith~r to prevent abuse of the process of any
court or otherwise to secure the ends of justice, though it
may not be possible to lay down any precise, clearly
defined and sufficiently channelised and inflexible
guidelines or rigid formulae and to give an exhaustive list
G of myriad kinds of cases wherein such power should be
·exercised.

( 1) Where the allegations made in the first information

H 24. Supra
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 621
INCORPORATED [SURINDER SINGH NIJJAR, J.]
report or the complaint, even if they are taken at A
their face value and accepted in their entirety do not
prima facie constitute any offence or make out a
case against the accused.

(2) Where the allegations in the first information report 8
and other materials, if any, accompanying the FIR
do not disclose a cognizable offence, justifying an
investigation by police officers under Section 156(1)
of the Code except under an order of a Magistrate
within the purview of Section 155(2) of the Code.
c
(3) Where the uncontroverted allegations made in the
FIR or complaint and the evidence collected in
support of the same do not disclose the
commission of any offence and make out a case
against the accused. D

(4) Where, the allegations in the FIR do not constitute
a cognizable offence but constitute only a non-
cognizable offence, no investigation is permitted by
a police officer without an order of a Magistrate as E
contemplated under Section 155(2) of the Code. ,

(5) Where the allegations made in the FIR or complaint
are so absurd and inherently improbable on the
basis of which no prudent person can ever reach a
just conclusion that there is sufficient ground for F
proceeding against the. accused.

(6) Where there is an express legal bar engrafted in any
of the provisions of the Code or the concerned Act
(under which a criminal proceeding is instituted) to G
·the institution and continuance of the proceedings
and/or where there is a specific provision in the
Code or the concerned Act, providing efficacious
redress for the grievance of the aggrieved party.
H
622 SUPREME COURT REPORTS (2010] 14 (ADDL.) S.C.R.

A (7) Where a criminal proceeding is manifestly attended
with mala fide and/or where the proceeding is
maliciously instituted with an ulterior motive for
wreaking vengeance on the accused and with a
view to spite him due to private and personal
B grudge.

103: We also give a note of caution to the effect that the
power of quashing a criminal proceeding should be
exercised very sparingly and with circumspection and that
too in the rarest of rare cases ; that the court will not be
c justified in embarking upon an enquiry as to the reliability
or genuineness or otherwise of the allegations made in the
FIR or the complaint and that the extraordinary or inherent
powers do not confer an arbitrary jurisdiction on the court
to act according to its whim or caprice."
D
The aforesaid ratio of law was further reiterated in the case of
Janata Oaf Vs. H.S. Chowdhary25 in the following words:

"132. The criminal courts are clothed with inherent power
to make such orders as may be 'necessary for the ends of
E
justice. Such power though unrestricted and undefined
should not be capriciously or arbitrarily exercised, but
should be exercised in appropriate cases, ex debito
justitiae to do real and substantial justice for the
administration of which alone the courts exist. The powers
F possessed by the High Court under Section 482 of the
Code are very wide and the very plenitude of the power
requires great caution in its exercise. Courts must be
careful to see that its decision in exercise of t~is power is
based on sound principles.
G
134. This Court in Dr Raghubir Sharan Vs . State of Bihar
had an occasion to examine the extent of inherent power
of the High Court and its jurisdiction when to be exercised.

H 25. [(1992) 4 sec 305J
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 623
INCORPORATED [SURINDER SINGH NIJJAR, J.]
Mudholkar, J . speaking for himself and Raghubar Day~l. A
J. after referring to a series of decisions of the Privy Council
and of the various High Courts held thus:

" ... [E)very High Court as the highest court -exercising
criminal jurisdiction in a State has inherent power to make
9
any order for the purpose of securing th_e ends of justice
.... Being an extraordinary.power it will, however, nor be
pressed in aid except for remedying a flagrant abuse by
a subordinate court of its powers ... ."

137. This inherent power conferred by Section 482 of the C
Code should not be exercised to stifle a legitimate
prosecution. The High Court being the highest court of a
State should normally refrain from giving a premature
decision in a case wherein the entire facts are extremely
incomplete and hazy, more so when the evidence has not 0
been collected and produced before the Court and the
issues involved whether factual or legal are of great
magnitude and cannot be seen in their true perspective
without sufficient material. Of course, no hard and fast rule
can be laid down in regard to the cases in which the High E
Court will exercise its extraordinary jurisdiction of quashing
the proceedings at any stage .... .. "

Adverting to the scope of the jurisdiction of the High Court
under Section 482, this Court in the case of State of Orissa
Vs. Debendra Nath PadhF6 again reiterated as follows:- F

"It is evident from the above that this Court was considering
the rare and exceptional cases where the High Cou~ may
consider unimpeachable evidence while exercising
jurisdiction for quashing under Section 482 of the Code. G
In the present case, however, the question involved is not
about the exercise of jurisdiction under Section 482 of the
Code where along with the petition the accused may file

26. [(2005) 1 sec s68J H
624 SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.

A unimpeachable evidence of sterling quality and on that
basis seek quashing, but is about the right claimed by the
accused to produce material at the stage of framing of
charge."

8 Again upon a very elaborate examination of the powers
possessed by the High Court under Section 482 Cr.P.C., this
Court in the case of lnder Mohan Goswami and Anr. Vs. State
of Uttaranchal and Ors. 27 very clearly· observed that the
aforesaid powers are very wide and the very plentitude of the
power requires great caution in its exercise. The Court must
C be careful to see that its decision in exercise of this power is
based on sound principles. It is clearly observed that the High
Courts have been invested with inherent powers, both in civil
and criminal matters, to achieve a salutary public purpose. A
Court proceeding ought not to be permitted to degenerate into
D a w~apon of harassment or persecution. At the same time, it
is also observed that the inherent power should not be
exercised to stifle a legitimate prosecution. The High Court
should normally refrain from giving a prima facie decision in a
case where all the facts are incomplete and hazy, more so, when
E the evidence has not been collected and produced before the
Court and the issues involved, whether factual or legal are of
such magnitude that they cannot be seen in their true
perspective without sufficient material. Reiterating the
observations made by this Court in the case o'f Indian Oil
F Corporation Vs. N£PC India Ltd. and Ors28, the Court again
cautioned about a growing tendency in business circles to
convert purely civil disputes into criminal cases. The Court
reiterated that any effort to settle civil disputes and claims, which
do not involve any criminal offence, by applying pressure
G through criminal prosecution should be deprecated and
discouraged.

The limits within which the jurisdiction under Section 482 can
21. [(2007} 12 sec 11
H 2a . [(2006) 6 sec 736}
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 625
INCORPORATED [SURINDER SINGH NIJJAR, J.]
be exercised was again precisely stated in the case of Divlne A
Retreat Centre Vs. State of Kerala 29, as follows:

"In our view, there is nothing like unlimited arbitrary
jurisdiction conferred on the High Court under Section 482
of the Code. The power has to be exe-rcised sparingly, a
carefully
I
a·nd with caution only where such exercise is
justified by ~he tests laid down in the sectign itself. It is well
settled that Section 482 does not confer any new power
on the High Court but only saves the inherent power which
the Court possessed before the enactment of the Code.
. G
There are three circumstances under which the mherent
jurisdiction may be exercised, namely, (i) to give effect to
an order under the Code, (ii) to prevent abuse of the
process of r:ourt, and (iii) to otherwise secure the ends of
justice.p
D i
In the case of M.N. Ojha and Others Vs. Alok Kumar Srivastav
and Anothe~. this Court was dealing with a situation where
the SDJM had issued process mechanically and without any
application of mind. Furthermore, the High Court had djsmissed
a petition for quashing the order of SDJM by a cryptic and non- E
speaking order. .In such circumstances, this Court observed :-

"25. Had the learned SDJM applied his mind to the facts
and circumstances and sequence of events and as well
as the documents filed by the complainant himself along
with the complaint, surely he would have dismissed the F
complaint. He would have realised that the complaint was
only a counterblast to the FIR lodged by the Bank against
the complainant and others with regard to the same
transaction.
G
27. The case on hand is a classic illustration of no'n-
application of mind by the learned Magistrate. The learned
Magistrate did not scrutinise even the contents of the
29. [(2008) 3 sec 5421
30. Supra H
626 SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.

A complaint, leave aside the material documents available
on record . The learned Magistrate truly was a silent
spectator at the time of recording of preliminary evidence
before summoning the appellants.

B 28. The High Court committed a manifest error in disposing
of the petition filed by the appellants under Section 482 of
the Code without even adverting to the basic facts which
were placed before it for its consideration.

29. It is true that the Court in exercise of its jurisdiction
c under Section 482 of the Code of Criminal Procedure
cannot go into the truth or otherwise of the allegations and
appreciate the evidence if any available on record.
Normally, the High Court would not intervene in the criminal
proceedings at the preliminary stage/when the
0 investigation/enquiry is pending.

30. Interference by the High Court in exercise of its
jurisdiction under Section 482 of the Code of Criminal
Procedure c~n only he where a clear case for such
interference is made out. Frequent and uncalled for
E
interference even at the preliminary stage by the High
Court may result in causing obstruction in progress of the
inquiry in a criminal case which may not be in the public
interest. But at the same time the High Court cannot refuse
to exercise its jurisdiction if the interest of justice so
F required where the allegations made in the FIR or complaint
are so absurd and inherently improbable on the basis of
which no fair minded and informed observer can ever reach
a just and proper' conclusion as to the existence of sufficient
grounds for proceeding. In such cases refusal to exercise
G the jurisdiction may equally result in injustice more
particularly in cases where the complainant sets the
crimina: law in motion with a view to exert pressure and
harass the persons arrayed as accused in the complaint."

H 33. Keeping in view the aforesaid principles, we may now
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 627
INCORPORATED [SURINDER SINGH NIJJAR, J.)
examine as to whether the High Court has adopted the correct A
approach while exercising its inherent power under Section 482
Cr.P.C. The High Court notices in extenso the facts as narrated
above. Thereafter the High Court notices the submissions
made on behalf of the parties. It was C?bserved by the High Court
that a company/corporation will not have the mens rea for s
commission of the offence under Section 415 IPC. The High
Court relied on the observations made by this ·Court in the case
of Ka/panath Rai Vs. State 31 and distinguished the judgment
in the case of M.V. Javali Vs. Mahajan B.orewe/1 & Co.32, . It is
held that a company being a juridical person cannot have the c
intention to deceive, which is the necessary mens rea for the
offence of cheating. According to the High court, although a
company can be a victim of deception, it can not be the
perpetrator of deception. It can only be a natural person who is
capable of having mens rea to commit the offence. According D
to the High Court, the same reasoning would also apply in
respect of the offence of conspiracy which involves a guilty mind
to do an illegal thing.

34. The judgments relied upon by 'the complainant are
distinguished by the High Court, as t~ey pertain to special E
provisions contained in different statutes such as, Income Tax
Act, Essentiai ·commodities ·Act, · Fo·od Adulteration ..Act and
TADA Act. It is noticed that in Kalpanath Rai Vs. State33 tnis
Court was concerned with the provisions of TADA Act. The
High Court was further of the opinion that Indian Penal Code F
does not contain any provision similar to the aforesaid acts.
Since the offence of cheating under Section 415 and the
offence of conspiracy under Section 1208 can only be
committed by a natural person, the word "whoever" cannot
include in its sweep, a juridical person like a company. The High G
Court notices the judgment of the Calcutta High Court in the

31 .. ((1997) a sec 732J
32. [(1997) a sec 121
33. Supra H
628 SUPREME COURT REPORTS (2010] 14 (ADDL.) S.C.R.

A case of A.K. Khosla Vs. T. S. Venkatesarf34 wherein it was held
that there are two tests in respect of prosecution of a corporate
body i.e. first being the test of mens era and the other being
the mandatory sentence of imprisonment. However, no opinion
has been expressed there upon by the High Court. In view of
B the aforesaid conclusions, the High Court has held that the
complaint would not be maintainable against the respondent.

35. We are of the considered opinion that there is much
substance in the submission of Mr. Jethmalani that virtually in
C all jurisdictions across the world governed by the rule of law,
the companies and corporate houses can no longer claim
immunity from criminal prosecution on the ground that they are
incapable of possessing the necessary.,- mens rea for the
commission of criminal offences. The legal position in England
and the United States has now crystallized to leave no manner
D of doubt that a corporation would be liable for crimes of intent.
In the year 1909, the United States Supreme Court in New York
Central & Hudson River Railroad Co. Vs. United States, 35
stated the principle thus:-

E "lt is true that there are some crimes whi9h, in their nature,
cannot be committed by corporations. But there is a large
class of offences, of which rebating· under the federal
statutes is one, wherein the crime consists in purposely
doing the things prohibited by statute._ In that class of
F crimes we see no good reason why corporations may not
be held responsible for and charged with the kn6wt,.edge
and purposes of their agents, acting within the authority
conferred upon them. If it were not so, many offences might
go unpunished and acts be committed in violation of law
where, as in the present case, the statute requires all
G
persons, corporate or private, to refraill from certain
pra~tices, forbidden in the interest of public policy.

***
34. [1992 Crl. L.J. 1448)
H 35. [53 LEd 613)
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 629
INCORPORATED [SURINDER SINGH NIJJAR, J.]
We see no valid objection in law, and every reason in A
public policy, why the corporation, which profits by the
transaction, and can only act through its agents and
officers, shall be held punishable by fine because of the
knowledge and intent of its agents to whom it has entrusted
authority to act in the subject-matter of making and fixing 8
rates of transportation, and whose knowledge and
purposes may well be attributed to the corporation for
which the agents act. While the law should have regard to
the rights of all, and to those of corporat{ons no less than
to those of individuals, it cannot shut its eyes to the fact c
that the great majority of business trans.actions in modern
times are conducted through these bodies, and particularly
that inter-State commerce is almost entirely in their hands,
and to give them immunity from all punishment because
of the old and exploded doctrine that a corporation cannot D
commit a ctime would virtually ta~e away the only means
of effectually controllin·g the subject-matter and correcting
the abuses aimed at." ·

The aforesaid sentiment is reiterated .in the 19 Americdn
Jurisprudence 2d para 1434 in the following words:- E ,

"Lord Holt is reported to have s'aid (Anonymous, 12 Mod
55-a 88 Eng Reprint 1164) that ~a corporation is not
indictable, but the particular members of it are'. On the
strengtry of this statement it was said by the early writers F
that a corporation is not indictable at common law, and this
view was taken by the courts in some of the earlier cases.
The broad general rule is now well established, however,
that a corporation may be criminally liable. This rule applies
as well to acts of misfeasance as to those of nonfeasance, G
and it is immaterial that the Act constituting the offence was
ultra vires. It has been held that a de facto corporation may
be held criminally liable.

As in case of torts the general rule prevails that a
corporation may be. criminally liable for the acts of an ~
630 SUPREME COURT REPORTS [2tn0] 14 (ADDL.) S.C.R. ·

A officer or agent, assumed to be done by him when
exercising authorized powers, and without proof that his
act was expressly authorized or approved by the
corporation. A specific prohibition made by the corporation
to its agents against violation of the law is no defence. The
B rule has been laid down. ·however, that corporations are
liable, civilly or criminally, only for the acts of their agents
who are·authorized to act for them in the particular matter
out of wh ich the unlawful conduct with which they are
charged grows or·in the business to which it relates."

C Again in 19 Corpus Juris Secundum, para 1363 it has been
observed as under:-

"A corporation may be criminally liable for crimes which
involve a specific element of intent as well for those which
D do not. and . although some crimes require such a
personal, malicious intent, that a corporation is considered
incapable of committing them, nevertheless. under the
proper circumstances the criminal intent of its agent may
be imputed to it so as to render it liable, the requisites of
E such imputation being essentially the same as those
required to impute malice to corporations in civil actions."

36. The Courts in England have emphatically rejected the
notion that a body corporate could not commit a criminal offence
which was an outcome of an ad of will needing a particular state
F of mind. The aforesaid notion has been rejected by adopting
the doctrine of attribution and imputation. In other words , the
criminal intent of the "alter ego" of the company I body
corporate, i.e., the person or group of person that guide the
business of the company, would be imputed to the corporation.
G It may be appropriate at this stage to notice the observations
made by the MacNaghten, J . in the case of Director of Public
Prosecutions Vs. Kent and Sussex Contractors Ltd.36:

H 36. [1944 1 AllER 119]
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 631
INCORPORATED [SURINDER SINGH NIJJAR, J.]
"A body corporate is a 'person' to whom , amongst the A
various attributes it may have, there should be imputed the
attribute of a mind capable of knowing and forming an
intention- indeed it is much too late in the day to suggest
the contrary. It can only know or form an intention through
its human agents, but circumstances may be such that the B
knowledge of the agent must be imputed to the body
corporate. Counsel for the respondents says that, although
a body corporate may be capable of having an intention,
it is not capable of having a criminal intention. In this
particular case the intention was the intention to deceive. G
If, as in this case , the responsible agent of. a body
corporate puts forward a document knowing it to be false
and intending that it should deceive, I apprehend, according
to the authorities that Viscount Caldecote, L.C.J., has cited,
his knowledge and intention must be imputed to the body
0
corporate."

The principle has been reiterated by Lord Denning in the
ca~e of H.L.Bolton (Engg.) Co. Ltd. Vs. T.J. Graham & Sons37
in the following words:-
E
"A company may in many ways be likened to a human
body. They have a brain and a nerve centre which controls .
what they do. They also have hands which hOld the tools
and act in accordance with directions from the centre.
Some of the people in the company are mere servants and F
·agents who are nothing more than hands to do the work
and cannot be said to represent the mind or will . Otners
are directors and managers who represent the directing
mind and will of the company, and control what they do.
The state of mind of these managers is the state of mind G
of the company and is treated by the law as such. So you .
will find that in cases where the law requires personal fault
as a condition of liability in tort; the fault of the manager

37. [1956 3 All ER 624]
H
632 SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.

A will be the personal fault of the company. That is made
clear in Lord Haldane's speech in Lennard's Carrying Co.
Ltd. Vs. Asiatic Petroleum Co. Ltd. (AC at pp. 713, 714}.
So also in the criminal law, in cases where the law requires
a guilty mind as a condition of a criminal offence, the guilty
a mind of the directors or the managers will render the
company them~elves guilty."

37. The aforesaid principle has been firmly established in
England since the decision of House of Lords in Tesco
Supermarkets Ltd. Vs. Nattrass38• In stating the principle of
C corporate liability for criminal offences, Lord Reid made the
following statement of law:-

"1must start by considering the nature of the personality
which by a fiction the law attributes to a corporation. A
D living person has a mind which can have knowledge or
intention or be negligent and he has hands to carry out his
intentions. A corporation has none of these; it must act
through living persons, though not always one or the same
person. Then the person who acts is not speaking or
E acting for the company. He is acting as the company and
his mind which directs his acts is the mind of the company.
There is no question of the company being vicariously
liable. He is not acting as a servant, representative , agent
or delegate. He is an embodiment of the company or, one
F could say, he hears and speaks through the persona of the
company, within his appropriate sphere, and his mind is
the mind of the company. If it is guilty mind then that guilt
is the guilt of the company. It must be a question of law
whether, once the facts have been ascertained, a person
in doing particular things is to be regarded as the
G
company or merely as the company's servant or agent. In
that case any liability of the company can only be a
statutory or vicarious liability."

H 38. [1971 All ER 127]
IRIDIUM INDIA TELECOM LTD. v_ MOTOROLA 633
INCORPORATED [SURINDER SINGH NIJJAR, J.]
l -

38. From the above it becomes evident that a corporation A
is virtually in the same position as any individual and may be
convicted of common law as well as statutory offences including
those requiring mens rea . The criminal liability of a corporation
would arise when an offence is committed in relation to the
business ofthe corporation by a person or body of persons in · B
control of. its affairs. In such circumstances, it would be
necessary to ascertain that the degree and control of the
person or body of persons is so intense that a corporation may
be said to think and act through the person or the body of
persons. The position of law on this issue in Canada is almost c
the same. Mens rea is attributed to corporations on the principle
of 'alter ego' of the company.

39. So far as India is concerned, the legal position has
been clearly stated by the Constitution Bench judgment of this
Court in the case of Standard Chartered Bank Vs. Directorate D
of Enforcemenf3 9 On a detailed consideration of the entire body
of case laws in this country as well as other jurisdictions, it has
been observed as follows:

"There is no dispute that a company is liable to be E
prosecuted and punished for criminal offences. Although
there are earlier authorities to the effect that corporations
cannot commit a crime, the generally accepted modern
rule is that except for such crimes as a corporation is held
incapable of committing by reason of the fact that they F
involve personal malicious intent, a corporation may be
subject to indictment or other criminal process, although
th~ r.riminal act is committed through its agents."

This Court also rejected the submission that a company could
avoid criminal prosecution in cases where custodial sentence -G
is mandatory. Upon examination of the entire issue, it is
observed as follows:-

"27. In the case of Penal Code offences, for example under
39. Supra H
634 . SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.

A Section 420 of the Indian penal_Code, for cheating and
dishonestly inducing delivery of property, the punishment
prescribed is imprisonment of either description for a term
which may extend to seven years and shall also be liable
to fine; and for the offence under Section 417, that is,
B simple cheating, _ t he punishment prescribed is
imprisonment of either description for a term which may
extend to one year or with fine or with both. If the appellants'
plea is accepted then for the offence under Section 417
IPC, which is an offence of minor nature, a company could
c be prosecuted and punished with fine whereas for the
offence under Section-420, which is an aggravated form
of cheating by which the victim is dishonestly induced to
deliver property, the company cannot be prosecuted as
there is a mandatory sentence of imprisonment.
D 28. So also there are several. other offences in the Indian
Penal Code which describe offences of serious nature
whereunder a corporate body also may be found guilty,
and the punishment prescribed is m_a ndatory custodial
sentence. There are a series of other offences under
E various statutes where the accused. are also liable to be
punished with custodial sentence and fine.

30~ As.the company cannot be sentenced to imprisonment,
· · the court has to resort to punishm~nt of imposition of fine
· .which is also a prescribed punishment. As per the scheme
F
of various enactments and also the Indian Penal Code,
mandatory· custodial sentence is prescribed for graver
offences. If the appellants' plea is accepted, no company
. or corporate bodies could be prosecuted for the graver
·offences whereas they could be prosecuted for minor
G offences. as the sentence prescribed therein is custodial
sentence or fine.

31 . As the company cannot be sentenced to imprisonment,
.the court cannot impose that punishment. but when
H imprisonment and fine is the prescribed punishment the
. .
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 635
INCORPORATED [SURINDER SINGH NIJJAR, J.}
court can impos~ the punishment of fine which could be A
enforced against the company. Such a discretion is to be
read into the section so far as the juristic person is
concerned. Of course, the court cannot exercise the same
discretion as regards a natural person. Then the court
would not be passing the sentence in accordance with law. B
As regards company, the court can always impose a
sentence of fine and the sentence of imprisonment can be
ignored as it is impossible to be carried out in respect of
a company. This appears to be the intention of the
legislature and we find no difficulty in construing the statute c
in such a way. We do not think that there is a blanket
immunity for any company from any prosecution for serious
offences merely because the prosecution would ultimately
entail a sentence of mandatory imprisonment. The
corporate bodies, such as a firm or company undertake a D
series of activities that affect the life, liberty and property
of the citizens. Large-scale financial irregularities are done
by various corporations . The corporate vehicle now
occupies such a large portion of the industrial, commercial
and sociological sectors that amenability of the corporation E
to a criminal law is essential to have a peaceful society
with stable economy.

32. We hold that there is no immunity to the companies
from prosecution merely because the prosecution is in
respect of offence·s for which ~he punishment prescribed F
is mandatory imprisonment (sic and fine). We overrule the
views expressed by the majority in .Vel!iappa Textiles! on
this point and answer the reference accordingly. Various
other contentions have been urged in aiJ appeals, including
t~is appeal, they be posted for hearing before an G
appropriate Bench."

40. These observations leave no manner of doubt that a
company I corporation cannot escape liability for a criminal
offence, merely because the punishment prescribed is that of
H
636 SUPREME COURT REPORTS [2010} 14 (ADDL.) S.C.R.

A imprisonment and fine. We are of the considered opinion that
in view of the aforesaid Judgment of this Court, the conclusion
reached by the High Court that the respondent could not have
the necessary mens rea is clearly erroneous.

41 . The next important question which needs to be
8
examined is as to whether the averments made in the complaint
if taken on their face value would not prima facie disclose the
ingredients for the offence of cheating as defined under Section
415 IPC. The aforesaid section is as under:-

c "Cheating.- Whoever, by deceiving any person, fraudulently
or dishonestly induces the person so deceived to deliver
any property to any person, or to consent that any person
shall retain any property, or intentionally induces the person
so deceived to do or omit to do anything wh ich he would
D not do or omit if he were not so deceive, and which act or
omission causes or is likely to cause damage or harm to
that person in body, mind, reputation or property, is said
to "cheat".

Explanation- A dishonest concealment of facts is a
E
deception within the meaning of the section."

42. A bare pe.rusal of the aforesaid section would show
that it can be conveniently divided into two.. parts. The first
. part
makes it necessary that the deception by the accused of the
F person deceived, must be fraudulent or dishonest. Such
deception must induce the person deceived to: either (a)
deliver property to any person; or ~b) consent that any person
shall retain any property. The second part also requires that the
accused must by deception intentionally induce the person
G deceived either to do or omit to do anything which he would
not do or omit, if he was not so deceived . Furthermore, such
act or omission must cause or must be likely to cause damage
or harm to that person in body, mind, reputation or property.
Thus, it is evident that deception is a necessary ingredient for
H the offences of cheating under both parts of this section. The
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 637
INCORPORATED [SURINDER SINGH NIJJAR, J.]
complainant, therefore, necessarily needs to prove that the A
inducement had been caused by the deception exercised by
the accused. Such deception must necessarily produce the
inducement to part with or deliver property, which the
complainant would not have parted with or delivered, but for the
inducement resulting from deception. The explanation to the 8
section would clearly indicate that there must be no dishonest
concealment of facts. In other words, non-disclosure of relevant
information would also be treated as a mis-representation of
facts leading to deception.

It was, therefore, necessary for the High Court to examine the
c
averments in the complaint in terms of the aforesaid section.
The High Court upon detailed examination of the 1992 PPM,
the Stock Purchase Agreements and the 1995 PPM concluded
that even if the averments made in the complaint are accepted
on ttteir face value, it would only disclose a civil dispute betWeen D
the parties.

'43. Surprisingly, the High Court notices the representations
that were made and contrasted the same with the actual realities
and yet concluded that the averments made in the complaint E
even if taken at their face value would not lead to the conclusion
that the respondent has committed the offence of cheating. In
coming to the aforesaid conclusions, the High Court has given
elaborate reasons. The High Court negated the submissions
of the appellant that 1992 PPM is in the nature of a prospectus F
or a brochure, which requires that all technical information
touching upon the commercial feasibility of the project had to
be faithfully and fully disclosed. The submission is rejected with
the observation that the 1992 PPM contained the following
caution:-
G
"An investment in Iridium involves certain risks, many of
which relate to the factors and developments listed above,
prospective investors should carefully consider the
disclosures set forth elsewhere in this memorandum,
H
638 SUPREME COURT REPORTS [2010] 14 (ADDL.) s.6.R.

A including those under the caption 'risk factors'(1992 PPM
Pg_ 5)"

The High Court also accepted the submissions of the
resp·ondent that the 1992 PPM contained a separate chapter
titled "Risk Factors". This portion related to the most important
6
risk factors which were as follows:-

"New regulated Business Venture. The Company is a new
business venture of global scope that will require
substantial licensing and authorizations from numerous
C sovereign nations before its business can be conducted
in the manner contemplated by its current business plan.
Therefore in deciding whether to invest rn Shares,
prospective investors must evaluate among other things,
the potential feasibility and future performance of the
D Company based on its business plan without benefit of any
operating history, and prior to application fqr an receipt of
such licensing and authorizations. No assurance can be
given that any of the necessary licenses and authorizations
will be obtained in a timely or at aiL (1992 PPM Pg. 72)"
E
44. According to the High Court, the respondent no_ 1 did
not keep the investors in dark about the Iridium System and
gave them all necessary information in respect of various
aspects of the system. In coming to the aforesaid conclusion,
F the High Court observed that "a bare perusal of the complaint
shows that there is no reference to the Stock Purchase
Agreements of 1993 and 1994. In fact, these two important
documents contain acknowledgments of the investors about
their capability of evaluating the merits and risks of the purchase
of the shares and their relying upon their own advisors." The
G High Court, therefore, negated the submission that there has
not been a complete and candid disclosure of the entire material
which has resulted in the deception I inducement of the
appellant to make huge investment in the Iridium. This
conclusion reached by the High Court did not take notice of the
H explanation to Section 415. The aforesaid explanation gives a
'
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 639
INCORPORATED [SURINDER SINGH NIJJAR, J.]
statutory recognition to the legal principles established through A
various judicial pronouncements that misleading statements
which withhold the vital facts for intentionally'inducing a person
to do or to omit to do something would amoul")t to deception.
Further, in case it is found that misleading statement has
wrongfully caused dam.age to the persor{ deceived it would a
amount to cheating . It would at this stage be appropriate to
nqtice·the observations made by the House of lords in the case
of The Director &c. of the Central Railway Company of
Venezuela Vs. Joseph Kisch 40 which would be of some
relevance to the issue under consideration. In this case; the c
House of Lords examined the duty of those who issued a
prospectus inviting investments from the general public and held
that they were required to make a true and full disclosure of all
the relevant facts. The House of lords quoted with approval the
observations made in the case of New Brunswick and Canada D
Railway Company Vs. Muggeridge41 wherein it has been
observed as follows :·

" .. .. ..... those who issue a prospectus holding out to the
public the great advantages which will accrue to persons
who will take shares in a proposed undertaking, and inviting E ·
them to take shares on the faith of the representations
therein contained; are bound to state everything with strict
and scrupulous accuracy, ·and not only to abstain from .
stating as fact that which is not so, but to omit no one fact
within their knowledge the existence of which might in any f:
degree affect the nature, or extent, or quality of the
privileges and advantages which the prospectus holds out
as inducements to take shares."

The House of Lords went on to observe that it is no answer to G
a person who has been deceived that he would have known
the truth by proper inquiry. It would be apposite to reproduce
here the observations made by the House of Lords on this
40. Supra
41. Supra H
640 SUPREME COURT REPORTS [2010) 14 (ADDL.) S.C.R.

A aspect of .the matter:
.
"But it appears t.<;> me that when once it is established that
there has been any fraudulent misrepresentation or willful
concealment by which a person has been induced to enter
into a contract, it is no answer to his claim to b~ relieved
8
from it to tell him that he might have known the truth by
proper inquiry. He has a right to retort upon his objector,
"You , at least, who have statep what is untrue or have
concealed the truth, for the purpose of drawing me into .a
contract, cannot accuse me of want of caution because I
c relied. implicitly upon your fairness and honesty". I quite
:~gree with the opinion of Lord Lyndhurst, in the case of
Small Vs. Attwood (1); that "where representations are
made with respect to the nature and character of property
which is to become the subject of purchase, affecting the
D value of that property, and those representations afterwards
turn out to be incorrect and false, to the knowledge of the
party making them , a foundation is laid for maintaining an
action in a Court of common Jaw to recover damages for
the deceit so practiced; and in a Court of equity a
E foundation is laid for setting aside the contract which was
founded upon that basis." And in the case of Dobell Vs.
Stevens (2), tq which he refers as an authority in support
of the proposition, which was an action for deceit in falsely
representing the amount of the business done in a public
F house, the purchaser was held to be entitled to recover
damages, although the books were in the house, and he
might have had access to them if he thought proper.

Upon the whole case I think the decree of Lords Justices
ought to be affirmed, and the appeal dismissed with costs."
G
The aforesaid observations leave no manner of doubt that the
appellants were entitled to an opportunity to prove the
averments made in the complaint. They were entitled to
establish that they have been deliberately induced into making
H huge investments on the basis of representations made by
IRIDIUM INDIA TELECOM LTD. v. MOTOROLA 641
INCORPORATED [SURINDER SINGH NIJJAR, J.]
respondent no. 1 and its representatives, which representations A
subsequently turned out to be completely false and fraudulent.
The appellants were entitled to an opportunity to establish that
respondent no. 1 and its representatives were aware of the
falsity of the representations at the time when they were· made.
The appellants have given elaborate details of the positive B
assertions made by respondent no. 1 which were allegedly false
to its knowledge. It is al$o claimed by the appellants that the
respondent no. f and its r~presentatives willfully concealed facts
which were material and ought to have been disclosed, but
were intentionally withheld so as to deceive the appellant into c
advancing and expending a sum of Rs.500 Crores.

As noticed earlier, both the appellants and· the respondents
have much to say in support of their respective view points.
Which of the views is ultimately to be accepted, could only be
decided when the parties have had the oppoijunities to place 0
the entire materials before the Court. This Couft has repeatedly
held that power to quash proceedings at the)mtial stage have
to be exercised sparingly with circumspection· and in the rarest
of the rare cases. The power is to be exercised ex debito
justitiae·. Such power can be exercised where a criminal E
proceeding is manifestly attended with malafide and have been
instituted maliciously with ulterior motive. This inherent power
' to be exercised to stifle a legitimate prosecution. In
ought not
the present case, the parties are yet to place on the record the
entire material in support of their claims. The issues involved F
are of considerable importance to the parties in particular, and
the world of trade and commerce in general.

45. In such circumstances, in our opinion, the High Court
ought to have refrained from indulging in detailed analysis of G
very complicated commercial documents and reaching any
definite conclusions. In our opinion, the High Court clearly
exceeded its jurisdiction in quashing the criminal proceeding
in the peculiar facts and circumstances of th is case. The High
Court noticed that while exercising jurisdiction ·under Section
H
642 SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.

A 482 Cr.P.C. "the complaint in its entirety will have to be
examined on the basis of the allegations made therein. But
the High Court has no authority or jurisdiction to go into the
matter or examine its correctness. The allegations in the ·
complaint will have to be accepted on the face of it and the
B truth or falsify cannot be entered into by the Court at this
stage. " Having said so, the High Court proceeded to do exactly
the opposite.

46. We, therefore, allow the appeal and set aside ttie
C impugned judgment of the Bombay High Court. There shall be
no order as to costs.

B.B.B. Appeal allowed.