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2011 Supreme(Mad) 2121
2011 (3) MLJ(Crl) 889, 2011 (2) LW(Crl) 421
High Court of Judicature at Madras
S. NAGAMUTHU
B. Jagadeesh & Others
Versus
The Deputy Superintendent of Police
Crl.O.P.No.6419 of 2007
Decided On: 12-04-2011
For the Petitioners:A. Ramesh, Senior Counsel, M/s. Ram and Ram, Advocates.
For the Respondent:P. Kumaresan, Additional Public Prosecutor assisted by V. Rajagopal, Government Advocate.
In the absence of specific provisions making directors vicariously liable for the company's actions under the Indian Penal Code, the accused could not be held vicariously liable.
Headnote:
Vicarious Liability - Criminal Prosecution - Sections 120-B, 420, 409, 34 of IPC
Fact of the Case:
The accused were directors of a company accused of cheating depositors. The accused petitioned to quash the case, arguing they had no active involvement in the company's affairs and could not be held vicariously liable for the company's actions.
Finding of the Court:
The court found that the accused had no active involvement in the company's affairs and could not be held vicariously liable for the company's actions. The court also noted that the company had gone into liquidation and the depositors' interests were secured.
Issues: Whether the accused could be held vicariously liable for the company's actions under Sections 120-B, 420, 409, 34 of IPC.
Ratio Decidendi: The court held that in the absence of specific provisions making directors vicariously liable for the company's actions under the Indian Penal Code, the accused could not be held vicariously liable. The court also emphasized that the interest of the depositors had been secured through the company's liquidation.
Final Decision: The Criminal Original Petition was allowed, and the criminal proceedings against the accused were quashed. The court also noted that the quashing of the proceedings against the accused would not impede the trial of the remaining accused.
1. The petitioners are the accused Nos.2 and 4 to 8 in C.C.No.7280 of 2006 on the file of the Chief Metropolitan Magistrate, Egmore, Chennai. Altogether, there are 9 accused. The 1st accused, namely, S.R. Velanandan is not before this Court and this Court is informed that he is absconding. The 3rd accused B.S. Kantharaj Chetty and the 9th accused V.Thangavel are also not before this Court. The 2nd petitioner (the 4th accused) Mr. K.N.Kannan Chettiar died on 12.6.2007. The remaining petitioners 1, 3, 4, 5 and 6 are the accused Nos.2 and 5 to 8 in the said case. Seeking to quash the said case as against them, these petitioners are before this Court with this petition under Section 482 of Cr.P.C.
2.The case of the prosecution in brief is as follows:
A company known as 'Associated Business Credits Limited' was incorporated as per the provisions of the Indian Companies Act on 18.10.1982. The Directors of the said company on the day of its incorporation were Mr.Velanandan (1st accused) who was the Managing Director, Mr.Premkumar (the 5th accused), one Dwarakanathan and Mr.Ravindran (the 8th accused). Between 1982 to 1988, the company was doing business well. During that period, it is alleged that the company collected a total sum of Rs.39,20,776/- from 34 depositors, promising them to repay the same with fabulous interest. Subsequently, there were changes in the management of the company about which I would make reference at the appropriate place. But the company did not repay the amounts to the depositors as promised. In those circumstances, one Mr. P.Patrica Ireland, a resident of Kilpauk, Chennai, preferred a complaint to the Inspector of Police, EOW-II, Namakkal, on 28.1.2004 alleging that the said company, namely, Associated Business Credits Limited, had failed to pay her deposit amount of Rs.3,30,000/- on maturity and thus cheated her. The deposit matured in the year 2001. But the same was not paid till the date of complaint. Based on the said complaint, a case was registered by the respondent police in Crime No.7/2004 on 28.1.2004 under Section 409 of IPC against the company, namely, Associated Business Credits Limited.
3. During investigation, it turned out that a total number of 34 depositors had been cheated to the tune of Rs.39,20,776/-. The Investigating Officer examined those depositors, collected deposit receipts and finally, laid charge sheet against the above stated 9 accused. It needs to be noted that the company against which the case was registered has not been arrayed as an accused in this case. It is alleged in the final report that the Director by name Dwarakanathan resigned from the company and therefore, the accused 1, 5 and 8 were the Directors. It is further alleged that subsequently, the other accused also became the Directors of the company at various points of time. It is, on these allegations it is alleged in the final report that the petitioners are responsible for the conduct of the company, namely, Associated Business Credits Limited. In the final report, it is alleged that these accused have committed offences under Sections 120-B read with 420 IPC and 409 read with 34 of IPC. The learned Chief Metropolitan Magistrate, Egmore, Chennai has taken cognizance on the same. It is this proceedings, that the petitioners want to quash.
4. I have heard Mr. A.Ramesh, learned Senior Counsel appearing for the petitioners and Mr. P.Kumaresan, learned Additional Public Prosecutor and also perused the materials available on record carefully.
5. It is the contention of the learned Senior Counsel for the petitioners that though it is true that the petitioners were the Directors of the company at one point of time or the other, absolutely, there is no material on record to show that the petitioners had in any manner either actively involved in the day-to-day affairs of the company, namely, Associated Business Credits Limited, or did they induce the depositors to make deposit by giving any false promise. The le
