Supreme Court of India
R. KALYANIversusJANAK C. MEHTA AND ORS.
- Citation
- 2008 INSC 1224
- Decided
- 24 October 2008
- Disposal
- Dismissed
- Bench
- S B SINHA
Holding
The Supreme Court upheld the quashing of the FIR against respondents 1 and 2 as the FIR disclosed no offence against them and held that the High Court’s order did not extend to respondent 3, whose investigation must continue.
Summary
The appellant R. Kalyani lodged an FIR under Sections 409, 420 and 468 read with Section 34 IPC against three respondents, alleging that the third respondent operated her account without consent and forged a letter, while the first two senior officers of the company were claimed to be vicariously liable. The respondents filed a petition under Section 482 CrPC to quash the FIR; the Madras High Court quashed the proceedings against respondents 1 and 2 but not against respondent 3. On appeal, the Supreme Court held that the FIR did not disclose any cognizable offence against respondents 1 and 2, so the High Court was correct in quashing the FIR against them. The Court also observed that respondent 3, who was not a petitioner, was not covered by the High Court order and his investigation must continue. Consequently, the appeal was dismissed.
Issues considered
- The High Court’s power under Section 482 CrPC to quash a FIR when the allegations do not disclose a cognizable offence against the accused.
- Whether vicarious liability can be attached to senior officers of a company under general criminal statutes.
- Whether the High Court’s order quashing the FIR against respondents 1 and 2 also extinguished the proceedings against respondent 3, who was not a petitioner.
- The proper scope and limits of the inherent jurisdiction of the High Court in criminal matters.
Legislation cited
- Code of Criminal Procedure, 1973s. 155, s. 156, s. 397, s. 482, s. 483
- Indian Penal Code, 1860s. 110, s. 34, s. 406, s. 409, s. 415, s. 420, s. 468
Subjects
Section 482 CrPCquashing FIRvicarious liabilityinherent jurisdictionIndian Penal Codecheatingforgerycorporate criminal liabilitycriminal procedure
Judgment
[2008] 14 S.C.R. 1249
R.'-:KALYANI A
V.
JANAK C. MEHTA AND ORS.
(Criminal Appeal No. 1694 of 2008 )
OCTOBER 24, 2008
B
[5.B. SINHA AND AFTAB ALAM, JJ.]
Code of Criminal Procedure, 1973 - s.482 - Criminal
proceedings - Quashing of, by High Court - Governing prin-
ciples - Explained - On facts, FIR lodged under ss.406, 420 C
and s.468 r.w. s.34 IPC against respondent 1to3- Petition for
quashing by respondent 1 and 2 - Allowed by High Court -
Challenge to - Held: High court rightly quashed proceedings
against respondent 1 and 2 as allegations contained in FIR
did not disclose offence against them - However,. since re-
0
spondent 3 was not applicant before High Court, his case was
not covered - Investigation against him would continue.
Liability - Vicarious liability - Held: Can be fastened only
by reason of a provision of statute - For the said purpose, a
legal fiction has to be created - Thus, if a person, has to be E
proceeded with as being vicariously liable for the acts of the
company, the company must be made an accused.
Respondent No.1 and 2 were the President and
Branch Coordinator of a Company. Both of them were
1
stationed at the Head Quarter at Bombay. The Company F
had branches including one at Chennai. Respondent no 13
was the Branch Manager of the Company at Chennai.
Appellant lodged a First Information Report against the
respondents alleging commission of offence und~r
ss.409, 420 and 468 r.w. s.34 IPC. G
The principal allegations in FIR were that the third -.
respondent without the knowledge and consent of the
appellant with mala fide intention, operated the account
1249 H
1250 SUPREME COURT REPORTS [2008] 14 S.C.R.
A maintained in the name of appellant. It was also alleged
in FIR that the second respondent forwarded a letter dated
10.1.2002 to the National Stock Exchange which was
forged and fabricated letter. Respondent no. 1 and 2 were
sought to be proceeded on the premise that they were
B vicariously liable for affairs of the Company.
Respondent no.1 and 2 filed petition under s.482
Cr.P.C. for quashing the First Information Report as also
the investigation initiated pursuant thereto, which was
allowed. Hence the instant appeal.
c
Dismissing the appeal, the Court
HELD: 1.1. The High Court ordinarily would not ex-
ercise its inherent jurisdiction to quash a criminal pro-
ceeding and, in particular, a First Information Report un-
D less the allegations contained therein, even if given face
value and taken to be correct in their entirety, disclosed
no cognizable offence. Such a power should be exer-
cised very sparingly. If the allegations made in the FIR
disclose commission of an offence, the court shall not
E go beyond the same and pass an order in favour of the ·
accused to hold absence of any mens rea or actus reus.
[Para 9] (1262-C, D, E)
1.2. Each case has to be considered on its own mer-
its. The Court, while exercising its inherent jurisdiction,
F although would not interfere with a genuine complaint
keeping in view the purport and object for which the pro-
visions of ss.482 and 483 Cr.P.C. had been introduced by
the Parlia~ent but would not hesitate· to exercise its ju-
risdiction in appropriate cases. One of the paramount
G duties of the Superior Courts is to see that a person who
is apparently innocent is not subjected to persecution and
humiliation on the basis of a false and wholly untenable
complaint. [Para 1O] (1262-F, G, H)
State of Haryana & Ors. v. Bhajan Lal & Ors. (1992)
H
R. KALYANI v. JANAK C. MEHTA 1251
& ORS.
,.. Supp.1 SCC 335; Rajesh Bajaj v. State of NCT of Delhi & A
Ors. (1999) 3 SCC 259; Hamid v. Rashid alias Rasheed &
Ors. (2008) 1 SCC 474; Sunita Jain v. Pawan Kumar Jain &
Ors. (2008) 2 SCC 705; State of Orissa & Anr. v. Saro} Kumar
Sahoo (2005) 13 SCC 540; Kai/ash Verma v. Punjab State
Civil Supplies Corporation & Anr. (2005) 2 SCC 571; Or. B
Monica Kumar & Anr. v. State of UP. & Ors. (2008) 9 SCALE
)- 166-reliedon.
2.1. A bare perusal of the First Information Report
clearly goes to show that authorisedly or unauthorisedly,
respondent No.3 was operating the appellant's account. C
It was furthermore not in dispute that she and her family
members were operating six accounts with the company.
It also stood admitted that the respondent No.3 resigned
from the post of Branch Manager on or about 25.10.2002.
The records also show that Demat Fixed Accounts were D
being operated by the brother of the appellant. It did not
appear that any transaction involving purchase and ·sale
of any share was entered into by and between the a·ppel-
lant and the company at any point of time, although the
accounts of the RSR Securities had been opened for trad- E
ing in shares. [Paras 15-17] (1265-B, C)
2.2. Whereas no allegation whatsoever was made
against the respondent No.1, the only allegation against
the respondent No.2 was that he had forwarded a letter
, dated 10.1.2002 ·to National Stock Exchange. The act of F
forgery on/or fabrication of the said letter was attributed
to Respondent No.3. The allegations contained in the First
Information Report, therefore, did not disclose an offence
against the respondent Nos 1 and 2. As there had never
been any interaction between the appellant and them, the G
. ., question of any representation which is one of the main
ingredients for constituting an offence of cheating, as con-
tained in s.415 IPC, did not and could not arise. Similarly,
it was not alleged that they were entrusted with or other-
wise had dominion over the property of the appellant or H
1252 SUPREME COURT REPORTS [2008] 14 S.C.R.
A they committed any criminal breach of trust. So far as "'
allegations in regard to commission of the offence of forg-.
ery were concerned, the same was made only against the
respondent No.3 and not against the respondent No.2.
Sending a copy thereof to the National Stock Exchange
8 without there being anything further to show that the re-
spondent No.2 had any knowledge of the fact that the
same was a forged and fabricated document would not -"(
constitute offence. Allegations contained in the FIR were
for commission of offences under a general statute. A vi-
carious liability can be fastened only by reason of a pro-
C vision of a statute and not otherwise. For the said pur-
pose, a legal fiction has to be created. A penal statute must
receive strict construction. If a· person, thus, has to be
proceeded with as being vicariously liable for the acts of
the company, the company must be made an accused. In
D any event, it would be a fair thing to do so, as legal fiction
is raised both against the Company as well as the person ~.
responsible for the acts of the Company [Paras 21, 23,
25, 26, 27, 28] (1266-G; 1267-D, F, G, H; 1268-A; 1271-A;
1271-G, H)
E Popular Muthiah v. State represented by Inspector of Po~
lice (2006) 7 SCC 296; Sham Sunder & Ors. v. State of
Haryana (1989) 4 SCC 630; Radhey Shyam Khemka & Anr.
• v. State of Bihar (1993) 3 SCC 54; Hira Lal Hari Lal Bhagwati
v. CBI, New Delhi (2003) 5 SCC 257; Vir Prakash Sharma v.
F Anil Kumar Agarwal & Anr. (2007) 7 SCC 373 - relied on. ,.
U.S. v. Wiltberger (1820) 2 Wheat (US) 76; Tuck v.
Priester (1887) 19 QBD 629; London and County Commer-
cial Properties Investments v. Attn Gen., (1953) 1 WLR 312;
Wills v. Thorp said (1875) LR 10 QB 383 - referred to.
G
Craies and Statute Law 7th Edn. At p. 529 - referred to . ...
2.3. Respondent No.3, arrayed as accused No.3 in
the First Information Report, did not file any application
under s.482 Cr.P.C. Nowhere in the impugned judgment,
H High Court found that the allegations contained in the
R. KALYANI v. JANAK C. MEHTA 1253
& ORS.
"' First Information Report against the respondent No.3 also A
did not disclose commission of any cognizable offence.
It is one thing to say that he has not committed the same
but it is another thing that the High Court's jurisdiction
under s.482 Cr.P.C. could have been invoked at this stage.
The High Court in its judgment cannot be said to have B.
covered the case of the respondent No.3. The investiga-
tion against him, therefore, should continue. However, it
would be open to him to take appropriate defences at ap-
propriate sta.ges as are permissible in law. [Paras 28,29]
(1272-B to E)
c
CASE LAW REFERENCE
(1992) Supp.1 sec 335 relied on Para 8
(1999) 3 sec 259 relied on Para 8
(2ooa) 1 sec 474 relied on Para 8 D
. (2008) 2 sec 105 relied on Para 8
. (2005) 13 sec 540 relied on Para 8
c2005) 2 sec 571 relied on Para 8
(2008) 9 SCALE 166 relied on Para 8 E
(2006) 1 sec 296 relied on Para 12
(1989) 4 sec 630 relied on Para 25
(1993) 3 sec 54 relied on Para 25
,F
(2003) 5 sec 257 relied on Para 25
(2001) 1 sec 373 relied on Para 25
(1820) 2 Wheat (US) 76 referred to Para 26
(1887) 19 QBD 629 referred to Para 26
G
(1953) 1 WLR 312 referred to Para 26
(1875) LR 10 QB 383 ref~rred to Para 26
CRIMINALAPPELLATE JURISDICTION: Criminal Appeal
No. 1694 of 2008 H
1254 SUPREME COURT REPORTS [2008] 14 S.C.R.
A From the final Judgment and Order dated 29.4.2004 of
the High Court of Judicature at Madras in Crl. O.P. No. 4613 of
2004
K.K. Mani, C.K.R. Lenin Sekar, R.K. Pandey and Punit
Aggarwal for the Appellant.
B
lndu Malhotra, Uday U. Lalit, Kunal Tandon, Vikas Mehta,
Vijay Thakur and Senthil Jagadeesan for the Respondents.
The Judgment of the Court was delivered by
c S.B. SINHA, J. 1. Leave granted.
2. Appellant lodged a First Information Report (FIR)
against the respondents on or about 4.1.2003 under Sections
409, 420 and 468 read with Section 34 of the Indian Penal
Code.
D
3. First and second respondent approached the High
Court for an order for quashing of the said FIR as also the in-
vestigation initiated pursuant thereto or in furtherance thereof.
The High Court allowed the said proceedings by reason of the
impugned order dated 29.4.2004.
E
Mr. K.K. Mani, learned counsel appearing on behalf of the
appellant, would, in support of the appeal, contend :
(1) The High Court exercised its inherent jurisdiction
under Section 482 of the Code of Criminal Procedure r
F wholly illegally and without jurisdiction insofar as it
entered into the disputed questions of fact in regard
to the involvement of the respondents as the contents
of the first information report disclose an offence of
cheating, criminal breech of trust and forgery.
G
(2) While admittedly the investigation was not even
complete, the High Court could not have relied upon
the documents furnished by the defendants either for
the purpose of finding out absence of mens rea on the
part of the applicants or their involvement in the case.
H
R. KALYANI v. JANAK C. MEHTA 1255
& ORS. [S.S. SINHA, J.]
't (3) Respondent Nos.1 and 2 herein being high ranking A
officers of M/s. Shares and Securities Ltd., a company
dealing in shares, were vicariously liable for
commission of the offence being in day to day charge
of the affairs thereof.
(4) An offence of forgery being a serious one and in B
view of the fact that the respondent No.2 forwarded
a letter purporting to authorize the accused No.3 to
transfer shares to the National Stock Exchange, he
must be held to have the requisite intention to commit
the said offence along with the respondent No.3. c
(5) In any view of the matter, the respondent No.3 being
not an applicant before the High Court, the entire
criminal prosecution could not have quashed by the
High Court.
D
4. Ms. lndu Malhotra, learned senior counsel appearing
on behalf of Respondent No.1, on the other hand, would con-
tend:
(a) In view of the admitted fact that a first information
report had been lodged by the respondents as E
against the appellant herein on 20.12 .2002, i.e., much
prior to the lodging of the FIR by the appellant herein
vis-a-vis the FIR lodged by the appellant herein on
4.1.2003, the same was done with a mala fide
intention. F
(b) In view of the fact that the appellant herself owed a
sum of Rs.13.28 lacs to the company and her group,
a sum of Rs.45 lacs which is evident from the balance
sheet of the appellants, continuation of the criminal
G
proceedings initiated against the respondents would
~
be an abuse of the process of court.
5. Mr. U.U. Lalit, learned senior counsel appearing on be-
half of the respondent No.2, supplementing the submissions of
Ms. Malhotra urged : H
1256 SUPREME COURT REPORTS [2008] 14 S.C.R.
A ( 1) Appellant having not entered into any individual ,...
transaction with the company and as the accounts
held by her together with members of her family were
treated as group accounts and only because
respondent No.2 had forwarded a letter of the
B appellant dated 10.1.2002, which is alleged to be
forged, to the NationC!I Stock Exchange, the same by
itself does not show that he was a party to the forgery.
(2) In respect of the offences under general law, vicarious
liability cannot be fastened on an individual.
c
6. Mr. Vijay Thakur, learned counsel appearing on behalf
of respondent No.3, submitted that although his client was not
an applicant before the High Court, if the High Court having
issued notice to him and quashed·the entire criminal proceed-
ings, the impugned judgment should not be interfered with.
D
7. The legal principles in regard to quashing of a First In-
•·
formation Report in view of a large number of decisions ren-
dered by this Court are now almost well settled.
8. We may notice some of them :
E
In State of Hazyana & Ors. v. Bhajan Lal & Ors. [1992
Supp.(1) sec 3L35r. it was held:
"192. In the backdrop of the interpretation of the various
relevant provisions of the Code under Chapter XIV and of
the principles of law enunciated by this Court in a series
of decisions relating to the exercise of the extra-ordinary
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
G cases by way of illustration wherein such power could be
exercised either to preve.nt 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
H guidelines or rigid formulae and to give an exhaustive list
R. KALYANI v. JANAK C. MEHTA 1257
& ORS. [S.B. SINHA, J.]
of myriad kinds of cases wherein such power should be A
exercised.
1. Where the allegations made in the First Information
Report or the complaint, even if they are taken at
their face value and accepted in their entirety do not
prima-facie constitute any offence or make out a case B
against the accused.
2. Where the allegations in the First Information Report
and other materials, if any, accompanying the F.l.R.
. do not disclose a cognizable offence, justifying an c
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.
3. Where the uncontroverted allegations made in the
. FIR or complaint and the evidence collected in support D
of the same do not disclose the commission of any
offence and make out a case against the accused.
4.
5. Where the allegations made in the FIR or complaint E
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
proceeding against the accused.
6. E
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 vie'«
G
to spite him due to private and personal grudge."
...
In Rajesh Bajaj v. State of NCT of Delhi & Ors. [(1999) 3
SCC 259], this Court held :
"7. After quoting Section 415 of IPC learned judges
H
1258 SUPREME COURT REPORTS [2008] 14 S.C.R.
A proceeded to consider the main elements of the .,..
offence in the following lines:
i•A bare reading of the definition of cheating would
suggest that there are two elements thereof, namely,
deception and dishonest intention to do or omit to
8 . do something. In order to bring a case within the first
part of Section 415, it is essential, in the first place,
that the person, who delivers the property should have "
been deceived before he makes the tjelivery; and in
the second place that he should have been induced
c to do so fraudulently or dishonestly. Where property
is fraudulently or dishonestly obtained, Section 415
would bring the said act within the ambit of cheating
provided the property is to be obtained by deception."
D
xxx xxx xxx
12. The High Court seems to have adopted a strictly hyper-
technical approach and sieved the complaint through a
calendar of finest gauzes for testing the ingredients under
Section 415, IPC. Such an endeavour may be justified
E during trial, but certainly not during the stage of
investigation. At any rate, it is too premature a stage for
the High Court to step in and stall the investigation by
declaring that it is a commercial transaction simplicitor
wherein no semblance of criminal offence is involved."
F In Hamid v. Rashid alias Rasheed & Ors. [(2008) 1 SCC
474], this Court opined :
"6. We are in agreement with the contention advanced on
behalf of the complainant appellant. Section 482 Cr.P.C.
saves the inherent powers of the High Court and its
G
language is quite explicit when it says that nothing in the
Code shall be deemed to limit or affect the inherent powers #--
of the High Court to make such orders as may be
necessary to give effect to any order under the Code, or
to prevent abuse of the process of any Court or otherwise
H
R. KALYANI v. JANAK C. MEHTA 1259
& ORS. [S.S. SINHA, J.]
to secure the ends of justice. A procedural Code, however A .
exhaustive, cannot expressly provide for all time to come
against all the cases or points that may possibly arise,
and in order that justice may not suffer, it is necessary that
every court must in proper cases exercise its inherent
power for the ends of justice or for the purpose of carrying B
out the other provisions of the Code. It is well established
principle that every Court has inherent power to act ex
debito justitiae to do that real and substantial justice for
the administration of which alone it exists or to prevent
abuse of the process of the Court."
c
In Sunita Jain v. Pawan Kumar Jain & Ors. [(2008) 2 SCC
705], it is stated :
"In exercising its jurisdiction under Section 561-A
the High Court would not embark upon an enquiry as
0
to whether the evidence in question is reliable or not.
That is the function of the trial Magistrate, and
ordinarily it would not be open to any party to invoke
the High Court's inherent jurisdiction and contend
that on a reasonable appreciation of the evidence
the accusation made against the accused would not E
be sustained."
In State of Orissa & Anr. v. Saroj Kumar Sahoo [(2005)
13 SCC 540], this Court stated the law, thus :
"11. As noted above, the powers possessed by the High F
Court under Section 482 of the Cr.P.C. are very wide and
the very plenitude of the power requires great caution in
its exercise. Court must be careful to see that its decision
in exercise of this power is based on sound principles.
The inherent power should not be exercised to stifle a G
legitimate prosecution. The High Court being the highest
court of a State should normally refrain from giving a prima
facie decision in a case where the entire facts are
incomplete and hazy, more so when the evidence has not
been collected and produced before the Court and the H
1260 SUPREME COURT REPORTS [2008] 14 S.C.R.
A issues involved, whether factual or legal, are of 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 cases in which the High Court will
exercise its extraordinary jurisdiction of quashing the
B proceeding at any stage.
xxx xxx xxx
"
14. It is to be noted that the investigation was not complete
and at that stage it was impermissible for the High Court
c to look into materials, the acceptability of which is
essentially a matter for trial. While exercising jurisdiction
under Section 482 of the Cr.P.C., it is not permissible for
the Court to act as if it was a trial Court. Even when charge
is framed at that stage, the Court has to only prima facie
be satisfied about existence of sufficient ground for
D proceeding against the accused: For that limited purpose, ..
the Court can evaluate material and documents on records
but it cannot appreciate evidence. The Court is not required
to appreciate evidence to conclude whether the materlals
produced are sufficient or not for convicting the accused.
}.
E In Chand Dhawan (Smf.) v. Jawahar Lal and Ors. [(1992)
3 sec ~17], it was observed that when the materials
relied upon by a party are reql. =red to be proved, no
inference can be drawn on the basis of those materials to
conclude the complaint to be unacceptable. The Court
~
F should not act on annexures to the petitions under Section ·-
482 of the Cr.P.C., which cannot be termed as evidence
without being tested and proved."
In Kailsah Verma v. Punjab State Civil Supplies Corpo-
ration & Anr. ((2005) 2 SCC 571], this Court stated :
G
"5. In Krishnan and Anr. v. Krishnaveni and Anr. ((1997)
4 SCC 241] this question came up for consideration. That
was a case where the complaint was registered under
Sections 420, 406 IPC. After inquiry, the police filed a
H ,report stating that the case was essentially of a civil na·ture
. . ' '
R. KALYANI v. JANAK C. MEHTA -1261
& ORS. [S. B. SINHA, J.]
and no offence was made out. The complainant brought A
the matter to the Superintendent of Police. As per the
• directions of the Superintendent of Police, the case was
investigated by the Crime Branch and a fresh report was
filed under Section 173 IPC. On receipt of the report, the
Magistrate took cognizance of the offences under Sections B
420 and 406 IPC. Thereupon, the appellant/accused filed
an application for discharge and the accused wa·s
'r
discharged by the Magistrate. The complainant filed a
revision before the Sessions Court and the revision was
dismissed. On further revision by the complainant, the High
Court set aside the order of the Magistrate and directed
c
the trial of the criminal case on merits. This was challenged
on the ground that the second revision was not
maintainable. A Bench consisting of three Judges of this
Court held:
D
... '. ..... though the revision before the High Court under
Sub-section (1) of Section 397 is prohibited Sub-
section 3 thereof, inherent power of the High Court
is still available under Section 482 of the Code and as
it is paramount power of continuous superintendence E
..... of the High Court under Section 483, the High Court
is justified in interfering with the order leading to
~ miscarriage of justice and in setting aside the order
of the courts below'."
However, Dr. Monica Kumar & Anr. v. State of U. ~ & Ors. F
[2008 (9) SCALE 166], held :
'The inherent power 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 prima
G
facie decision in a case where the entire facts are
~ incomplete and hazy, more so when. the evidence has not
\
been collected and produced before the Court and the
..../
~
issues involved, whether factual or legal, are of magnitude
and cannot be seen in their true perspective without
H
1262 SUPREME COURT REPORTS [2008) 14 S.C.R.
A sufficient material. Of course, no hard and fast rule can be
laid down in regard to cases in which the High Court will
exercise its jurisdiction of quashing the proceeding at any
stage."
9. Propositions of law which emerge from the said deci-
8 sions are:
(1) The High Court ordinarily would not exercise its ·
inherent jurisdiction to quash a criminal proceeding
and, in particular, a First Information Report unless
c the allegations contained therein, even if given face
·value and taken to be correct in their entirety,
. disclosed no cognizable offence.
(2) For the said purpose, the Court, save and except in
very exceptional circumstances, would not look to
any document relied upon by the defence.
(3) Such a power should be exercised very sparingly. If
the allegations made in the FIR disclose commission
of an offence, the court shall not go beyond the same
and pass an order in favour of the accused to hold
E absence of any mens rea or actus rems.
(4). If the allegation discloses a civil dispute, the same
- by itself may not be a ground to hold that the criminal
proceedings should not be allowed to continue.
F 10. It is furthermore well known that no hard and fast rule
can be laid down. Each case has to be considered on its own
merits. The Court, while exercising its inherent jurisdiction, al-
though would not interfere with a genuine complaint keeping in
view the purport and object for which the provisions of Sections
·G 482 and 483 of the Code of Criminal Procedure had been in-
_.:; ; ~ •. traduced by the Parliament but would not hesitate to exercise
'. •.. :.Jts jurisdiction in appropriate cases. One of the paramount du-
:· ' ties of the Superior Courts is to see-that a person who is appar-
ently innocent is not subjected to persecution and humiliation
a
H - on the basis of false and wholly untenable complaint.
R. KALYANI v. JANAK C. MEHTA 1263
& ORS. [S.B. SINHA, J.]
~
11. In the aforementioned backdrop, we may now exam- A
ine as to whether the FIR lodged by the appellant makes out
any case for proceeding against the respondent.
12. We may, for the said purpose, notice the ingredients
of Section 420 and 406 of the Indian Penal Code.
a
The ingredients of Section 420 of the Indian Penal Code
are as follows:
i) Deception of any persons;
ii) Fraudulently or dishonestly inducing any person to 0
deliver any property; or
iii) to consent that any person shall retain any property
and finally intentionally inducing that person to do or
omit to do anything which he would not do or omit.
D
Section 406 of the Indian Penal Code reads, thus:
"406. Punishment for criminal breach of trust.-Whoever
commits criminal breach of trust shall be punished with
imprisonment of either description for a term which may
extend to three years, or with fine, or with both." E
In Popular Muthiah v. State represented by Inspector of
Police [(2006) 7 sec 296], it was opined :
"While exercising its appellate power, the jurisdiction of
the High Court although is limited but, in our opinion, there F
exists a distinction but a significant one being that the
High Court can exercise its revisional jurisdiction and/ or
inherent jurisdiction not only when an application therefore
is filed but also suo motu. It is not in dispute that suo motu
power can be exercised by the High Court whi[e exercising
G
its revisional jurisdiction. There may not, therefore, be an
~
embargo for the High Court to exercise its extraordinary
inherent jurisdiction while exercising other jurisdictions Jo~.- .
the matter. Keeping in view the intention of the Parliament,
· while making the new law the emphasis of the Parliament
H
1264 SUPREME COURT REPORTS [2008] 14 S.C.R.
A being 'a case before the court' in contradistinction from 'a .,,
person who is arrayed as an accused before it' when the
High Court is seized with the entire case although would
, exercise a limited jurisdiction in terms of Section 386 of
the Code of Criminal Procedure, the same, in our
considered view, cannot be held to limit its other powers
and in particular that of Section 482 of the Code of Criminal
Procedure in relation to the matter which is not before it."
13. LKP Shares and Securities Ltd. (the Company) is a
company registered and incorporated under the Indian Com-
e panies Act, 1956. Whereas respondent No.1 is its President,
the second respondent is its Branch Coordinator. Both of them
are stationed at Bombay which is its headquarters. It has many
branches including the one at Chennai. Every branch is said to
be an independent entity.
·D
14. Respondent No.3 who has been arrayed as accused
No.3 in the FIR was the Branch Manager of the company at
. Chennai. Indisputably,. all interactions and transactions by and
between the appellant and the company, if any, were made by
tt:ie complainant only with the respondent No.3.
E
15. A bare perusal of the First Information clearly goes to
show that authorisedly or unauthorisedly, respondent No.3 was
operating the appellant's account. It is furthermore not in dis-
pute that she and her family members were operating six ac-
F. counts with the com~any, the details whereof are as under :
SI. No. Name Account No.
1. Mr. A Sridhar A555
2. Mr. Dinesh D 0316
G
3. Mrs. Dhanam 80002
4. Ms. Kalyani R. K0004
5. Jayamani S. J0001
H 6. M/s. R.S.R. Securities Limited R0014
R. KALYANI v. JANAK C. MEHTA 1265
& ORS. [S.B. SINHA, J.]
16. It is admitted that the appellant and her husband were 'A
Directors of M/s. R.S.R. Securties Ltd. It is furthermore con-
ceded that the respondent No.3 and the brother of the appel-
lant herein, when the company was in great financial difficul-
ties, became the Directors of the said M/s. RSR Securities Ltd.
It also stands admitted that the respondent No.3 resigned from.· B
the post of Branch Manager on or about 25.10.2002. !
17. The records before us also show that Demat Fixed
Accounts were being operated by Sridhar, brother of the ap-
pellant. It does not appear that any transaction involving pur-
chase and sale of any share was entered into by and between C
the appellant and the company at any point of time, although
the accounts of the RSR Securities had been opened for trad-
ing in shares.
18. Apparently, the First Information Report does not con- D
tain any allegation against the appellant No.1.
19. The principal allegations therein are only against the
third respondent which may be enumerated hereinafter :
(1) He, without the knowledge and consent of the
complainant with mala fide intention, operated the E
account maintained in her name.
(2) He promised to take over the liabilities of the
company's account R-14 and at his instance only the
appellant and her husband resigned from the F
company and he and Mr. Sridhar became the
Directors.
(3) Accused No.3 promised to pay a sum of Rs.9.57
lacs being the balance in the account K-4 and also
Rs.11.97 lacs being the value of shares purchased ~
in the account as early as 1999 but not delivered in
time, but he failed and or neglected to do so.
Paragraph 11 of the said First Information which is mate-
rial for our purpose reads as under :
H
1266 SUPREME COURT REPORTS [2008] 14 S.C.R.
A "11. The complainant submits that the 3rd accused in R-14 ..
account without the knowledge and consent of the
complainant caused liabilities in the said account and even
after taking over the said liabilities by the 3rd accused by
inducting himself as director of the company now with
B ulterior intentions, fabricated a letter dated 10.1.2002 ·
purported to have been written by the complainant by
forging signature of the complainant, thereby trying to
"
misappropriate the money due to the complainant from
the personal account and also the 1st and 2nd accused
... who are responsible for the day to day management and
c affairs of the company as responsible persons of the
company, liable for the act of 3rd accused who is a manager
in their company."
20. It was also alleged therein that the appellant came to
D learn that the second accused had forwarded a letter dated
10.1.2002 to the national Stock Exchange which is said to be a r
forged and fabricated letter, the contents whereof are :
~
-
"Pursuant to the discussions my brother Mr. A. Sridharan
· had with you regarding settlement of all outstanding
E payments in the accounts which we were operating.
I request you to transfer the credit balance of Rs.9,57 ,037 .16
·~
from my personal account No.K004 to adjust the debit
balance of Rs.21,08,420.45 in our co·mpany SRI R.S.R.
F Securities account No.R104. Any further debit balance
after adjustment as above will be recoverable against the -
company."
21. Whereas, thus, no allegation whatsoever has been
made against the respondent No.1, the only allegation against
G the respondent No.2 was that he had forwarded the said letter
dated 10.1.2002 to National Stock Exchange. The act of forg-
ery on/or fabrication lof the said letter had been attributed to
, Respondent No.3.
Respondent Nos.1 and 2 ~erein were sought to be pro-
H
R. KALYANI v. JANAK C. MEHTA 1267
& ORS. [S.B. SINHA, J.]
-1
ceeded against on the premise that they are vicariously liable A
for the affairs of the company.
22. As Mr. Mani had time and again referred to the allega-
tions relating to forgery of the said document dated 10.1.2002,
we may also notice a disturbing fact. Before lodging the said '
First Information, a notice was issued by the appellant against B
the respondents herein on 15.10.2002, whereas the address '
of respondent Nos.1 and 2 were shown as 404, Embassy Cen-
tre, Nariman Point, Mumbai - 400 021 and 302, Veena Cham-
bers, 21, Dalal Street, Fort, Mumbai - 400 001 respectively.
However, in the complaint petition, they were shown to be resi- c
dents of Chennai.
23. In the aforementioned factual backdrop, we although
do not agree with the approach of the High C_ourt, concur with
its conclusion.
,0
The allegations contained in the First Information Report,
therefore, do not disclose an offence against the respondent
Nos 1 and 2. They have in their individual capacity been charged
for commission of offences of cheating, criminal breach of trust
and forgery.
E
24. As there had never been any interaction between the
appellant and them, the question of any representation which is
one of the main ingredients for constituting an offence of cheat-
ing, as contained in Section 415 of the Indian Penal Code, did
not and could not arise.
F
25. Similarly, it has not been alleged that they were en-
trusted with or otherwise had dominion over the property of the
appellant or they have committed any criminal breach of trust.
So far as allegations in regard to commission of the of-
fence of forgery are concerned, the same had been made only G
against the respondent No.3 and not against the respondent
No.2. Sending a copy thereof to the National Stock Exchange
without there being anything further to show that the respondent
No.2 had any knowledge of the fact that the same was a forged
and fabricated document cannot constitute offence. H
1268 SUPREME COURT REPORTS [2008) 14 S.C.R.
A Allegations contained in the FIR are for commission of ,.
offences under a general statute. A vicarious liability can be
fastened only by reason of a provision of a statute and not oth-
erwise. For the said purpose, a legal fiction has to be created.
Even under a special statute when the vicarious criminal liabil-
B ity is fastened on a person on the premise that he was in-charge
of the affairs of the company and responsible to it, all the ingre-
dients laid down under the statute must be fulfilled. A legal fie-
tion must be confined to the object and purport for which it has
been created.
c In Sham Sunder& Ors. v. State of Haryana ((1989) 4 SCC
630], this Court held :
"9. But we are concerned with a criminal liability under
penal provision and not a civil" liability. The penal provision
must be strictly construed in the first place. Secondly, there
D
is no vicarious liability in criminal law unless the statute
takes that also within its fold. Section 1O does not provide
for such liability. It does not make all the partners liable for
the offence whether they do business or not."
E Yet again, in Radhey Shyam Khemka & Anr. v. State of
Bihar ((1993) 3 SCC 54], the law has been laid down by this
Court, thus :
"6. But, at the same time, while taking cognizance of alleged
offences in connection with the registration, issuance of
F prospectus, collection of moneys from th.e investors and
the misappropriation of the fund co'llected from the shar:e-
holders which constitute one offence or other under the
Penal Code, court must be satisfied that prima facie and
offence under the Penal Code has been disclosed on the
G materials produced before the court. If the screening on
this questi~n is not done properly at the stage of initiation
'f
of the criminal proceeding, in many cases, some
disgruntled share-holders may launch prosecutions agai!lst
the promoters, directors an<;I those in charge of the
H · · management of the company concerned and can paralyse
R. KALYANI v. JANAK C. MEHTA 1269
& ORS. [S.B. SINHA, J.]
the functioning of such company. It need not be impressed A
that for prosecution for offences under the Penal Code the
complainant has to make out a prima fade case against
the individuals concerned, regarding their acts and
omissions which constitute the different ingredients of the
offences under the Penal Code. It cannot be overlooked B
that there is a basic difference between the offences under
the Penal Code and acts and omissions which have been
made punishable under different Acts and statutes which
are in nature of social welfare legislations. For framing
charges in respect of those acts and omissions, in many
cases,. mens rea is not an essential ingredient; the
c
concerned statue imposes a duty on those who are in
charge of the management, to follow the statutory
provisions and once there is a breach or contravention,
such persons become liable to be punished. But for
D
framing a charge for an offence under the Penal Code,
the traditional rule of existence of mens rea is to be
followed."
In Hira Lal Hari Lal Bhagwati v. CBI, New Delhi [(2003) 5
sec 257], it has been held: E
"32. Likewise the ingredients of Section 420 of the Indian
Penal Code are also not made out. There is no reason as
to why the appellants must be made to undergo the agony
.J
of a criminal trial as has been held by this Court in the
case of G. Sagar Suri and Anr. v. State of U.P. and Ors. F
[(2000) 2 SCC 636]. In this, this Court held that.
"Jurisdiction under Section 482 of the Code has to
be exercised with great care. In exercise of its
jurisdiction the High Court is not to examine the
matter superficially. It is to be seen if a matter, which
G
is essentially of a civil nature, has been given a cloak
of criminal offence. Criminal proceedings are not a
short cut of other remedies available in law. Before
issuing process a criminal court has to exercise a
H
1270 SUPREME COURT REPORTS [2008] 14 S.C.R.
A great deal of caution. For the accused, it is a serious •
matter."
39. It is settled law, by catena of decisions, that for
establishing the offence of cheating, the complainant is
required to show that the accused had fraudulent or
B dishonest intention at the time of making promise of
representation. From his making failure to keep up
promise subsequently, such a culpable intention right at
the beginning that is at the time when the promise was
made cannot be presumed."
c
{[See also Vir Prakash Sharma v. Anil Kumar Agarwal &
Anr. [(2007) 7 sec 373]}.
26. Although the legal principle that a penal statute must
receive strict construction, it is not in doubt or dispute, we may
D notice some authorities in this behalf.
.
In Section 263 of the Francis Bennion's Statutory Inter-
pretation it is stated :
"A principle of statutory interpretation embodies the policy
E of the law, which is in turn based on public policy. The
Court presumes, unless the contrary intention appears,
that the legislator intended to conform to this legal policy
A principle of statutory interpretation can therefore be
described as a principle of legal policy formulated as a
F guide to legislative intention."
Maxwell in The Interpretation of Statutes (12th Edn) says:
"The strict construction .of penal statutes seems to manifest
itself in four ways: in the requirement of express language
for the creation of an offence; in interpreting strictly words
G
setting out the elements of an offence; in requiring the
If
fulfillmentto the letter of statutory conditions precedent to
the infliction of punishment; and in insisting on the strict ·
observance of technical provisions concerning cciminal
procedure and jurisdiction."
H
R. KALYANI v. JANAK C. MEHTA 1271
& ORS. [S.B. SINHA, J.]
In Craies and Statute Law (71h Edn. At p. 529) it is said that A
penal statutes must be construed strictly. At page 530 of the
said treatise, referring to U.S. v. Wiltberger, [(1820) 2 Wheat
(US) 76], it is observed, thus :
"The distinction between a strict construction and a more
free one has, no doubt, in modern times almost B
disappeared, and the question now is, what is the true
.. construction of the statute? I should say that in a criminal
statute you must be quite sure that the offence charged is
within the letter of the law. This rule is said to be founded
on the tenderness of the law for the rights of individuals, c
and on the plain principle that the power of punishment is
vested in the Legislature, and not in the judicial department,
for it is the Legislature, not the Court, which is to define a
crime and ordain its punishment"
D
In Tuck v. Priester, [(1887)) 19 QBD 629] which is followed
in London and County Commercial Properties Investments v.
Attn Gen., [(1953) 1 WLR 312], it is stated:
"We must be very careful in construing that section,
because it imposes a penalty. If there is a reasonable E
interpretation, which will avoid the penalty in any
particular case, we must adopt that construction. Unless
penalties are imposed in clear terms they are not
enforceable. Also where various interpretations of a
section are admissible it is a strong reason against F
adopting a particular interpretation if it shall appear that
the result would be unreasonable or oppressive."
Blackburn, J. in Wills v. Thorp said [(1875) LR 10 QB 383]:
"When the Legislature imposes a penalty, the words
G
imposing it must be clear and distinct."
~ -
27. If a person, thus, has to be proceeded with as being
variously liable for the acts of the company, the company must
be made an accused. In any event, it would be a fair thing to do
so, as legal fiction is raised both against the Company as well H
1272 SUPREME COURT REPORTS [2008] 14 S.C.R.
A as the person responsible for the acts of the Company.
- 28. For the reasons aforementioned, we do not find any
legal infirmity in the impugned judgment. Before parting with
this case, however, we must clarify one aspect of the matter.
B Respondent No.3, arrayed as accused No.3 in the First
Information Report, did not file any application under Section
482 of the Code of Criminal Procedure. We do not know under
·•
what Circumstances, the High Court directed service of the no-
tice on him. Nowhere in the impugned judgment, High Court
c found that the allegations contained in the First Information Re-
port against the respondent No.3 also do not disclose commis-
sion of any cognizable offence. It is one thing to say that he has
not committed the same but it is another thing that the High
Court's jurisdiction under Section 482 of the Code of Criminal
Procedure could have been invoked at this stage.
D
29. In view of our findings aforementioned, we have no >--
other option but to hold that the High Court in its judgment can-
not be said to have covered the case of the respondent No.3.
The investigation against him, therefore, shall continue. How-
E ever, it will be open to him to take appropriate defences at ap-
propriate stages as are permissible in law.
30. The appeal is dismissed with the aforementioned ob-
servations.
F D.G. Appeal dismissed. j._
f
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