RELIGARE FINVEST LIMITEDversusSTATE OF NCT OF DELHI & ANR.

                 [2023] 12 S.C.R. 197 : 2023 INSC 819



                            CASE DETAILS

                   RELIGARE FINVEST LIMITED
                                     v.
                  STATE OF NCT OF DELHI & ANR.
                  (Criminal Appeal No(s). 2242 of 2023)
                         SEPTEMBER 11, 2023
       [S. RAVINDRA BHAT AND ARAVIND KUMAR, JJ.]
                             HEADNOTES
     Issue for consideration: Whether a transferee entity-a successor
bank (DBS Bank) can be fastened with corporate criminal liability for
the offences which the amalgamating entity-the erstwhile Laxmi Vilas
Bank (LVB) is accused of.
     Criminal Law – Corporate criminal liability – When cannot be
fastened on a transferee entity:
     Held: Criminal liability of a company cannot be transferred ipso
facto, except when it is in the nature of penalty proceeding – Only
defi ned legal proceedings are succeeded to by the transferee company,
which is the DBS Bank in the instant case – Further, every scheme of
amalgamation is statutory and sanctioned under the Banking Act – Such
amalgamation aims at securing larger public interest and health of the
banking industry – Overall objective of the scheme is to ensure recovery
of what are the bank’s dues and ensuring protection of the creditors – In
the present case, Clause 3 (3) of the amalgamation scheme no doubt,
mentions that legal proceedings would be continued by or against the
transferee bank-DBS Bank however, when viewed in the backdrop as
aforesaid, the express mention of directors and such other individuals
in the proviso to Clause 3 (3) means that it is to that extent only that
prosecutions or other criminal proceedings can continue; in the ordinary
sense, criminal liability can neither be attributed to DBS nor its directors,
brought in after the amalgamation, whose appointments were approved
by the RBI– Criminal liability of the individuals now attributed to
DBS are actions of those who were officials of LVB – Their individual
                                    197
198          SUPREME COURT REPORTS                        [2023] 12 S.C.R.


responsibility and accountability in criminal law remains unaffected
by the amalgamation – No involvement of DBS Bank revealed in the
charge sheet – Pending criminal proceedings to the extent it involved
DBS, which was the subject mat-ter of the impugned judgment and all
consequent proceedings arising therefrom (to the extent involving DBS),
quashed – Impugned judgment set aside – Banking Regulation Act, 1949
– s.45(2) – Penal Code, 1860 – ss.409, 120B. [Paras 30-32, 34 and 35]
      Criminal Law – Criminal liability of a company:
      Held: Criminal liability of a company is recognized where it can
be attributable to individual acts of employees, directors or officials of a
company or juristic persons – It is recognized even if its conviction results
in a term of imprisonment – Further, the legal effect of amalgamation
of two companies is the destruction of the corporate existence of the
transferor company (LVB, in the present case); it ceases to exist. [Para 30]
      Criminal Law – Quashing – Exercise of power:
      Held: Power to quash a criminal investigation or proceedings
should not be lightly exercised – Yet, to refuse recourse to that power,
in cases that require or may demand it, is being blind to justice – In
the present case, the public’s confidence in the banking industry was at
stake, when RBI stepped in, imposed the moratorium and asked DBS
to take over the entire functioning, management assets and liabilities of
the erstwhile LVB – To permit prosecution of DBS for the acts of LVB
officials (facing criminal charges) would result in travesty of justice.
[Para 35]
     Criminal Law – Liability of corporate entities – Divergence of
opinion amongst certain High Courts – Discussed.

       LIST OF CITATIONS AND OTHER REFERENCES

     McLeod Russel India Limited v. Regional Provident Fund Commissioner,
Jalpaiguri & Ors., [2014] 9 SCR 162; Iridium India Telecom v. Motorola Inc.,
(2010) 14 (Addl.) SCR 591; M/s. General Radio & Appliances Co. Ltd. v. M.A.
                 RELIGARE FINVEST LIMITED V.                       199
                 STATE OF NCT OF DELHI & ANR.

Khader (dead) by LR’s, [1986] 2 SCR 607; Saraswati Industrial Syndicate
Ltd. v. CIT, Haryana, H.P. & Delhi, [1990] 1 Supp SCR 332 – relied on.
     Sham Sunder & Others v. State of Haryana, (1984) 4 SCC 630
: [1989] 3 SCR 886; M. Abbas Haji v. T.N. Channakeshava, (2019)
9 SCC 606; Standard Chartered Bank v. Directorate of Enforcement,
[2005] 1 Suppl. ) SCR 49 – referred to.
     Champa Agency v. R. Chowdhury, 1974 CHN 400; Sunil Banerjee
v. Krishna Nath, AIR 1949 Cal 689; AK Khosla v. Venkatesan, (1992)
98 CrLJ 1448 (Cal); Esso Standard Inc. v. Udharam Bhagwandas
Japanwalla, [1975] 45 Comp Cas 16 (Bom); Tesco Supermarkets Ltd.
v. Nattrass, 1971 (2) All ER 127; Meridian Global Funds Management
Asia Ltd v. Securities Commission, [1995] 3 All ER 918; Walker’s
Settlement 1935 (1) Ch. D. 567; In Re: Skinner 1958 (3) All E.R 273
– referred to.
    Stroud’s Judicial Dictionary of Words and Phrases (9th edition). 25
Black’s Law Dictionary, Eleventh Edition – referred to.

      OTHER CASE DETAILS INCLUDING IMPUGNED
             ORDER AND APPEARANCES

    CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
2242 of 2023.
     From the Judgment and Order dated 24.03.2023 of the High Court
of Delhi at New Delhi in CRLMC No. 3173 of 2021.
     With
     Criminal Appeal No. 2243 of 2023
     Appearances:
     Mukul Rohatgi, Jayant Bhushan, Jana Kalyan Das, Rana
Mukherjee, Sr. Advs., Amit Jajoo, Ms. Sushmita Gandhi, Malak Manish
Bhatt, Ms. Neeha Nagpal, Ms. Vatsala Pant, Ms. Samridhi, Sandeep
Devashish Das, Shreekant Neelappa Terdal, Ms. R. Bala, Sachin
Sharma, Bhawarpal Singh Jadon, Dr. N. Visakamurthy, Advs. for the
appearing parties.
200             SUPREME COURT REPORTS                     [2023] 12 S.C.R.



         JUDGMENT / ORDER OF THE SUPREME COURT
                                    JUDGMENT
       S. RAVINDRA BHAT, J.
     1. These appeals 1 arise from a final order2 of the Delhi High
Court rejecting a petition for quashing criminal proceedings, filed by
the DBS Bank India Limited (second respondent in the first appeal /
appellant in second the appeal) (hereafter “DBS”). In the two appeals,
Religare Finvest Limited (hereafter “complainant” or “RFL”) and DBS
have challenged the impugned order. To be more specific, they are also
impleaded as second respondents in each other’s appeal.
     2. RFL filed a commercial suit 3 seeking to recover ₹791 Crores
from (the erstwhile) Laxmi Vilas Bank (hereafter “LVB”). The claim
was based on the allegations that LVB misappropriated Fixed Deposits
(“FDs”) furnished as security by RFL and its group companies, namely
RHC Holding Pvt. Ltd. (hereafter “RHC Holding”) and Ranchem Pvt.
Ltd. (hereafter “Ranchem”), to secure short-term loans.
     3. Subsequently, on 23.9.2019, RFL lodged a criminal complaint
asserting that officials of LVB had conspired with RHC Holding and
Ranchem. This led to the registration of FIR4 by the Economic Offences
Wing under Sections 409 and 120B of the Indian Penal Code, 1860
(IPC) (registered as Crime No. 1534/2020). The contents of the FIR
alleged that RFL had placed four FDs with a combined value of ₹750
Crores as security for short-term loans. LVB extended loans to RHC
Holding and Ranchem, utilizing these FDs as security. When RHC
Holding and Ranchem defaulted on their loan payments, LVB debited
an amount of ₹723.71 crores from RFL’s current account without
obtaining proper authorization or prior notice.
     4. Meanwhile, due to high net levels of Non-Performing Assets,
inadequate Capital to Risk (Weighted) Average Ratio and Common


1     Crl. A. No. 2242 / 2023 & Crl.A. No. 2243 / 2023.
2     Dated 24.3.2023 in Crl. M. C. No. 3173 of 2021.
3     (Comm.) No. 940/2018.
4     FIR No. 189/2019.
    RELIGARE FINVEST LIMITED v. STATE OF NCT OF                                     201
         DELHI & ANR. [S. RAVINDRA BHAT, J.]

Equity Tier-I Capital, two years of negative Return on Assets, and
high leverage, the Reserve Bank of India (hereafter “RBI”) placed
LVB under “Prompt Corrective Action” 5.
     5. A chargesheet was filed against ten bank officials of LVB;
however, LVB itself was not implicated as an accused. The Chief
Metropolitan Magistrate took cognizance of these offenses on
September 17, 2020.6
     6. On November 17, 2020, RBI imposed a moratorium7 on LVB in
terms of Section 45(2) of the Banking Regulation Act, 1949 [hereafter
“the Banking Act”]. On November 25, 2020, due to LVB’s unstable
financial condition, the Central Government directed its non-voluntary
amalgamation to DBS 8.
      7. On February 12, 2021, a supplementary chargesheet or final
report was filed, to implead LVB, represented through its director, (now
DBS Bank India Limited after amalgamation), as an accused9 along
with bank officials and the companies RHC Holding and Ranchem. It
was alleged that LVB and other accused parties conspired to siphon
off funds that were lent, and belonged to RFL. LVB stood to make
substantial profits from this lending, as it obtained the FDs at a 4.5%
interest rate and then ostensibly lent the money at a rate of 10% p.a.
Investigation revealed that LVB’s actions were based on the premise
that RFL, RHC Holding, and Ranchem were group companies under the
same promoters. LVB created security against FDs of RFL. However,
proper authorization from RFL was not secured for this arrangement.
The loans advanced by LVB to RHC Holding and Ranchem against
FDs of RFL were ultimately utilized by RHC Holding. Consequently,


5   Prompt Corrective Action (PCA) Framework is to enable Supervisory intervention at
    appropriate time and require the Supervised Entity to initiate and implement remedial
    measures in a timely manner, so as to restore its financial health. The PCA Framework
    is also intended to act as a tool for effective market discipline. The PCA Framework
    does not preclude the Reserve Bank of India from taking any other action as it deems
    fit at any time in addition to the corrective actions prescribed in the Framework.
6   Crime Case No. 1534/2020, titled State vs. Malvinder Mohan Singh.
7   Moratorium order dated 17.11.2020.
8   under section 45(7) of the Banking Regulation Act, 1949.
9   in Crime No. 1534/2020.
202           SUPREME COURT REPORTS                      [2023] 12 S.C.R.


when RHC Holding failed to repay the loans to LVB, the FDs of RFL
were adjusted by LVB against the outstanding loan amounts. As a
result, it was observed that the actual beneficiaries of RFL’s funds,
amounting to ₹729.13 Crores, was the RHC Holding. In absence of
sufficient documentation supporting explicit authorization from RFL
led to the allegation that LVB facilitated the diversion of funds for the
promoter’s personal gain.
     8. In this way, LVB revoked the FDs worth ₹729 Crores and also
benefited by earning ₹115 crores, in interest. It was alleged that the
parties involved acted in connivance with each other and committed
acts of commission and omission in furtherance of the conspiracy to
cheat the complainant company.
     9. Summons were issued to DBS (identified as accused No. 12)
on 16.2.2021. Aggrieved, DBS filed a Criminal Miscellaneous Case10
before the Delhi High Court, seeking to quash the supplementary
chargesheet dated 12.2.2021 and summoning order dated 16.2.202111 ,
contending inter alia that LVB had ceased to exist due to the non-
voluntary amalgamation scheme and that DBS should not face
prosecution for the acts and omissions of the entity which it merged
with, as directed by the Government of India and the RBI. Additionally,
Clause 3(3) of the Amalgamation scheme provides for the institution of
criminal proceedings against officials of LVB and therefore, liability
should not be attributed to the rescuer bank.
      10. The High Court, by its impugned order, observed that quashing
the summoning order against the DBS at this stage may hamper
the purpose of the scheme since there was no explicit provision for
abatement of criminal proceedings against the DBS bank in the scheme
sanctioned by the RBI. The court directed the involved parties to seek
clarification regarding the interpretation of Clause 3(3) of the scheme
in respect of criminal proceedings constituted against transferor bank if be
carried forward to transferee bank or not after the amalgamation from RBI.
Additionally, the court stayed the summoning order issued on February


10 Crl. M. C. No. 3173/2021.
11 Arising out FIR No. 189/2019.
    RELIGARE FINVEST LIMITED v. STATE OF NCT OF                        203
         DELHI & ANR. [S. RAVINDRA BHAT, J.]

16, 2021, against DBS Bank till clarification was issued by RBI.
DBS appeals to this court, aggrieved by the refusal to quash criminal
proceedings by the impugned order; RFL’s appeal is limited to the point
that the court ought not to have deferred the issue, for consideration by
RBI and should have dismissed the request for quashing, simpliciter
and ought not to have indefinitely stayed the summoning order.
     Contentions of RFL
      11. Mr. Rana Mukherjee, learned senior counsel for RFL, contends
that the High Court ought not to have indefinitely stayed the summoning
order, especially when it observed that quashing the summoning order
against DBS would not be in public interest. This is more significant
because the High Court denied such interim measure in its previous
order dated 17.12.2021.
      12. It was argued that the direction to approach RBI for
clarification is beyond the scope of the original petition as DBS did
not assert or seek relief in its quashing petition for the parties to
approach the RBI for clarification. This direction essentially imposes
a new obligation on the parties involved. If the High Court deemed it
necessary to seek RBI’s view, it should have ideally impleaded RBI
as a necessary party. Nevertheless, the RBI cannot sit in appeal over
the findings of the High Court. Additionally, the High Court failed to
take into account its own findings regarding interpretation of Clause
3(3) of the amalgamation scheme, that is –
     “15. Now, if one peruse sub clause 3 of Clause 3 of Scheme of Merger,
     it may appear there is no impediment to prosecute the petitioner
     company as the proviso of the said Scheme specifically says any cause
     of action or any other proceedings of whatsoever nature, against the
     transferee bank, the same shall not abate but shall be prosecuted by
     or against the transferee bank. The proviso to sub clause 3 appears to
     be only qua Director, Secretary, Manager, officer or other employee
     of the transferee bank who has actually committed criminal offence.”
      13. RFL argued that criminal proceedings do not automatically
abate upon the amalgamation of a company. LVB gained from the
illegal transaction, and DBS is benefited from the assets of LVB, which
204           SUPREME COURT REPORTS                              [2023] 12 S.C.R.


included misappropriated funds obtained from RFL’s fixed deposits.
Moreover, Clause 3(3) of the scheme incorporates the notion of criminal
accountability, and there is no such bar on transferring criminal liability
onto the transferee bank. The High Court’s decision essentially denies
the petitioner the chance to pursue the case on merits, and instead, it
necessitates involving an external body to interpret the amalgamation
scheme. Lastly, as the trial is in its early stages, an indefinite stay will
further delay the trial process.
      Contentions of DBS
     14. Mr. Mukul Rohatgi and Mr. Jayant Bhushan, learned senior
counsel, argued that the acts outlined in the chargesheet occurred well
before the appointed date of the amalgamation, i.e., 27.11.2020. LVB
was not implicated as an accused prior to the appointed date and was
only added in the supplementary chargesheet. Before the amalgamation,
LVB had no ties to DBS. LVB existed as a distinct and separate entity
without being part of the same group or affiliate of or in any manner
associated with DBS in any capacity. It ceased to exist in terms of
Clause 7(2) of the scheme of amalgamation.
      15. It was submitted that it is well settled principle that only the actual
wrongdoer can only be punished for its wrongdoing, and no vicarious
criminal liability can be inherited by a transferee company. Reliance was
placed on Sham Sunder & Others v. State of Haryana12 and McLeod Russel
India Limited v. Regional Provident Fund Commissioner, Jalpaiguri & Ors.13
It was further submitted that the High Court has wrongly ignored/rejected a
binding judgment passed by a coordinate bench of the same High Court in
Nicholas Piramal India Limited v. S. Sundaranayagam14 passed in similar
circumstances, wherein it was held that no vicarious criminal liability was
being passed on to the transferee company in an amalgamation where the
relevant Clause of the scheme was more or less identical by observing:
      “The legal position which emerges from afore-noted judicial decisions
      is that upon an amalgamation between two companies, the transferor


12 (1989) 4 SCC 630.
13 2014 (9) SCR 162.
14 Rendered on August 23, 2007, in Cri. M.C. No. 5392 of 2005.
    RELIGARE FINVEST LIMITED v. STATE OF NCT OF                       205
         DELHI & ANR. [S. RAVINDRA BHAT, J.]

     company dies a civil death and the entity which has evolved upon
     amalgamation cannot be prosecuted for an offence committed by
     the transferor company. […] So far as clause 8 relied upon by the
     counsel for the State is concerned, same relates to transfer of legal
     proceedings. The clause does not contemplate that criminal liability
     for offence committed by the earlier company would be transferable
     to the petitioner company.”
      16. It was submitted that after the amalgamation, particularly,
a non-voluntary scheme of amalgamation necessitated to safeguard
the public interests, LVB ceased to exist and criminal proceedings
against LVB shall abate. The transfer pertained to civil liability, with
no provision concerning the continuation of criminal proceedings
for the transferee company. Moreover, it was submitted that criminal
proceedings cannot be transferred through a contract or statute, let
alone by a scheme. Similarly, it placed reliance on M. Abbas Haji v. T.
N. Channakeshava15 to submit that even in the case of a natural person
where upon the demise of an accused person, criminal proceedings do
not pass on to legal heirs or successors.
     17. It was further submitted that the High Court was wrong to
rely on foreign cases to observe that a transferee company can entail
criminal liability as those judgments were rendered by considering
legal interpretations distinct from those in India.
      18. It was submitted that while one arm of the Government,
namely the RBI and the Central Government, took proactive measures
by formulating the Scheme under Section 45(7) of the Banking Act to
safeguard the interests of LVB’s depositors, employees, and others,
another arm of the Government, represented by Respondent No. 1,
cannot vitiate the process by imposing criminal liability against DBS
for the past actions of LVB.
      19. Furthermore, DBS highlighted that RFL itself argued before
the High Court that an interpretation from the RBI was necessary and
that the Court should not make a determination on this matter. RFL


15 (2019) 9 SCC 606.
206           SUPREME COURT REPORTS                         [2023] 12 S.C.R.


presented in its Reply dated 09.01.2022 before the High Court, the
following:
      “21. Without prejudice to the submissions made herein, as per the
      Clause 13 of the Scheme of amalgamation, if any doubt arises in the
      interpretation of the provisions of the scheme, in that case the matter
      is to be raised and referred to the RBI.”
     Therefore, through the current appeal, RFL is blowing hot and
cold by contesting the impugned order, asserting that such clarification
wasn’t needed and the stay of the summoning order is wrong.
      20. Lastly, it was submitted that subsequent to the Impugned
Order, RBI through its letter dated 14.06.2023, provided clarification
that criminal proceedings against the officials of the transferor bank
do not get carried forward to the transferee.
      Analysis
     21. Before discussing and dealing with the rival submissions, it
would be useful to extract provisions of the scheme of amalgamation
published by the RBI. Clause 3(3) of the amalgamation notification
reads as follows:
      “3. Transfer of assets and liabilities and general effect thereof. -
      (1)-(2) xxxxxxx
      (3) If on the appointed date, any cause of action, suit, decrees, recovery
      certificates, appeals or other proceedings of whatever nature is pending
      by or against the transferor bank before any court or tribunal or any
      other authority (including for the avoidance of doubt, an arbitral
      tribunal), the same shall not abate, be discontinued or be ill any way
      prejudicially affected, but shall, subject to the other provisions of this
      Scheme, be prosecuted and enforced by or against the transferee bank:
      Provided that where a contravention of any of the provision of any
      statute or of any rule, regulation, direction or order made thereunder
      has been committed by or any proceeding for a criminal offence has
      been instituted against, a director or secretary, manager, officer or
      other employee of the transferor bank before the appointed date, such
    RELIGARE FINVEST LIMITED v. STATE OF NCT OF                          207
         DELHI & ANR. [S. RAVINDRA BHAT, J.]

     director, secretary, manager, officer or other employee shall, without
     prejudice to the application of section 6 of the General Clauses Act,
     1897 (10 of 1897), be liable to be proceeded against under such law
     and punished accordingly, as if the transferor bank, being a banking
     company had not been dissolved.”
     Section 45(5)(e) of the Banking Act reads as follows:
     “45. Power of Reserve Bank to apply to Central Government for
     suspension of business by a banking company and to prepare
     scheme of reconstruction or amalgamation. —
     (1) Notwithstanding anything contained in the foregoing provisions of
     this Part or in any other law or [any agreement or other instrument],
     for the time being in force, where it appears to the Reserve Bank
     that there is good reason so to do, the Reserve Bank may apply to
     the Central Government for an order of moratorium in respect of [a
     banking company].
     (2) to (4) xxx
     (5) The scheme aforesaid may contain provisions for all or any of the
     following matters, namely:—
     (e) subject to the provisions of the scheme, the continuation by or
     against the banking company on its reconstruction or, as the case
     may be, the transferee bank, of any actions or proceedings pending
     against the banking company immediately before the [reconstruction
     or amalgamation]”
      Clause 13 of the Amalgamation scheme in the present case, i.e.,
relating to interpretation by RBI in the case of disputes, is as follows:
     “13. Interpretation of provisions of this Scheme. – If any doubt arises
     in the interpretation of the provisions of this Scheme, the matter shall
     be referred to the Reserve Bank and its views on the issue shall be
     final and binding on all concerned.”
     22. As is apparent from the factual narrative and the above
discussion, the issue which this court is concerned with, is whether a
transferee entity (here, a successor bank) can be fastened with corporate
208            SUPREME COURT REPORTS                        [2023] 12 S.C.R.


criminal liability for the offences which the amalgamating entity- the
erstwhile LVB is accused of.
      23. There was some divergence of opinion amongst certain High
Court about the liability of corporate entities. The Calcutta High
Court’s view was that that only natural persons, could be ascribed
with intention or “mens rea”. Resultantly, a juristic person such as
a company could not be ascribed with criminal intent [Ref Champa
Agency v. R. Chowdhury16, Sunil Banerjee v. Krishna Nath17, and AK Khosla
v. Venkatesan18 ]. The Bombay High Court, differed, and had taken
note of developments in the United Kingdom. In Esso Standard Inc. v.
Udharam Bhagwandas Japanwalla19 arguments were advanced before the
court on whether a company can have mens rea, and on how the process
of attribution would, in fact, operate, with the precise question being
whose mens rea would be attributed to the company. The High Court
accepted that a strict test of mens rea was required to locate or ascribe
criminal responsibility of a company, on the concerned decision maker.
The Court adopted this line of reasoning, approving Lord Diplock’s
opinion in Tesco Supermarkets Ltd. v. Nattrass20, including the following
relevant observations:
       “In my view, therefore, the question: what natural persons are to be
       treated in law as being the company for the purpose of acts done in
       the course of its business, including the taking of precautions and
       the exercise of due diligence to avoid the commission of a criminal
       offence, is to be found by identifying those natural persons who by the
       memorandum and articles of association or as a result of action taken
       by the directors, or by the company in general meeting pursuant to the
       articles, are entrusted with the exercise of the powers of the company.”
   In Meridian Global Funds Management Asia Ltd v Securities
Commission21, a more nuanced approach was adopted:


16    1974 CHN 400.
17    AIR 1949 Cal 689.
18    1992 (98) CrLJ 1448 (Cal).
19    [1975] 45 Comp Cas 16 (Bom).
20    1971 (2) All ER 127.
21    [1995] 3 All ER 918.
RELIGARE FINVEST LIMITED v. STATE OF NCT OF                          209
     DELHI & ANR. [S. RAVINDRA BHAT, J.]

“These primary rules of attribution are obviously not enough to enable
a company to go out into the world and do business. Not every act
on behalf of the company could be expected to be the subject of a
resolution of the board or a unanimous decision of the shareholders.
The company therefore builds upon the primary rules of attribution by
using general rules of attribution which are equally available to natural
persons, namely, the principles of agency. It will appoint servants
and agents whose acts, by a combination of the general principles
of agency and the company’s primary rules of attribution, count as
the acts of the company. And having done so, it will also make itself
subject to the general rules by which liability for the acts of others
can be attributed to natural persons, such as estoppel or ostensible
authority in contract and vicarious liability or tort.
It is worth pausing at this stage to make what may seem an obvious
point. Any statement about what a company has or has not done, or
can or cannot do, is necessarily a reference to the rules of attribution
(primary and general) as they apply to that company. Judges sometimes
say that a company ‘as such’ cannot do anything; it must act by servants
or agents. This may seem an unexceptionable, even banal remark. And
of course the meaning is usually perfectly clear. But a reference to a
company ‘as such’ might suggest that there is something out there
called the company of which one can meaningfully say that it can or
cannot do something. There is in fact no such thing as the company as
such, no ding an such, only the applicable rules. To say that a company
cannot do something means only that there is no one whose doing of
that act would, under the applicable rules of attribution, count as an
act of the company.
The company’s primary rules of attribution together with the general
principles of agency, vicarious liability and so forth are usually
sufficient to enable one to determine its rights and obligations. In
exceptional cases, however, they will not provide an answer. This will
be the case when a rule of law, either expressly or by implication,
excludes attribution on the basis of the general principles of agency
or vicarious liability. For example, a rule may be stated in language
primarily applicable to a natural person and require some act or state
210           SUPREME COURT REPORTS                         [2023] 12 S.C.R.


      of mind on the part of that person ‘himself’ as opposed to his servants
      or agents. This is generally true of rules of the criminal law, which
      ordinarily impose liability only for the actus reus and mens rea of the
      defendant himself. How is such a rule to be applied to a company?
      One possibility is that the court may come to the conclusion that the
      rule was not intended to apply to companies at all; for example, a law
      which created an offence for which the only penalty was community
      service. Another possibility is that the court might interpret the law
      as meaning that it could apply to a company only on the basis of its
      primary rules of attribution, i.e. if the act giving rise to liability was
      specifically authorised by a resolution of the board or an unanimous
      agreement of the shareholders. But there will be many cases in which
      neither of these solutions is satisfactory; in which the court considers
      that the law was intended to apply to companies and that, although it
      excludes ordinary vicarious liability, insistence on the primary rules
      of attribution would in practice defeat that intention. In such a case,
      the court must fashion a special rule of attribution for the particular
      substantive rule. This is always a matter of interpretation: given that
      it was intended to apply to a company, how was it intended to apply?
      Whose act (or knowledge, or state of mind) was for this purpose
      intended to count as the act etc. of the company? One finds the answer
      to this question by applying the usual canons of interpretation, taking
      into account the language of the rule (if it is a statute) and its content
      and policy.’
      Lord Hoffmann, in his opinion stated that:
      “. . their Lordships would wish to guard themselves against being
      understood to mean that whenever a servant of a company has authority
      to do an act on its behalf, knowledge of that act will for all purposes
      be attributed to the company. It is a question of construction in each
      case as to whether the particular rule requires that the knowledge that
      an act has been done, or the state of mind with which it was done,
      should be attributed to the company. Sometimes, as in In re Supply
      of Ready Mixed Concrete (No. 2) [1995] 1 A.C. 456 and this case, it
      will be appropriate . . .. On the other hand, the fact that a company’s
      employee is authorised to drive a lorry does not in itself lead to the
    RELIGARE FINVEST LIMITED v. STATE OF NCT OF                           211
         DELHI & ANR. [S. RAVINDRA BHAT, J.]

     conclusion that if he kills someone by reckless driving, the company
     will be guilty of manslaughter. There is no inconsistency. Each is an
     example of an attribution rule for a particular purpose, tailored as
     it always must be to the terms and policies of the substantive rule.”
    24. This court, considered the issue in Iridium India Telecom v
Motorola Inc22 and held, inter alia, that:
     “38. From the above it becomes evident that 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 mens rea.
     The criminal liability of a corporation 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 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.”
     Earlier, in the Constitution Bench ruling in Standard Chartered
Bank v Directorate of Enforcement23, the court referred to Section 11
of the IPC, which defined “person”. “The word “person” includes any
Company or Association or body of persons, whether incorporated or not”;
the court also referred to the 41st and 47th Law Commission reports.
The Law Commission had stated that
     “In every case in which the offence is only punishable with
     imprisonment or with imprisonment and fine and the offender is a
     company or other body corporate or an association of individuals, it
     shall be competent to the court to sentence such offender to fine only.”
      The judges- in the majority held that all penal statutes are to be
strictly construed, in the sense that the court must see that the thing
charged as an offence is within the plain meaning of the words used
and must not strain the words. Any act falling within the mischief that
is addressed should be intended to be included and has to included if
thought of. Further, all penal provisions, like all other statutes, need to


22 [2010) 14 (ADDL.) SCR 591.
23 2005 [Supp] (1) SCR 49.
212            SUPREME COURT REPORTS                               [2023] 12 S.C.R.


be fairly construed in terms of expressed legislative intent. The intent
to prosecute corporate bodies for the offences committed by them was
clear and explicit, and the statute did not intend to exonerate them
from prosecution. The court, therefore, held that it would be violence
to commonsense that the legislature intended to punish the corporate
bodies for minor and silly offences while at the same time, extended
immunity of prosecution to major and grave economic crimes.
     25. According to Stroud24, “amalgamation” is “welding or blending
of two or more concerns into one.” It also states that “where there the
companies concerned retain separate entities, [] there is no amalgamation”.
Black 25 defines amalgamation as the “act of combining or uniting;
consolidation < amalgamation of two small companies to form a new
corporation >…” The Companies Act, 2013 does not contain any
express definition of amalgamation; it rather outlines and regulates
the procedure for amalgamation and spells out its legal effect, which
results in extinguishment of the corporate identity of the transferor
company 26 [read, in this case, LVB]. In Walker’s Settlement27, the term
‘amalgamation’ is defined as:
      “The word ‘amalgamation’ has no definite legal meaning. It
      contemplates a state of things under which 2 companies are so joined
      as to form a third entity or one company is absorbed into and blended
      with another company.”
     In Re: Skinner28 too referred to amalgamation schemes and their
effect as follows:
      “…schemes and orders made by virtue of Section 206 and Section
      208 of the Companies Act 1948 can only transfer such rights, powers,


24 Stroud’s Judicial Dictionary of Words and Phrases (9thedition).
25 Black’s Law Dictionary, Eleventh Edition.
26 Section 233 of the Companies Act, 2013 outlines the result of acceptance of a scheme
   of amalgamation:
   “(8) The registration of the scheme under sub-section (3) or sub-section (7) shall be
   deemed to have the effect of dissolution of the transferor company without process of
   winding-up.”
27 1935 (1) Ch. D. 567.
28 1958 (3) All E.R 273.
    RELIGARE FINVEST LIMITED v. STATE OF NCT OF                          213
         DELHI & ANR. [S. RAVINDRA BHAT, J.]

     duties and property as are capable of being lawfully transferred by a
     party to the scheme if no such sections of the Companies Act existed. It
     is not necessary in a scheme to exclude specifically from its operation
     things incapable of such transfer as general words in the scheme and
     any order in furtherance must be taken to operate in a manner not to
     repugnant to the general law of England.”
      26. In M/s. General Radio & Appliances Co. Ltd. vs. M.A. Khader
(dead) by LR’s 29 , the effect of amalgamation of two companies
was considered by the Supreme Court. It was held that after the
amalgamation of two companies, the transferor company ceases to
have any entity, and the amalgamated company acquires a new status,
and it is not possible to treat the two companies as partners or jointly
liable in respect of their liabilities and assets.
     27. In the context of income tax liability, this court, in Saraswati
Industrial Syndicate Ltd. vs. CIT, Haryana, H.P. & Delhi30, observed that:
     “The true effect and character of the amalgamation largely depends
     on the terms and scheme of merger but there cannot be any doubt that
     when two companies amalgamate and merge into one the transferor
     company loses its entity as it ceases to have its business. However,
     their respective rights or liabilities are determined under the scheme
     of amalgamation but the corporate entity of the transferor company
     ceases to exist with effect from the date the amalgamation is made
     effective.”
     28. McLeod Russel India Limited v. Regional Provident Fund
Commissioner, Jalpaiguri & Ors31. was a case involving default in paying
provident fund dues under the Employees Provident Fund Act, 1952
(“the EPF Act”). In this case, one Mathura Tea Estate owned Saroda
Tea Company Ltd., which was covered by the EPF Act. During the
pendency of recovery and penalty proceedings, the entire management
of Mathura Tea Estate (including ownership of Saroda Tea Co. Ltd
and the estate) was taken over by Eveready Industries (India) Ltd.,


29 1986 (2) SCR 607.
30 1990 Supp (1) SCR 332.
31 2014 (9) SCR 162.
214           SUPREME COURT REPORTS                         [2023] 12 S.C.R.


which discharged the principal EPF liability but sought to disclaim
penalty (for non-compliance in the requirement to remit or deposit
EPF contributions). This court negatived its position by noticing that
the takeover document clearly noted the liability and how it was to be
treated as McLeod Russel’s liability:
      “13. There is no gainsaying that criminal liability remains steadfastly
      fastened to the actual perpetrator and cannot be transferred by any
      compact between persons or even by statute. But this incontrovertible
      legal principle does not support or validate the contention of Mr. Jayant
      Bhushan, Learned Senior Advocate for the Appellants, that damages
      levied in terms of Section 14B of the EPF Act cannot be foisted onto
      his clients. Sections 14, 14A, 14AA, 14AB and 14AC of the EPF Act
      are the provisions postulating prosecution; in contradistinction Section
      14B contemplates the power to “recover from the employer by way of
      penalty such damages, not exceeding the amount of arrears, as may
      be specified in the Scheme”. It is true that it is not a river but a mere
      rivulet that segregates and distinguishes the legal concepts of damages
      or compensatory damages or exemplary damages or deterrent damages
      or punitive damages or retributory damages. We shall abjure from
      writing a dissertation on this compelling legal nodus; save to clarify
      that modern jurisprudence recognizes that the imposition of punitive
      damages, quintessentially quasi-criminal in character, can be resorted
      to even in civil proceedings to deter wilful wrongdoing by making an
      admonished example of the wrongdoer. This is the essential purpose,
      it seems to us, of Section 14B of the EPF Act, and an imposition within
      its confines does not assume criminal prosecution so as to stand
      proscribed insofar as transfer of establishment from one management/
      employer to its successor is concerned.”
     29. In Shyam Sundar v State of Haryana (supra), the liability of a
partnership firm, based on the agency of every partner for the individual
criminal acts of its partners, was negatived:
      “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 is no vicarious liability in
      criminal law unless the statute takes that also within its fold. Section
     RELIGARE FINVEST LIMITED v. STATE OF NCT OF                           215
          DELHI & ANR. [S. RAVINDRA BHAT, J.]

      10 does not provide for such liability. It does not make all the partners
      liable for the offence whether they do business or not.”
    30. It is, therefore, noticeable that the criminal liability of a
company
      (a) is recognized where it can be attributable to individual acts
      of employees, directors or officials of a company or juristic
      persons (Tesco, Meridian Global Funds, Standard Chartered Bank,
      and Iridium)
      (b) recognized even if its conviction results in a term of
      imprisonment (Meridian, Iridium);
      (c) cannot be transferred ipso facto, except when it is in the nature
      of penalty proceeding (McLeod Russel)
      (d) the legal effect of amalgamation of two companies is the
      destruction of the corporate existence of the transferor company
      (in this case, LVB); it ceases to exist.
      (e) that apart, only defined legal proceedings, are succeeded to by
      the transferee company, which, in this case, is the DBS Bank 32 .
      31. As noted earlier, Clause 3 (3) of the scheme in this case, no
doubt mentions that legal proceedings would be continued by or against
the transferee bank (read DBS Bank). However, it is also important to
notice the proviso:
      “3. Transfer of assets and liabilities and general effect thereof. -
      (1)-(2) xxxxxxx
      (3) If on the appointed date, any cause of action, suit, decrees, recovery
      certificates, appeals or other proceedings of whatever nature is pending
      by or against the transferor bank before any court or tribunal or any
      other authority (including for the avoidance of doubt, an arbitral
      tribunal), the same shall not abate, be discontinued or be ill any way
      prejudicially affected, but shall, subject to the other provisions of this
      Scheme, be prosecuted and enforced by or against the transferee bank:


32 Section 233 (9) of the Companies Act, 2013.
216           SUPREME COURT REPORTS                           [2023] 12 S.C.R.


      Provided that where a contravention of any of the provision of any
      statute or of any rule, regulation, direction or order made thereunder
      has been committed by or any proceeding for a criminal offence has
      been instituted against, a director or secretary, manager, officer or
      other employee of the transferor bank before the appointed date, such
      director, secretary, manager, officer or other employee shall, without
      prejudice to the application of section 6 of the General Clauses Act,
      1897 (10 of 1897), be liable to be proceeded against under such law
      and punished accordingly, as if the transferor bank, being a banking
      company had not been dissolved.”
       32. Every scheme of amalgamation is statutory and sanctioned under
the Banking Act. Such amalgamation is to ensure that the interests of the
depositors, the creditors and others who had invested, or given credit to
in the erstwhile bank, before its sickness, and that the general public are
protected. It aims at securing larger public interest and health of the banking
industry. Late intervention into the affairs of a bank can result in a “run” on
it, resulting in serious loss of confidence in the intricately woven banking and
financial system. If one sees this and the overall objective of the scheme, it is
to ensure recovery of what are the bank’s dues and ensuring protection of the
creditors. Clause 3 (3) of the scheme, therefore, has to be considered from
this backdrop. In this context, the express mention of directors and such other
individuals in the proviso means that it is to that extent only that prosecutions
or other criminal proceedings can continue; in the ordinary sense, criminal
liability can neither be attributed to DBS nor its directors, brought in after the
amalgamation, whose appointments were approved by the RBI.
     33. The charge sheet, to the extent it is relevant in the present
case, reads as follows:
      “PS – EOW, FIR – 189/2019
      **********************
      Further, during the course of investigation, the certified copy of the
      emails were obtained from the bank along with certificate U/s 65-B
      Evidence Act which are as under: -
RELIGARE FINVEST LIMITED v. STATE OF NCT OF                          217
     DELHI & ANR. [S. RAVINDRA BHAT, J.]

1. Certified copy of email dated 10.11.16.
2. Certified copy of email dated 07.01.17.
3. Certified copy of email dated 09.01.17.
4. Certified copy of email dated 13.07.17.
Further, the complainant informed that “we draw you kind attention
to the recent amalgamation of LVB With DBS by the Reserve Bank of
India. Pursuant to the Press Release bearing No. 2020- 2021/647, the
RBI announced a scheme of amalgamation of LVB with DBS Which
came into force on 27.11.2020, post which LVB has amalgamated
with DBS.”
From the investigation conducted, it was emerged that the bank
officials in collusion with promoters of the REL deliberately/knowingly
did not complete the formalities which are mandatory for the loan
transaction to benefit the promoters/accused of RHC Holding Limited
and Ranchem Pvt. Limited by extending loan to the entities which
the promoters/accused persons used to square of their liabilities.
The deposit loan was extended from time to time and the mandatory
requirements were not completed and there is no satisfactory response
of not following the manual in respect of deposit loan of their own
bank and later on, when invoke the deposit they tried to shift the
responsibility to each other. There is no document as per requirement
of the bank itself is on record which established that these are the loans
against the security/FDRS of RFL. It has emerged that the loan was
required by the promoters of REL as well as RHC Holding Pvt. Limited
to square off the liabilities/borrowing of RHC Holdings Limited and
Ranchem Private Limited. The accused Malvinder Mohan Singh and
Shivinder Mohan Singh cannot avail the loan in their 100% holding
company against the FDs of REL as it requires approval of related
party transaction committee from the board of REL. Therefore, this
arrangement was done with the connivance of the bank officials who
facilitated this transaction by passing the SOP of their own. Moreover,
loans were extended from time to time and eventually the security has
been invoked by the Lakshmi Vilas Bank thus causing wrongful loss to
the complainant Company to the tune of Rs. 791 crores approximately.
218           SUPREME COURT REPORTS                         [2023] 12 S.C.R.


      From the investigation conducted so far, the supplementary charge
      sheet has been prepared against LVB Bank (Now DBS Bank India
      Limited) and bank officials namely (1) Anjani Kumar Vermam, (2)
      S. Venkatesh, (3) Pradeep Kumar and (4) Parthsarathi Mukherjee
      (without arrest) and accused persons Malvinder Mohan Singh,
      Shivinder Mohan Singh, Sunil Godhwani, Hemant Dhingra, Kavi Arora
      and company RHC Holding Pvt. Limited, M/s Ranchem Pvt. Limited
      as they acted in connivance with each other being members of a well-
      planned conspiracy and interacted with each other and committed
      acts of commission and of omission in furtherance of the conspiracy
      to cheat the complainant company. Hence, this charge sheet against
      the accused persons, company and Bank u/s 409/120B IPC has been
      prepared by putting their names in column no. 11.
      It is therefore, respectfully prayed that this supplementary charge sheet
      may kindly be treated as part of main chargesheet against the said
      accused and the entire oral and documentary evidence as reflected in
      the lists of PWs, and documents enclosed herewith may also be treated
      as supplement to the main chargesheet.
      17. Refer Notice Served Yes No:               Date
      Acknowledgement to be placed
      18. Dispatched on:
      -sd-”
     34. It is, therefore, clear that the criminal liability of the individuals
now attributed to DBS are actions of (1) Anjani Kumar Verma, (2)
S. Venkatesh, (3) Pradeep Kumar and (4) Parthsarathi Mukherjee.
They were all officials of LVB. Their individual responsibility and
accountability in criminal law, is and remains unaffected by the
amalgamation. Therefore, there is in fact, no involvement of DBS Bank,
revealed in the charge sheet filed by the Delhi Police. In completely
ignoring these aspects and proceeding on a rather superficial basis, the
High Court, in our considered opinion fell into error.
     35. There is no gainsaying that the power to quash a criminal
investigation or proceedings should not be lightly exercised. Yet, to
     RELIGARE FINVEST LIMITED v. STATE OF NCT OF                        219
          DELHI & ANR. [S. RAVINDRA BHAT, J.]

refuse recourse to that power, in cases that require or may demand it,
is being blind to justice, which the courts can scant afford to be. In the
present context, the public’s confidence in the banking industry was at
stake, when RBI stepped in, imposed the moratorium and asked DBS
to take over the entire functioning, management assets and liabilities
of the erstwhile LVB. To permit prosecution of DBS for the acts of
LVB officials (who are in fact, facing criminal charges) would result in
travesty of justice. Therefore, the pending criminal proceedings (arising
out of FIR – 189/2019 registered at P.S. Economic Affairs Wing, New
Delhi), to the extent it involves DBS, which was the subject matter
of the impugned judgment and all consequent proceedings arising
therefrom (to the extent of involvement of DBS), are hereby quashed.
     36. The impugned judgment is accordingly set aside; the appeal
by DBS is allowed; the appeal by RFL/complainant is, for the same
reasons, dismissed. No costs.


Headnotes prepared by:                                   Appeals disposed of.
Divya Pandey