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HIGH COURT OF BOMBAY
A. S. GADKARI, J
Ganesh Benzoplast Limited – Appellant
Versus
Morgan Securities Credits Private Limited & Anr. – Respondent
CRIMINAL WRIT PETITION NO.127 OF 2020 | CRIMINAL WRIT PETITION NO. 128 OF 2020 | CRIMINAL WRIT PETITION NO. 129 OF 2020 | CRIMINAL WRIT PETITION NO. 130 OF 2020 | CRIMINAL WRIT PETITION NO. 348 OF 2020 | CRIMINAL WRIT PETITION NO. 349 OF 2020 | CRIMINAL WRIT PETITION NO. 357 OF 2020
For the Appellants/Petitioners: Mr. M.G. Shukla, Ms. Chaula Solanki, Mr. H.H. Nagi
For the Respondents:Mr. Aabad Ponda, Senior Advocate, Mr. Abhishek Gupta, Mr. Ravi Mishra, Mr. A.R. Patil, APP
A company can be prosecuted for criminal offences, including cheating and breach of trust, even when committed by its directors.
Headnote:(A) Constitution of India - Article 227 - Code of Criminal Procedure, 1973 - Section 482 - Criminal breach of trust and cheating - Complaint against accused for misappropriation and illegal sale of pledged shares - Court confirmed the issuance of process under Sections 406 and 420 of IPC against the accused, rejecting their plea of exoneration - The process was upheld as it was established that the accused engaged in actions detrimental to the complainant’s interests. (Paras 1, 4, 20, 21)
(B) Cheating - Ingredients of cheating alleged - The court emphasized that mere breach of contract does not equate to cheating, highlighting the requisite mens rea for such a charge. The accused did not adhere to the prescribed terms of the agreement, demonstrating intent to deceive. (Para 14)
(C) Vicarious Liability of Corporations - The ruling clarified that companies can be prosecuted for criminal acts, even if such acts are committed by their directors, stressing that companies are not immune from criminal liability. (Paras 18, 19)
Facts of the case:
The complainant, a company, accused the respondents of breaching trust through the illegal sale of pledged shares during a market downturn, which resulted in monetization below fair market value. The shares were pledged as security for a loan; when security value diminished, the complainant indicated a willingness to repay, and yet shares were sold improperly.
Findings of Court:
The court upheld the process issued for offences under IPC sections related to criminal breach of trust and cheating, confirming the necessity of the corporation’s involvement for proper adjudication and dismissing the accused's doubts regarding legal liability.
Issues: The central issues involved whether the accused's actions constituted cheating, whether a proper basis for summoning had been established, and the implications of vicarious liability of corporate entities.
Ratio Decidendi: The court ruled that the complainant established a valid case for fraudulent conduct by the accused, preserving the integrity of the original process issued which was based on comprehensive review of allegations.
Result: Petitions by the complainant allowed; petitions by the accused dismissed.
| Table of Content |
|---|
| 1. parties identified and initial complaint context established. (Para 1 , 1 , 4) |
| 2. challenging previous orders and claims by parties. (Para 2 , 3 , 7 , 8) |
| 3. arguments presented by both sides focusing on legal interpretation. (Para 10 , 11 , 12) |
| 4. judicial observations regarding the necessity of process. (Para 14 , 15 , 19) |
| 5. final judgment and orders issued by the court. (Para 21) |
1) The aforementioned Petitions are filed under Article 227 of the Constitution of India and under Section 482 of the Code of Criminal Procedure, 1973 (for short, ' Cr.P.C .').
The Petitioner Ganesh Benzoplast Limited is Complainant in CC No.56/SW/2011 pending on the file of learned Metropolitan Magistrate, Railway Mobile Court, Andheri, Mumbai. The Respondent No.1 in WP No. 127 of 2020 i.e. Morgan Securities Credits Pvt. Ltd. is accused No.1 and Petitioners in WP No.348 of 2020, 349 of 2020 and 357 of 2020 are original accused Nos.3, 4 and 2 respectively in the said complaint.
For the sake of brevity, the parties herein will be hereinafter referred to as per their nomenclature in the said complaint i.e.
‘complainant’ and ‘accused’.
2) All the Petitioners impugn Judgments and Orders dated 2nd December, 2019 passed in Criminal Revision Application Nos.128 of 2017, 167 of 2017, 168 of 2017 and 166 of 2017, by the learned Additional Sessions Judge, Borivali Division, Dindoshi, Mumbai. The said Revisions were filed by Accused against the Order of issuance of process under Sections 406 , 420 r/w Section 34 of the Indian Penal Code r/w Section 15- HA of the SEBI Act, 1992 , by the learned Metropolitan Magistrate, Railway Mobile Court, Andheri, Mumbai, below Exh-1, in CC No.56/SW/2011, by its Order dated 22nd March, 2017.
2.1) Writ Petition No.127 of 2020 filed by the complainant impugns Judgment and Order passed in Criminal Revision Application No.128 of 2017 by the Revisional Court, thereby completely exonerating accused No.1, Morgan Securities Pvt. Ltd.. The Criminal Writ Petition Nos.128 of 2020, 129 of 2020 and 130 of 2020 impugn Orders of the Revisional Court to the extent, it exonerated accused Nos.2 to 4 from the offences under Sec. 420 of IPC and under Sec. 15-HA of the SEBI Act.
2.2) Writ Petition Nos.348 of 2020 and 349 of 2020 and 357 of 2020 are filed by accused Nos.3,4 and 2 respectively challenging the impugned Orders to the extent, it upheld issuance of process Order under Section 406 r/w Section 34 of the IPC against them, being Directors of accused No.1-company.
2.3) As common questions of facts and law are involved in all the aforestated Petitions, the same are decided and disposed off by this common Judgment.
3) Heard Mr. Aabad Ponda, learned Senior Advocate for the Petitioners in WP Nos.348 of 2020, 349 of 2020 and 357 of 2020 and for the Respondent-accused in WP Nos.127 of 2020, 128 of 2020, 129 of 2020 and 130 of 2020, Mr. M.G. Shukla, learned counsel for the Petitioners in WP Nos.127 of 2020, 128 of 2020, 129 of 2020 and 130 of 2020 and for the Respondent No.2 in WP Nos.348 of 2020, 349 of 2020 and 357 of 2020 and Mr. A.R. Patil, learned APP for the State in all the Petitions.
4) Complainant has filed the aforestated complaint bearing CC No.56/SW/2011 before the learned Magistrate on 11th February, 2011.
It is the case of the complainant that, the complainant is a company incorporated under the provisions of Companies Act, 1956 . That, Ganesh Benzoates Pvt. Ltd. is the sister concern company of the complainant and as a Guarantor provided the security to the accused on behalf of complainant against the Inter Corporate Deposit (ICD) facility provided by the accused No.1, to the complainant to the extent of Rs.50 lacs. The accused Nos.2 to 4 are the Directors of accused No.1-company and are responsible for day to day affairs and acts of accused No.1.
4.1) In the month of March, 2000 accused No.1 Morgan Securities Credits Pvt. Ltd. (for short, 'Morgan') agreed to provide an ICD facility to the complainant, Ganesh Benzoplast Li
