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2016 Supreme(Cal) 431
IN THE HIGH COURT AT CALCUTTA
R.K. Bag, J.
Navjeet Singh Sobti – Petitioner
Versus
Central Bureau of Investigation – Respondent
CRR N0.3363 of 2014
Decided On : 29-09-2016
For the Petitioner: Mr. Abhrajit Mitra, Mr. Sabyasachi Banerjee, Mr. Ayan Bhattacharjee, Mr. Amit Agarwalla, Mr. Anirudha Agarwalla, Ms. Farnaz Nazim
For the Respondent: Mr. Asraf Ali
The principle of "alter ego" cannot be applied to prosecute the Managing Director of a company as the "alter ego" of the company in the absence of evidence of his involvement in the criminal conspiracy or cheating.
Headnote:
CRIMINAL LAW - CHEATING - ALTER EGO - MANAGING DIRECTOR OF COMPANY - PROSECUTION - WRONG APPLICATION OF PRINCIPLE - "SUNIL BHARTI MITTAL V. CENTRAL BUREAU OF INVESTIGATION" - "IRIDIUM INDIA TELECOM LTD. V. MOTOROLA INCORPORATED AND OTHERS" - "SUMAN SOOD V. STATE OF RAJASTHAN" - RATIO DECIDENDI - PRINCIPLE OF "ALTER EGO" MISAPPLIED - MANAGING DIRECTOR OF COMPANY CANNOT BE PROSECUTED AS "ALTER EGO" OF COMPANY IN ABSENCE OF EVIDENCE OF INVOLVEMENT IN CRIMINAL CONSPIRACY OR CHEATING - ORDER FRAMING CHARGE AGAINST MANAGING DIRECTOR SET ASIDE - MANAGING DIRECTOR DISCHARGED FROM CASE.
Fact of the Case:
Petitioner, Managing Director of M/s Almondz Global Securities Ltd. (formerly M/s Allianz Securities Ltd.), challenged an order framing charges against him under Sections 420/120B of the Indian Penal Code for allegedly aiding and abetting M/s Allianz Securities Ltd. in mobilizing institutional funds for HUDCO to earn commission. The petitioner argued that the principle of "alter ego" was wrongly applied to prosecute him as the Managing Director of the company in the absence of evidence of his involvement in the conspiracy or cheating.
Finding of the Court:
The court held that the principle of "alter ego" could not be applied to prosecute the petitioner as the Managing Director of M/s Allianz Securities Ltd. in the absence of evidence of his involvement in the conspiracy to mobilize funds or in the offense of cheating. The court relied on the Supreme Court's decision in "Sunil Bharti Mittal V. Central Bureau of Investigation" to hold that the criminal intent of the "alter ego" of a company could be imputed to the company, but not vice versa.
Issues: 1. Whether the principle of "alter ego" could be applied to prosecute the petitioner as the Managing Director of M/s Allianz Securities Ltd. in the absence of evidence of his involvement in the conspiracy or cheating. 2. Whether the order framing charges against the petitioner was justified.
Ratio Decidendi: The principle of "alter ego" can only be applied to impute the criminal intent of the "alter ego" of a company to the company, but not vice versa. In the absence of evidence of the petitioner's involvement in the conspiracy to mobilize funds or in the offense of cheating, the principle of "alter ego" could not be applied to prosecute him as the Managing Director of M/s Allianz Securities Ltd.
Final Decision: The court set aside the order framing charges against the petitioner and discharged him from the case.
R. K. Bag, J.
The petitioner, Vice-Chairman and Managing Director of M/s Almondz Global Securities Ltd., previously known as M/s Allianz Securities Ltd. has preferred this revisional application under Section 401 read with Section 482 of the Code of Criminal Procedure challenging the order dated August 11, 2014 passed by Learned Judge, Special C.B.I. Court No.2, Bichar Bhawan, Calcutta in connection with Special (CBI) Case No.38 of 2011 corresponding to Special Case No.33 of 2008, by which Learned Judge of the court below framed charge against the petitioner under Sections 420/120B of the Indian Penal Code.
2. The backdrop of the present revisional application is as follows: The opposite party, Central Bureau of Investigation (hereinafter referred to as C.B.I.) registered first information report bearing no.RC0102007A0030 on August 14, 2007 against one Ram Krishna Ganguly, Senior Accounts Officer, Kolkata Port Trust on the allegation that surplus funds of Non-Contributory Provident Fund of Kolkata Port Trust to the tune of Rs.18 crore were invested with Housing and Urban Development Corporation (hereinafter referred to as HUDCO) through M/s Allianz Securities Ltd. in violation of guidelines of Government of India and without approval of the Board of Trustees of Kolkata Port Trust. The Vigilance Department of Kolkata Port Trust made an inquiry and confirmed that the said investment was made by Ram Krishna Ganguly, the then Senior Accounts Officer of Kolkata Port Trust by manipulating endorsement on the application form for investment of fund and by writing a separate letter to the HUDCO through broker, M/s Allianz Securities Ltd. and thereby he obtained undue gain by favouring M/s Allianz Securities Ltd. to earn commission to the tune of Rs.18 lakh. It is alleged that some other persons are also involved in conspiracy with Ram Krishna Ganguly in committing forgery and cheating for the purpose of assisting and aiding M/s Allianz Securities Ltd. to make wrongful gain as broker for investment of fund by Kolkata Port Trust with HUDCO.
3. The C.B.I. investigated the criminal case and submitted charge-sheet against Ram Krishna Ganguly, Senior Accounts Officer, Kolkata Port Trust and M/s Allianz Securities Ltd. on the allegation of committing offence punishable under Sections 420/468/471/120B of the Indian Penal Code and under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. The C.B.I. also carried out further investigation and submitted supplementary Charge-sheet under Section 173(8) of the Code of Criminal Procedure for prosecution of the petitioner as the Managing Director of M/s Allianz Securities Ltd. for the offence punishable under Sections 120B/420/468/471 of the Indian Penal Code read with Section 13(2) and 13(1)(d) of the Prevention of Corruption Act, 1988.
4. The charge-sheet submitted by the C.B.I. indicates that Kolkata Port Trust Non-Contributory Provident Fund is managed by the Board of Trustees consisting of the Chairman, Deputy Chairman, Financial Adviser, and the Chief Accounts Officer of Kolkata Port Trust. The funds lying in Non-Contributory Provident Fund are managed by Senior Accounts Officer, subject to the control of the Trustees as per provisions of the Kolkata Port Trust Non-Contributory Provident Fund Regulations of 1988. Ram Krishna Ganguly, the then Senior Accounts Officer of Provident Fund Section was responsible for the management of surplus funds lying in Kolkata Port Trust Non-Contributory Provident Fund during the year 2004. There are guidelines and circulars of Ministry of Surface Transport, Government of India for investment of surplus funds lying in the Non-Contributory Provident Fund of Kolkata Port Trust by making direct investment in promissory notes, debentures, stocks and securities of the Central Government, and not through any broker.
5. On May 27, 2004 Ram Krishna Ganguly initiated a note for investment of Rs.10 crore lying surplus in Non-Contributory
