Shareholders of a company cannot be held vicariously liable for criminal offences committed by the corporate entity unless there is specific material demonstrating their active management, control, or direct participation in the commission of the offence.

VINOD S. BHARDWAJ, J. (Oral)

The present petition has been filed for seeking quashing of case bearing FIR No.63 dated 06.03.2015 registered under Sections 406, 420 and 120-B of the Indian Penal Code, 1860 at Police Station Sadar Ferozepur, District Ferozepur alongwith all consequential proceedings arising therefrom.

Learned counsel appearing on behalf of the petitioners contends that the above FIR was registered on the complaint submitted by the District Manager of the Punjab State Cooperative Supply and Marketing Federation (Markfed). The respondent-Markfed has alleged that it was subjected to financial loss and was cheated in relation to the paddy supplied to it. Learned counsel points out that the gravamen of the accusation is that Markfed suffered a loss to the tune of approximately Rs.3.21 crores on account of the acts and omissions attributed to the petitioners and other accused persons. Learned counsel further submits that the allegations essentially pertain to transactions concerning procurement, supply and accounting of paddy and that the prosecution has sought to attribute criminal liability to the petitioners on the allegation that the respondent-Markfed was wrongfully deprived of paddy and/or its equivalent value, resulting in the aforesaid alleged loss of about Rs.3.21 crores. On the basis of the aforesaid allegations, the investigating agency has registered the present FIR against the petitioners and other co-accused persons.

Learned counsel for the petitioners further contends that the principal accused in the present case is DPD Industries Limited, a company incorporated under the provisions of the Companies Act, 1956. The aforesaid company was engaged in the business of procurement, purchase, sale, storage and processing of foodgrains and was also operating a rice shelling unit under the name and style of DPD Industries Limited. Learned counsel submits that under the Custom Milling Policy framed by the State Government, paddy procured by procurement agencies is allotted to various rice shellers for milling. Upon completion of the milling process, the resultant Custom Milled Rice (CMR) is required to be delivered by the rice sheller to the Food Corporation of India for inclusion in the Central Pool on behalf of the concerned procurement agency. It is further contended that for the purpose of regulating the rights and obligations of the parties, an agreement is executed between the authorized representative of the procurement agency and the rice sheller. In the present case, for the milling season 2010–2011, an agreement dated 04.10.2010 was executed between Markfed and DPD Industries Limited through its Managing Director, Davinder Pal Dhawan. The said agreement stipulated the terms and conditions governing the custody, milling and delivery of paddy and the consequent supply of custom milled rice to the designated authorities.

Learned counsel submits that the present criminal proceedings have their genesis in disputes arising out of the performance of the aforesaid contractual obligations and as per the allegations levelled by the respondent-Markfed, DPD Industries Limited failed to deliver the entire quantity of custom milled rice corresponding to the paddy entrusted to it and there was an shortfall in delivery of the milled rice, pursuant whereto the respondent-Markfed suffered a financial loss of approximately ₹3.21 crores and attributed liability thereof to the company and its functionaries.

The matter came up for hearing on 04.07.2022, when the following argument was raised:-

“The petitioners have approached this Court seeking quashing of FIR No.63 dated 6.3.2015, registered at Police Station Sadar Ferozepur, District Ferozepur, under Sections 406, 420 and 120-B of Indian Penal Code, wherein the allegations are broadly to the effect that the firm 'M/s DPD Industries Limited' of which the petitioners are shareholders, had misappropriated paddy valuing Rs.3,21,65,683/-, which had been allotted to the company