http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7  

CASE NO.: Appeal (crl.)  1248 of 2007

PETITIONER: Maksud Saiyed

RESPONDENT: State of Gujarat & Ors

DATE OF JUDGMENT: 18/09/2007

BENCH: S.B. Sinha & Harjit Singh Bedi

JUDGMENT: J U D G M E N T

CRIMINAL APPEAL NO.   1248       OF 2007 [Arising out of SLP (Crl.) No. 923 of 2006]

S.B. SINHA,  J :

1.      Leave granted.

  2.     Respondent No. 2 is a former Chairman-cum-Managing Director of  Dena Bank.  He is presently the Chairman and Managing Director of Bank  of Baroda, Mumbai.  Respondent Nos. 3 to 11 are Directors of Dena Bank.   Appellant is a Director of Nagami Nicotine Pvt. Ltd. (hereinafter referred to  as "the Company").  He had transactions with the said Company.  He had  taken loan from Dena Bank.  As loans were not paid, admittedly, an original  application was filed against him before the Debts Recovery Tribunal,  Ahmedabad for recovery of a sum of Rs. 120.13 lakhs from the Company.  

3.      The Bank floated a public issue of 8 crores equity shares of Rs. 10/-  each for cash at a premium of Rs. 17/- i.e. at a price of Rs. 27/- each.   Prospectus was published for the purpose of public issue and therein some  false and misleading information had been given with regard to sanction  limits, the dues and export bills of the Company.  It was alleged that the  Company had committed an offence punishable under Sections 120B, 425,  191, 192, 177, 181 as also 500 of the Indian Penal Code.  A criminal  complaint was filed before the Chief Judicial Magistrate, Vadodara by the  appellant on or about 28.02.2005 alleging:

"(A)    Following false, fabricated and fraudulent  documents illegally and dishonestly misused by  Shri G.C. Garg in the absence of the sanction  letters of the Bank along with its stipulated  sanctioned terms and conditions for the sanctioned  so called credit facilities, evidently acceptance of  Complainant’s Company for the stipulated  sanctioned terms and conditions does not exist.   Hence following false, fabricated and fraudulent  dishonestly and purposefully misused documents  with malafide intention are illegal, invalid and not  maintainable.  Thus, Shri G.C. Garg solemnly  affirmed and signed the verification of the  aforesaid Original Application by dishonestly  making false claim under Section 209 by giving  false and fabricated statements, information and  evidences under Sections 177, 181, 191, 192, 196,  199, 200, 470 and 471 of IPC."

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7  

4.     An order under Sub-section (3) of Section 156 of the Code of  Criminal Procedure was passed by the learned Chief Judicial Magistrate  relying on or on the basis of allegations made in the said complaint petition.   The learned Chief Judicial Magistrate by an order dated 28.02.2005 directed  the police authorities to investigate the complaint.  Respondent filed an  application under Section 482 of the Code of Criminal Procedure for  quashing the complaint and the investigation on 10.05.2005.  By reason of  the impugned judgment dated 9.01.2006, the said application has been  allowed.

5.      Mr. Bishwajit Bhattacharyya, learned counsel appearing on behalf of  the appellant would submit that the High Court committed a serious error in  passing the impugned order insofar as it failed to take into consideration that  it had no jurisdiction to quash the police investigation at that stage.   According to the learned counsel, the acts of omission and commission on  the part of the bank in causing loss of reputation of the appellant is evident  on its face.  Such an action on the part of the officers of the appellant’s bank  was wholly irresponsible.   

6.      The jurisdiction of the High Court to quash a FIR in exercise of its  jurisdiction under Section 482 of the Code of Criminal Procedure is well- known.  The court may not enter into determination of a disputed question of  fact at that stage.  It may, however, take note of the allegations made in the  complaint petition vis-‘-vis the conduct of the parties.  It is not disputed that  the bank had filed an original application before the Debts Recovery  Tribunal, Ahmedabad.  A civil suit was filed at Vadodara in the year 2003.   In the prospectus issued, it was stated:   "Sr.  No. Suit  details,  Date of  Filing Name of the  party Branch Amount  claimed  (Rs. in  lacs) Nature of claim made  against the Bank 4 DRT,  A’bad  28.3.03    M/s.  Nagami  Nicotine  Pvt. Ltd. A.R.B.  A’bad 993.74 The case is filed against  the Bank for non- submission of export  bills and non-releasing of  the sanctioned limits.   We have taken plea that  since the borrower is not  clearing the dues of the  Bank, Bank has not  released the export bills  as per procedure of  UCPDC rules."

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7  

  7.      It is not in dispute that in the year 2003, the matter was pending  before the City Civil Court, Ahmedabad.  Other relevant facts stated in the  said prospectus were not incorrect.  The stand taken by the respondents  therein as contained in Column under the Head "Nature of claim made  against the Bank" is also not incorrect as the same was subject matter of a  civil suit.  Appellant in its notice addressed to Respondent No. 2 herein  through his advocate dated 25.01.2005 stated:

"My client says and submits that the litigation you  are mentioning does not exist at DRT,  Ahmedabad.  On the contrary my client has filed  Special Civil Suit No. 178/2003 on 28.3.2003 and  the same is pending for adjudication in the Civil  Court Vadodara before the Hon’ble Civil Judge  (SD) Vadodara.  Besides my client does not know  ARB, Ahmedabad and also not aware of its place  of existence and its whereabouts in Ahmedabad  and ARB, Ahmedabad has nothing to do with the  suit."

8.      A case of defamation was found only on that basis.  It is not in dispute  that Respondent No. 2 in reply to the said notice dated 5.02.2005 through his  advocate stated:

"5.     The averments made in para 3 of your legal  notice are not true and correct and are not  admitted.  The export bills were sent to Bank of  Fujirah and the same were returned unpaid due to  discrepancy in the documents, and again, the said  export bills were sent to HSBC Bank but, the same  were returned unpaid by HSBC bank without  payment on account of discrepancy in the Export  bills L/C.  There is no negligence on the part of  Bank in respect of Export bills under L/C.  Thus,  to pressurize the Bank, your client has filed the  Special Civil Suit No. 178/2003 in the Civil Court  at Vadodara.  In fact, in para 51 of your client’s  plaint, it is claimed that the branch did not release  the CC hypothecation limit. ***                             ***                     *** 7.      The contents of para 5 of your notice are not  true and correct and the same are denied by my  client and there is no question of concealing any  facts in the prospectus as alleged by you.

       There is no question of any concealment or  suppression of facts in the prospectus.  Had the  notice been given in time the bank could have  taken corrective steps in time to include the fact  which was omitted unintentionally.  The public  issue was closed on 29.01.2005 (Saturday) as  mentioned in the prospectus.

       Draft prosecectus of public issue was filed  by the Bank with SEBI on 3.12.2004 and was kept  on the Website of the bank, SEBI and Lead  Manager M/s. SBI Caps and a press note was  released.  Final prospectus of the issue was filed  with SEBI on 10.1.2005 and was kept on Website  of the Bank, SEBI and lead Manager M/s.  SBI  Caps, and a press note was released.  Statutory  advertisement was published in the newspapaer on  12.1.2005.  The public issue opened on 24.1.2005  and closed on 29.1.2005.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7  

       My client received your notice on  27.1.2005, but it was not readable and hence my  client informed on fax to send the same again.   However, the notice was not refaxed and instead  my client received the notice on 28.1.2005 by post.   The fact that the notice was served belatedly,  suggests that the intention of your client is to  pressurize and put the bank into uncomfortable  position.  Thus, there is no bonafide intention on  the part of your client except to harass my client  and to avoid your client’s liability towards the  repayment of the Bank’s dues. ***                             ***                     *** 9.      In view of the above, my client has not acted  with malafide intention and has not concealed or  suppressed any material facts against the interest  of the public at large and investors in particulars.   The error is by inadvertence and was not  intentional.

       We hope that wiser counsel shall prevail  upon your client and advise your client to  withdraw the notice forthwith.  We request you  that you will desist from taking unwarranted  actions against the bank.

       In spite of the above if your client takes any  action against my client, my client will defend the  same at the cost of your client and your client will  be held liable and responsible for the costs and  consequences thereof."

9.      An inadvertent mistake committed by the bank in referring to the case  being pending before DRT instead of City Civil Court cannot, in our  opinion, give rise to a cause of action for filing a complaint petition far less  under Section 500 of the Indian Penal Code particularly when the other  particulars contained therein were not found to be incorrect.   

10.     It is pertinent to notice that the learned Chief Judicial Magistrate in its  order dated 28.02.2005 proceeded on the basis that the respondents are  Managers and Branch Managers of Dena Bank.  There has, thus, been a total  non-application of mind on the part of the learned Chief Judicial Magistrate.   The learned Chief Judicial Magistrate noticed:

"\005As per the say of the Complainant, Dena Bank  has come out with public issue and on page no. 87  of its Prospectus, the published false information  damages the Complainant’s Company and  endangers credit of the Company.  This apart, the  Bank fabricated false documents in spite of  Complainant has not taken amount under loan and  in violation of the rules and regulations of banking  law and practice, the Bank deceived the company  by filing false suit before DRT, by false  submissions and producing false affidavit are the  allegations of the Complainant.  This apart, the  Bank withheld export bills of the Complainant’s  Company under its custody under the pretext of the  false  excuses by cheating and committed criminal  offence, despite no amount of demand loan taken  by the Complainant, the Bank fabricated false  reasons and committed offence against the  Complainant’s Company are the subject matter of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7  

the Complaint and looking to this, if the Police  investigates the present complaint, more and better  investigation is possible.  Hence the present  complaint is necessitated for the investigation by  the Police, therefore following order is given."

11.     Allegations contained in the complaint petition, as noticed by the  learned Magistrate, may give rise to tortuous liability on the part of Dena  Bank.  Principal allegations were made against the bank.  Who had acted on  behalf of the bank was not disclosed.  The acts of omission and commission  on the part of the bank, if any, by withholding export bills of the bank may  give rise to a statutory violation on its part but the respondents were not  personally liable therefor.   

12.     In Saroj Kumar Poddar v. State (NCT of Delhi) and Anr. [2007 (2)  SCALE 36], this Court held :

       "Apart from the Company and the appellant, as  noticed hereinbefore, the Managing Director and all other  Directors were also made accused.  The appellant did not  issue any cheque.  He, as noticed hereinbefore, had  resigned from the Directorship of the Company.  It may  be true that as to exactly on what date the said resignation  was accepted by the Company is not known, but, even  otherwise, there is no averment in the complaint petitions  as to how and in what manner the appellant was  responsible for the conduct of the business of the  Company or otherwise responsible to it in regard to its  functioning.  He had not issued any cheque.  How he is  responsible for dishonour of the cheque has not been  stated.  The allegations made in paragraph 3, thus, in our  opinion do not satisfy the requirements of Section 141 of  the Act."   [See also Everest Advertising Pvt. Ltd. v. State, Govt. of NCT of Delhi and  Ors. JT 2007 (5) SC 529 and S.M.S. Pharmaceuticals Ltd. v.  Neeta Bhalla  and Anr. 2007 (3) SCALE 245]

13.     Where a jurisdiction is exercised on a complaint petition filed in terms  of Section 156(3) or Section 200 of the Code of Criminal Procedure, the  Magistrate is required to apply his mind.  Indian Penal Code does not  contain any provision for attaching vicarious liability on the part of the  Managing Director or the Directors of the Company when the accused is the  Company.  The learned Magistrate failed to pose unto himself the correct  question viz. as to whether the complaint petition, even if given face value  and taken to be correct in its entirety, would lead to the conclusion that the  respondents herein were personally liable for any offence.  The Bank is a  body corporate.  Vicarious liability of the Managing Director and Director  would arise provided any provision exists in that behalf in the statute.   Statutes indisputably must contain provision fixing such vicarious liabilities.   Even for the said purpose, it is obligatory on the part of the complainant to  make requisite allegations which would attract the provisions constituting  vicarious liability.

14.     It will bear repetition to state that throughout the complaint petition,  no allegation had been made as against any of the respondents herein that  they had any thing to deal with personally either in discharge of their  statutory or official duty.  As indicated hereinbefore, in the prospectus, a  bona fide mistake had been committed.  The fact that such a mistake had  been committed stands accepted.  In any event, the statement that the matter  was pending before the DRT in stead and place of the City Civil Court,  Ahmedabad, per se, cannot be said to be defamatory as the fact that a suit  was pending for recovery of the huge amount is neither denied nor disputed.   Whether such a suit was maintainable and/ or is ultimately to be decreed or  disposed of is a question which has to be gone into in the suit itself.  A

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7  

criminal court cannot even take that factor into consideration.  The High  Court considered the matter at some great details.  Having analysed the  materials placed before it, it was held:

"\005It was, therefore, stated that there was no  suppression or concealment of any facts and it did  not amount to criminal breach of trust and cheating  on the part of the Bank as alleged by the  complainant.  The said export bills under L/C were  negotiated by the Bank under the provisions of  UCPDC 500 1995 Revision.  The Bank has also  informed vide its letter dated 8.2.2005 to M/s. SBI  Capital Markets Ltd.  It was stated therein that the  Bank has not concealed or suppressed any material  fact against the interest of the public at large and  investors in particular.  The bonafide mis- description in setting out the nature of claim was  unintentional.  It was further stated that the  material particulars like the amount of claim, date  of filing and name of the company was correctly  mentioned.  The mis-description did not materially  influence/affect the decision of the  investors/public\005"

       It was furthermore opined:

"It appears to the Court that the learned Chief  Judicial Magistrate has not applied his mind while  passing the order under Section 156(3) of the  Criminal Procedure Code directing the police to  investigate in the matter.  The impugned order, on  the face of it, reveals that he has not gone through  the complaint.  He has stated in the order that the  accused Nos. 1 to 10 are Manager and Branch  Manager of Dena Bank.  As a matter of fact, the  accused No. 1 was the Ex-Chairman and Managing  Director of Dena Bank, and the accused No. 2 was  the Executive Director.  The accused Nos. 3 to 10  are Directors of Dena Bank.  None of these  persons are Managers or Branch Manager.  Despite  this, the learned Chief Judicial Magistrate has  mentioned in his order that they are Managers or  Branch Managers.  With regard to the prospectus  he has simply stated that the Bank has issued  prospectus for its public issue and at page No. 87  false informations were given so as to cause  damage to the Company and to jeopardize the  reputation of the Company.  Despite the fact that  the litigations are pending before the Civil Court  he has mentioned about non-returning of export  bills etc.  On these facts he has passed order under  Section 156 (3) of the Criminal Procedure Code,  directing the PSI, Sayajiganj Police Station to  make inquiry in the matter."

       The approach of the High Court, with respect, is entirely correct.  

15.     This Court in Pepsi Foods Ltd. and Another v. Special Judicial  Magistrate and Others [(1998) 5 SCC 749], held as under:

"28. Summoning of an accused in a criminal case is a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7  

serious matter. Criminal law cannot be set into motion as  a matter of course. It is not that the complainant has to  bring only two witnesses to support his allegations in the  complaint to have the criminal law set into motion. The  order of the Magistrate summoning the accused must  reflect that he has applied his mind to the facts of the  case and the law applicable thereto. He has to examine  the nature of allegations made in the complaint and the  evidence both oral and documentary in support thereof  and would that be sufficient for the complainant to  succeed in bringing charge home to the accused. It is not  that the Magistrate is a silent spectator at the time of  recording of preliminary evidence before summoning of  the accused. The Magistrate has to carefully scrutinise  the evidence brought on record and may even himself put  questions to the complainant and his witnesses to elicit  answers to find out the truthfulness of the allegations or  otherwise and then examine if any offence is prima facie  committed by all or any of the accused."

       The learned Magistrate, in our opinion, shall have kept the said  principle in mind.

16.     For the reasons aforementioned, there is no merit in this appeal which  is dismissed accordingly with costs.  Counsel’s fee assessed at Rs. 25,000/-.