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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

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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 :

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"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.\027Criminal breach of trust\027 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

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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).