Directors of a liquidated company can be criminally liable under IPC, but charges under Sections 406 and 420 IPC cannot coexist, necessitating a reassessment of charges.

ORDER :

N. SESHASAYEE, J.

A1 in C.C.No.9825 of 2005 on the file of Additional Chief Metropolitan Magistrate Court, Egmore, has preferred this revision challenging an order dismissing his petition in Crl.M.P.No.6997 of 2020, filed U/s.239 Cr.P.C.

2. The quintessence of the prosecution case is that A1 to A8 and A9, the company whose affairs A1 and A2 presided as directors, are alleged to have committed offences U/s.406 and 420 I.P.C. The other relevant facts are:

a) A1 to A8 were the directors of certain financial institution known by the name Synergy Financial Exchange Limited (SFEL), A1 and A2 were also the directors of A9 Company. Both SFEL and A9 company were engaged in financial services of accepting deposits which inter alia included accepting deposits and advancing loans.

b) SFEL had gone into liquidation and today it has been fully liquidated.

c) According to prosecution, part of the funds of SFEL had been diverted by the directors of that company to A9 and this invited registration of a F.I.R. by the respondent/C.B.I.

3. The final report in this case has been laid, charges too have been framed against A1 to A8 for offence U/s.406 and 420 I.P.C. It is in this scenario, A1 had preferred Crl.M.P.No.6997 of 2020 before the trial Court for his discharge. The trial Court had dismissed it and its line of reasoning is that there the materials made available show a triable case. As stated earlier, this revision is directed against the aforesaid order of the trial Court.

4. Mr.V.Raghavachari, the learned Senior Counsel for the petitioner made the following submissions:

a) It is not in dispute that SFEL had gone into liquidation, and today the liquidator had discharged all its liabilities. If at all any part of the amounts belonging to SFEL had been diverted by A1 to A8 to A9, then it is the job of the liquidator to proceed against A9 to realize whatever sum which is alleged to have been diverted from SFEL to A9 company, for the benefit of the creditors of SFEL. It can never form a foundation for crime. After the depositors have received their dues pro rata from the liquidator, there can never be a prosecution for something done by a liquidated company when the depositors have no qualms in receiving their dues pro rata. If at all something still remains to be realized, it is the job of the liquidator to realise it.

b) The petitioner has been charged with for committing offences U/s.406 and 420 I.P.C., but the ingredients of both can never sail together. To constitute an offence U/s.420 I.P.C., the mens rea to cheat must be there right at the inception, whereas when money is entrusted it becomes very obvious that there is no mens rea to cheat. The petitioner can never be tried simultaneously for both the charges.

c) Interestingly enough, SFEL was not arrayed as an accused.

Reliance was placed on authorities in Delhi Race Club (1940) Ltd., and others Vs State of Uttar Pradesh and another [2024 SCC OnLine SC 2248]; Aneeta Hada and others Vs Godfather Travels and Tours Pvt Ltd., and others [MANU/SC/0335/2012] and M.E.Shivalingamurthy Vs Central Bureau of Investigation, Bengaluru [MANU/SC/0012/2020] .

5.1 The learned prosecutor makes the following submissions:

a) SFEL was liquidated and the liquidation proceedings itself concluded on 11.09.2000. A year before the conclusion of the liquidation proceedings, two of the depositors of SFEL preferred separate complaints based on which CTCB had registered cases in Crime Nos.277 and 1216 of 1999 for offences U/s.406 and 420 I.P.C. Later this Court had transferred the investigation to C.B.I. vide its order dated 19.12.2001. And, merely because the company is under liquidation it does not absolve its erstwhile directors of the company of criminal liability.

b) After