Judgement Delivered by : SINHA, S.B. (J)

CASE NO.:
Appeal (crl.) 317 of 2008

PETITIONER:
S.K. Alagh

RESPONDENT:
State of U.P. & Ors

DATE OF JUDGMENT: 15/02/2008

BENCH:
S.B. Sinha & V.S. Sirpurkar

JUDGMENT:
J U D G M E N T

CRIMINAL APPEAL NO. 317 OF 2008
(Arising out of SLP (Crl) No.4661 of 2007)

S.B. Sinha, J.

1. Leave granted.
2. M/s. Akash Traders was an Area Wholesale dealer of Britannia
Industries Limited (the Company) for Azamgarh, U.P. Dealership of
Respondent No.2 was terminated by the said company. It was earlier
informed that goods will be delivered only upon receipt of demand drafts
issued by it. Complainant sent two demand drafts for a sum of Rs.18,000/-
and Rs.1,50,000/- for supply of goods on 14.9.2000 despite the fact that the
dealership had been terminated earlier.
3. The said demand drafts were sent to the appellant through the local
Sales In-charge of the Company. It is stated that the complainant refused to
take the same back.
4. A new Area Wholesaler for Azamgarh was appointed by the
company.
5. A demand was made by the complainant to deliver goods by a letter
dated 24.9.2000 stating that the company owes him a sum of Rs.1,00,000/-.
The stand of the company that his dealership had been terminated was
reiterated by a letter dated 25.9.2000.
6. Ashok Kumar Aggarwal, purported to be the proprietor of the firm
M/s. Akash Traders, filed a complaint petition in the court of Chief Judicial
Magistrate, Azamgarh against the appellant herein for commission of an
offence under Section 406 of the Indian Penal Code. Britania Industries Ltd.
was not impleaded as an accused therein.
7. On or about 17.2.2001, i.e., after filing of the complaint petition, the
dealer accepted the said demand drafts being dated 8.1.2002 for a sum of
Rs.1,68,000/-. On or about 25.2.2001, Ashok Kumar Aggarwal, the original
complainant expired. A substitution application was filed by the second
respondent-Alok Kumar Aggarwal on or about 19.4.2001.
8. Inter alia, relying on or on the basis of the allegations made in the
complaint petition that 'the company with mala fide intention neither sent
the goods, nor returned the money'; an order for summoning the appellants
was passed on 8.5.2001. A publication to that effect was also made in an
article in a local newspaper.
9. An application for recalling the order summoning before the learned
Chief Judicial Magistrate was filed by the appellant. The learned Chief
Judicial Magistrate, by an order dated 13.12.2001 discharged the accused in
terms of Section 245(2) of the Code of Criminal Procedure, holding :
"From the perusal of the record, this fact has come
to light that in between the complainant M/s.
Akash Traders, Azamgarh and Britannia Industries
Ltd., Kolkata an agreement was made. M/s. Akash
Traders were the authorized agent of Britannia
Industries Ltd. and according to terms and
conditions of the Agreement, Britannia Industries
Ltd. used to supply biscuit to M/s. Akash Traders,
Azamgarh. On 8.9.2000, Britannia Industries Ltd.
terminated the agency regarding agreement as a
result of which in between the parties dispute
arose. It is the submission of the complainant that
on 13.9.2001 bank draft of Rs.1,68,000/- was sent
in favour of Britannia Industries Ltd. but on behalf
of the accused the above amount did not return till
7.2.2001 to the complainant. The pleading on
behalf of the accused is that the bank draft of
Rs.1,68,000/- was returned to M/s. Akash Traders
on 8.1.2001 and its payment was received by the
complainant on 19.2.2001 under protest. Both the
parties regarding the above reference after the case
being decided this legal position has been made
clear that if in any matter civil or criminal case is
made out then on the basis of obtaining civil relief
the proceedings of the suit could not be terminated.
In the present matter, it has to be decided that
whether in between both the parties during the
business transactions prima facie criminal case was
found? If in the present case any criminal case is
not found then under Section 245(2) Cr.P.C. the
accused could be released at any stage. After the
termination of agreement in between the accused
and the complainant regarding agency on
13.9.2001 bank draft for an amount of
Rs.1,68,000/- was sent to Britannia Industries Ltd.
for the supply of biscuits. Prior to this also
agreement dated 8.9.2000 has already been
terminated regarding the agency in favour of M/s.
Akash Traders Azamgarh. The complainant for
receiving back an amount of Rs.1,68,000/- sent
letters dated 11.10.2000 and 21.10.2000 but till
7.2.2001, the complainant did not receive back the
above amount of Rs.1,68,000/-. But from the
perusal of the photo copy of the letter enclosed
with the file of bank draft of State Bank of India,
Keshavpuram, Delhi it has become clear that bank
draft No.597805 dated 8.1.2001 for an amount of
Rs.1,68,000/ had already been prepared in favour
of M/s. Akash Traders, Azamgarh and after the
departmental proceedings of clearance on
19.2.2001 the complainant had received back the
amount on 19.2.2001. Thus, it is clear that the
applicant/accused had transferred an amount of
Rs.1,68,000/- on 8.1.2001in favour of the
complainant M/s. Akash Traders through Bank
Draft, thus, in transaction whatever delay was
made in returning back the amount of bank draft
that has been committed due to proceedings
relating to payment being done due to banking
process and looking to the aforesaid facts it
becomes clear that on the side of applicant/accused
there was no intention of criminal
misappropriation and, thus, there is no appropriate
basis to initiate any action against the accused.
Therefore, under Section 245(2) Cr.P.C. the
proceedings of the case are terminated and the
accused is released."

11. A revision application was filed thereagainst by the complainant
which, by reason of an order dated 5.6.2002, was allowed, stating :
"It is clear from the perusal of the file that the
learned Chief Judicial Magistrate in the impugned
order dated 13.12.2001 has not granted any
opportunity of adducing the evidences in detail
under the provisions of Section 244 Cr.P.C. but by
not granting any opportunity to adduce the
evidences by the complainant under Section 244
Cr.P.C. has passed the impugned order under the
provisions of Section 245(2) Cr.P.C. which is not
legal and proper. Under the provisions of Section
244 Cr.P.C.the complainant must be granted
opportunity of filing the evidences in detail as per
the law. Under the above, provisions, the charges
are framed against the accused persons after the
evidences are taken on record otherwise not, that is
to say, passing of order under Section 245 Cr.P.C.
would be proper and justifiable."

12. An application filed by the appellant before the High Court in terms of
Section 482 of the Code of Criminal Procedure was dismissed by the High
Court by reason of the impugned judgment, stating :
"From the perusal of the allegations made against
the applicants and from the perusal of the
impugned order, it appears that prima facie offence
is made out against the applicant and there is no
procedural mistake in taking cognizance and
summoning the applicants, therefore, the prayer for
quashing the impugned orders dated 8.5.2001
passed by the learned Magistrate, Azamgarh and
5.6.2002 passed by the learned Additional Sessions
Judge, Fast Track Court No.2, Azamgarh is
refused.
The interim stay order dated 3.7.2002 is
vacated.
Accordingly, this application is dismissed."

13. The short question which arises for consideration is as to whether the
complaint petition, even if given face value and taken to be correct in its
entirety, disclosed an offence as against the appellant under Section 406 of
the Indian Penal Code.
14. Section 405 defines 'criminal breach of trust' to mean :
Section 405.Criminal breach of trust
Whoever, being in any manner entrusted with
property, or with any dominion over property,
dishonestly misappropriates or converts to his own
use that property, or dishonestly uses or disposes
of that property in violation of any direction of law
prescribing the mode in which such trust is to be
discharged, or of any legal contract, express or
implied, which he has made touching the discharge
of such trust, or wilfully suffers any other person
so to do, commits "criminal breach of trust"."

15. Appellant No.1 is the Managing Director of the Company.
Respondent No.3 was its General Manager. Indisputably, the company is a
juristic person. The demand drafts were issued in the name of the company.
The company was not made an accused. The dealership agreement was by
and between M/s. Akash Traders and the company.
16. Mr. Pramod Swarup, learned counsel appearing on behalf of
Responent No.2, in support of the order passed by the learned Chief Judicial
Magistrate as also the High Court, submitted that as, prima facie, the
appellant was in charge of and was in control of the business of the
company, he would be deemed to be liable for the offence committed by the
company.
17. Indian Penal Code, save and except some provisions specifically
providing therefor, does not contemplate any vicarious liability on the part
of a party who is not charged directly for commission of an offence.
18. A criminal breach of trust is an offence committed by a person to
whom the property is entrusted.
19. Ingredients of the offence under Section 406 are :
"(1) a person should have been entrusted with
property, or entrusted with dominion over
property;
(2) that person should dishonestly
misappropriate or convert to his own use
that property, or dishonestly use or dispose
of that property or willfully suffer any other
person to do so;
(3) that such misappropriation, conversion, use
or disposal should be in violation of any
direction of law prescribing the mode in
which such trust is to be discharged, or of
any legal contract which the person has
made, touching the discharge of such trust."

20. As, admittedly, drafts were drawn in the name of the company, even if
appellant was its Managing Director, he cannot be said to have committed an
offence under Section 406 of the Indian Penal Code. If and when a statute
contemplates creation of such a legal fiction, it provides specifically
therefor. In absence of any provision laid down under the statute, a Director
of a company or an employee cannot be held to be vicariously liable for any
offence committed by the company itself. {See Sabitha Ramamurthy and
Anr. v. R.B.S. Channabasavaradhya [(2006) 10 SCC 581]}.
21. We may, in this regard, notice that the provisions of the Essential
Commodities Act, Negotiable Instruments Act, Employees' Provident Fund
(Miscellaneous Provision) Act, 1952 etc. have created such vicarious
liability. It is interesting to note that Section 14A of the 1952 Act
specifically creates an offence of criminal breach of trust in respect of the
amount deducted from the employees by the company. In terms of the
explanations appended to Section 405 of the Indian Penal Code, a legal
fiction has been created to the effect that the employer shall be deemed to
have committed an offence of criminal breach of trust. Whereas a person in
charge of the affairs of the company and in control thereof has been made
vicariously liable for the offence committed by the company along with the
company but even in a case falling under Section 406 of the Indian Penal
Code vicarious liability has been held to be not extendable to the Directors
or officers of the company. {See Maksud Saiyed v. State of Gujarat and Ors.
[2007 (11) SCALE 318]}.
22. The High Court, therefore, committed a manifest error in passing the
impugned judgment.
23. For the reasons aforementioned, the impugned judgment cannot be
sustained. It is set aside accordingly. The appeal is allowed. Respondent
No.2 is liable to bear the costs of the appellant for causing harassment to him
which is quantified at Rs.1,00,000/- (Rupees one lac only).
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pdf format CitationJudgement2008 AIR 1731, 2008(2 )SCR1088, 2008(5 )SCC662 , 2008(2 )SCALE523 , 2008(2 )JT540