Telangana High Court
M/S.The India Cements Limited vs The Dy Inspector General/Chief ... on 21 October, 2022
THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN
CRIMINAL PETITION No.12989 OF 2016
ORDER:
Heard Mr. T.Niranjan Reddy, learned Senior Counsel for Sri Challa Gunaranjan, learned counsel for the petitioner and Mr. K.Surender, learned Special Public Prosecutor for Central Bureau of Investigation (CBI) (as his Lordship then was).
2. This petition has been filed under Section 482 of the Code of Criminal Procedure, 1973 (Cr.P.C) to quash the charge sheet qua the petitioner in C.C.No.24 of 2013 pending on the file of Principal Special Judge for CBI Cases, Nampally, Hyderabad (briefly, 'the CBI Court' hereinafter). Petitioner further seeks quashing of the cognizance order dated 25.09.2013 passed by the CBI Court qua the petitioner.
3. Facts relevant for adjudication of the criminal petition as projected by the petitioner may be briefly stated. 3.1. Petitioner is a company called 'M/s.India Cements Limited'. It is represented by its Vice Chairman and Managing Director Sri N.Srinivasan.
23.2. One P.Shankar Rao, former M.L.A., and late Yerran Naidu, former M.P., filed W.P.Nos.794 and 6604 of 2011 respectively before the then High Court for the composite State of Andhra Pradesh alleging corruption against late Y.S.Rajasekhara Reddy, former Chief Minister of Andhra Pradesh, his son Sri Y.S.Jagan Mohan Reddy and others and sought for investigation into such allegations of corruption by the CBI. By order dated 10.08.2011, the erstwhile High Court of Andhra Pradesh directed CBI to investigate the allegations. Following the High Court order, CBI, Anti Corruption Bureau (ACB), Hyderabad registered a case on 17.08.2011 being R.C.19(A)/2011-CBI-HYD against seventy four accused persons including the petitioner herein under various provisions of the Indian Penal Code, 1860 (IPC), such as Section 120B read with Sections 420, 409, 420 and 477A and also under provisions of Sections 6, 12, 13(2) read with Section 13(1)(c) and (d) of the Prevention of Corruption Act, 1988 (briefly, 'the PC Act', hereinafter). 3 3.3. It may be mentioned that allegation against the petitioner is that it had made certain investments in three corporate entities promoted by Sri Y.S.Jagan Mohan Reddy and in return, petitioner got the land lease of 2.16 acres renewed for the cement plant at Kadapa District; that apart petitioner was given permission to draw 7 lakh gallons of water per day in addition to 3 lakh gallons of water already permitted from Krishna river for its cement plant located in Vishnupuram, Nalgonda District. Besides, the petitioner was allowed to draw 13 million cubit feet of water from Kagna river for its cement plant located at Malkapur in Ranga Reddy District.
3.4. Petitioner and its officials cooperated in the investigation carried out by CBI. On conclusion of investigation, CBI filed charge sheet in final report form under Section 173 of Cr.P.C., before the CBI Court putting up nine accused persons to face trial, including the petitioner represented by its Vice Chairman and Managing Director, Sri N.Srinivasan as accused No.7. Sri N.Srinivasan was personally made accused No.3. After narrating the case 4 history and the allegations against the petitioner, CBI stated in the charge sheet that petitioner (accused No.7) acting through its Vice Chairman and Managing Director, Sri N.Srinivasan (accused No.3) had committed offences punishable under Section 120B read with Section 420 IPC and Section 12 of the PC Act.
3.5. CBI Court registered the charge sheet as C.C.No.24 of 2013 and vide the cognizance order dated 25.09.2013 took cognizance of the charges framed against the accused persons including against Sri N.Srinivasan, Vice Chairman and Managing Director of M/s.India Cements Limited (accused No.3) and M/s.India Cements Limited represented by its Vice Chairman and Managing Director, Sri N.Srinivasan (accused No.7). Cognizance was taken under Section 120B read with Section 420 IPC and Section 12 of the PC Act. Sri N.Srinivasan was also charged under the aforesaid provisions.
4. Aggrieved by the same, the present petition has been filed for quashing the charge sheet as well as the cognizance order qua the petitioner.
5
5. It is stated that accused No.3, Sri N.Srinivasan, Vice Chairman and Managing Director of petitioner, had filed criminal petition No.7584 of 2015 before this Court under Section 482 of Cr.P.C., to quash the charges against him in C.C.No.24 of 2013. Vide order dated 18.03.2016 the criminal petition was allowed and proceedings in C.C.No.24 of 2013 qua accused No.3 was quashed. That apart, CBI had approached the Central Government for granting sanction under Section 197 of Cr.P.C., to prosecute accused No.5, Sri Adithyanath Das, IAS, who was at the relevant point of time Secretary to the Government of Andhra Pradesh, Irrigation and CAD Department. However, the Central Government declined to grant sanction to prosecute accused No.5, Sri Adithyanath Das on the ground that he had neither violated any business rule nor he had taken any illegal gratification.
6. Mr. T.Niranjan Reddy, learned Senior Counsel for the petitioner submits that no case of any illegality or wrong doing, not to speak of any criminality, was made out against the petitioner. Therefore, CBI had erred in filing charge sheet against the petitioner. CBI Court also mechanically took 6 cognizance without any application of mind. No reasons were assigned by the CBI Court as to why cognizance was taken against the petitioner. He submits that petitioner is an artificial person. There are no materials on record to justify prosecution of an artificial person like the petitioner. Non- consideration of the same by the CBI Court has completely vitiated the cognizance taken.
6.1. Learned Senior Counsel has elaborately taken the Court to the first information report as well as to the charge sheet. He has painstakingly referred to the statements made by the witnesses regarding lease of land, allocation of water from Kagna river and Krishna river and also regarding investments. In this connection, he has also referred to the board resolutions, the share subscription agreement entered into by the petitioner with M/s.Bharathi Cements Limited. 6.2. Learned Senior Counsel has referred to decisions of various High Courts and of the Supreme Court regarding quashing under Section 482 of Cr.P.C., including State of 7 Haryana v. Bhajan Lal1. He has also placed reliance on the following decisions on the point of cognizance:
(1) GHCL Employees Stock Option Trust v. India Infoline Limited2, (2) Sarah Mathew v. Institute of Cardio Vascular Diseases3, and (3) S.R.Sukumar v. S.Sunaad Raghuram4.
6.3. Thereafter, learned Senior Counsel submitted that on a plain reading of the charge sheet, it is crystal clear that there is no scope for prosecution of the petitioner for commission of alleged offence under Section 120B read with Section 420 IPC and Section 12 of the PC Act. In this connection, he has also placed reliance on several decisions of the Supreme Court as to the ingredients of Sections 120B and 420 IPC. 6.4. In the circumstances, learned Senior Counsel submits that all the allegations brought against the petitioner, a juristic person, are false and baseless. It would be wholly unfair and unjust if the petitioner represented by its Vice 1 AIR 1992 SC 604 2 (2013) 4 SCC 505 3 (2014) 2 SCC 62 4 (2015) 9 SCC 609 8 Chairman and Managing Director, Sri N.Srinivasan, is compelled to undergo the ordeal of a long drawn criminal trial since the outcome thereof is a foregone conclusion, more particularly after quashing of the charge sheet against the Vice Chairman and Managing Director himself i.e., accused No.3, Sri N.Srinivasan. That being the position, learned Senior Counsel submits that the present is a fit case for quashing the charge sheet filed in C.C.No.24 of 2013 qua the petitioner.
7. Per contra, learned Special Public Prosecutor for CBI submits that the order of cognizance need not be a long and a detailed one. The order of cognizance has to be read in conjunction with the charge sheet. There are sufficient materials against the petitioner in the charge sheet to make out a case for trial. Arguments advanced on behalf of the petitioner are in the nature of its defence. Petitioner cannot be exonerated at the threshold on the basis of its defence, which would be gone into in the course of the trial. Therefore, no case for interference is made out at this stage. 9
8. Submissions made by learned counsel for the parties have received the due consideration of the Court. Also perused and considered the relevant citations.
9. As already noted above, criminal investigation was set in motion following the order dated 10.08.2011 passed by the High Court in W.P.Nos.794 and 6604 of 2011. On the basis of the aforesaid order, CBI registered F.I.R. R.C.19(A)/2011-CBI- HYD against seventy four persons. On conclusion of investigation, CBI submitted a charge sheet before the CBI Court under Section 173 Cr.P.C., being charge sheet No.13 dated 10.09.2013. Altogether nine persons were arrayed as accused to face trial including the petitioner represented by its Vice Chairman and Managing Director, Sri N.Srinivasan as accused No.7. Sri N.Srinivasan as an individual was also arrayed as accused No.3. The charge sheet gave a broad outline of the facts starting from the order dated 10.08.2011 passed by the High Court in W.P.Nos.794 and 6604 of 2011 upto filing of the charge sheet.
109.1. Brief facts of the case as narrated in the charge sheet dated 10.09.2013 is extracted as under:-
The Hon'ble High Court of Andhra Pradesh vide Order dated 10.08.2011, while hearing Writ Petition Nos.794 and 6604 of 2011 filed by Sri P.Shankar Rao, MLA, Secunderabad Cantonment and Late Sri Yerran Naidu, Ex-MP, directed CBI for registration of the case and for thorough investigation in all the aspects into financial misdeeds involving huge magnitude of government largesse, corporate dealings including huge investments as part of Quid Pro Quo arrangement for the largesse and the benefit obtained by the investors from the State of Andhra Pradesh and also in all other aspects.
As per the orders of the Hon'ble High Court of AP, Hyderabad, CBI, ACB, Hyderabad Branch registered the case vide RC.19(A)/2011-CBI-HYD on 17.08.2011 u/s 120-B r/w 420, 409 & 477-A & Sec. 13(2) r/w 13(1)(c)&(d) of PC Act 1988 against Sri Y.S.Jagan Mohan Reddy (A-1), Member of Parliament, Kadapa and 73 others including M/s.Raghuram Cements (A-9 in FIR), M/s. Jagati Publications Ltd (A-8 in FIR), M/s.Carmel Asia Holdings Pvt Ltd (A-4 in FIR) and M/s.India Cements (A-22 in FIR) and the Directors/Promoters of other unknown companies (Sl.No.72), the Unknown Public Servants of Government of AP (Sl.No.73 of FIR) and Unknown others (Sl.No.74).
On 14.05.2004, late Dr. Y.S.Rajasekhara Reddy, was sworn in as the Chief Minister of Andhra Pradesh, Sri Y.S.Jagan Mohan Reddy and late Dr. Y.S.Rajasekhara Reddy, the then Chief Minister have adopted several ingenious ways to amass illegal wealth which resulted in 11 great public injury. Late Dr. Y.S.Rajasekhara Reddy, during his stint as Chief Minister of Andhra Pradesh from May 2004 to August 2009, abused his public office to favour his son Sri Y.S.Jagan Mohan Reddy. The modus operandi followed by the duo was to dole out public properties, licenses, allotting/granting various projects, SEZs, mining leases, ports, real estate permissions and other benefits to the persons of their choice in gross violation of all established norms and procedures in the Government of AP. The beneficiaries, in turn, have given bribes to Sri Y.S.Jagan Mohan Reddy under the guise of purchasing shares of M/s.Jagati Publications Ltd., M/s.Raghuram Cements Ltd., (presently known as M/s.Bharathi Cement Corporation Pvt. Ltd.), M/s.Carmel Asia Holdings Pvt. Ltd. And other companies floated by him at an exorbitant premiums.
The role of Sri Y.S.Jagan Mohan Reddy in the process was to exercise personal influence on his father and other public servants including Ministers and Secretaries to Government, through his father, and to see that the benefits were conferred on the chosen persons and in the process received illegal gratifications in the sham of investments in his companies amounting to thousands of Crores of rupees.
Since May, 2004 Sri Y.S.Jagan Mohan Reddy started floating /acquiring number of companies including M/s.Raghuram Cements Ltd., M/s.Jagati Publications Ltd and M/s.Carmel Asia Holdings Pvt Ltd. Such companies, it is alleged were floated/acquired with the sole objective of laundering the ill-gotten wealth obtained by misusing the office of the Chief Minister held by his father Dr. Y.S.Rajasekhara Reddy.12
It is alleged that the country's leading Cement Companies like M/s.India Cements Ltd and M/s.Darmia Cements whose share values are around Rs.110 and 40 respectively, after decades of their existence and reputation in the sector, are made to purchase the shares of novice company i.e., M/s/Raghuram Cements Ltd/M/s.Bharathi Cements at a premium of Rs.1440 at the time of inception itself which is allegedly other instance of payment of bribe in the guise of purchase of shares for the benefits given to them by the State Government M/s.India Cements Ltd., invested Rs.95 crores in M/s.Raghuram Cements Ltd., by purchasing shares at a premium of Rs.110 and Rs.1440/-.
M/s.India Cements Ltd., had invested Rs.40 crores in M/s.Jagati Publications and were allotted shares at a premium of Rs.350/-. In addition to this, the India Cements Ltd., is alleged to have invested Rs.5 crores in another group company viz., M/s.Carmel Asia Holdings Ltd., and purchased shares at a premium of Rs.252/-.
M/s.India Cements in lieu of the above investments got the lease of land over an extent of 2.60 acres at Chowdur (M), Kadapa District renewed vide G.O.Ms.No.865 dated 11.07.2008 of Revenue (ASN.IV) Department.
The company was given permission to draw additional 10 lac gallons of water from Krishna River vide G.M.Ms.No.146 dated 22.07.2008 of Irrigation and CAD Department, 13 Million Cubit Feet of water from Kagna River vide G.O.Ms.No.94 dated 12.08.2009 of Irrigation and CAD Department.
It is alleged that the unexpected growth of M/s.Bharathi Cements Corporation Limited its share 13 were again subscribed by the same group of investors along with some new ones, at a premium which is unheard of in Cement sector.
During the year 2007-08, M/s.India Cements acquired shares at a premium of Rs.1440/- per share. Whereas, after lapse of one year, Sri Y.S.Jagan Mohan Reddy and his associates have divested their shares to the French Company at Rs.671/- per share.
It is alleged that these investments from various persons and companies are nothing but bribe money paid by beneficiary companies and individuals who got allotment of lands for Special Economic Zones (SEZs), contracts for irrigation projects, special relaxation/permissions for real estate ventures, mines, etc. This is the kickback money paid to Sri Y.S.Jagan Mohan Reddy who has exercised his personal influence over his father and benefited them at the cost of public exchequer. Except these beneficiaries, no other person allegedly bought shares in M/s.Jagati Publications Pvt. Ltd., at premium rate. Thus, it is alleged that they are the consequential result of illegal gains from the office of the Chief Minister and other persons, who are holding important positions in the Government.
10. The two writ petitions were filed alleging financial misdeeds involving huge magnitude of Government largess, corporate dealings including investments made as part of quid pro quo arrangement for the largess and the benefits obtained by the investors from the State of Andhra Pradesh. By the 14 order dated 10.08.2011, High Court directed CBI to register a case and to investigate such allegations. It was, thereafter that CBI registered the case against seventy four persons under various provisions of IPC and the PC Act. The charge sheet discloses that on 14.05.2004, Dr. Y.S.Rajasekhara Reddy was sworn in as the Chief Minister of Andhra Pradesh. Both Dr. Y.S.Rajasekhara Reddy and his son Sri Y.S.Jagan Mohan Reddy had adopted several ingenious ways to amass illegal wealth. Dr Y.S.Rajasekhara Reddy abused his public office to favour his son. The modus operandi followed by the two was to dole out public properties, licenses, allotting/granting various projects, Special Economic Zones (SEZs), mining leases, ports, real estate permissions etc., to persons of their choice in violation of all established governmental norms and procedures. The beneficiaries in turn had given bribes to Sri Y.S.Jagan Mohan Reddy under the guise of purchasing shares in the companies floated by him at exorbitant premia.
10.1. In this connection, CBI alleged that leading cement companies of the country like the petitioner and M/s.Dalmia 15 Cements whose share values were around Rs.110 and Rs.40 respectively after decades of their existence and built up reputation, purchasing shares of novice companies floated by Sri Y.S.Jagan Mohan Reddy at a premia of Rs.1,440 at the time of inception itself, was nothing but payment of bribe in the guise of purchase of shares for the benefits given by the State Government. In this process, petitioner had invested Rs.95 crores in M/s.Raghuram Cements Limited, Rs.40 crores in M/s.Jagati Publications and Rs.5 crores in M/s.Carmel Asia Holdings Limited. It is alleged that in lieu of the above investments, petitioner got lease of land measuring about 2.60 acres in Kadapa District. That apart, petitioner was given permission to draw additional 10 lakh gallons of water from the Krishna river and 13 million cubit feet of water from the Kagna river. It was further alleged that during the year 2007-08, petitioner had acquired shares of the above companies at a premia of Rs.1,440 per share, whereas Sri Y.S.Jagan Mohan Reddy and his associates divested their shares of the said companies after lapse of one year to a French company at Rs.671 per share.
1610.2. Thereafter, the roles of the accused and various transactions were analysed in the charge sheet. This included lease of 2.60 acres of land in Kadapa District in favour of the petitioner for a period of twenty years from the date on which the company was in possession since the year 1983; allocation of water from Kagna river and Krishna river; and investments made in the companies floated by Sri Y.S.Jagan Mohan Reddy. In so far the role of the petitioner is concerned, the charge sheet mentions as under:-
7. M/s.India Cements Ltd. (A-7) represented by Sri N.Srinivasan:
i) M/s. India Cements Ltd. (A-7) was incorporated as a public limited company in 1946 under the Indian Companies Act, 1913. The registration number of the company is 00931. The company was promoted by Mr. S.N.Sankaralinga Iyer and Mr. T.S.Narayanaswami.
ii) Sri N.Srinivasan (A-3) was appointed as Managing Director of the company on 15th September, 1989 and became Vice Chairman and Managing Director and continuing as such. Sri N.Srinivasan (A-3) is incharge of the day-to-day management and functions of the company.17
iii) M/s.India Cements Ltd., (A-7) acquired Coromandel Cement plant at Cuddapah during 1990. In 1997 they acquired Cement Plant of Visakha Cement Industry Ltd., at Tandur, Ranga Reddy District of Andhra Pradesh and in 1998 M/s.India Cements Ltd., acquired Cement Plant of Cement Corporation of India, at Yerraguntla, Andhra Pradesh.
iv) M/s.India Cements Ltd., (A-7) acquired Raasi Cements Ltd., at Nalgonda District of Andhra Pradesh during 1998.
v) M/s.India Cements Ltd., (A-7) represented by Sri N.Srinivasan (A-3) as part of criminal conspiracy paid illegal gratification to the tune of Rs.140.32 crores to M/s.Raghuram Cements, M/s.Jagati Publications (A-8) and M/s.Carmel Asia Holdings (A-9) without any justification and in violation of Companies Act as a quid pro quo for the favours received from late Y.S.Rajasekhara Reddy under the influence of Sri Y.S.Jagan Mohan Reddy (A-1).
vi) M/s.India Cements Ltd., (A-7) represented by Sri N.Srinivasan (A-3) paid illegal gratification to the tune of Rs.95 crores in M/s.Raghuram Cements Ltd (A-6) at a very high premium in the form of investment although the company was at very nascent stage clearly establishing the fact that the investment made was not a genuine investment but for accommodating the bribe.
vii) M/s.India Cements Ltd., (A-7) represented by Sri N.Srinivasan (A-3) paid illegal gratification to the 18 tune of Rs.40 crores in M/s.Jagati Publications (A-8) and Rs.5 crores in M/s.Carmel Asia Holdings (A-9) at a very high premium in the form of investment in violation of corporate laws clearly establishing the fact that the investment made was not a genuine investment but for accommodating the bribe as a quid pro quo.
viii) M/s.India Cements Ltd., (A-7) represented by Sri N.Srinivasan (A-3) received undue favour in the form of extension of lease of land to an extent of 2.60 acres at Chowdur Mandal, Kadapa for a period of 20 years; permission to draw additional 10 lakh litres of water per day from River Kagna; permission to draw additional 10 lakhs gallons of water per day from Krishna River.
ix) By the above said overt acts, M/s.India Cements Ltd (A-7) acting through its VC and Managing Director Sri N.Srinivasan (A-3) has committed offences punishable u/s 120-B r/w 420 IPC and Section 12 of PC Act, 1988.
10.3. Thus, the allegation against the petitioner is that it had paid illegal gratification to the tune of Rs.140.32 crores to M/s.Raghuram Cements Limited, M/s.Jagati Publications and M/s.Carnel Asia Holdings Private Limited as a quid pro quo for the favours received from Dr. Y.S.Rajasekhara Reddy under the influence of his son Sri Y.S.Jagan Mohan Reddy. 19 Alleged undue favours received by the petitioner included extension of lease of land to an extent of 2.60 acres in Kadapa District besides being granted permission to draw additional water from Kagna and Krishna rivers. Therefore, CBI charged that petitioner acting through its Vice Chairman and Managing Director Sri N.Srinivasan, accused No.3, had committed offences punishable under Section 120B read with Section 420 IPC and Section 12 of the PC Act.
10.4. After the charge sheet was filed before CBI Court on 10.09.2013, C.C.No.24 of 2013 was registered by the CBI Court and cognizance was taken on 25.09.2013, whereafter summons were issued to the accused persons for their appearance. Cognizance order dated 25.09.2013 is extracted hereunder:
Charge sheet filed in R.C.No.19(A)/2011 against A1 to A9 under Section 120-B read with 420, 420 IPC and Sections 9, 12, 13(2) read with 13(1)(d) of P.C.Act, 1988 and this Court taken cognizance on 25.09.2013 as follows:
COGNIZANCE ORDER DATED 25.09.2013 20 Perused the record and office note. Charge sheet is taken on file for the offences against the accused as mentioned below:
A-1 - Y.S. Jagan Mohan Reddy - 120-B r/w 420, 420 IPC & Sec. 9 & 12 of P.C. Act, 1988 A-2 - V.Vijay Sai Reddy - 120-B r/w 420, 420 IPC & Sec. 9 of P.C. Act, 1988 A-3 - N.Srinivasan V.C.& M.D. M/s. India Cements Ltd., Chennai - 120-B r/w 420 IPC & Sec. 12 of P.C. Act, 1988 A-4 - M.Samuel - 120-B r/w 420, 420 IPC A-5 - Adithyanath Das - 120-B r/w 420, 420 IPC A-6 - M/s.Raghuram Cements Ltd (Presently known as M/s.Bharathi Cements Corp. P. Ltd.,), rep. by its Promoter Y.S.Jagan Mohan Reddy - 120-B r/w 420, 420 IPC & Sec. 9 of P.C. Act, 1988 A-7 - M/s.India Cements Ltd., rep. by its VC & MD N.Srinivasan - 120-B r/w 420 IPC & Sec 12 of P.C. Act, 1988 A-8 - M/s.Jagati Publications Ltd., rep. by the then Director, Y.S.Jagan Mohan Reddy -120-B r/w 420 IPC A-9 - M/s.Carmel Asia Holdings Private Limited, rep. by its the then Director, Y.S.Jagan Mohan Reddy - 120-B r/w 420 IPC Register C.C. and issue summons to accused for their appearance before this Court on 01.11.2013. Since A2 is in judicial custody, issue P.T Warrant for his production before Court.21
10.5. From the above it is evident that CBI Court took cognizance against both petitioner represented by its Vice Chairman and Managing Director Sri N.Srinivasan as accused No.7 and Sri N.Srinivasan personally as accused No.3 for alleged commission of offence under Section 120-B read with Section 420 IPC and Section 12 of the PC Act.
11. At this stage, the word 'cognizance' or what is meant by taking 'cognizance' needs a little elaboration. The word 'cognizance' though finds place in Cr.P.C., however is not a defined expression. It is, therefore, necessary to refer to certain judicial pronouncements to have an understanding of the concept of 'cognizance'.
12. In Chief Enforcement Officer v. Videocon International Limited5 Supreme Court held that the expression 'cognizance' has not been defined in the Cr.P.C, but the said word is of indefinite import. However, it has no esoteric or mystic significance in criminal law. It merely means 'become aware of' and when used with reference to a court or a judge, it connotes 'to take notice of judicially'. It indicates the point 5 (2008) 2 SCC 492 22 when a Court or a Magistrate takes judicial notice of an offence with a view to initiating proceedings in respect of such offence said to have been committed by someone. Thus it connotes that judicial notice is taken note of an offence after application of mind. It was held as follows:
20. 'Taking cognizance' does not involve any formal action of any kind. It occurs as soon as a Magistrate applies his mind to the suspected commission of an offence. Cognizance is taken prior to commencement of criminal proceedings. Taking of cognizance is thus a sine qua non or condition precedent for holding a valid trial.
Cognizance is taken of an offence and not of an offender. Whether or not a Magistrate has taken cognizance of an offence depends on the facts and circumstances of each case and no rule of universal application can be laid down as to when a Magistrate can be said to have taken cognizance.
13. Supreme Court in Mehmood Ul Rehman v. Khazir Mohammad6 referred to various case laws and thereafter observed that cognizance of an offence on complaint is taken for the purpose of issuing process to the accused. Since it is a process of taking judicial notice of certain facts which constitute an offence, there has to be application of mind as 6 (2015) 12 SCC 420 23 to whether the allegations in the complaint, when considered along with statements recorded or the inquiry conducted thereon, would constitute violation of law so as to call a person to appear before the criminal Court. It is not a mechanical process or a matter of course. To set in motion the process of criminal law against a person is a serious matter. Thus, Supreme Court held that taking of cognizance presupposes application of mind as to whether a person should be summoned as an accused or not which is certainly not a mechanical process.
14. This position was reiterated by a Constitution Bench of the Supreme Court in Sarah Mathew v. Institute of Cardio Vascular Diseases7. It has been held as follows:
31. It is now necessary to see what the words 'taking cognizance' mean. Cognizance is an act of the court. The term 'cognizance' has not been defined in the Cr.P.C. To understand what this term means we will have to have a look at certain provisions of the Cr.P.C. Chapter XIV of the Code deals with 'Conditions requisite for initiation of proceedings'. Section 190 thereof empowers a Magistrate to take cognizance upon (a) receiving a complaint of facts which constitute such offence; (b) a police report of such 7 (2014) 2 SCC 62 24 facts; (c) information received from any person other than a police officer, or upon his own knowledge, that such offence has been committed. Chapter XV relates to 'Complaints to Magistrates'. Section 200 thereof provides for examination of the complainant and the witnesses on oath. Section 201 provides for the procedure which a Magistrate who is not competent to take cognizance has to follow. Section 202 provides for postponement of issue of process. He may, if he thinks fit, and shall in a case where the accused is residing at a place beyond the area in which he exercises his jurisdiction, postpone the issue of process against the accused and either inquire into the case himself or direct an investigation to be made by a police officer for the purpose of deciding whether there is sufficient ground for proceeding. Chapter XVI relates to commencement of proceedings before the Magistrate.
Section 204 provides for issue of process. Under this section if the Magistrate is of the opinion that there is sufficient ground for proceeding and the case appears to be a summons case, he shall issue summons for the attendance of the accused. In a warrant case, he may issue a warrant. Thus, after initiation of proceedings detailed in Chapter XIV, comes the stage of commencement of proceedings covered by Chapter XVI.
xxx xxx xxx xxx xxx
34. Thus, a Magistrate takes cognizance when he applies his mind or takes judicial notice of an offence with a view to initiating proceedings in respect of offence which is said to have been committed. This is the special connotation acquired by the term 'cognizance' and it has to be given the same meaning wherever it appears in Chapter XXXVI. It bears repetition to state that taking 25 cognizance is entirely an act of the Magistrate. Taking cognizance may be delayed because of several reasons. It may be delayed because of systemic reasons. It may be delayed because of the Magistrate's personal reasons.
15. Again in S.R.Sukumar v. S.Sunaad Raghuram8 Supreme Court held that cognizance has a reference to the application of judicial mind by the Magistrate in connection with the commission of an offence. It has been held as follows:
12. "Cognizance" therefore has a reference to the application of judicial mind by the Magistrate in connection with the commission of an offence and not merely to a Magistrate learning that some offence had been committed. Only upon examination of the complainant, the Magistrate will proceed to apply the judicial mind whether to take cognizance of the offence or not. Under Section 200 Cr.P.C., when the complainant is examined, the Magistrate cannot be said to have ipso facto taken the cognizance, when the Magistrate was merely gathering the material on the basis of which he will decide whether a prima facie case is made out for taking cognizance of the offence or not. "Cognizance of offence" means taking notice of the accusations and applying the judicial mind to the contents of the complaint and the material filed therewith. It is neither practicable nor desirable to define as to what is meant by taking cognizance. Whether the Magistrate has taken 8 (2015) 9 SCC 609 26 cognizance of the offence or not will depend upon facts and circumstances of the particular case.
16. From a careful analysis of the aforesaid decisions of the Supreme Court, what is deducible is that 'cognizance' means taking judicial notice of an offence by a Court or by a Magistrate with a view to initiating criminal proceedings in respect of such offence. Since it is a question of taking judicial notice for initiating criminal proceedings, it is axiomatic that there has to be application of mind at the time of taking cognizance. It cannot be a mechanical exercise to set in motion the process of criminal law against a person which is a serious matter.
17. In so far the present case is concerned, petitioner who has been arrayed as accused No.7 is a juristic person, being a company. The question which therefore falls for consideration is whether the petitioner can be criminally proceeded against? Ancillary to the above is the question as to whether there was application of mind by the CBI Court while taking cognizance against the petitioner?
27
18. To answer the above questions, it is necessary to examine the legal position which has evolved regarding criminal prosecution of a juristic person like a company.
19. While examining criminal prosecution against a juristic person like a company, Supreme Court deliberated upon the principle of alter ego in Sunil Bharati Mittal v. CBI9 in the backdrop of commission of an offence involving a company or a corporation. After a detailed analysis, Supreme Court held that criminal intent of the alter ego of the company i.e., the group of persons that guide the business of the company/ corporation would be imputed to the company/corporation. If the person or group of persons who control the affairs of the company commit an offence with a criminal intent, their criminality can be imputed to the company as well as they are the alter ego of the company. After holding so, Supreme Court discussed the circumstances when the Director/person in charge of the affairs of the company can also be prosecuted when the company is an accused person. It has been held as follows:
9
(2015) 4 SCC 609 28
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 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.
xxx xxx xxx xxx xxx
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 Hada10, 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 10 Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 29 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.
20. Therefore, when it is a case of commission of an alleged offence by a company, the criminal intent of the alter ego of the company would be looked into. Alter ego would mean a person or a group of persons who are at the helm of affairs of the company; in other words, they are in control over the affairs of the company. However, as is discernible from the above citations, Supreme Court sounded a note of caution that since a corporate entity is an artificial person, there can be no vicarious liability of the alter ego unless the statute specifically provides for the same. This is because it is the cardinal principle of criminal jurisprudence that there can be no vicarious liability unless the law so provides. Therefore, it has been held that when a company or a corporation is an offender, vicarious liability of the Directors or the alter ego 30 cannot be imputed automatically if there is no statutory provision to this effect.
21. In the recent decision of the Supreme Court in Ravindra Bajpe v. Mangalore SEZ Limited11 Supreme Court held that summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. In the order issuing summons, the learned Magistrate has to record his satisfaction about the prima facie case against the accused who are Managing Director, 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. Merely because the accused are officials of the company, they cannot be held vicariously liable unless there are specific allegations against them. In the facts of that case, Supreme Court found that the learned Magistrate had not recorded his prima facie satisfaction that a case against the officials of the company was made out or not. Merely because respondents therein were officials of the company, they could not automatically be 11 Criminal Appeal Nos.1047‐1048/2021 decided on 27.09.2021 31 held vicariously liable, unless there were specific allegations against each one of them with respect to their individual role. Thus Supreme Court held that the High Court had rightly dismissed the revision application by confirming the order of the Sessions Court quashing the order of the learned Magistrate in issuing summons to the respondents therein. It has been held as follows:
8.3 As held by this Court in the case of GHCL Employees Stock Option Trust (supra), 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 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 A1 & A6, 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 A1& A6.32
9. From the order passed by the learned Magistrate issuing the process against the respondents herein -
accused Nos.1 to 8, there does not appear that the learned Magistrate has recorded his satisfaction about a prima facie case against respondent Nos.2 to 5 and 7 and 8. Merely because respondent Nos.2 to 5 and 7 & 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 respondent Nos.1 to 8 herein - original accused Nos.1 to 8 for the offences punishable under Sections 427, 447, 506 and 120B read with Section 34 IPC.
22. In so far the present case is concerned, from a perusal of the cognizance order dated 25.09.2013, it is evident that the CBI Court had merely recorded that it had perused the record and office note and thereafter the charge sheet was taken on file for the offences against each of the nine accused persons as mentioned in the cognizance order, including Sri N.Srinivasan in his capacity as Vice Chairman and Managing Director as accused No.3 and the petitioner represented by its 33 Vice Chairman and Managing Director Sri N.Srinivasan as accused No.7. Cognizance was taken against both under Section 120B read with Section 420 IPC and Section 12 of the PC Act. However, what is glaring is that the CBI Court did not record any satisfaction that there is a prima facie triable case against the petitioner or against Sri N.Srinivasan. The cognizance order does not disclose any application of judicial mind on the part of the CBI Court.
23. As seen from the above, Supreme Court has held that there cannot be any automatic fastening of criminal culpability on the alter ego for commission of alleged offence by the corporate entity. From a reading of the cognizance order dated 25.09.2013, application of mind by the CBI Judge is not at all discernible. Cognizance was taken and the cognizance order was passed most mechanically. Such cognizance, therefore, cannot stand the test of judicial scrutiny.
24. Before we analyse the contours of power exercised by the High Court under Section 482 Cr.P.C. since the said 34 provision has been invoked by the petitioner for quashing of the charge sheet and the cognizance order, it would be apposite to advert to the order of this Court dated 18.03.2016 passed in Criminal Petition No.7584 of 2015 (N.Srinivasan v. CBI). As mentioned above, Sri N.Srinivasan is the Vice Chairman and the Managing Director of the petitioner. Petitioner has been arrayed as accused No.7 through Sri N.Srinivasan, who additionally was arrayed as accused No.3. The above criminal petition was filed by Sri N.Srinivasan to quash the proceedings in C.C.No.24 of 2013 as well as the cognizance order qua Sri N.Srinivasan. In his elaborate order, a learned Judge of this Court culled out the following points for consideration:
1. Whether the petitioner/A-3-Srinivasan, being the Vice Chairman and Managing Director of M/s. India Cements Limited (A-7), be made personally liable for any acts of India Cements Limited with vicarious liability for the offences punishable under Sections 120-B read with 420 I.P.C. and Section 12 of the Prevention of Corruption Act, by virtue of any statutory liability or legal fiction?
2. If not, whether petitioner/A-3-Srinivasan, other than of his status or position as Vice Chairman and Managing Director of India Cements Limited, be 35 made personally liable for any acts and if so on what basis for the final report to accuse and for the learned special judge to take cognizance without specifying as to on vicarious liability or personnel liability?
3. Whether the cognizance taken by the learned special judge without specifying as to on vicarious liability or personnel liability, is outcome of non-
application of judicial mind and same is otherwise unsustainable for not reflecting any reasons or otherwise and is liable to be quashed?
4. To what result?
24.1. Learned Judge examined in great detail relevant portions of the charge sheet and held as follows:
15) A-7/India Cements from the material on record relied by both parties in support of their respective contentions, is a private limited company incorporated and in existence since 1946 and A-3 is acting as its Vice Chairman and Managing Director from 15.09.1989 undisputedly. It is also not in dispute that A-7 entity has acquired or taken over some of the cement and other units viz., Coromandel Fertilizers, Raasi Cements etc., and the entity got more than 4000 crores turn over.
16) It is needless to say that the petitioner/A-3 by virtue of his status as Vice Chairman and Managing Director of A-7/India Cements not shown as vicariously liable either under the Prevention of Corruption Act or under the I.P.C or by any other statutory or legal expressions or other legal fiction including on the 36 principle of alterego. The vicarious liability at best that is defined under the Indian Penal Code to be make out is under Sections 34 to 37 or 141 to 149 or 107 to 120 or 120-B I.P.C and under the Prevention of Corruption Act is with reference to Section 120-B and 107 I.P.C and under Section 12 of the Act. It is needless to say for that there must be a specific allegation or attribution either as instigator or abettor or conspirator or person sharing common intention or participant or atleast a member of the assembly formed unlawfully with some common object. Though the final report speaks the accusation under Section 120-B I.P.C for the offence under Section 420 I.P.C and under Section 12 of the Prevention of Corruption Act as referred supra of the gist of the police final report that was taken cognizance, there is nothing at the cost of repetition to say how the petitioner/A-3 being a privy by any specific overt act of any common concert or agreement to say conspirator or abettor. In the absence of showing any meeting of minds from alleged acts of conspiracy to attribute so far as petitioner/A-3, being managing director of A-7, other than by virtue of the status for same by any legal fiction no way made liable if at all any conspiracy between A-7 and A-1 with others if any including any of the officials of the State Government in toeing to A-1, no way makes the petitioner/A-3 personally liable from the settled position of the law of the land as on date undisputedly.
24.2. Thereafter learned Judge held that there was nothing in the charge sheet under the IPC or under the PC Act to demonstrate that accused No.3 by virtue of his status as Vice 37 Chairman and Managing Director of accused No.7 was vicariously liable. There was nothing on record to even remotely suggest hatching of conspiracy by accused No.3. 24.3. Further, learned Judge also examined in detail the allegations against the petitioner as well since the allegations against the petitioner (accused No.7) and Sri N.Srinivasan (accused No.3) got intertwined. It was held as follows:
18) Undisputedly India Cements Limited (A-7) acquired the Coromandel cement plant of Kadapa only in 1990 and the cement plant of Cement Corporation of India of Yarraguntla in Kadapa District only in the year 1998 (which are within the Andhra area) and acquired the Visakha Cement Industry of Tandur at Ranga Reddy District in the year 1997 and the Raasi Cement Limited of Nalgonda District in the year 1998 which are within the Telangana area. So far as regards the lease of lands concerned, (i) of Ac.2.60 cents at Chowdur Mandal, Kadapa District in favour of India Cements Limited (A-7) for a period of 20 years from the date on which the Company was in possession from 1983 and the Chief Commissioner Land Acquisition (CCLA) Government of Andhra Pradesh after examining said proposals of the District Collector, issued orders vide G.O.Ms.No.53, dated 18.01.2001 awarding lease of said land in favour of India Cements Limited (A-7) for 20 years with retrospective effect from 1983 to 2003 for construction of infiltration 38 well with pump house for supply of water to the cement plant at Chilamkur village with a condition of 10% annual lease on market value of Rs.50,000/- per annum and with provision for 20% increase for every 5 years as per the provisions of the Revenue Board sanding order-
24. It is very clear that the leases were entered earlier even before India Cements Limited/A-7 acquired the Cement plants. It is only the leases renewed with retrospective effect for the period already under enjoyment without continuation concerned also in generating revenue to the Government without loss that cannot be ignored. It is for the subsequent period, India Cements Limited (A-7) submitted a requisition to the District Collector, Kadapa on 30.06.2003 after expiry of earlier lease period supra for renewal of the lease of said land as long as the operations of the cement plant continues in Chilamkur, stating that the infiltration well built in that land is the only source of water for their plant operations, on 06.02.2006 the District Collector, Kadapa through his letter No.E1/909/2000 submitted proposals to the Government through CCLA for extension of the lease of the Ac.2.60 cents in favour of India Cements Limited (A-7) with a recommendation that the period as prescribed under G.O.Ms.No.1484, dated 15.11.1977 on payment of rent at 10% of the market value of Rs.2,50,000/- per acre per annum and the CCLA forwarded said proposals by accepting the recommendation and the Revenue Department put up the latest amendment to the lease rules to Finance Department, which in turn returned the file to Revenue Department with remarks to take action as per G.O.Ms.No.1484, dated 15.11.1977 read with 39 G.O.Ms.No.840, dated 14.10.1996. On receipt of the proposal, a circulation note was put by the then Joint Secretary Revenue Department endorsed to consider for approval and placed before the Council of Ministers in the Cabinet meeting held on 30.06.2008 and approved for five years period from 01.07.2003 and would expire on 01.07.2008 vide its resolution No.241/2008, dated 01.07.2008. Sri M.Samuel (A-4)-Principal Secretary, in furtherance of the criminal conspiracy with other accused persons, by abusing his office as a public servant said to have issued orders vide G.O.Ms.No.865, dated 11.07.2008 extending the lease of land in Sy.No.657/2, Ac.2-60 cents of Chowduru Village of Proddatur Mandal in favour of India Cements Limited (A-7), Chilamkur for a period as prescribed under G.O.Ms.No.1484, dated 15.11.1977 read with G.O.Ms.No.840, dated 14.10.1996, thereby giving the lease for 25 years instead of only five years and M/s.India Cements Limited (A-7) was unduly favoured through this and A-7, in furtherance of the above said criminal conspiracy and in quid-pro-quo for favours received, had paid illegal gratification to the tune of Rs.140.00 crores in total, in the guise of investment, in the companies viz., M/s.Raghuram Cements Limited (Rs.95.00 crores), M/s.Jagati Publications Limited (Rs.40.00 crores) and M/s.Carmel Asia Holdings Private Limited (Rs.5.00 Crores), owned by Sri Y.S.Jagan Mohan Reddy (A-1), who was the ultimate beneficiary to the illegal gratification.
19) From the above, there is nothing against A-3 of he played personal and specific role to make him liable and in the absence of which from his mere status as Managing Director of A-7 cannot be made liable for any of 40 the offences taken cognizance by the learned Special Judge from the transactions supra. It is also important in this context of G.O.Ms.No.1484, dated 15.11.1977 is only applicable to the Telangana Area under Hyderabad Land Revenue Act for uniformity of the leases as it mentions specifically in so far as Andhra area or Andhra region the leases are covered by Revenue Board Standing Orders and in particular B.S.O No.24A. Same is also the position regarding G.O.Ms.No.840 only for Telangana Area. It is important to mention that the prosecution claims from the final report said G.O fixes the maximum 25 years of lease and cannot be extended beyond the period of the lease commenced in the year 1983. The final report speaks the entity was not acquired by A-7/India Cements in 1983 but for later. It is to say indirectly of the lease was continuing even to prior to acquisition of the entity by India Cements. Even otherwise, taken for granted the lease was from the beginning only in favour of the India Cements, a combined reading of the two G.O.Ms.Nos.1484 and 840 clearly visualizes that it mentioned lease initially for five years and there is no outer limit to the maximum period of 25 years or it cannot be said more than 25 years, even to find fault for asking for 75 years or even by counting from the original commencement of the lease allegedly in the year 1983, extended beyond 25 years by the original lease initially for five years or the extension for further periods and the total period if counted comes beyond 25 years. In fact the Board Standing Orders 24 speaks with proforma of lease even coming to G.O.Ms.No.53, the same referring to B.S.O.No.24 for the lease rightly. Even coming to G.O.ms.No.865, dated 11.07.2008, same amended by 41 G.O.Ms.No.100®, dated 02.02.2010, it also reflects B.S.O 24 and amended from five years to 25 years or so. As referred supra in none of the proceedings or material, there is anything to reflect any role or petitioner/A-3 specifically as privy but for to say by virtue of his status in A-7/India Cements which no way makes him vicariously liable for no statutory provision or legal fiction including on the principal of alterago.
24.4. In so far the benefit of drawing additional water from the two rivers is concerned, learned Judge examined the same and held as follows:
20) So far as the water distribution or allotment of additional water component to any of the entities that were acquired by IC/A-7 concerned and making of the provision concerned, M/s.Visaka Cement Industries Limited was undisputedly amalgamated with India Cements Limited (A-7) only in the year 2007. In fact long prior to it, M/s.Visaka Cement Industries Limited was given permission undisputedly to draw 10 mcft of water vide G.O.Ms.No.244 dated 19.12.1996, though the Government`s order did not mention the period of permission and the rate of water royalty to be fixed by the Government. The India Cements Limited (A-7) applied only on 10.03.2008 for additional allocation of 13 Mcft water from River Kagna in addition to the already allocated 10 Mcft water to M/s.Visaka Cements. The Chief Engineer, Minor Irrigation forwarded the request for obtaining Government Orders, from Special Officer(Technical), Irrigation & Command Area 42 Development (I&CAD) Department raised the following points to be ascertained as to the proposed enhancement will not affect Lower & Upper Riparian Rights and does not exceed the restriction of 6 TMC, period of permission to be granted, whether the former company had paid royalty charges up-to-date and remarks of CE, ISWR on the proposal, the matter was needed to be referred to Inter State Water Resources (ISWR), terms and conditions of drawl of water in the earlier G.O.Ms.No.244 namely period and royalty fixed, however Sri Adithyanath Das (A-
5) in furtherance of the criminal conspiracy, by breaching the trust reposed in him and by abuse of his official position, without referring the matter of allocation of water from Kagna River to Inter State Water Resources, only referred the file to Sri Lava Kusha Reddy, Advisor (Telangana), who made a favourable observation though the Secretariat Business Rules defined no role for the advisers. Sri Adithyanath Das (A-5), Secretary, Irrigation Department with the favourable noting from Adviser, overlooked the objections raised by the Special Officer (Technical), gave his assent for allocation of water to M/s.
India Cements Limited (A-7). The proposal was put up to the Minister and there was a final approval of the then Chief Minister resulted in issuing G.O.Ms.No.94, I&CAD dated 12.08.2009. It was in saying conspiracy therein. For that there is nothing to attribute against the petitioner/A3-Srinivasan by any whisper much less specific and substantial allegation of any of his role. The earlier non-payment of royalty by Visakha Cements was for the period prior to amalgamation with India Cements Limited if at all owing water royalty since May, 1997, that cannot be a ground for attributing conspiracy. Similarly 43 coming to the India Cements Limited (A-7) acquired in the year 1998, Raasi Cement Factory at Wazirabad; undisputedly the Raasi Cement was given permission to draw 3 lakh gallons of water from Krishna River by G.O.Ms.No.408 dated 21.06.1979 issued by Irrigation & Power (IRR.III) Department. What all later continued was in saying Sri R.Nagi Reddy, Senior Personal Manager of India Cements Limited (A-7), Wazirabad entered into Article of Agreement for permission to draw 3 lakh gallons of water per day from Krishna River for cement factory for the period from 20.09.2007 to 19.09.2008 for an amount of Rs.1,62,000/- for 12 months and Sri P.R.K.Raju, Chief Manager of India Cements Limited (A-7) vide letter dated 10.12.2007 addressed to the Executive Engineer, Irrigation Department, Nalgonda stating that they had taken permission to draw 3 lakh gallons of water per day from Krishna River earlier from Irrigation Department vide letter No.C/1, dated 12.10.1982 and that they were expanding their plant and require additional quantity of water to an extent of 7 lakhs gallons per day. Even therefrom, it is not A3-Srinivasan but local officers that were party to above agreement, based on which, the Superintendent Engineer requested Chief Engineer to obtain permission from the Government by alleged creation of agreement dated 20.09.2007 for a period of one year. The Executive Engineer, Nalgonda, recommended the request of India Cements Limited (A-7) for enhancement of water to a tune of 10 lakh gallons per day by letter dated 23.02.2008 and the Superintendent Engineer, Irrigation & Command Area Development, Irrigation Circle, Hyderabad by letter No.DEE-I/TS-2/7152, dated 44 12.03.2008 addressed to the Chief Engineer, Minor Irrigation, Hyderabad requesting the Chief Engineer to obtain necessary permission from the Government and the Chief Engineer, Minor Irrigation addressed a letter No.DCE(MI)/OT3-T4/India Cements/ 2008, dated 28.03.2008 to the Principal Secretary, Irrigation & CAD, Department, Hyderabad stating that permission was accorded to India Cements Limited (A-7) formerly M/s.Raasi Cement to draw water from Krishna River, downstream of Nagarjunasagar Dam near Wazirabad village at the rate of 3 lakh gallons per day as per G.O.Ms.No.408, Irrigation & Power (Irrigation-II) Department dated 21.06.1979 and are paying royalty and for additional drawl from 3 lakh gallons to 10 lakh gallons per day sought from expansion of the cement plant. Same was circulated with note put up in C.No.10548/Reforms/2008 on 03.04.2008 and the Special Officer (Technical) observed as period is not specified, remarks of the E in C (irrigation) and the CE/ISWR on sparing of 10 lakh gallons per day to the company are to be obtained subject to confirmation of the expansion of the cement plant. A-5-Adityanathdas issued a memo vide No.10548/Reforms/2008, dated 29.04.2008 to the Engineer-in-Chief/Chief Engineer, Inter State Water Resources to offer their remarks on sparing 10 lakh gallons of water per day to India Cements Limited (A-7) and send a report in the matter at the earliest and Dr.P.Rama Raju, Chief Engineer, Inter State Water Resources, Hyderabad, vide letter No.RCWR/DD(K)/7527/89, Vol.III, dated 23.05.2008 mentioned that as per requirement sought by the firm is relatively small, the proposal may be considered for giving 45 permission duly accounting for the above quantity against the savings from the utilizations within the framework of the Bachawat Tribunal allocations. It was therefrom on 25.06.2008 the then Minister (M & MI) Sri Ponnala Lakshmaiah agreed to the proposal and finally the then Chief Minister late Sri Y.S.Rajasekhara Reddy, in furtherance of criminal conspiracy accorded his assent on 03.07.2008, in quid-pro-quo to the illegal gratification paid by India Cements Limited (A-7) and A-5 by abusing his official position as a public servant issued G.O.Ms. No.146, dated 22.07.2008 according permission to draw 10 lakh gallons of total quantity of water per day including 3 lakh gallons of water already permitted from Krishna River unduly favouring the firm, by suppressing the facts pertaining to the terms and conditions mentioned in the earlier G.O.Ms.No.408, during the period 2007 to 2008 apart from India Cements Limited (A-7) other companies viz., M/s.Deccan Cements Limited, Hyderabad, M/s.Madhucon Sugar and Power Industries, M/s.Maruti Ispat and Energy Private Limited had also applied for allocation of water and whose proposals kept pending as there was quid-pro-quo investments by India Cements Limited (A-7) into the companies of Sri Y.S.Jagan Mohan Reddy out of 12,50,000 preference shares at a premium of Rs.110/- for a sum of Rs.15,00,00,000/-, India Cements Limited (A-7) invested Rs.80.31 crores at a premium of Rs.1440/- with no explanation available in the minutes of the meeting or the statements recorded from top management of the company with regard to the necessity to increase the premium from Rs.110/- to Rs.1440/- (sudden raise of almost 12 times within a small time span of 9 to 10 46 months), except a simple statement that it is a "bouquet of investments" and India Cements Limited (A-7) sold the shares at Rs.671/- to M/s.PARFICIM, SAS, FRANCE on 14.04.2010 undergoing a loss of Rs.26,85,50,489/- Even therefrom in saying the investments into M/s.Raghuram Cements Limited, M/s.Bharathi Cement Corporation Limited by M/s.India Cements Limited (A-7) was nothing but a quid-pro-quo investment, there is nothing of any specific role of A3-Petitioner, but for saying his status as Managing Director of India Cements Ltd, including in regard to in April, 2010 M/s.Pani & Associates, Bangalore evaluated the share price of M/s.Raghuram Cement Corporation Private Limited at Rs.221.17 Ps per share and the Board Resolution of India Cements Limited (A-7) dated 14.04.2010 resolved to invest up to Rs.125 crores by way of Inter Corporate Loans/Advance/ Investment in M/s.Bharathi Cement Group whereas on the same day India Cements Limited (A-7) had sold their stake 1803973 shares of Rs.10/-each in M/s.Bharathi Cements Corporation Limited at a total price of Rs.121.00 crores to M/s.PARFICIM, SAS, FRANCE. Thus, there is no any specific averment from the above of any role of the petitioner/A3-Srinivasan to make him liable. 24.5. Finally, learned Single Judge concluded that as there was nothing to show judicial application of mind to the materials on record while taking cognizance of the alleged offences under Section 120B read with Section 420 IPC as well as under Section 12 of the PC Act in so far accused No.3 47 was concerned, the cognizance taken by the CBI Court was required to be quashed. Accordingly, cognizance taken against accused No.3 was quashed.
25. It appears that this order has attained finality. The position which thus emerges is that the alter ego of the petitioner has been cleared of all allegations of wrong doing by the High Court, which are also the allegations brought by the CBI against the petitioner.
26. Reverting back to Section 482 Cr.P.C., the said provision provides that nothing therein shall be deemed to limit or affect the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under the Cr.P.C or to prevent abuse of the process of any Court or otherwise to secure the ends of justice. Examining this provision, Supreme Court in State of Karnataka v. L. Muniswamy12 held as under:
In the exercise of this wholesome power, the High Court is entitled to quash a proceeding if it comes to the conclusion that allowing the proceeding to continue would be an abuse of the process of the Court or that the 12 (1977) 2 SCC 699 48 ends of justice require that the proceeding ought to be quashed. The saving of the High Court's inherent powers, both in civil and criminal matters, is designed to achieve a salutary public purpose which is that a Court proceedings ought not to be permitted to degenerate into a weapon of harassment or persecution. In a criminal case, the veiled object behind a lame prosecution, the very nature of the material on which the structure of the prosecution rests and the like would justify the High Court in quashing the proceeding in the interest of justice. The ends of justice are higher than the ends of mere law though justice has got to be administered according to laws made by the legislature. The compelling necessity for making these observations is that without a proper realisation of the object and purpose of the provision which seeks to save the inherent powers of the High Court to do justice between the State and its subjects, it would be impossible to appreciate the width and contours of that salient jurisdiction.
27. Thus Supreme Court observed that saving of the High Court's inherent powers is designed to achieve a salutary public purpose; in a criminal case the veiled object behind a lame prosecution, the very nature of the material on which the structure of the prosecution rests and the like would justify the High Court in quashing the proceeding in the interest of justice.
49
28. Question is under what circumstances and in what categories of cases, a criminal proceeding can be quashed either in exercise of the extra-ordinary powers of the High Court under Article 226 of the Constitution of India or in exercise of its inherent powers under Section 482 Cr.P.C. This question was considered in great detail by the Supreme Court in Bhajan Lal (supra). In the backdrop of the interpretation of various relevant provisions of Cr.P.C. and the judicial precedents relating to exercise of the extra-ordinary power of the High Court under Article 226 or the inherent powers under Section 482 Cr.P.C., Supreme Court laid down categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice. The categories of cases by way of illustration mentioned in paragraph 102 of the report are as under:
(1) Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused;50
(2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code;
(3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused;
(4) Where the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code;
(5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused;
(6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party;51
(7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.
29. Supreme Court in Priya Vrat Singh v. Shyam Ji Sahai13, relied upon category 7 as laid down in Bhajan Lal (supra) and observed that Section 482 Cr.P.C. envisages three circumstances under which inherent jurisdiction of the High Court may be exercised, namely, (1) to give effect to an order under the Cr.P.C., (2) to prevent abuse of the process of court, and (3) to otherwise secure the ends of justice. It is neither possible nor desirable to lay down any inflexible rule which would govern the exercise of inherent jurisdiction. It is to be exercised ex debito justitiae to do real and substantial justice for the administration of which alone courts exist. In exercise of such powers, court would be justified to quash any proceeding if it finds that initiation and/or continuance of it amounts to abuse of the process of court or quashing of proceeding would otherwise serve the ends of justice. No hard-and-fast rule can be laid down in this regard. 13 (2008) 8 SCC 232 52
30. Thus applying the above principle and upon thorough consideration of all aspects of the matter, Court is of the view that it would not at all secure the ends of justice if criminal prosecution is allowed to continue against the petitioner, a corporate entity, through its Vice Chairman and Managing Director Sri N.Srinivasan, more so when the charge sheet against Sri N.Srinivasan as accused No.3 in his capacity as Vice Chairman and Managing Director of the petitioner on the same set of allegations has been quashed by this Court. Consequently, C.C.No.24 of 2013 pending on the file of Principal Special Judge for CBI Cases, Nampally, Hyderabad, as well as the cognizance order dated 25.09.2013 qua the petitioner are hereby quashed. Criminal Petition is accordingly allowed. However, there shall be no order as to costs.
Miscellaneous petitions, if any, pending in this criminal petition shall stand closed.
__________________ UJJAL BHUYAN, CJ 21.10.2022 pln