Karnataka High Court
Mr. Shekappa vs Directorate Of Revenue Intelligence on 14 March, 2025
Author: S.R.Krishna Kumar
Bench: S.R.Krishna Kumar
-1-
NC: 2025:KHC:10820
WP No. 27090 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 14TH DAY OF MARCH, 2025
BEFORE
THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR
WRIT PETITION NO.27090 OF 2023 (GM-RES)
BETWEEN:
1. MR. SHEKAPPA
S/O SRI. CHANDRAPPA,
AGED ABOUT 35 YEARS,
R/AT 1-7-78, NAGAVI ROAD,
EK-KAMAN, JAFFAR GUNG,
CHITAPUR, GULBARGA - 585 211.
NOW R/AT THE TREE BY PROVIDENT,
SYNDICATE BANK LAYOUT,
ANDHARAHALLI MAIN ROAD,
BANGALORE - 560 091.
2. DR. RAJESH R
S/O H. RAMACHANDRA REDDY,
AGED ABOUT 51 YEARS,
Digitally signed by
CHANDANA B M DOCTOR BY PROFESSION,
Location: HIGH
COURT OF R/AT NO.12, I MAIN ROAD,
KARNATAKA
UAS LAYOUT,
BHOOPASANDRA,
BANGALORE - 560 094.
(NOW BOTH ARE IN JUDICIAL CUSTODY CENTRAL
PRISON, BANGALORE).
...PETITIONERS
(BY SRI. HASHMATH PASHA, SENIOR COUNSEL FOR
SRI. KARIAPPA N A., ADVOCATE)
-2-
NC: 2025:KHC:10820
WP No. 27090 of 2023
AND:
DIRECTORATE OF REVENUE INTELLIGENCE
BANGALORE ZONAL UNIT,
NO.8(2), P, OPP.BDA COMPLEX,
HBR LAYOUT, KALYANNAGAR,
BANGALORE - 560 043.
...RESPONDENT
(BY SRI. MADHU N. RAO AND
SRI. CHANDAN BHAT, ADVOCATES)
THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE
CONSTITUTION OF INDIA PRAYING TO QUASH THE ENTIRE
PROCEEDING IN CASE FILE NO.DRI/BZU/S-IV/ENQ-08/(INT-
NIL)/2023 ON THE FILE OF RESPONDENT DIRECTORATE OF
REVENUE INTELLIGENCE, BANGALORE, FOR OFFENCES UNDER
SECTIONS 8(C), 12, 21(C), 22(C), 23(C), 24, 26 AND 28 OF THE NDPS
ACT AND RULES WHICH IS PENDING IN SPL.C.C.NO.2150/2023 ON
THE FILE OF THE HON'BLE XXXIII ADDITIONAL CITY CIVIL AND
SESSIONS COURT AND SPECIAL COURT FOR NDPS CASES,
BANGALORE CITY AS PER ANNEXURE-C ORDER OF TAKING
COGNIZANCE DATED 27.09.2023 AS AN ABUSE OF PROCESS OF
LAW IN SO FAR AS PETITIONERS ARE CONCERNED AND ETC.
THIS PETITION, COMING ON FOR ORDERS, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE S.R.KRISHNA KUMAR
ORAL ORDER
In this petition, petitioners seek the following reliefs-
"a. Issue a writ of certiorari or a writ or order or direction of appropriate in nature and quash the entire proceeding in case File No.DRI/BZU/S-IV/ENQ-08/(INT-NIL)/2023 on the file of respondent Directorate of Revenue Intelligence, Bangalore, for offences under Sections 8(c), 12, 21(c), 22(c), 23(c), 24, 26 and 28 of the NDPS Act -3- NC: 2025:KHC:10820 WP No. 27090 of 2023 and Rules which is pending in Spl.C.C.No.2150/2023 on the fie of Hon'ble XXXIII Additional City Civil and Sessions Court and Special Court for NDPS Cases, Bangalore City as per Annexure-'C' - Order of taking cognizance dated 27.09.2023 as an abuse of process of law in so far as petitioners are concerned.
b. To issue a writ of certiorari or a writ or direction of appropriate in nature, declaring that the arrest of petitioners on 06.04.2023 by Respondent DRI in case File No.DRI/BZU/S-IV/ENQ-08/(INT-NIL)/2023 is illegal and abuse of process of law as per Annexure-'V-1' and 'V-2' and consequently direct the Chief Superintendent of Central Prison, Bangalore, forthwith.
c. To issue a writ of mandamus or order or direction of appropriate in nature granting compensation for their illegal arrest and illegal detention caused by Respondent DRI, because of their abuse of power so far as petitioners are concerned.
d. To issue a writ or order or direction of appropriate in nature granting such other relief or reliefs as this Hon'ble Court deems fit to grant in the facts and circumstances to the Petitioners, in the interest of Justice."
2. Heard learned Senior Counsel for the petitioners and learned counsel for the respondent and perused the material on record.
-4-NC: 2025:KHC:10820 WP No. 27090 of 2023
3. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned Senior Counsel for the petitioners invited my attention to the complaint at Annexure-B filed by the respondent -authorised officer for the offences punishable under Sections 21(c), 22(c), 23(c), 24, 26 & 28 of the NDPS Act, 1985 and read with NDPS Rules, 1985 in order to point out that both the petitioners are the Directors of M/s.Rashe Life Science Private Limited, which is a company incorporated under the Companies Act, 1956 and an independent, legal, juristic entity, which has not been arraigned as party as mandatorily required under Section 38 of the NDPS Act. In the absence of a company being arraigned as a person along with the Directors, the impugned proceedings are not maintainable and deserves to be quashed.
3.1 In support of his submissions, learned counsel for the petitioners placed reliance upon the following judgments:
(i) Aneeta Hoda Vs. Godfather Travels and Tours Private Limited - (2012) 5 SCC 661.
(ii) Ravindranath Bajpe - (2021) SCC OnLine SC 806.-5-
NC: 2025:KHC:10820 WP No. 27090 of 2023
(iii) Dayle De' Souza - (2021) SCC OnLine SC 1012
(iv) Sushil Sethi - (2020) 3 SCC 240
(v) Rafel Del Riya - Crl.P.No.102512/2021 dated 08.02.2022
(vi) Sunil Bharti Mittal - (2015) 4 SCC 609.
4. Before adverting to the rival submissions, it would be profitable to extract Section 38 of the NDPS Act, which reads as under:
"38. Offences by companies.--
(1) Where an offence under Chapter IV has been committed by a company, every person, who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where any offence under Chapter IV has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly."-6-
NC: 2025:KHC:10820 WP No. 27090 of 2023
5. In the instant case, it is an undisputed fact that the petitioners are the Directors of the aforesaid Company, which has not been arraigned as accused in the impugned proceedings.
Under identical circumstances, in relation to the offences under Section 138 of the N.I. Act in respect of the offences committed by the Companies, the Apex Court in the case of Aneeta Hoda (supra) held as under:
"58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words "as well as the company" appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted.
59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can -7- NC: 2025:KHC:10820 WP No. 27090 of 2023 only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh [(1970) 3 SCC 491 : 1971 SCC (Cri) 97] which is a three-Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal [(1984) 4 SCC 352 : 1984 SCC (Cri) 620] does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada [(2000) 1 SCC 1 : 2001 SCC (Cri) 174] is overruled with the qualifier as stated in para 51. The decision in Modi Distillery [(1987) 3 SCC 684 : 1987 SCC (Cri) 632] has to be treated to be restricted to its own facts as has been explained by us hereinabove."
6. It is needless to state that the provisions contained in Section 141 of the N.I. Act are in pari materia of Section 13 of NDPS Act. So also, in the case of Ravindranath Bajpe (supra), in relation to IPC offences, the Apex Court relied upon the earlier judgment in the case of Sunil Bharti Mittal (supra) and came to the conclusion that in the absence of including Company as a party, the Directors alone cannot be made as parties, as under:
"8. In Sunil Bharti Mittal [Sunil Bharti Mittal v. CBI, (2015) 4 SCC 609 : (2015) 2 SCC (Cri) 687] , it is observed by this Court in paras 42 to 44 as under : (SCC p. 638) "(iii) Circumstances when Director/person in charge of the affairs of the company can also be -8- NC: 2025:KHC:10820 WP No. 27090 of 2023 prosecuted, when the company is an accused person
42. No doubt, a corporate entity is an artificial person which acts through its officers, Directors, Managing Director, Chairman, etc. If such a company commits an offence involving mens rea, it would normally be the intent and action of that individual who would act on behalf of the company.
It would be more so, when the criminal act is that of conspiracy. However, at the same time, it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute specifically provides so.
43. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made an accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated is in those cases where the statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision.
44. When the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect. One such example is Section 141 of the Negotiable Instruments Act, 1881. In Aneeta Hada [Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 :
(2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241] , the Court noted that if a group of persons that guide the business of the company have the criminal intent, that would be imputed to the body corporate and it is in this backdrop, Section 141 of the Negotiable Instruments Act has to be understood.
Such a position is, therefore, because of statutory intendment making it a deeming fiction. Here also, the principle of "alter ego", was applied only in one direction, namely, where a group of persons that guide the business had criminal intent, that is to be imputed to the body corporate and not the vice -9- NC: 2025:KHC:10820 WP No. 27090 of 2023 versa. Otherwise, there has to be a specific act attributed to the Director or any other person allegedly in control and management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company."
8.1. In Maksud Saiyed v. State of Gujarat [Maksud Saiyed v. State of Gujarat, (2008) 5 SCC 668 : (2008) 2 SCC (Cri) 692] , in para 13, it is observed and held as under :
(SCC p. 674) "13. Where a jurisdiction is exercised on a complaint petition filed in terms of Section 156(3) or Section 200 of the Code of Criminal Procedure, the Magistrate is required to apply his mind. The Penal Code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the Company when the accused is the company. The learned Magistrate failed to pose unto himself the correct question viz.
as to whether the complaint petition, even if given face value and taken to be correct in its entirety, would lead to the conclusion that the respondents herein were personally liable for any offence. TheBank is a body corporate. Vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. Statutes indisputably must contain provision fixing such vicarious liabilities. Even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability."
8.2. As observed by this Court in Pepsi Foods Ltd. v. Special Judicial Magistrate [Pepsi Foods Ltd. v. Special Judicial Magistrate, (1998) 5 SCC 749 : 1998 SCC (Cri) 1400] and even thereafter in a catena of decisions, summoning of an accused in a criminal case is a serious
- 10 -
NC: 2025:KHC:10820 WP No. 27090 of 2023 matter. Criminal law cannot be set into motion as a matter of course. In para 28 in Pepsi Foods Ltd. [Pepsi Foods Ltd. v. Special Judicial Magistrate, (1998) 5 SCC 749 : 1998 SCC (Cri) 1400] , it is observed and held as under : (SCC p. 760) "28. Summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. It is not that the complainant has to bring only two witnesses to support his allegations in the complaint to have the criminal law set into motion. The order of the Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. He has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof and would that be sufficient for the complainant to succeed in bringing charge home to the accused. It is not that the Magistrate is a silent spectator at the time of recording of preliminary evidence before summoning of the accused. The Magistrate has to carefully scrutinise the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused."
8.3. As held by this Court in India Infoline Ltd. [GHCL Employees Stock Option Trust v. India Infoline Ltd., (2013) 4 SCC 505 : (2013) 2 SCC (Cri) 414] , in the order issuing summons, the learned Magistrate has to record his satisfaction about a prima facie case against the accused who are Managing Director, the Company Secretary and the Directors of the Company and the role played by them in their respective capacities which is sine qua non for initiating criminal proceedings against them. Looking to the averments
- 11 -
NC: 2025:KHC:10820 WP No. 27090 of 2023 and the allegations in the complaint, there are no specific allegations and/or averments with respect to role played by them in their capacity as Chairman, Managing Director, Executive Director, Deputy General Manager and Planner & Executor. Merely because they are Chairman, Managing Director/Executive Director and/or Deputy General Manager and/or Planner/Supervisor of A-1 and A-6, without any specific role attributed and the role played by them in their capacity, they cannot be arrayed as an accused, more particularly they cannot be held vicariously liable for the offences committed by A-1 and A-6.
9. From the order passed by the learned Magistrate issuing the process against the respondents herein, Accused 1 to 8, there does not appear that the learned Magistrate has recorded his satisfaction about a prima facie case against Respondents 2 to 5 and 7 and 8. Merely because Respondents 2 to 5 and 7 and 8 are the Chairman/Managing Director/Executive Director/Deputy General Manager/Planner & Executor, automatically they cannot be held vicariously liable, unless, as observed hereinabove, there are specific allegations and averments against them with respect to their individual role. Under the circumstances, the High Court has rightly dismissed the revision applications and has rightly confirmed the order passed by the learned Sessions Court quashing and setting aside the order passed by the learned Magistrate issuing process against Respondents 1 to 8 herein -- original Accused 1 to 8 for the offences punishable under Sections 427, 447, 506 and 120- B read with Section 34IPC."
- 12 -
NC: 2025:KHC:10820 WP No. 27090 of 2023
7. A similar view has been taken by the Apex Court in Sushil Sethi's case (supra), wherein it is held as under:
"7.5. In Sharad Kumar Sanghi [Sharad Kumar Sanghi v. Sangita Rane, (2015) 12 SCC 781 : (2016) 1 SCC (Cri) 159] , this Court had an occasion to consider the initiation of criminal proceedings against the Managing Director or any officer of a company where company had not been arrayed as a party to the complaint. In the aforesaid decision, it is observed and held by this Court that in the absence of specific allegation against the Managing Director of vicarious liability, in the absence of company being arrayed as a party, no proceedings can be initiated against such Managing Director or any officer of a company. It is further observed and held that when a complainant intends to rope in a Managing Director or any officer of a company, it is essential to make requisite allegation to constitute the vicarious liability.
8.2. It is also required to be noted that the main allegations can be said to be against the company. The company has not been made a party. The allegations are restricted to the Managing Director and the Director of the company respectively. There are no specific allegations against the Managing Director or even the Director. There are no allegations to constitute the vicarious liability. In Maksud Saiyed v. State of Gujarat [Maksud Saiyed v. State of Gujarat, (2008) 5 SCC 668 : (2008) 2 SCC (Cri) 692] , it is observed and held by this Court that the Penal
- 13 -
NC: 2025:KHC:10820 WP No. 27090 of 2023 Code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the company when the accused is the company. It is further observed and held that the vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. It is further observed that the statute indisputably must contain provision fixing such vicarious liabilities. It is further observed that even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability. In the present case, there are no such specific allegations against the appellants being Managing Director or the Director of the company respectively. Under the circumstances also, the impugned criminal proceedings are required to be quashed and set aside."
8. In Dayle D'Souza's case (supra), the Apex Court held as under:
"30. In terms of the ratio above, a company being a juristic person cannot be imprisoned, but it can be subjected to a fine, which in itself is a punishment. Every punishment has adverse consequences, and therefore, prosecution of the company is mandatory. The exception would possibly be when the company itself has ceased to exist or cannot be prosecuted due to a statutory bar. However, such exceptions are of no relevance in the present case. Thus, the present prosecution must fail for this reason as well.
- 14 -
NC: 2025:KHC:10820 WP No. 27090 of 2023
31. There is also another aspect which requires our attention. We have noted in some detail the contents of the complaint, which refers to the violation as certain notices were not displayed and certain registers and forms were not kept at the "worksite", namely, ATM of the SBI at AST, Komal Chand Petrol Pump, Civil Lines, Sagar, District Sagar. A response to the show cause-cum-compliance notice in the form of a short reply by the authorised signatory of M/s Writer Safeguard Pvt. Ltd. on 2-4-2014, which factum though accepted, has not been adverted to in the complaint. This short reply states that the Company neither manages the ATM nor works at the ATM and that the ATM site was managed by the respective banks and, therefore, the violations as alleged do not apply to them. The complaint does not state why the reply was deficient or indicate even briefly as to the nature of activity and involvement of the Company's workers at the ATM site of State Bank of India mandating compliance at the site in question. We are not ruling on merits, albeit highlighting the complaint being bereft and silent on these aspects and whether the authorities considered the legal provisions in the context of the factual background before initiating prosecution.
32. The authorities bestowed with the duty to confirm compliance are often empowered to take stringent including penal action to ensure observance and check defiance. There cannot also be any quarrel on the need to enforce obedience of the rules as the beneficial legislation protects the worker's basic right to receive minimum wages. The
- 15 -
NC: 2025:KHC:10820 WP No. 27090 of 2023 rulebook makes sure that the workers are made aware of their rights and paid their dues as per law without unnecessary disputes or allegations as to absence, overtime payment, deductions, etc."
9. In Sunil Bharti Mittal's case (supra), the Apex Court held as under:
(iii) Circumstances when Director/person in charge of the affairs of the company can also be prosecuted, when the company is an accused person
42. No doubt, a corporate entity is an artificial person which acts through its officers, Directors, Managing Director, Chairman, etc. If such a company commits an offence involving mens rea, it would normally be the intent and action of that individual who would act on behalf of the company. It would be more so, when the criminal act is that of conspiracy. However, at the same time, it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute specifically provides so.
43. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made an accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated is in those cases where the statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision.
- 16 -
NC: 2025:KHC:10820 WP No. 27090 of 2023
44. When the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect. One such example is Section 141 of the Negotiable Instruments Act, 1881. In Aneeta Hada [Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 : (2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241] , the Court noted that if a group of persons that guide the business of the company have the criminal intent, that would be imputed to the body corporate and it is in this backdrop, Section 141 of the Negotiable Instruments Act has to be understood. Such a position is, therefore, because of statutory intendment making it a deeming fiction. Here also, the principle of "alter ego", was applied only in one direction, namely, where a group of persons that guide the business had criminal intent, that is to be imputed to the body corporate and not the vice versa. Otherwise, there has to be a specific act attributed to the Director or any other person allegedly in control and management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company.
45. This very principle is elaborated in various other judgments. We have already taken note of Maharashtra State Electricity Distribution Co. Ltd. [Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd., (2010) 10 SCC 479 : (2011) 1 SCC (Cri) 68] and S.K. Alagh [S.K. Alagh v. State of U.P., (2008) 5 SCC 662 : (2008) 2 SCC (Cri) 686] . A few other judgments reiterating this principle are the following:
- 17 -
NC: 2025:KHC:10820 WP No. 27090 of 2023 45.1.Jethsur Surangbhai v. State of Gujarat [1984 Supp SCC 207 : 1984 SCC (Cri) 474] : (SCC pp. 210-11, para 9) "9. ... With due respect what the High Court seems to have missed is that in a case like this where there was serious defalcation of the properties of the Sangh, unless the prosecution proved that there was a close cohesion and collusion between all the accused which formed the subject-matter of a conspiracy, it would be difficult to prove the dual charges particularly against the appellant (A-1). The charge of conspiracy having failed, the most material and integral part of the prosecution story against the appellant disappears. The only ground on the basis of which the High Court has convicted him is that as he was the Chairman of the Managing Committee, he must be held to be vicariously liable for any order given or misappropriation committed by the other accused. The High Court, however, has not referred to the concept of vicarious liability but the findings of the High Court seem to indicate that this was the central idea in the mind of the High Court for convicting the appellant. In a criminal case of such a serious nature mens rea cannot be excluded and once the charge of conspiracy failed the onus lay on the prosecution to prove affirmatively that the appellant was directly and personally connected with acts or omissions pertaining to Items 2, 3 and 4. It is conceded by Mr Phadke that no such direct evidence is forthcoming and he tried to argue that as the appellant was Chairman of the Sangh and used to sign papers and approve various tenders, even as a matter of routine he should have acted with care and caution and his negligence would be a positive proof of his intention to commit the offence. We are however unable to agree with this somewhat broad statement of the law. In the absence of a charge of conspiracy the mere fact that the appellant happened to be
- 18 -
NC: 2025:KHC:10820 WP No. 27090 of 2023 the Chairman of the Committee would not make him criminally liable in a vicarious sense for Items 2 to 4. There is no evidence either direct or circumstantial to show that apart from approving the purchase of fertilisers he knew that the firms from which the fertilisers were purchased did not exist. Similar is the case with the other two items. Indeed, if the Chairman was to be made liable then all members of the Committee viz. Tahsildar and other nominated members, would be equally liable because all of them participated in the deliberations of the meetings of the Committee, a conclusion which has not even been suggested by the prosecution. As Chairman of the Sangh the appellant had to deal with a large variety of matters and it would not be humanly possible for him to analyse and go into the details of every small matter in order to find out whether there has been any criminal breach of trust. In fact, the hero of the entire show seems to be A-3 who had so stage-managed the drama as to shield his guilt and bring the appellant in the forefront. But that by itself would not be conclusive evidence against the appellant. There is nothing to show that A-3 had either directly or indirectly informed the appellant regarding the illegal purchase of fertilisers or the missing of the five oil engines which came to light much later during the course of the audit. Far from proving the intention the prosecution has failed to prove that the appellant had any knowledge of defalcation of Items 2 to 4. In fact, so far as Item 3 is concerned, even Mr Phadke conceded that there is no direct evidence to connect the appellant."
45.2.Sham Sunder v. State of Haryana [(1989) 4 SCC 630 : 1989 SCC (Cri) 783] : (SCC p. 632, para 9) "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
- 19 -
NC: 2025:KHC:10820 WP No. 27090 of 2023 liability in criminal law unless the statute takes that also within its fold. Section 10 does not provide for such liability. It does not make all the partners liable for the offence whether they do business or not."
45.3.Hira Lal Hari Lal Bhagwati v. CBI [(2003) 5 SCC 257 : 2003 SCC (Cri) 1121] : (SCC p. 277, para 30) "30. In our view, under the penal law, there is no concept of vicarious liability unless the said statute covers the same within its ambit. In the instant case, the said law which prevails in the field i.e. the Customs Act, 1962 the appellants have been thereinunder wholly discharged and the GCS granted immunity from prosecution."
45.4.Maksud Saiyed v. State of Gujarat [(2008) 5 SCC 668 : (2008) 2 SCC (Cri) 692] : (SCC p. 674, para 13) "13. Where a jurisdiction is exercised on a complaint petition filed in terms of Section 156(3) or Section 200 of the Code of Criminal Procedure, the Magistrate is required to apply his mind. The Penal Code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the Company when the accused is the company. The learned Magistrate failed to pose unto himself the correct question viz. as to whether the complaint petition, even if given face value and taken to be correct in its entirety, would lead to the conclusion that the respondents herein were personally liable for any offence. The Bank is a body corporate. Vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. Statutes indisputably must contain provision fixing such vicarious liabilities. Even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations
- 20 -
NC: 2025:KHC:10820 WP No. 27090 of 2023 which would attract the provisions constituting vicarious liability."
45.5.R. Kalyani v. Janak C. Mehta [(2009) 1 SCC 516 : (2009) 1 SCC (Cri) 567] : (SCC p. 527, para 32) "32. 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 otherwise. For the said purpose, a legal fiction has to be created. Even under a special statute when the vicarious criminal liability 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 ingredients laid down under the statute must be fulfilled. A legal fiction must be confined to the object and purport for which it has been created."
45.6.Sharon Michael v. State of T.N. [(2009) 3 SCC 375 : (2009) 2 SCC (Cri) 103] : (SCC p. 383, para 16) "16. The first information report contains details of the terms of contract entered into by and between the parties as also the mode and manner in which they were implemented. Allegations have been made against the appellants in relation to execution of the contract. No case of criminal misconduct on their part has been made out before the formation of the contract. There is nothing to show that the appellants herein who hold different positions in the appellant Company made any representation in their personal capacities and, thus, they cannot be made vicariously liable only because they are employees of the Company."
45.7.Keki Hormusji Gharda v. Mehervan Rustom Irani [(2009) 6 SCC 475 : (2009) 2 SCC (Cri) 1113] : (SCC pp. 480-81, paras 16-19)
- 21 -
NC: 2025:KHC:10820 WP No. 27090 of 2023 "16. We have noticed hereinbefore that despite of the said road being under construction, the first respondent went to the police station thrice. He, therefore, was not obstructed from going to the police station. In fact, a firm action had been taken by the authorities. The workers were asked not to do any work on the road. We, therefore, fail to appreciate that how, in a situation of this nature, the Managing Director and the Directors of the Company as also the Architect can be said to have committed an offence under Section 341 IPC.
17. The Penal Code, 1860 save and except in some matters does not contemplate any vicarious liability on the part of a person. Commission of an offence by raising a legal fiction or by creating a vicarious liability in terms of the provisions of a statute must be expressly stated. The Managing Director or the Directors of the Company, thus, cannot be said to have committed an offence only because they are holders of offices. The learned Additional Chief Metropolitan Magistrate, therefore, in our opinion, was not correct in issuing summons without taking into consideration this aspect of the matter. The Managing Director and the Directors of the Company should not have been summoned only because some allegations were made against the Company.
18. In Pepsi Foods Ltd. v. Judicial Magistrate [(1998) 5 SCC 749 : 1998 SCC (Cri) 1400] this Court held as under : (SCC p. 760, para 28) '28. Summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. It is not that the complainant has to bring only two witnesses to support his allegations in the complaint to have the criminal law set into motion. The order of the Magistrate summoning the accused must reflect that he has applied his mind
- 22 -
NC: 2025:KHC:10820 WP No. 27090 of 2023 to the facts of the case and the law applicable thereto. He has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof and would that be sufficient for the complainant to succeed in bringing charge home to the accused. It is not that the Magistrate is a silent spectator at the time of recording of preliminary evidence before summoning of the accused. The Magistrate has to carefully scrutinise the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused.'
19. Even as regards the availability of the remedy of filing an application for discharge, the same would not mean that although the allegations made in the complaint petition even if given face value and taken to be correct in its entirety, do not disclose an offence or it is found to be otherwise an abuse of the process of the court, still the High Court would refuse to exercise its discretionary jurisdiction under Section 482 of the Code of Criminal Procedure."
10. Point No.(i): Whether the complaint was maintainable without the Company being made an accused in the proceedings?
11. It is not in dispute that the petitioner is the Managing Director of Syngenta India Limited which is a Company registered under the Companies Act, 1956. The entire proceedings are initiated for offences punishable under
- 23 -
NC: 2025:KHC:10820 WP No. 27090 of 2023 Sections 6(a) and 19(a) of the Act. Sections 6 and 19 and 21 of the Act read as follows:
"6. The Central Government may, after consultation of the Committee and by notification in the Official Gazette, specify -
(a) the minimum limits of germination and purity with respect to any seed of any notified kind or variety:
(b) the mark or label to indicate that such seed conforms to the minimum limits of germination and purity specified under clause (a) and the particulars which marks or label may contain.
19. Penalty.--If any person--
(a) contravenes any provision of this Act or any rule made thereunder; or
(b) prevents a Seed Inspector from taking sample under this Act; or
(c) prevents a Seed Inspector from exercising any other power conferred on him by or under this Act, he shall, on conviction, be punishable--
(i) for the first offence with fine which may extend to five hundred rupees, and
(ii) in the event of such person having been previously convicted of an offence under this section, with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.
21. (1) Where an offence under this Act has been committed by a company, every person who at the time the offence was committed was in charge of, and was responsible to the company for the conduct of the business
- 24 -
NC: 2025:KHC:10820 WP No. 27090 of 2023 of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub- section shall render any such person liable to any punishment under this Act if he proves that the offence was committed without his knowledge and that he exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub- section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation. - For the purpose of this section,-
(a) "company" means any body corporate and includes a firm or other association of individuals; and
(b) "director", in relation to a firm, means a partner in the firm."
Section 6 deals with the minimum limit of germination and purity with respect to any seed of any notified kind or variety.
- 25 -
NC: 2025:KHC:10820 WP No. 27090 of 2023 Section 19 deals with penalty. Section 19(a) directs any person indulging in acts contrary to any provisions of the Act or the Rules would become liable for prosecution under the Act. Section 21 deals with offences by companies. Therefore, the directors of the Company are also held to be vicariously liable and become liable to be proceeded against and punished.
12. It is not in dispute that the Company is not made a party in these proceedings which is in violation of Section 21 (supra). The proceedings without, at the outset, the Company being made a party would not be maintainable. The issue in this regard need not detain this Court for long or delve deeper in to the matter as identical provisions of the Negotiable Instruments Act, 1881 have been interpreted by the Apex Court in the case of ANEETA HADA1 (supra) wherein the Apex Court has held as follows:
"53. It is to be borne in mind that Section 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in Section 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a 1 (2012) 5 SCC 661 strict construction of the provision would be necessitous and, in a way, the warrant.
56. We have referred to the aforesaid passages only to highlight that there has to be strict observance of the
- 26 -
NC: 2025:KHC:10820 WP No. 27090 of 2023 provisions regard being had to the legislative intendment because it deals with penal provisions and a penalty is not to be imposed affecting the rights of persons, whether juristic entities or individuals, unless they are arrayed as accused. It is to be kept in mind that the power of punishment is vested in the legislature and that is absolute in Section 141 of the Act which clearly speaks of commission of offence by the company. The learned counsel for the respondents have vehemently urged that the use of the term "as well as" in the section is of immense significance and, in its tentacle, it brings in the company as well as the Director and/or other officers who are responsible for the acts of the company and, therefore, a prosecution against the Directors or other officers is tenable even if the company is not arraigned as an accused. The words "as well as" have to be understood in the context.
59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag- net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh [(1970) 3 SCC 491 : 1971 SCC (Cri) 97] which is a three-Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal [(1984) 4 SCC 352 : 1984 SCC (Cri) 620] does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada [(2000) 1 SCC 1 : 2001 SCC (Cri) 174] is
- 27 -
NC: 2025:KHC:10820 WP No. 27090 of 2023 Crl.P.No.102512/2112 overruled with the qualifier as stated in para 51. The decision in Modi Distillery [(1987) 3 SCC 684 : 1987 SCC (Cri) 632] has to be treated to be restricted to its own facts as has been explained by us hereinabove."
The said judgment in the case of ANEETA HADA has been followed in plethora of cases by the Apex Court and this Court. Section 21 of the Act , is in pari materia with section 141 of the Negotiable Instruments Act 1881 considered by the Apex Court in the case of Aneeta Hada. Therefore, the entire proceedings would stand vitiated as the complaint itself, without at the outset the company being made a party, would not be maintainable. Therefore, I answer the point arising in favour of the petitioner."
10. Learned counsel for the respondent submits that since the respondent has filed an application under Section 319 Cr.P.C.
on 26.12.2023 to including the company / firm as party to the proceedings, the present petition is liable to be rejected.
11. Per contra, learned Senior Counsel for the petitioners invited my attention to the order sheet maintained in Spl.C.C.No.2150/2023 in order to contend that the petitioners had preferred the present petition as long back as on 01.12.2023 itself much prior to the respondent filing the said application before the Trial Court and subsequent filing of the said application on
- 28 -
NC: 2025:KHC:10820 WP No. 27090 of 2023 26.12.2023 would not cure the initial / inherent defect in instituting the proceedings at the point in time without impleading / arraying the company / firm as parties to the proceedings. It is therefore contended that though the respondent has subsequently filed the said application, the initial / inherent defect and impleading the company could not be cured as on the date of the taking of the cognizance by the Trial Court on 27.09.2023, which is not a curable defect.
12. As rightly contended by the learned Senior Counsel for the petitioners, it was incumbent upon the respondent to implead and array the company as party prior to the Trial Court before taking cognizance of the offence against the petitioner. In the instant case, it is an undisputed fact that the respondent did not implead or arraign the company as party to the proceedings but instead chose to implead / arraign the petitioners as accused Nos.1 and 2, respectively and at the time of the taking cognizance, the company / firm were not arraigned as parties. It is therefore clear that merely because application under Section 319 Cr.P.C. was filed on 26.12.2023, subsequent to the taking of cognizance by the Trial Court and subsequent to the petitioners filing the present
- 29 -
NC: 2025:KHC:10820 WP No. 27090 of 2023 petition on 01.12.2023 interalia contending that the proceedings were not maintainable for non-impleadment of the company / firm as parties to the proceedings, the said initial / inherent defect in initiating proceedings and the Trial Court not being competent to take cognizance, the said defect cannot be cured by subsequent filing of the application under Section 319 Cr.P.C. which cannot be said to relate back to the date of institution of the proceedings, which were otherwise not maintainable in law. Under these circumstances, even this contention urged on behalf of the respondent cannot be accepted.
13. In view of the aforesaid facts and circumstances and in the light of the undisputed fact that the petitioners are the Directors of the aforesaid Company, which has not been arraigned as party-
accused, the impugned proceedings only against the Directors without arraigning a company is not maintainable and deserves to be quashed.
14. In the result, I pass the following:
ORDER
(i) The petition is hereby allowed.
- 30 -
NC: 2025:KHC:10820 WP No. 27090 of 2023
(ii) The impugned criminal proceedings in Spl.C.C.No.2150/2023 pending on the file of the XXXIII Additional City Civil and Sessions Court and Special Court for NDPS Cases, Bangalore City, in so far as the petitioners are concerned, are hereby quashed.
SD/-
(S.R.KRISHNA KUMAR) JUDGE BMC / SV List No.: 2 Sl No.: 6