Gujarat High Court
Religare Securities Ltd. Thro ... vs State Of Gujarat & 2 on 4 August, 2014
Author: R.D.Kothari
Bench: R.D.Kothari
R/CR.MA/8129/2008 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CRIMINAL MISC.APPLICATION NO. 8129 of 2008
With
CRIMINAL MISC.APPLICATION NO. 7936 of 2008
With
CRIMINAL MISC.APPLICATION NO. 3145 of 2008
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE R.D.KOTHARI
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1 Whether Reporters of Local Papers may be allowed to see
the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law as
to the interpretation of the Constitution of India, 1950 or any
order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
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RELIGARE SECURITIES LTD. THRO DILPISINH NARANBHAI RANA &
2....Applicant(s)
Versus
STATE OF GUJARAT & 2....Respondent(s)
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Appearance:
MR SUDHANSHU S PATEL, ADVOCATE for the Applicant(s) No. 1 - 3
MR SR SHARMA, ADVOCATE for the Respondent(s) No. 2
MS CM SHAH, APP for the Respondent(s) No. 1
RULE SERVED for the Respondent(s) No. 2 - 3
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CORAM: HONOURABLE MR.JUSTICE R.D.KOTHARI
Page 1 of 13
R/CR.MA/8129/2008 JUDGMENT
Date : 04/08/2014
ORAL JUDGMENT
1. This group of petitions raises identical and similar issues. In Criminal Misc. Application No.14089 of 2008, this Court had passed order on 24.10.2008 wherein while admitting Criminal Misc. Application No.14089 of 2008 Court has also to hear the said petition along with Criminal Misc. Application No.3145 of 2008 and Criminal Misc. Application No.7936 of 2008. This Court had issued Rule and granted interim relief.
2. First I may deal with Criminal Special Application No.8129 of 2008. Complainant had a Demat account No.DS247 with one Religare Security Ltd. A2 to A4 are office bearer of the said Religare Company. Said company is registered under the Companies Act. The said company provides facilities of "Stock Broking". It is say of the complainant that in this regard parties had entered into model margin trading agreement. Complainant claims to hold shares of different companies in his Demat account. Grievance of the complainant is, shares worth Rs.17,29,118/ on 22.01.2008 and on 23.01.2008 shares worth of Rs.38,88,705/ are sold off by the accused company without permission and consent of Page 2 of 13 R/CR.MA/8129/2008 JUDGMENT the complainant. That after disposal of the shares, the company has not forwarded any contract notes to the complainant. It is also say of the complainant that disposing of shares on above referred two dates was intimated by company to complainant by Email. Then thereafter in this regard company has also addressed a communication by regular post. It is say of the complainant that there is a discrepancy and inconsistency in the details supplied to the complainant by Email and by post. The complainant claims that he has drawn attention of high official of company in this regard. They have said to have given assurance to the complainant to reimburse the loss that complainant may have suffered. Thereafter alleged reminders by the complainant to them has gone in a vain. Complainant, therefore, has lodged the complaint before SEBI on 24.03.2008. Complainant has also given notice through advocate claiming loss of Rs.1,00,00,000/. That despite giving of notice by the complainant, company has not complied with the same and it is the say of the complainant that, therefore, it is clear that company has committed breach of trust and has committed cheating with the complainant. Accordingly the complainant alleging cheating and forgery has filed present complaint before J.M.F.C. Court, Vadodara for the offence under Sections 406, 420, Page 3 of 13 R/CR.MA/8129/2008 JUDGMENT 465, 467, 468, 469, 471 and 114 of IPC.
3. Allegations are identical and similar in Criminal Misc. Application No.7936 of 2008. In fact, in both the cases allegations of loss, said to have suffered by the complainant are also same, Only difference isin the former case, accused are office bearers of Religare Securities Ltd. while in Criminal Misc. Application No.7936 of 2008 those very persons are referred as office bearers of Religare Finvest Ltd. In following common discussion, these two petitions are considered.
4. Heard learned advocate for the petitioner Mr.S.S. Patel, learned advocate Mr.S.R. Sharma for respondent No.2 and learned A.P.P. Ms. C.M. Shah for the State.
5. Learned advocate Mr. Patel has drawn attention of the Court to the complaint filed by the complainant and other relevant material on record. It was submitted that the complainant has dragged 4 employees as the accused; however, no specific or independent allegations made against any of the accused in the complaint. It was submitted that accused has acted in accordance Page 4 of 13 R/CR.MA/8129/2008 JUDGMENT with law and in accordance with terms and agreement entered into between the parties.
6. It is also submitted that in January 2008, an unusual crash has taken place in the stock market, which has forced the accused company to dispose of the complainant's shares. It is also submitted that pursuant to the agreement entered into between the parties, the accused had moved the arbitrator. The arbitrator has issued the notice to the complainant, but the complainant did not appear before the learned Arbitrator. That various written submissions were submitted by complainant before arbitrator but he has not appeared before the arbitration. Then arbitrator passed award in favour of accused. Thereafter, the complainant had approached Delhi High Court to quash the award. Copy of award is on record. Delhi High Court has rejected complainant's petition.
7. Learned advocate Mr. Patel has drawn attention of the Court to the decision in the case of (M/s) GHCL Employees Stock Option Trust Vs. M/s India Infoline Ltd. reported in 2013 (1) G.L.H. 754. In GHCL Employees Stock Option Trust case (supra), the complainant had a Demat account with the company. Facts of Page 5 of 13 R/CR.MA/8129/2008 JUDGMENT the said case and the facts of the present case are somewhat similar in nature. In that case also, complaint was filed for the offence of cheating. Shortly stated in that case, say of the complainant company was that Rs.10.48 Crores has remained outstanding in the account of complainant. The complainant company had paid up the said amount. However, thereafter it came to its notice that outstanding dues were only of Rs.10,22,77,522/. The complainant demanded Rs.25,22,477.53. Instead of returning back the said amount i.e. excess amount of Rs.25,22,477.53 the accused company has intimated to the complainant about adjustment of the amount against 5 accounts of the complainant. Thus, the complainant filed the complaint for offence under Sections 415, 409, 34 and 120 B of IPC. The complaint was filed against 7 employees of the company.
8. On issuance of summons by learned Magistrate, each of the employee had approached the Court for quashing of criminal case. Delhi High Court allowed the petition filed by employees and by the Managing Director. The Supreme Court dismissing the appeal filed by the complainant has held thus:
"From bare perusal of the complaint and the allegations made therein, Page 6 of 13 R/CR.MA/8129/2008 JUDGMENT we do not find in any of the paragraphs that the complainant has made specific allegations against respondent Nos.2 to 7. In paragraph 2 of the complaint, it is alleged that respondent Nos.2 to 6 are looking after the daytoday affairs of the Company. With whom the complainant or its authorized representative interacted has also not been specified. Although in paragraph 11 of the complaint it is alleged that the complainant on numerous occasions met accused Nos.2 to 7 and requested to refund the amount, but again the complainant has not made specific allegation about the date of meeting and whether it was an individual meeting or collective meeting. Similarly, in paragraph 17 of the complaint, there is no allegation that a particular Director or Managing Director fabricated debit note. In the entire complaint there are bald and vague allegations against respondent Nos.2 to 7.(Para12) There is no dispute with regard to the legal proposition that the case of breach of trust or cheating are both a civil wrong and a criminal offence, but under certain situations where the act alleged would predominantly be a civil wrong, such an act does not constitute a criminal offence."
(Para13)
9. In the above case, issuance of summons against respondent Nos.2 to 7 held illegal and amounting to abuse of the process of law:
"In the order issuing summons, the learned Magistrate has not recorded his satisfaction about the prima facie case as against respondent Nos.2 to 7 and the role played by them in the capacity of Managing Director, Company Secretary or Directors which is sine qua non for initiating criminal action against them. Recently, in the case of M/s Thermax Ltd. & Ors. v. K.M. Johny & Ors. 2011 (11) SCALE 128, & Ors. while dealing with a similar case, this Court held as under." (Para
19)
20. Though Respondent No.1 has roped all the appellants in a criminal case without their specific role or participation in the alleged offence with the sole purpose of settling his dispute with appellantCompany by initiating the criminal prosecution, it is pointed out that appellant Nos.2 to 8 are ExChairperson, Ex Directors and Senior Managerial Personnel of appellant No.1 Company, who do not have any personal role in the allegations and claims of Respondent No.1. There is also no specific allegation with regard to their role.Page 7 of 13
R/CR.MA/8129/2008 JUDGMENT 9.1. It has also held that concept of vicarious liability is unknown.
It has held thus:
"21. Apart from the fact that the complaint lacks necessary ingredients of Sections 405, 406, 420 read with Section 34 IPC, it is to be noted that the concept of 'vicarious liability' is unknown to criminal law. As observed earlier, there is no specific allegation made against any person but the members of the Board and senior executives are joined as the persons looking after the management and business of the appellantCompany."
10. Learned advocate Mr. Patel has also drawn attention of the Court on the decision in the case of Aparna A. Shah Vs. Sheth Developers Private Limited reported in (2013) 8 SCC 71 in support of his submission that vicarious liability is unknown in criminal law. Attention of this Court was also drawn to the decision in the case of S.K. Alagh Vs. State of Uttar Pradesh reported in (2008) 5 SCC 662 wherein it was held that vicarious liability cannot be fastened on the Managing Director or other Officers of the company for the offence under Section 406 alleged to have committed.
11. In the present case as referred above, there is no whisper about the role played by each of the accused in respect of grievance of the complainant. Joining the employees as an accused Page 8 of 13 R/CR.MA/8129/2008 JUDGMENT without assigning any role and without making any specific averment in the complaint, is bad. The ratio laid down in the case of GHCL (supra) supports the say of the petitioner.
12. Further the dispute between the parties was referred to the arbitrator. The arbitrator's award is on record. The Arbitrator has passed the award and directed the complainant to pay Rs.19,35,940/. The attention was also been drawn to relevant terms of the agreement entered into between the parties. This conclusion of arbitrator if read with the grievance of the complainant about disposal of his share without his notice, it would appear that in the facts and circumstances of the case, say of the complainant does not merits serious consideration.
13. It is the say of the petitioner that they opted to sell the shares of the complainant pursuant to the agreement entered into between the parties. In any case, there is considerable force in the submission that it is a dispute of civil nature and initiation of proceedings was abuse of the process of the Court. At this stage, on rereading of the complaint the other fatal defect came to the notice iscomplainant has not made company as a party. In both Page 9 of 13 R/CR.MA/8129/2008 JUDGMENT these cases complaint is not filed against the company. Name of company is just referred and company is not made accused.
14. In view of above Special Criminal Applications No.8129 of 2008 and 7936 of 2008 succeed mainly on two grounds i.e. dispute of civil nature and vicarious liability is unknown in criminal law. In view of above, both the petitions are allowed. Rule is made absolute.
Criminal Misc. Application No.3145 of 2008
1. Grievance of the complainant is that the shares of the companies named in the complaint are sold by the accused on 22.1.2008 without prior consent of the complainant and thereby caused loss of huge amount to the complainant and committed breach of trust. It is the say of the complainant that the complainant never wanted to sell the shares and therefore, the complainant gave the account payee cheque of Rs.40,000/ to the the accused and in spite of the same the accused have sold away the shares of the complainant without his consent and thereby the accused have committed the offence of cheating and forgery to the Page 10 of 13 R/CR.MA/8129/2008 JUDGMENT tune of Rs.1,40,142.80/.
2. In the present case also complainant had Demat account in the accused company. For reasons stated above, present petition is also required to be allowed.
3. Learned advocate for the petitioner Mr.Patel referring the say of the complainant about giving account payee cheque of Rs.40,000/ to the accused. It was pointed out that the complainant was required to maintain the margin as per the term of the agreement.
4. It is pertinent to note that it is not the say of the complainant that though he had maintained the margin, the accused has disposed off his shares. As per the statement of the complainant account produced at AnnexureB commencing from 22.5.2007, the complainant has traded in shares and stock, so actively that crowded detail of datewise transaction stretched in 11 printed pages.
5. Further complainant has traded even after 22.01.2008. Page 11 of 13
R/CR.MA/8129/2008 JUDGMENT As this Annexure shows, transaction by the complainant through the Demat Account in question continued till 29.02.2008. In fact, even after filing the present complaint on 20th February 2008. To maintain margin is obligation of the complainant and failure to maintain margin by the complainant led to disposing of shares by the accused. In the circumstances of the case, accused cannot be said to have committed offence of cheating and breach of trust.
6. Above all principal ground in favour of the present petitioner is in the present case also, the complainant has not joined the company as an accused. In the present case the complaint is filed against the Branch Manager, Zonal Head and Branch Developer.
7. In view of above, this petition is succeeds also on the ground on which Criminal Misc. Application No.8129 of 2008 and Criminal Misc. Application No.7936 of 2008 are allowed. Criminal Case No.1058 of 2008 registered in the Court of learned C.J.M., Bhavnagar is hereby quashed and set aside. Rule is made absolute.
(R.D.KOTHARI, J.)
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R/CR.MA/8129/2008 JUDGMENT
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