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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=20
Industries Limited (the Company) for Azamgarh, U.P.  Dealership of=20
Respondent No.2 was terminated by the said company.  It was earlier=20
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/-=20
and Rs.1,50,000/- for supply of goods on 14.9.2000 despite the fact that =
the=20
dealership had been terminated earlier. =20
3.	The said demand drafts were sent to the appellant through the local=20
Sales In-charge of the Company.  It is stated that the complainant =
refused to=20
take the same back. =20
4.	A new Area Wholesaler for Azamgarh was appointed by the=20
company. =20
5.	A demand was made by the complainant to deliver goods by a letter=20
dated 24.9.2000 stating that the company owes him a sum of =
Rs.1,00,000/-. =20
The stand of the company that his dealership had been terminated was=20
reiterated by a letter dated 25.9.2000. =20
6.	Ashok Kumar Aggarwal, purported to be the proprietor of the firm=20
M/s. Akash Traders, filed a complaint petition in the court of Chief =
Judicial=20
Magistrate, Azamgarh against the appellant herein for commission of an=20
offence under Section 406 of the Indian Penal Code.  Britania Industries =
Ltd.=20
was not impleaded as an accused therein.
7.	On or about 17.2.2001, i.e., after filing of the complaint petition, =
the=20
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=20
complainant expired.  A substitution application was filed by the second =

respondent-Alok Kumar Aggarwal on or about 19.4.2001.=20
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=20
the goods, nor returned the money'; an order for summoning the =
appellants=20
was passed on 8.5.2001.  A publication to that effect was also made in =
an=20
article in a local newspaper.
9.	An application for recalling the order summoning before the learned=20
Chief Judicial Magistrate was filed by the appellant.  The learned Chief =

Judicial Magistrate, by an order dated 13.12.2001 discharged the accused =
in=20
terms of Section 245(2) of the Code of Criminal Procedure, holding :
"From the perusal of the record, this fact has come=20
to light that in between the complainant M/s.=20
Akash Traders, Azamgarh and Britannia Industries=20
Ltd., Kolkata an agreement was made.  M/s. Akash=20
Traders were the authorized agent of Britannia=20
Industries Ltd. and according to terms and=20
conditions of the Agreement, Britannia Industries=20
Ltd. used to supply biscuit to M/s. Akash Traders,=20
Azamgarh.  On 8.9.2000, Britannia Industries Ltd.=20
terminated the agency regarding agreement as a=20
result of which in between the parties dispute=20
arose.  It is the submission of the complainant that=20
on 13.9.2001 bank draft of Rs.1,68,000/- was sent=20
in favour of Britannia Industries Ltd. but on behalf=20
of the accused the above amount did not return till=20
7.2.2001 to the complainant.  The pleading on=20
behalf of the accused is that the bank draft of=20
Rs.1,68,000/- was returned to M/s. Akash Traders=20
on 8.1.2001 and its payment was received by the=20
complainant on 19.2.2001 under protest.  Both the=20
parties regarding the above reference after the case=20
being decided this legal position has been made=20
clear that if in any matter civil or criminal case is=20
made out then on the basis of obtaining civil relief=20
the proceedings of the suit could not be terminated. =20
In the present matter, it has to be decided that=20
whether in between both the parties during the=20
business transactions prima facie criminal case was=20
found?  If in the present case any criminal case is=20
not found then under Section 245(2) Cr.P.C. the=20
accused could be released at any stage.  After the=20
termination of agreement in between the accused=20
and the complainant regarding agency on=20
13.9.2001 bank draft for an amount of=20
Rs.1,68,000/- was sent to Britannia Industries Ltd.=20
for the supply of biscuits.  Prior to this also=20
agreement dated 8.9.2000 has already been=20
terminated regarding the agency in favour of M/s.=20
Akash Traders Azamgarh.  The complainant for=20
receiving back an amount of Rs.1,68,000/- sent=20
letters dated 11.10.2000 and 21.10.2000 but till=20
7.2.2001, the complainant did not receive back the=20
above amount of Rs.1,68,000/-.  But from the=20
perusal of the photo copy of the letter enclosed=20
with the file of bank draft of State Bank of India,=20
Keshavpuram, Delhi it has become clear that bank=20
draft No.597805 dated 8.1.2001 for an amount of=20
Rs.1,68,000/ had already been prepared in favour=20
of M/s. Akash Traders, Azamgarh and after the=20
departmental proceedings of clearance on=20
19.2.2001 the complainant had received back the=20
amount on 19.2.2001.  Thus, it is clear that the=20
applicant/accused had transferred an amount of=20
Rs.1,68,000/- on 8.1.2001in favour of the=20
complainant M/s. Akash Traders through Bank=20
Draft, thus, in transaction whatever delay was=20
made in returning back the amount of bank draft=20
that has been committed due to proceedings=20
relating to payment being done due to banking=20
process and looking to the aforesaid facts it=20
becomes clear that on the side of applicant/accused=20
there was no intention of criminal=20
misappropriation and, thus, there is no appropriate=20
basis to initiate any action against the accused.
Therefore, under Section 245(2) Cr.P.C. the=20
proceedings of the case are terminated and the=20
accused is released."
=20
11.	A revision application was filed thereagainst by the complainant=20
which, by reason of an order dated 5.6.2002, was allowed, stating :
"It is clear from the perusal of the file that the=20
learned Chief Judicial Magistrate in the impugned=20
order dated 13.12.2001 has not granted any=20
opportunity of adducing the evidences in detail=20
under the provisions of Section 244 Cr.P.C. but by=20
not granting any opportunity to adduce the=20
evidences by the complainant under Section 244=20
Cr.P.C. has passed the impugned order under the=20
provisions of Section 245(2) Cr.P.C. which is not=20
legal and proper.  Under the provisions of Section=20
244 Cr.P.C.the complainant must be granted=20
opportunity of filing the evidences in detail as per=20
the law.  Under the above, provisions, the charges=20
are framed against the accused persons after the=20
evidences are taken on record otherwise not, that is=20
to say, passing of order under Section 245 Cr.P.C.=20
would be proper and justifiable."

12.	An application filed by the appellant before the High Court in terms =
of=20
Section 482 of the Code of Criminal Procedure was dismissed by the High=20
Court by reason of the impugned judgment, stating :
"From the perusal of the allegations made against=20
the applicants and from the perusal of the=20
impugned order, it appears that prima facie offence=20
is made out against the applicant and there is no=20
procedural mistake in taking cognizance and=20
summoning the applicants, therefore, the prayer for=20
quashing the impugned orders dated 8.5.2001=20
passed by the learned Magistrate, Azamgarh and=20
5.6.2002 passed by the learned Additional Sessions=20
Judge, Fast Track Court No.2, Azamgarh is=20
refused. =20
	The interim stay order dated 3.7.2002 is=20
vacated.
	Accordingly, this application is dismissed."

13.	The short question which arises for consideration is as to whether =
the=20
complaint petition, even if given face value and taken to be correct in =
its=20
entirety, disclosed an offence as against the appellant under Section =
406 of=20
the Indian Penal Code. =20
14.	Section 405 defines 'criminal breach of trust' to mean :
Section 405.=17Criminal breach of trust=17
Whoever, being in any manner entrusted with=20
property, or with any dominion over property,=20
dishonestly misappropriates or converts to his own=20
use that property, or dishonestly uses or disposes=20
of that property in violation of any direction of law=20
prescribing the mode in which such trust is to be=20
discharged, or of any legal contract, express or=20
implied, which he has made touching the discharge=20
of such trust, or wilfully suffers any other person=20
so to do, commits "criminal breach of trust"."

15.	Appellant No.1 is the Managing Director of the Company. =20
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. =20
The company was not made an accused.  The dealership agreement was by=20
and between M/s. Akash Traders and the company.
16.	Mr. Pramod Swarup, learned counsel appearing on behalf of=20
Responent No.2, in support of the order passed by the learned Chief =
Judicial=20
Magistrate as also the High Court, submitted that as, prima facie, the=20
appellant was in charge of and was in control of the business of the=20
company, he would be deemed to be liable for the offence committed by =
the=20
company. =20
17.	Indian Penal Code, save and except some provisions specifically=20
providing therefor, does not contemplate any vicarious liability on the =
part=20
of a party who is not charged directly for commission of an offence. =20
18.	A criminal breach of trust is an offence committed by a person to=20
whom the property is entrusted. =20
19.	Ingredients of the offence under Section 406 are :
"(1) 	a person should have been entrusted with=20
property, or entrusted with dominion over=20
property;=20
(2) 	that person should dishonestly=20
misappropriate or convert to his own use=20
that property, or dishonestly use or dispose=20
of that property or willfully suffer any other=20
person to do so;=20
(3) 	that such misappropriation, conversion, use=20
or disposal should be in violation of any=20
direction of law prescribing the mode in=20
which such trust is to be discharged, or of=20
any legal contract which the person has=20
made, touching the discharge of such trust."

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

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