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SUPREME COURT OF INDIA
Pinaki Chandra Ghose, Amitava Roy, JJ.
HDFC Securities Ltd. & Ors. – Appellants
Versus
State of Maharashtra & Anr. – Respondents
Criminal Appeal No. 1213 of 2016 (Arising out of S.L.P.(Crl.) No.1913 of 2012)
Decided On : 09-12-2016
(2013) 10 SCC 705; (1976) 3 SCC 252; (2015) 6 SCC 439; (2014) 2 SCC 1; (2005) 4 SCC 370; (2008) 14 SCC 1; (2007) 14 SCC 776; (1998) 1 SCC 692; 1992 Supp (1) SCC 335; (2013) 3 SCC 330; (2014) 7 SCC 215; (2008) 5 SCC 662; (2008) 5 SCC 668; (2011) 13 SCC 412; (2015) 4 SCC 609; (2009) 1 SCC 516; (2015) 12 SCC 781 – Referred
Facts of the case:
Appellant No.1 HDFC Securities Ltd., is a public liability company, appellant No.2 is the Managing Director of the Company, appellant No.3 is Business Head of the Company, and appellant No.4 is the Regional head of Mumbai Region of the Company, respectively. Respondent No.1 is State of Maharashtra and respondent No.2 is an individual, who held an account with the Company.
Respondent No.2, had registered herself with the Company as a constituent/client by opening Securities Trading Account and was an imperial customer of the Company for about eight years.
On 3rd August, 2009, respondent No.2 requested the appellants to make good the losses caused to her by indulging in unauthorized and fraudulent trading in her account by one Vinod Koper (Relationship Manager of the company-“RM” in short) during the period July, 2008 to June, 2009.
Thereafter, she filed arbitration proceedings before NSE Panel of Arbitrators against the Company for a sum of Rs.48.99 Lacs and costs of Rs.2.5 Lacs. The Arbitrators passed an award in favour of the Company recording a shift in the stand of respondent No.2, authorizing her husband to trade on her behalf.
She filed a complaint against the appellants, RM and AVP. She also filed a criminal complaint before 10th Metropolitan Magistrate, Andheri alleging execution of unauthorized trades in her account without her consent by the appellants and claimed that she had thereby suffered losses amounting to Rs.70 Lacs. Specific allegations were levelled against RM and appellant No.3. General allegations of involvement of other appellants were made.
On 25th September, 2010, she preferred an appeal before NSE Appellate Panel of Arbitrators, wherein she disputed the trades which had taken place during the period December 2008 to April 2009. Being completely oblivious of the Arbitration proceedings, the award passed therein and the appeal preferred by respondent No.2, on 04.01.2011, the learned Metropolitan Magistrate directed registration of FIR against the appellants and ordered for a report after investigation.
Juhu Police Station registered the FIR under Sections 409, 420, 465, 467 read with Sections 34 and 120-B of the IPC.
Meanwhile, the Appellate Tribunal had decided the appeal against respondent No.2.
Thereafter, the appellants filed a writ petition before the Bombay High Court praying for quashing of the said FIR.
The High Court dismissed both the writ petitions as according to it, the filing of the writ petitions was premature and there was no need for exercising the powers either under Article 227 of the Constitution of India or under Section 482 Cr.P.C.
Finding of the Court:
High Court rightly dismissed the appellants’ criminal writ petitions.
Result: Appeals dismissed.
Key Points:
The appeal concerns whether the order directing police investigation under Section 156(3) of CrPC, which led to the registration of an FIR, is liable to be quashed (!) (!) .
The High Court dismissed the criminal writ petitions filed by the appellants on the grounds that such petitions were premature and that the powers under Article 227 of the Constitution and Section 482 of CrPC should be exercised sparingly (!) .
The order by the Magistrate for investigation was based on a complaint that appeared to disclose cognizable offences, and the Magistrate had applied his mind to the complaint, which is a necessary procedural requirement (!) (!) .
The stage of investigation under Section 156(3) does not cause irreparable injury to the accused and therefore does not justify quashing at this stage; the filing of criminal proceedings is premature before the investigation report is filed (!) (!) .
The legal principle that criminal proceedings require a higher standard of proof than civil proceedings was highlighted, and the importance of ensuring allegations are specific and sufficient to establish criminal liability was emphasized (!) (!) .
Vicarious liability of a corporate entity or its officials cannot be presumed without specific statutory provisions or requisite allegations establishing personal liability; mere involvement or general allegations are insufficient to initiate criminal proceedings against individuals in a corporate context (!) (!) (!) .
The inherent powers of the High Court under Section 482 CrPC are to be exercised sparingly and only in cases of abuse of process or to prevent miscarriage of justice; at the stage of investigation, such powers are generally not invoked (!) (!) .
The order to investigate is not an automatic endorsement of guilt; accused persons are entitled to a fair opportunity to defend themselves, and the court's role is to ensure that investigations are conducted lawfully and based on reasonable grounds (!) (!) .
The appeal was ultimately dismissed, affirming the view that the proceedings initiated were not inherently illegal or unjustified at this stage, and that the High Court's assessment was correct in dismissing the petitions as premature (!) (!) .
JUDGMENT :
Pinaki Chandra Ghose, J.
1. Leave granted.
2. This appeal has been filed assailing the judgment and order dated 16th November, 2011, passed by the High Court of Judicature at Bombay in Criminal Writ Petition No.672 of 2011, whereby the writ petitions filed by the appellants were dismissed by the High Court on the ground that the filing of the writ petition was premature and there was no need for exercising the powers either under Article 227 of the Constitution of India or under Section 482 Cr.P.C.
3. Brief facts of the case are as follows: appellant No.1 HDFC Securities Ltd., is a public liability company (hereinafter referred to as “the Company” for short), appellant No.2 is the Managing Director of the Company, appellant No.3 is Business Head of the Company, and appellant No.4 is the Regional head of Mumbai Region of the Company, respectively. Respondent No.1 is State of Maharashtra and respondent No.2 is an individual, who held an account with the Company. The Company is engaged in the business of dealing in shares and securities on behalf of its constituents and clients on Brokerage Charge and it is also a member of National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange of India Limited (BSE).
4. Respondent No.2, had registered herself with the Company as a constituent/client by opening Securities Trading Account vide No.342889 and was an imperial customer of the Company for about eight years. She executed a Member-Client Agreement dated 28th June, 2005. On 3rd August, 2009, respondent No.2, through a legal Notice dated 03.08.2009, requested the appellants to make good the losses caused to her by indulging in unauthorized and fraudulent trading in her account by one Vinod Koper (Relationship Manager of the company-”RM” in short) during the period July, 2008 to June, 2009. This Notice was also sent to RM and one Rohan Raut, Assistant Vice President of the Company, on 20th October, 2009. Thereafter, she filed arbitration proceedings before NSE Panel of Arbitrators against the Company for a sum of Rs.48.99 Lacs and costs of Rs.2.5 Lacs, and chose the Arbitrators of her choice, being two retired High Court Judges and sought to call RM as a witness. The Arbitrators passed an award in favour of the Company on 18th August, 2010, recording a shift in the stand of respondent No.2, authorizing her husband to trade on her behalf. In the meantime, as the Police did not take cognizance of the matter, albeit she filed a complaint on 31st march, 2010, against the appellants, RM and AVP, on 10th June, 2010, she also filed a criminal complaint under Section 156(3) of the Code of Criminal Procedure, 1973 (hereinafter referred to as Cr.P.C.) before 10th Metropolitan Magistrate, Andheri, bearing Case No.143/2010, alleging execution of unauthorized trades in her account without her consent by the appellants and claimed that she had thereby suffered losses amounting to Rs.70 Lacs. Specific allegations were levelled against RM and appellant No.3 as she was introduced to RM by appellant No.3 and was told that RM would handle her investment portfolio honestly and efficiently with her prior instructions. General allegations of involvement of other appellants were made. On 25th September, 2010, she preferred an appeal before NSE Appellate Panel of Arbitrators, being Arbitration REF No.CM/M-213/2009, wherein she disputed the trades which had taken place during the period December 2008 to April 2009. Being completely oblivious of the Arbitration proceedings, the award passed therein and the appeal preferred by respondent No.2, on 04.01.2011, the learned Metropolitan Magistrate directed registration of FIR against the appellants and ordered for a report after investigation.
5. Pursuant to the order of the learned Metropolitan Magistrate dated 4.01.2011, Juhu Police Station registered the FIR, being MECR No.7 of 2011 dated 30th January, 2011, under Sections 409, 420, 465, 467 read with Sections 34 and 120-B of the IPC. Meanwhile,
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