Vicarious liability of directors requires sufficient evidence of their active role and criminal intent, and there must be specific allegations to constitute vicarious liability.

JUDGMENT :

Instant petition has been filed for quashing of F.I.R. and entire criminal proceeding of Sakchi P.S. Case No.20 of 2022 under Section 406, 420, 384, 504, 506, 34 of the Indian Penal Code pending in the Court of Chief Judicial Magistrate, Jamshedpur.

2. As per the prosecution case, the opposite party No.2 filed Complaint Case No.2243 of 2021 before Chief Judicial Magistrate, Jamshedpur wherein he alleged that he purchased a mobile phone manufactured by the petitioner for Rs.73,900/- on 08.04.2019 from B.S. Enterprises (A2). It is alleged that after three months, the said mobile phone developed some problem and O.P. No.2 approached the showroom but they refused to replace the mobile phone and only offered to repair. However, even after repair, the said mobile phone was not made functional. The O.P. No.2 send a legal notice through his Advocate but the accused No.2 replied that he has no responsibility for the same.

3. It is submitted by learned counsel on behalf of petitioner that there is no material to disclose the fundamental ingredient of the offence under Sections 406/420 of the IPC. To make out an offence under Section 406 of the IPC, there must be some material to show (i) entrustment of a property or dominion over property, (ii) the accused was actuated by dishonest intention, misappropriated it or converted to his own use. It is settled law that dishonest inducement is the basic ingredient of the offence of cheating. In the absence of any allegation of inducement in the F.I.R. against the petitioner or any of its employees, the offence under Section 420 of the I.P.C. is not made out.

4. The notice had been earlier issued and served on the informant but none has appeared.

5. Learned A.P.P. has opposed the petition for quashing.

6. It is settled that a corporate entity is an artificial person which acts through its Officers, Directors, Managing Director/Chairman etc. It is the cardinal principle of criminal jurisprudence that where there are allegations of vicarious liability, then there has to be sufficient evidence of the active role of each director. There has to be a specific act attributed to a Director or the person allegedly in control of management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company. There is consistent line of judicial precedence on the point that there should be some material to show active role of the Director or the officer in order to initiate criminal prosecution against him. Reference to some of the judicial pronouncement on the subject will amply clarify the law on the point.

Sunil Bharti Mittal v. CBI, (2015) 4 SCC 609

43. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made an accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated is in those cases where the statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision.

44. When the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect.

Sharad Kumar Sanghi Vs Sangat Rane (2015)12 SCC 781

The allegations which find place against Managing Director in his personal capacity seem to be absolutely vague. When a complainant intends to rope in the Managing Director or any officer of the Company, it is essential to make requisite allegation to constitute the vicarious liability.

Shiv Kumar Jatia v. State (NCT of Delhi), (2019) 17 SCC 193

It is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute specifically provides for. It is further held by this Court, an individual who has perpetrated the commission of an offence on behalf of the company can be made an accused, along with the company, if there is sufficient evidence of his