REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.  1694      OF 2008 (Arising out of SLP (Crl.) No.5672 of 2004)

R. Kalyani … Appellant

Versus

Janak C. Mehta & Ors. … Respondents

J U D G M E N T

S.B. Sinha, J.

1. Leave granted.

2. Appellant  lodged  a  First  Information  Report  (FIR)  against  the

respondents  on  or  about  4.1.2003 under  Sections  409,  420 and 468 read

with Section 34 of the Indian Penal Code.   

3. First and second respondent approached the High Court for an order

for  quashing  of  the  said  FIR as  also  the  investigation  initiated  pursuant

thereto  or  in  furtherance  thereof.   The  High  Court  allowed  the  said

proceedings by reason of the impugned order dated 29.4.2004.

Mr. K.K. Mani, learned counsel appearing on behalf of the appellant,

would, in support of the appeal, contend :

(1) The High Court exercised its inherent jurisdiction under Section 482

of  the  Code  of  Criminal  Procedure  wholly  illegally  and  without

jurisdiction insofar as it entered into the disputed questions of fact in

regard to the involvement of the respondents as the contents of the

first  information  report  disclose  an  offence  of  cheating,  criminal

breech of trust and forgery.  

(2) While admittedly the investigation was not even complete, the High

Court  could  not  have  relied  upon  the  documents  furnished  by the

defendants either for the purpose of finding out absence of mens rea

on the part of the applicants or their involvement in the case.

(3) Respondent Nos.1 and 2 herein being high ranking officers of M/s.

Shares  and  Securities  Ltd.,  a  company  dealing  in  shares,  were

vicariously liable for commission of the offence being in day to day

charge of the affairs thereof.   

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(4) An offence of forgery being a serious one and in view of the fact that

the respondent  No.2 forwarded a  letter  purporting  to  authorize the

accused No.3 to transfer shares to the National Stock Exchange, he

must  be  held  to  have  the  requisite  intention  to  commit  the  said

offence along with the respondent No.3.

(5) In any view of the matter, the respondent No.3 being not an applicant

before the High Court, the entire criminal prosecution could not have

quashed by the High Court.

4. Ms.  Indu  Malhotra,  learned  senior  counsel  appearing  on  behalf  of

Respondent No.1, on the other hand, would contend :  

(a) In view of the admitted fact that a first information report had been

lodged  by  the  respondents  as  against  the  appellant  herein  on

20.12.2002, i.e., much prior to the lodging of the FIR by the appellant

herein vis-à-vis the FIR lodged by the appellant herein on 4.1.2003,

the same was done with a mala fide intention.   

(b) In view of the fact that the appellant herself owed a sum of Rs.13.28

lacs  to  the company and her  group,  a sum of Rs.45  lacs  which  is

evident from the balance sheet of the appellants, continuation of the

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criminal  proceedings  initiated against  the respondents  would be an

abuse of the process of court.

5. Mr.  U.U.  Lalit,  learned  senior  counsel  appearing  on  behalf  of  the

respondent No.2, supplementing the submissions of Ms. Malhotra urged :

(1) Appellant having not entered into any individual transaction with the

company and as the accounts held by her together with members of

her  family  were  treated  as  group  accounts  and  only  because

respondent  No.2  had  forwarded  a  letter  of  the  appellant  dated

10.1.2002,  which  is  alleged  to  be  forged,  to  the  National  Stock

Exchange, the same by itself does not show that he was a party to the

forgery.

(2) In respect of the offences under general law, vicarious liability cannot

be fastened on an individual.

6. Mr. Vijay Thakur, learned counsel appearing on behalf of respondent

No.3,  submitted  that  although  his  client  was  not  an  applicant  before  the

High Court, if the High Court having issued notice to him and quashed the

entire  criminal  proceedings,  the  impugned  judgment  should  not  be

interfered with.

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7. The  legal  principles  in  regard  to  quashing  of  a  First  Information

Report in view of a large number of decisions rendered by this Court are

now almost well settled.   

8. We may notice some of them :

In State of Haryana & Ors. v. Bhajan Lal & Ors. [1992 Supp.(1) SCC

335], it was held :

“102. In the backdrop of the interpretation of the various  relevant  provisions  of  the  Code  under Chapter  XIV  and  of  the  principles  of  law enunciated by this Court  in a series of decisions relating to the exercise of the extra-ordinary power under  Article  226  or  the  inherent  powers  Under Section 482 of the Code which we have extracted and  reproduced  above,  we  give  the  following categories of cases by way of illustration wherein such power  could  be  exercised  either  to  prevent abuse of the process of any Court or otherwise to secure  the  ends of  justice,  though it  may not  be possible to lay down any precise, clearly defined and  sufficiently  channelised  and  inflexible guidelines  or  rigid  formulae  and  to  give  an exhaustive list  of  myriad kinds of cases wherein such power should be exercised.

1. Where  the  allegations  made  in  the  First Information Report or the complaint, even if they  are  taken  at  their  face  value  and accepted in their entirety do not prima-facie constitute  any offence  or  make out  a  case against the accused.

2. Where  the  allegations  in  the  First Information  Report  and  other  materials,  if

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any,  accompanying  the  F.I.R.  do  not disclose a cognizable offence, justifying an investigation  by  police  officers  under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code.

3. Where the uncontroverted allegations made in  the  FIR or  complaint  and  the  evidence collected  in  support  of  the  same  do  not disclose the commission of any offence and make out a case against the accused.

4. ….

5. Where the  allegations  made in  the  FIR or complaint  are  so  absurd  and  inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there  is  sufficient  ground  for  proceeding against the accused.

6. ….

7. Where a criminal  proceeding is  manifestly attended  with  mala  fide  and/or  where  the proceeding is maliciously instituted with an ulterior  motive for wreaking vengeance on the  accused  and with  a  view to  spite  him due to private and personal grudge.”

In Rajesh Bajaj v. State of NCT of Delhi & Ors. [(1999) 3 SCC 259],

this Court held :

“7.  After  quoting  Section  415  of  IPC  learned judges proceeded to consider the main elements of the offence in the following lines:

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“A bare reading of the definition of cheating would  suggest  that  there  are  two elements thereof,  namely,  deception  and  dishonest intention to do or omit to do something. In order to bring a case within the first part of Section 415, it is essential, in the first place, that  the  person,  who  delivers  the  property should have been deceived before he makes the delivery; and in the second place that he should  have  been  induced  to  do  so fraudulently or dishonestly. Where property is  fraudulently  or  dishonestly  obtained, Section 415 would bring the said act within the ambit of cheating provided the property is to be obtained by deception.”

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12.  The  High  Court  seems  to  have  adopted  a strictly  hyper-technical  approach  and  sieved  the complaint through a calendar of finest gauzes for testing  the  ingredients  under  Section  415,  IPC. Such an endeavour may be justified during trial, but certainly not during the stage of investigation. At any rate, it is too premature a stage for the High Court  to  step  in  and  stall  the  investigation  by declaring  that  it  is  a  commercial  transaction simplicitor  wherein  no  semblance  of  criminal offence is involved.”

In  Hamid v.  Rashid alias Rasheed & Ors. [(2008) 1 SCC 474], this

Court opined :

“6.  We  are  in  agreement  with  the  contention advanced on behalf of the complainant appellant. Section 482 Cr.P.C. saves the inherent powers of the High Court and its language is  quite explicit when  it  says  that  nothing  in  the  Code  shall  be

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deemed to  limit  or  affect  the  inherent  powers of the  High  Court  to  make  such  orders  as  may be necessary  to  give  effect  to  any  order  under  the Code,  or  to  prevent  abuse of  the process of  any Court or otherwise to secure the ends of justice. A procedural  Code,  however  exhaustive,  cannot expressly provide for all time to come against all the cases or points that may possibly arise, and in order  that  justice  may not  suffer,  it  is  necessary that every court must in proper cases exercise its inherent  power for the ends of  justice or  for the purpose of carrying out the other provisions of the Code.  It  is  well  established  principle  that  every Court has inherent power to act ex debito justitiae to  do  that  real  and  substantial  justice  for  the administration  of  which  alone  it  exists  or  to prevent abuse of the process of the Court.”

In Sunita Jain v. Pawan Kumar Jain & Ors. [(2008) 2 SCC 705], it is

stated :

“In exercising its jurisdiction under Section 561-A  the  High  Court  would  not  embark upon an enquiry as to whether the evidence in  question  is  reliable  or  not.  That  is  the function  of  the  trial  Magistrate,  and ordinarily it would not be open to any party to  invoke  the  High  Court's  inherent jurisdiction  and  contend  that  on  a reasonable appreciation of the evidence the accusation made against the accused would not be sustained.”

In State of Orissa & Anr. v. Saroj Kumar Sahoo [(2005) 13 SCC 540],

this Court stated the law, thus :

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“11. As noted above, the powers possessed by the High Court under Section 482 of the Cr.P.C. are very  wide  and  the  very  plenitude  of  the  power requires great caution in its exercise. Court  must be careful to see that its decision in exercise of this power is based on sound principles. The inherent power should not be exercised to stifle a legitimate prosecution.  The  High  Court  being  the  highest court  of  a  State  should  normally  refrain  from giving a prima facie decision in a case where the entire  facts  are  incomplete  and  hazy,  more  so when  the  evidence  has  not  been  collected  and produced before the Court and the issues involved, whether  factual  or  legal,  are  of  magnitude  and cannot  be  seen  in  their  true  perspective  without sufficient material. Of course, no hard and fast rule can be laid down in regard to cases in which the High  Court  will  exercise  its  extraordinary jurisdiction  of  quashing  the  proceeding  at  any stage.  

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14. It is to be noted that the investigation was not complete and at that stage it was impermissible for the  High  Court  to  look  into  materials,  the acceptability of  which is  essentially  a matter  for trial.  While  exercising  jurisdiction  under  Section 482  of  the  Cr.P.C.,  it  is  not  permissible  for  the Court to act as if it was a trial Court. Even when charge  is  framed at  that  stage,  the  Court  has  to only  prima facie  be  satisfied  about  existence  of sufficient  ground  for  proceeding  against  the accused. For that limited Page 2274 purpose, the Court  can  evaluate  material  and  documents  on records  but  it  cannot  appreciate  evidence.  The Court  is  not  required  to  appreciate  evidence  to conclude  whether  the  materials  produced  are sufficient  or  not  for  convicting  the  accused.  In Chand  Dhawan  (Smt.)  v.  Jawahar  Lal  and  Ors. [(1992) 3 SCC 317], it was observed that when the

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materials relied upon by a party are required to be proved, no inference can be drawn on the basis of those  materials  to  conclude  the  complaint  to  be unacceptable.  The  Court  should  not  act  on annexures to the petitions under Section 482 of the Cr.P.C.,  which  cannot  be  termed  as  evidence without being tested and proved.”

In Kailsah Verma v. Punjab State Civil Supplies Corporation & Anr.

[(2005) 2 SCC 571], this Court stated :

“5.  In  Krishnan and Anr. v.  Krishnaveni  and Anr. [(1997) 4 SCC 241] this question came up for  consideration.  That  was  a  case  where  the complaint was registered under Sections 420, 406 IPC. After inquiry, the police filed a report stating that the case was essentially of a civil nature and no  offence  was  made  out.  The  complainant brought the matter to the Superintendent of Police. As  per  the  directions  of  the  Superintendent  of Police,  the  case  was  investigated  by  the  Crime Branch and a fresh report was filed under Section 173 IPC. On receipt of the report, the Magistrate took  cognizance  of  the  offences  under  Sections 420  and  406  IPC.  Thereupon,  the appellant/accused  filed  an  application  for discharge and the accused was discharged by the Magistrate.  The  complainant  filed  a  revision before  the  Sessions  Court  and  the  revision  was dismissed. On further revision by the complainant, the  High  Court  set  aside  the  order  of  the Magistrate  and  directed  the  trial  of  the  criminal case on merits. This was challenged on the ground that the second revision was not maintainable. A Bench  consisting  of  three  Judges  of  this  Court held:

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‘......though  the  revision  before  the  High Court under Sub-section (1) of Section 397 is prohibited Sub-section 3 thereof, inherent power  of  the  High  Court  is  still  available under Section 482 of the Code and as it  is paramount  power  of  continuous superintendence  of  the  High  Court  under Section 483,  the  High Court  is  justified in interfering  with  the  order  leading  to miscarriage  of  justice  and  in  setting  aside the order of the courts below’.”

However, Dr. Monica Kumar & Anr. v. State of U.P. & Ors. [2008

(9) SCALE 166], held :

“The  inherent  power  should  not  be  exercised  to stifle  a  legitimate  prosecution.  The  High  Court being the highest court of a State should normally refrain from giving a prima facie decision in a case where  the  entire  facts  are  incomplete  and  hazy, more so when the evidence has not been collected and  produced  before  the  Court  and  the  issues involved,  whether  factual  or  legal,  are  of magnitude  and  cannot  be  seen  in  their  true perspective without sufficient material. Of course, no hard and fast rule can be laid down in regard to cases  in  which  the  High  Court  will  exercise  its jurisdiction  of  quashing  the  proceeding  at  any stage.”

9. Propositions of law which emerge from the said decisions are :

(1) The High Court ordinarily would not exercise its inherent jurisdiction

to quash a criminal proceeding and, in particular, a First Information

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Report  unless  the  allegations  contained  therein,  even  if  given  face

value and taken to be correct in their entirety, disclosed no cognizable

offence.

(2) For the said purpose, the Court, save and except in very exceptional

circumstances, would not look to any document relied upon by the

defence.

(3) Such a power should be exercised very sparingly.  If the allegations

made in the FIR disclose commission of an offence, the court shall

not go beyond the same and pass an order in favour of the accused to

hold absence of any mens rea or actus reus.

(4) If the allegation discloses a civil dispute, the same by itself may not

be  a  ground  to  hold  that  the  criminal  proceedings  should  not  be

allowed to continue.  

10. It is furthermore well known that no hard and fast rule can be laid

down.  Each case has to be considered on its own merits.  The Court, while

exercising  its  inherent  jurisdiction,  although  would  not  interfere  with  a

genuine complaint  keeping in  view the  purport  and object  for  which the

provisions of Sections 482 and 483 of the Code of Criminal Procedure had

been introduced by the Parliament  but  would  not  hesitate  to  exercise  its

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jurisdiction  in  appropriate  cases.   One  of  the  paramount  duties  of  the

Superior  Courts is to see that a person who is apparently innocent is  not

subjected to persecution and humiliation on the basis of a false and wholly

untenable complaint.

11. In the aforementioned backdrop, we may now examine as to whether

the FIR lodged by the appellant makes out any case for proceeding against

the respondent.   

12. We may, for the said purpose, notice the ingredients of Section 420

and 406 of the Indian Penal Code.

The  ingredients  of  Section  420  of  the  Indian  Penal  Code  are  as

follows:

i) Deception of any persons;

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.

Section 406 of the Indian Penal Code reads, thus :

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“406.  Punishment for criminal breach of trust. —Whoever  commits criminal breach of trust shall be  punished  with  imprisonment  of  either description for a term which may extend to three years, or with fine, or with both.”

In  Popular  Muthiah v.  State  represented  by  Inspector  of  Police

[(2006) 7 SCC 296], it was opined :

“While  exercising  its  appellate  power,  the jurisdiction of the High Court although is limited but, in our opinion, there exists a distinction but a significant  one  being  that  the  High  Court  can exercise its revisional jurisdiction and/ or inherent jurisdiction not only when an application therefore is filed but also suo motu. It is not in dispute that suo  motu  power  can  be  exercised  by  the  High Court  while exercising its  revisional  jurisdiction. There may not,  therefore,  be an embargo for the High Court  to exercise its  extraordinary inherent jurisdiction while exercising other jurisdictions in the matter.  Keeping  in  view the intention  of  the Parliament,  while  making  the  new  law  the emphasis of the Parliament being 'a case before the court'  in  contradistinction  from 'a person who is arrayed  as  an  accused  before  it'  when  the  High Court  is  seized  with  the  entire  case  although would exercise  a limited jurisdiction in  terms of Section  386 of  the Code of  Criminal  Procedure, the same, in our considered view, cannot be held to limit its other powers and in particular that of Section 482 of the Code of Criminal Procedure in relation to the matter which is not before it.”

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13. LKP  Shares  and  Securities  Ltd.  (the  Company)  is  a  company

registered  and  incorporated  under  the  Indian  Companies  Act,  1956.

Whereas  respondent  No.1  is  its  President,  the  second  respondent  is  its

Branch  Coordinator.  Both  of  them are  stationed  at  Bombay which  is  its

headquarters.  It has many branches including the one at Chennai.  Every

branch is said to be an independent entity.   

14. Respondent No.3 who has been arrayed as accused No.3 in the FIR

was  the  Branch  Manager  of  the  company at  Chennai.   Indisputably,  all

interactions and transactions by and between the appellant and the company,

if any, were made by the complainant only with the respondent No.3.   

15. A bare  perusal  of  the  First  Information  clearly  goes  to  show that

authorisedly  or  unauthorisedly,  respondent  No.3  was  operating  the

appellant’s account.  It is furthermore not in dispute that she and her family

members were operating six accounts with the company, the details whereof

are as under :

Sl. No. Name Account No. 1. Mr. A Sridhar A555 2. Mr. Dinesh D D316 3. Mrs. Dhanam B0002 4. Ms. Kalyani R. K0004 5. Jayamani S. J0001 6. M/s. R.S.R. Securities Limited R0014

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16. It is  admitted that the appellant and her husband were Directors of

M/s. R.S.R. Securties Ltd.  It is furthermore conceded that the respondent

No.3 and the brother of the appellant herein, when the company was in great

financial difficulties, became the Directors of the said M/s. RSR Securities

Ltd.  It also stands admitted that the respondent No.3 resigned from the post

of Branch Manager on or about 25.10.2002.   

17. The records  before  us  also show that  Demat Fixed Accounts  were

being operated by Sridhar, brother of the appellant.  It does not appear that

any transaction involving purchase and sale of any share was entered into by

and between the appellant and the company at any point of time, although

the accounts of the RSR Securities had been opened for trading in shares.  

18. Apparently,  the  First  Information  Report  does  not  contain  any

allegation against the appellant No.1.   

19. The principal allegations therein are only against the third respondent

which may be enumerated hereinafter :

(1) He, without the knowledge and consent of the complainant with mala

fide intention, operated the account maintained in her name.

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(2) He promised to take over the liabilities of the company’s account R-

14 and at his instance only the appellant and her husband resigned

from the company and he and Mr. Sridhar became the Directors.

(3) Accused  No.3  promised  to  pay  a  sum  of  Rs.9.57  lacs  being  the

balance in the account K-4 and also Rs.11.97 lacs being the value of

shares purchased in the account as early as 1999 but not delivered in

time, but he failed and or neglected to do so.

Paragraph 11 of the said First Information which is material for our

purpose reads as under :

“11. The  complainant  submits  that  the  3rd accused  in  R-14 account  without  the  knowledge and consent of the complainant caused liabilities in the said account and even after taking over the said  liabilities  by  the  3rd accused  by  inducting himself  as  director  of  the  company  now  with ulterior  intentions,  fabricated  a  letter  dated 10.1.2002 purported to have been written by the complainant  by  forging  signature  of  the complainant, thereby trying to misappropriate the money due to the complainant  from the personal account and also the 1st and 2nd accused who are responsible  for  the  day to  day management  and affairs of the company as responsible persons of the company, liable for the act of 3rd accused who is a manager in their company.”

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20. It was also alleged therein that the appellant came to learn that the

second accused had forwarded a letter dated 10.1.2002 to the national Stock

Exchange which is  said to be a forged and fabricated letter,  the contents

whereof are :

“Pursuant  to  the  discussions  my brother  Mr.  A. Sridharan had with you regarding settlement of all outstanding  payments  in  the  accounts  which  we were operating.

I request you to transfer the credit  balance of  Rs.9,57,037.16  from  my  personal  account No.K004  to  adjust  the  debit  balance  of Rs.21,08,420.45  in  our  company  SRI  R.S.R. Securities  account  No.R104.   Any  further  debit balance  after  adjustment  as  above  will  be recoverable against the company.”

21. Whereas, thus, no allegation whatsoever has been made against the

respondent No.1, the only allegation against the respondent No.2 was that

he  had  forwarded  the  said  letter  dated  10.1.2002  to  National  Stock

Exchange.  The act of forgery on/or fabrication of the said letter had been

attributed to Respondent No.3.   

Respondent Nos.1 and 2 herein were sought to be proceeded against

on the premise that they are vicariously liable for the affairs of the company.

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22. As Mr. Mani had time and again referred to the allegations relating to

forgery  of  the  said  document  dated  10.1.2002,  we  may  also  notice  a

disturbing  fact.   Before  lodging the  said  First  Information,  a  notice  was

issued  by  the  appellant  against  the  respondents  herein  on  15.10.2002,

whereas  the  address  of  respondent  Nos.1  and  2  were  shown  as  404,

Embassy  Centre,  Nariman  Point,  Mumbai  –  400  021  and  302,  Veena

Chambers,  21,  Dalal  Street,  Fort,  Mumbai  –  400  001  respectively.

However,  in  the  complaint  petition,  they were  shown  to  be  residents  of

Chennai.

23. In the  aforementioned factual  backdrop,  we although  do  not  agree

with the approach of the High Court, concur with its conclusion.   

The allegations contained in the First Information Report, therefore,

do not disclose an offence against the respondent Nos 1 and 2.  They have

in  their  individual  capacity  been  charged  for  commission  of  offences  of

cheating, criminal breach of trust and forgery.   

24. As there had never been any interaction between the appellant and

them,  the  question  of  any  representation  which  is  one  of  the  main

ingredients for constituting an offence of cheating, as contained in Section

415 of the Indian Penal Code, did not and could not arise.   

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25. Similarly,  it  has  not  been alleged  that  they were  entrusted  with  or

otherwise  had  dominion  over  the  property  of  the  appellant  or  they  have

committed any criminal breach of trust.   

So far as allegations in regard to commission of the offence of forgery

are concerned, the same had been made only against the respondent No.3

and not against the respondent No.2.  Sending a copy thereof to the National

Stock  Exchange  without  there  being  anything  further  to  show  that  the

respondent No.2 had any knowledge of the fact that the same was a forged

and fabricated document cannot constitute offence.   

Allegations  contained  in  the  FIR  are  for  commission  of  offences

under a general statute.  A vicarious liability can be fastened only by reason

of a provision of a statute and not otherwise.  For the said purpose, a legal

fiction has to be created.  Even under a special statute when the vicarious

criminal  liability is  fastened on a person on the  premise that  he was  in-

charge of the affairs of the company and responsible to it, all the ingredients

laid  down  under  the  statute  must  be  fulfilled.   A  legal  fiction  must  be

confined to the object and purport for which it has been created.

In Sham Sunder & Ors. v. State of Haryana [(1989) 4 SCC 630], this

Court held :

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“9. But we are concerned with a criminal liability under  penal  provision  and  not  a  civil"  liability. The penal provision must be strictly construed in the  first  place.  Secondly,  there  is  no  vicarious liability  in  criminal  law  unless  the  statute  takes that  also  within  its  fold.  Section  10  does  not provide for such liability. It does not make all the partners  liable  for  the  offence  whether  they  do business or not.”

Yet  again,  in  Radhey  Shyam  Khemka  &  Anr. v.  State  of  Bihar

[(1993) 3 SCC 54], the law has been laid down by this Court, thus :

“6. But, at the same time, while taking cognizance of  alleged  offences  in  connection  with  the registration, issuance of  prospectus,  collection of moneys  from  the  investors  and  the misappropriation  of  the  fund  collected  from the share-holders  which  constitute  one  offence  or other under the Penal Code, court must be satisfied that prima facie and offence under the Penal Code has  been  disclosed  on  the  materials  produced before the court. If the screening on this question is not done properly at the stage of initiation of the criminal  proceeding,  in  many  cases,  some disgruntled share-holders may launch prosecutions against  the  promotors,  directors  and  those  in charge  of  the  management  of  the  company concerned  and  can  paralyse  the  functioning  of such company. It  need not be impressed that  for prosecution for offences under the Penal Code the complainant  has  to  make  out  a  prima  fade  case against the individuals concerned, regarding their acts and omissions which constitute the different ingredients of the offences under the Penal Code. It  cannot  be  overlooked  that  there  is  a  basic difference  between  the  offences  under  the  Penal Code  and  acts  and  omissions  which  have  been

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made punishable under different Acts and statutes which are in nature of social welfare legislations. For framing charges in respect of those acts and omissions,  in  many  cases,  mens  rea  is  not  an essential ingredient; the concerned statue imposes a  duty  on  those  who  are  in  charge  of  the management,  to  follow  the  statutory  provisions and once there is a breach or contravention, such persons  become  liable  to  be  punished.  But  for framing a charge for  an offence under the Penal Code, the traditional rule of existence of mens rea is to be followed.”

In  Hira  Lal Hari  Lal  Bhagwati v.  CBI,  New Delhi [(2003)  5 SCC

257], it has been held :

“32. Likewise the ingredients of Section 420 of the  Indian  Penal  Code  are  also  not  made  out. There is no reason as to why the appellants must be made to undergo the agony of a criminal trial as has been held by this Court in the case of  G. Sagar  Suri  and  Anr.  v.  State  of  U.P.  and Ors. [(2000) 2 SCC 636].  In this, this Court held that.

"Jurisdiction under Section 482 of the Code has  to  be  exercised  with  great  care.  In exercise of its jurisdiction the High Court is not to examine the matter superficially. It is to be seen if a matter, which is essentially of a  civil  nature,  has  been  given  a  cloak  of criminal  offence.  Criminal  proceedings  are not a short cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused, it is a serious matter.”

39. It is settled law, by catena of decisions, that for establishing  the  offence  of  cheating,  the

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complainant is required to show that the accused had fraudulent or dishonest intention at the time of making  promise  of  representation.  From  his making failure to keep up promise subsequently, such  a  culpable  intention  right  at  the  beginning that  is  at  the  time  when  the  promise  was  made cannot be presumed.”

{[See also  Vir Prakash Sharma v.  Anil Kumar Agarwal & Anr. [(2007) 7

SCC 373]}.

26. Although the legal principle that a penal  statute must receive strict

construction, it is not in doubt or dispute, we may notice some authorities in

this behalf.   

In Section 263 of the Francis Bennion's Statutory Interpretation it is

stated :

“A principle  of  statutory interpretation  embodies the policy of the law, which is  in turn based on public  policy.  The  Court  presumes,  unless  the contrary  intention  appears,  that  the  legislator intended  to  conform  to  this  legal  policy.  A principle  of  statutory interpretation  can therefore be  described  as  a  principle  of  legal  policy formulated as a guide to legislative intention.”

Maxwell in The Interpretation of Statutes (12th Edn) says:

"The strict construction of penal statutes seems to manifest itself in four ways: in the requirement of

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express language for the creation of an offence; in interpreting strictly words setting out the elements of  an offence;  in  requiring the fulfillment  to  the letter  of  statutory  conditions  precedent  to  the infliction  of  punishment;  and in  insisting  on  the strict  observance  of  technical  provisions concerning criminal procedure and jurisdiction."

In  Craies and Statute Law (7th Edn. At p. 529) it is said that penal

statutes must be construed strictly. At page 530 of the said treatise, referring

to U.S. v. Wiltberger, [(1820) 2 Wheat (US) 76], it is observed, thus :

“The distinction between a strict construction and a more free  one has,  no  doubt,  in  modern times almost disappeared, and the question now is, what is the true construction of the statute? I should say that  in a criminal  statute you must be quite sure that the offence charged is within the letter of the law.  This  rule  is  said  to  be  founded  on  the tenderness of the law for the rights of individuals, and  on  the  plain  principle  that  the  power  of punishment is vested in the Legislature, and not in the judicial  department,  for  it  is  the  Legislature, not  the  Court,  which  is  to  define  a  crime  and ordain its punishment.”

In  Tuck v.  Priester,  [(1887)]  19  QBD 629]  which  is  followed  in

London  and  County  Commercial  Properties  Investments v.  Attn  Gen.,

[(1953) 1 WLR 312], it is stated:

"We  must  be  very  careful  in  construing  that section, because it imposes a penalty. If there is a

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reasonable interpretation, which will avoid the penalty in any particular case,  we must adopt that construction. Unless penalties are imposed in  clear  terms  they  are  not  enforceable. Also where  various  interpretations  of  a  section  are admissible it is a strong reason against adopting a particular interpretation if it shall appear that the result would be unreasonable or oppressive."

Blackburn, J. in Wills v. Thorp said [(1875) LR 10 QB 383]:

“When  the  Legislature  imposes  a  penalty,  the words imposing it must be clear and distinct.”

27. If a person, thus, has to be proceeded with as being variously liable

for the acts of the company, the company must be made an accused.  In any

event, it would be a fair thing to do so, as legal fiction is raised both against

the Company as well as the person responsible for the acts of the Company.

28. For the reasons aforementioned, we do not find any legal infirmity in

the impugned judgment.  Before parting with this case, however, we must

clarify one aspect of the matter.   

Respondent No.3, arrayed as accused No.3 in the First  Information

Report,  did  not  file  any  application  under  Section  482  of  the  Code  of

Criminal Procedure.  We do not know under what circumstances, the High

Court  directed  service  of  the  notice  on  him.  Nowhere  in  the impugned

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judgment,  High  Court  found  that  the  allegations  contained  in  the  First

Information  Report  against  the  respondent  No.3  also  do  not  disclose

commission of any cognizable offence.  It is one thing to say that he has not

committed the same but it is another thing that the High Court’s jurisdiction

under  Section  482  of  the  Code  of  Criminal  Procedure  could  have  been

invoked at this stage.   

29. In view of our findings aforementioned, we have no other option but

to hold that the High Court in its judgment cannot be said to have covered

the case of the respondent No.3.  The investigation against him, therefore,

shall continue.  However, it will be open to him to take appropriate defences

at appropriate stages as are permissible in law.   

30. The appeal is dismissed with the aforementioned observations.   

……………………………….J. [S.B. Sinha]

..…………………………..…J. [Aftab Alam]

New Delhi;

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October 24, 2008

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