REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 1504    OF 2010 (Arising out of SLP (Crl) No.5768 of 2008)

M.A.A. Annamalai .. Appellant  

Versus

State of Karnataka & Another .. Respondents

J U D G M E N T

Dalveer Bhandari, J.

1. Leave granted.

2. This appeal is directed against the judgment and order  

dated  26.05.2008 passed by the High Court of Karnataka at  

Bangalore in Criminal Petition No.2625 of 2004.

3. Brief facts of the case are as under:-

The appellant,  who was one  of  the  Directors  of  R.P.S.  

Benefit  Fund  Ltd.  submitted  his  resignation  letter  on  

8.12.1997 which became effective  from the date  of  filing  of  

Form 32 (27.12.1997) with the Registrar of Companies.  The  

said Form has been filed with this petition.

4. Respondent no.2 filed a complaint with the Indira Nagar  

Police Station, Bangalore, alleging:

- that RPS Benefit Fund had invited deposits from  the  public  vide  circular  dated  06.12.1998  and  that monies had been invested by the Petitioner  and  his  wife  in  the  Pensioner’s  Benefit  Fund,  pursuant to the approval of the scheme by the  Reserve Bank of India;

- that  the  Company  had  issued  letters  on  18.05.1999 and 14.06.1999 to the investors not  to  present  their  interest  warrants  and  that  payments of interests would be made by August  1999;

- that the company had since closed its business  and the amount due to the Respondent No.2 was  about Rs.2,91,778/-;

5. The Respondent No.2 lodged a First Information Report  

on 15.10.1999 with the Indira Nagar Police Station alleging the  

offence  under  section  420  Indian  Penal  Code  read  with  

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sections 3, 4, 5 and 6 of the Money Circulation and Banning  

Act, 1978.” In the FIR, it was stated that the alleged offences,  

if any, were committed during the period between 24.05.1998  

and 17.09.1999.   

6. According to the appellant, he ceased to be a Director of  

the  company  from  27.12.1997,  therefore,  he  was  not  

responsible  in  any  manner  for  what  had  happened  in  the  

company after he had resigned as a Director of the company.   

7. The First Information Report was lodged by respondent  

no.2  and  consequently  the  then  Xth  Additional  Chief  

Metropolitan  Magistrate,  Bangalore  issued  a  non  bailable  

warrants against the appellant.

8.  On  Company  Petition  filed  at  the  instance  of  the  

creditors,  the  Company  Court  on  23.7.2002  directed  the  

winding  up  of  the  company.   In  the  winding  up  petition,  

nothing had been mentioned about the appellant because he  

was not the Director of the company at the relevant point of  

time.

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9. The  Karnataka  High  Court  on  10.6.2004  directed  

quashing  of  the  entire  proceedings  in  Criminal  Petition  

No.4007  of  2002  regarding  the  erstwhile  Directors  of  the  

company.  The  proceedings  before  the  Xth  Additional  Chief  

Metropolitan Magistrate were based on the complaint filed by  

respondent no.2 stating that he and his wife had invested in  

the Short Term Deposit Scheme with the company.   

10. The High Court held that some of the Directors of the  

company had retired in April 1999 and that the non-payment  

of matured funds and non payment of interest amount had  

taken place after April 1999.  According to the appellant, he is  

in no manner responsible for company’s non payment of either  

the  mature  funds  and  interest  amount.   The  appellant  

submitted that the petition had been filed for some collateral  

purposes for unnecessary exerting the pressure on the former  

Directors.   

11. The learned Judge also held that material ingredients of  

the offence of cheating had not been made out.  The appellant  

filed  a  petition  before  the  High  Court  of  Karnataka  under  

section  482  of  the  Code  of  Criminal  Procedure  seeking  to  

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quash the proceedings initiated on the basis of the complaint  

registered  as  CC  22656  of  2001  arising  out  of  the  Crime  

No.425/1999  pending  before  the  Xth  Additional  Chief  

Metropolitan Magistrate, Bangalore.   

12. The appellant submitted that he cannot be held liable or  

responsible for any of the alleged illegalities committed by the  

company  after  he  had  resigned  from  the  company.  The  

appellant’s main grievance is that in the impugned judgment,  

the  learned  Single  Judge  has  not  dealt  with  this  principal  

argument  advanced  by  the  appellant.    In  the  impugned  

judgment the court observed:-

“It is needless to say that there are some documents  produced  by  the  petitioner  to  show  that  at  the  relevant point of time he was not the Director of the  Company.  It is also his case that he also being an  investor, the ratio followed by this court in the case  of similarly situate persons, applies to his case also.  However, it is for the trial court to ascertain as to  whether there is investment by the petitioner or not,  when  he  was  appointed  as  a  Director,  when  he  resigned and whether the alleged incident has taken  place  during  his  directorship  and  further,  to  ascertain the preliminary aspect as to whether there  is a prima facie case against him and whether he  has  participated  in  the  proceeding  or  not  as  in- charge  and  managing  affairs  keeping  in  view  the  various  decisions  and  pass  orders  in  accordance  with law.”

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13. The court further observed that the petition was disposed  

of with a direction to the appellant to approach the trial court  

seeking for order of discharge.

14. According  to  the  appellant,  even  according  to  the  

averments  of  the  complaint  in  the  First  Information  Report  

there were no allegations whatsoever against the appellant, in  

that  event,  the  High  Court  ought  to  have  quashed  the  

proceedings against the appellant instead of compelling him to  

approach the Trial Court for obtaining the order of discharge.  

The  casual  approach  of  the  High  Court  has  led  to  grave  

miscarriage of justice.

15. According to the appellant, respondent no.2 had invested  

in the Pensioner’s Benefit Fund after approval of the scheme  

by the Reserve Bank of India and therefore, in any event, the  

element of  cheating  as  alleged cannot  be made out  by  any  

stretch  of  imagination.  The  complaint  and  the  First  

Information Report, as aforementioned, do not make out any  

case against the appellant.

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16. In  the  facts  and  circumstances  of  this  case,  the  High  

Court  was not  justified  in  refusing  to  quash the  complaint  

against  the appellant  and compelling  him to go to the trial  

court for seeking an order of discharge.

17. We have heard the learned counsel for the parties.  The  

learned counsel appearing for the State has failed to point out  

any  specific  allegation  or  averment  against  the  appellant.  

Admittedly,  the  appellant  had  resigned  from  the  Board  of  

Directors  of  the  Company  with  effect  from 27.12.1997  and  

therefore, cannot be held responsible for any activities of the  

company  after  he  ceased  to  be  a  Director  of  the  company.  

Even,  according  to  the  allegation  of  respondent  no.2,  no  

criminal case can be made out against the appellant.

18. It  may be  pertinent  to  mention that  a  letter  has been  

placed  on  record  which  was  sent  by  respondent  no.2,  R.  

Narayanamurthy to the Inspector of Police, Indranagar Police  

Station, Indranagar, Bangalore which reads as under:-

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“From:

R. Narayanamurthy, S/o Late N.A. Ramaswamy, 105, Second Main Road, 4th Cross, Sadanandnagar, NGEF Layout, Bangalore – 560038

To

The Inspector of Police, Indranagar Police Station, Indranagar, Bangalore-560033

Dear Sir,

Sub:  Complaint  against  RPS  Benefit  Fund  Ltd.  and  Mr.  M.A.A. Annamalai, Director of the company.

I wish to inform you that I am withdrawing all my charges  against  the  abovesaid  company  and  its  director  M.A.A.  Annamalai,  s/o  Annamalai  Chettiar  residing  at  No.1,  Velayudam Street, Nungambakkam, Chennai -6000034.

I further wish to inform you that I am withdrawing all my  criminal  cases  against  Mr.  M.A.A.  Annamalai  and  other  directors because of my advanced age and ill health and also  as I  have received 55% of  the deposited amount from the  Official Liquidator, High Court of Madras at Chennai and I  am also confident to receive further amounts in due course.

I also understand that Mr. M.A.A. Annamalai resigned from  the Board of RPS benefit Fund Ltd. on 8/12/1997 whereas I  have  deposited  my  money  with  the  company  only  in  December 1998 and in the year 1999.  His name has been  inadvertently  included as  an accused by  the  Investigating  Officer.

Hence I am withdrawing all my criminal charges against Mr.  M.A.A. Annamalai and the company.

Thanking you,

Yours faithfully,

Sd/-

(R. Narayanamurthy)

Date: 16/09/09”

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19. This  letter  indicates  that  respondent  no.2  is  not  

interested  in  prosecuting  the  appellant.   According  to  the  

appellant,  the proceedings initiated against  the  appellant  in  

this case are liable to be quashed.

20. It may be pertinent to mention that respondent no. 2 also  

filed  an  affidavit  on  16.9.2009  before  this  Court.  In  this  

affidavit,  reference has also been made to the affidavit  filed  

before the High Court on 24.6.2009 in which he prayed that  

all cases against the Company and the Directors be withdrawn  

as he had already received 55% of the deposit amount from  

the Official Liquidator, High Court of Madras at Chennai.  In  

the said affidavit filed before this Court, it was also mentioned  

that the appellant had resigned as Director from RPS Benefit  

Fund Ltd. on 8.12.1997 but his name had been included as  

one  of  the  accused  by  the  Investigating  Officer.   In  this  

connection, he had also mentioned that the deponent was to  

withdraw the charges of cheating against all the Directors of  

the RPS Benefit  Fund Ltd.,  including the appellant  pending  

before  the  10th Additional  Chief  Metropolitan  Magistrate,  

Bangalore.    

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21. The  learned  counsel  for  the  appellant  submitted  that,  

apart from the affidavit  of  respondent no. 2,  no case under  

section  420  IPC  is  made  out  against  the  appellant.   The  

primary requirement to make out an offence of cheating under  

section  415  punishable  under  section  420  IPC  is  

dishonest/fraudulent intention at the time of  inducement is  

made.   In  order  to  appreciate  the  controversy  in  proper  

perspective, we deem it appropriate to reproduce section 415  

IPC.  The same reads as under:

“415.  Cheating.-   Whoever, by deceiving any person,  fraudulently  or  dishonestly  induces  the  person  so  deceived  to  deliver  any property  to  any person,  or  to  consent that any person shall  retain any property,  or  intentionally  induces the person so deceived to do or  omit to do anything which he would not do or omit if he  were not so deceived, and which act or omission causes  or is likely to cause damage or harm to that person in  body, mind, reputation or property, is said to “cheat”.”

22. Two main ingredients of section 420 IPC are dishonest  

and fraudulent intention.  The Indian Penal Code has defined  

the word “dishonestly” in section 24 IPC.  Section 24 IPC reads  

as under:

“24.  Dishonestly  -   Whoever  does  anything with  the  intention  of  causing  wrongful  gain  to  one  person  or  wrongful loss to another person, is said to do that thing  “dishonestly”.”

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23. The word “fraudulently” has also been defined in section  

25 IPC.  Section 25 IPC reads as under:

“25. Fraudulently -  A person is said to do a thing  fraudulently  if  he  does  that  thing  with  intent  to  defraud but not otherwise.”

24. In the instant case, according to the appellant there has  

been no dishonest intention nor have any allegations as to the  

extent  of  such  a  dishonest  intention  been  made  in  the  

complaint and FIR.  In fact, no material whatsoever has been  

produced by the respondent no.2 which would indicate any  

such dishonest/fraudulent intention at any stage leave alone  

at the stage of the alleged inducement of inviting depositors to  

deposit  money  with  the  company.    Furthermore,  the  

complaint against  the Chairman and the Managing Director  

itself has been quashed by an order of the  High Court  for  the  

very  reason  that  such dishonest/fraudulent intention was  

not made out in this case.  The judgment of the High Court  

acquired finality  before  no  appeal  was preferred  before  this  

Court.    

25. It  is  submitted  that  the  FIR merely alleged a violation  

under the Money Circulation and Banning Act without giving  

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any basis or material for the same, cannot be sustained.  In  

the instant case, a company was operating under license from  

the Reserve Bank of India and was so carrying on a legitimate  

business under a license by the statutory authority.  The mere  

fact that the company got into financial distress and went into  

liquidation would not in any manner make the activity carried  

out by them unlawful so as to invoke sections 3 to 6 of the  

Money Circulation and Banning Act.   In fact, to fall within the  

mischief of the Act, it must be shown that the activity ought to  

be  an unlawful  one  to  make  quick  and easy  money  and a  

lawful  activity  duly  approved  by  the  Reserve  Bank of  India  

cannot fall under the mischief of the said Act.

26. According  to  the  appellant,  the  company  started  its  

activities only after getting license from the Reserve Bank of  

India and the depositors were legally invited to invest in the  

company  thereafter  and  respondent  no.2  was  one  of  the  

depositors.  Admittedly, in the liquidation proceedings, more  

than  55%  of  outstanding  company’s  liabilities  had  been  

cleared despite the company having been wound up.    

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27. The appellant submitted that a complaint under section  

420 IPC stands on a different footing than a complaint under a  

special  statute.   Unlike special  statutes,  like  the  Negotiable  

Instruments Act which casts a vicarious liability on officers in  

charge of and responsible for the company in an offence under  

the Indian Penal Code, there is no role for vicarious liability.  

The appellant has also alleged that even assuming that the  

company can be said to have committed an offence, this would  

not be enough to sustain a complaint against any officer of the  

company for an offence under the Indian Penal Code unless an  

allegation or material of the said officer having been involved  

in the commission of  the offence is made out.   Any special  

provision like section 141 of the Negotiable Instruments Act, a  

deemed provision is included where if the offence is committed  

by a company, the officers responsible for the conduct of the  

business  of  the  company  are  deemed  to  be  liable  and  a  

presumption of their liability arise unless duly discharged by  

them.    There is no such presumption under the Indian Penal  

Code  and  while  so  necessary  allegation/  material  must  be  

available not merely against the company but also against the  

accused persons as having participated in such offence.   In  

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the instant case, there is not even a whisper anywhere either  

in the complaint or in any material collected to show a direct  

participation of the appellant who was merely included on the  

ground that, once upon a time, he was one of the Directors of  

the company.  

28. The appellant  also  submitted  that  even assuming  that  

there  could  have  been  a  vicarious  liability  thrust  on  the  

appellant,  even  then  there  cannot  be  any  such  vicarious  

liability  in absence  of  any allegations and material  to  show  

that  the  appellant  was  in  charge  of  or  responsible  for  the  

conduct of the company’s business which had given rise to the  

offence.   In the instant case, the appellant ceased to be the  

Director  of  the  company  w.e.f.  27.12.1997  following  his  

resignation on 8.12.1997, which fact was also recorded in the  

Statutory  Form 32  filed  before  the  Registrar  of  Companies.  

The  complaint  itself  expressly  stated  that  the  offence  had  

taken place only thereafter and in fact the FIR expressly stated  

that  the  occurrence  of  offence  was  between  24.5.1998  and  

17.9.1999.  At that stage, the appellant had admittedly ceased  

to be a Director of the company and was not even connected  

with the company in any manner at the time when the alleged  

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offence was committed and cannot be prosecuted in respect of  

such acts of the company.

29. The  appellant,  in  order  to  strengthen  his  stand,  has  

placed  reliance  on  a  numbers  of  judgments  of  this  Court.  

Reliance has been placed on the case of  Hira Lal Hari Lal  

Bhagwati v. CBI, New Delhi (2003) 5 SCC 257.  In this case,  

the  Court  has  observed  that  for  establishing  the  offence  of  

cheating,  the  complainant  is  required  to  show  that  the  

accused had fraudulent or dishonest intention at the time of  

making promise or representation.  From his failure to keep  

promise subsequently, such a culpable intention right at the  

beginning cannot be presumed.    

30. Reliance has also been placed on another case between  

Uma Shankar Gopalika v. State of Bihar & Another (2005)  

10  SCC  336,  in  which  this  Court  observed  that  it  is  well  

settled that every breach of contract would not give rise to an  

offence of cheating and only in those cases breach of contract  

would  amount  to  cheating  where  there  was  any  deception  

played at the very inception.   If the intention to cheat has  

developed later on, the same cannot amount to cheating.   

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31. The learned counsel for the appellant also relied on the  

case  of  S.V.L.  Murthy  etc. v.  State  represented  by  CBI,  

Hyderabad (2009) 6 SCC 77, in which this Court observed as  

under:

“41. An offence of cheating cannot be said to have  been made out unless the following ingredients are  satisfied: (i) deception of a person either by making a false  

or misleading representation or by other action  or omission;

(ii) fraudulently  or  dishonestly  inducing  any  person to deliver any property; or

(iii) to  consent  that  any  person  shall  retain  any  property and finally intentionally inducing that  person to do or omit to do anything which he  would not do or omit.

For  the  purpose  of  constituting  an  offence  of  cheating, the complainant is required to show that  the accused had fraudulent or dishonest intention  at  the  time  of  making  promise  or  representation.  Even in a case where allegations are made in regard  to  failure  on the  part  of  the  accused to  keep his  promise, in the absence of a culpable intention at  the time of making initial promise being absent, no  offence under Section 420 of the Penal Code can be  said to have been made out.”

32. In Vir Prakash Sharma v. Anil Kumar Agarwal (2007)  

7 SCC 373, this Court observed as under:

“13.  The  ingredients  of  Section  420  of  the  Penal  Code are as follows:

(i) Deception of any persons;

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(ii) Fraudulently or dishonestly inducing any  person to deliver any property; or

(iii) To consent that any person shall  retain  any  property  and  finally  intentionally  inducing that person to do or omit to do  anything which he would not do or omit.

No  act  of  inducement  on  the  part  of  the  appellant  has been alleged by the respondent.  No  allegation has been made that he had an intention  to cheat the respondent from the very inception.”

33. This  Court  in  Pepsi  Foods  Ltd.  &  Anr.  v. Special  

Judicial Magistrate & Ors.  (1998) 5 SCC 749 observed as  

under:

“28. Summoning of an accused in a criminal case is  a 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.”

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34. The learned counsel appearing for the State of Karnataka  

supported  the  impugned  judgment  of  the  High  Court  and  

submitted that no interference is called for by this court.   He  

placed reliance on the case of State of Haryana & Others v.  

Bhajan Lal & Others 1992 Supp (1) SCC 335 in which this  

Court observed as under:

“…..that  the  power  of  quashing  a  criminal  proceeding should be exercised very sparingly and  with circumspection and that  too in the  rarest  of  rare  cases;  that  the  court  will  not  be  justified  in  embarking upon an enquiry as to the reliability or  genuineness or otherwise of the allegations made in  the FIR or the complaint and that the extraordinary  or  inherent  powers  do  not  confer  an  arbitrary  jurisdiction  on the  court  to  act  accordingly  to  its  whims or caprice.”

35. The learned counsel for the State also submitted that, in  

the instant case, the FIR was not only registered under section  

420 IPC but under sections 3, 4, 5 and 6 of the Prize Chits  

and Money Circulation Schemes (Banning) Act, 1978.   

36. He also placed reliance on the case of  Rajesh Bajaj v.  

State NCT of Delhi & Others (1999) 3 SCC 259, in which  

this Court, while dealing with section 482 Cr.P.C. has held as  

under:

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“It  is  not  necessary  that  a  complainant  should  verbatim reproduce in the body of his complaint all  the ingredients of the offence he is alleging. Nor is it  necessary that the complainant should state in so  many words that the intention of the accused was  dishonest  or  fraudulent.  Splitting  up  of  the  definition into different components of the offence to  make  a  meticulous  scrutiny,  whether  all  the  ingredients have been precisely spelled out in the  complaint, is not the need at this stage. If factual  foundation  for  the  offence  has  been  laid  in  the  complaint  the  court  should  not  hasten  to  quash  criminal  proceedings  during  investigation  stage  merely on the premise that one or two ingredients  have not been stated with details. For quashing an  FIR (a step which is permitted only in extremely rare  cases) the information in the complaint must be so  bereft of even the basic facts which are absolutely  necessary for making out the offence”.

37. The learned counsel for the State further submitted that  

the  mere  settlement  of  the  case  with  the  complainant  on  

whose complaint the initial FIR was lodged does not dislodge a  

criminal  prosecution  by the  State.   Several  other  witnesses  

exist who would testify to the transactions and it would be up  

to the trial court to test the prosecution case.

38. Reliance  was  also  placed  on  the  case  of  Medchl  

Chemicals  &  Pharma  (P)  Ltd. v.  Biological  E.Ltd.  &  

Ors.(2000) 3 SCC 269, wherein this Court observed as under:

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“Needless  to  record  however  and  it  being  a  settled  principle of law that to exercise powers under Section  482 of the Code, the complaint in its entirety shall have  to be examined on the basis of the allegation made in  the complaint and the High Court at that stage has no  authority  or  jurisdiction  to  go  into  the  matter  or  examine its correctness. Whatever appears on the face  of  the  complaint  shall  be  taken  into  consideration  without any critical examination of the same. But the  offence ought to appear ex facie on the complaint”.

39. It is further submitted by the counsel for the State that  

the complaint clearly disclosed the offences under sections 3,  

4, 5 and 6 of the Act and also offence under section 420 IPC.

40. Reliance has been placed by the learned counsel for the  

State  that  this  Court  in  Kuriachan  Chacko  &  Others  v.  

State of Kerala (2008)  8 SCC 708,  while  dealing with the  

Prize Chits and Money Circulation Schemes (Banning) Act, has  

held that:

“21. The Preamble of the 1978 Act declares that it has  been enacted “to ban the promotion or conduct of prize  chits and money circulation schemes and for matters  connected therewith and incidental thereto”.

22. Section 2 is legislative dictionary and defines certain  terms.  The  phrase  “money  circulation  scheme”  is  defined in clause (c) which reads as under:

2.(c)  ‘money circulation scheme’ means any  scheme,  by  whatever  name  called,  for  the  making of  quick or easy money,  or  for  the  receipt of any money or valuable thing as the  consideration for a promise to pay money, on  any  event  or  contingency  relative  or  applicable to the enrolment of members into  

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the scheme, whether or not such money or  thing is derived from the entrance money of  the  members  of  such scheme or periodical  subscriptions;

In this case, it was further held that:

“39. We are unable to agree with the learned counsel.  The courts below rightly held that prima facie case had  been  made  out  against  the  accused.  Both  the  ingredients necessary for application of Section 2(c)  of  the Act are present in the case on hand. The trial court,  for  coming  to  that  conclusion,  referred  to  certain  documents.  The advertisement  clearly  declared that  a  member would get double the amount when after his  enrolment, two members were enrolled under him and  thereafter, 4 other persons were enrolled and after the  enrolled 4 persons, 8 persons were enrolled under them.  Thus,  only  after  14  persons  under  the  first  enrolled  person become members  under  the Scheme,  the first  person  would  get  Rs.1250  i.e.  double  the  amount  of  Rs.625  (1+2+4+8).  The  trial  court  also  noted  that  Kuriachan  Chacko  (Accused  1)  who  proposed  the  project  for  implementation,  described  how the  project  would work from which also it is clear that the double  amount will be given to a person who purchases a unit  only after 14 persons are enrolled subsequent to him.”

41. We have carefully  considered the rival  contentions.   It  

emerges that:

a) In the instant case, the appellant ceased to be a  

Director  of  the  company  from  27.12.1997  

whereas  the  alleged  offences,  if  any,  were  

committed during the period from 24.5.1998 to  

17.9.1999.  

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b) Admittedly,  there are no allegations against the  

appellant in the First Information Report.  

c) The  company  had  invited  investment  from  the  

depositors to invest in the business/benefit funds  

after receiving due approval of the scheme from  

the  Reserve  Bank  of  India.   Therefore,  in  any  

event, the element of cheating as alleged cannot  

be made out by any stretch of imagination.   

d) The complainant/respondent  no.2  submitted  in  

writing  to  this  Court  that  he  does  not  want  to  

proceed against the appellant because according  

to  him  the  appellant  has  been  inadvertently  

included  as  an  accused  by  the  Investigating  

Officer.  He further mentioned in the letter that  

he  had  already  received  55%  of  the  deposited  

amount from the Official  Liquidator and he did  

not want to proceed against the appellant.  

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e) Even  assuming  that  there  could  have  been  a  

vicarious  liability  thrust  on the appellant,  even  

then there cannot be any such vicarious liability  

in  absence  of  any  allegations  and  material  to  

show  that  the  appellant  was  in-charge  of  or  

responsible  for  the  conduct  of  the  company’s  

business  which  had  given  rise  to  the  offence.  

From  any  angle  of  the  matter,  the  appellant  

cannot be compelled to face the criminal trial in  

this case.

42. The inherent power should not be exercised to stifle the  

legitimate  prosecution  but  at  the  same  time  no  person  be  

compelled to face criminal prosecution if basic ingredients of  

the alleged offence against him are altogether absent.

43. On  consideration  of  the  totality  of  the  facts  and  

circumstances  of  this  case,  the  impugned  judgment  of  the  

High Court  is  set  aside  and the  appeal  is  allowed  and the  

proceedings initiated against the appellant on the basis of the  

complaint registered as CC 22656 of 2001 pending before the  

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Xth  Addl.  Chief  Metropolitan  Magistrate,  Bangalore,  are  

quashed.

44. As a result, this appeal is allowed.  

…….……………………..J.   (Dalveer Bhandari)

…….……………………..J.   (A.K. Patnaik)

New Delhi; August 12, 2010.

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