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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, Mr. Aabad Ponda, Mr. Abhishek Gupta, Mr. Ravi Mishra
For the Respondents: Mr. A.R. Patil, APP
Corporate liability for criminal breach of trust requires a distinct deceptive intent beyond mere breach of contract, implicating directors as necessary parties when misappropriation occurs.
Headnote:(A) Constitution of India - Article 227 - Code of Criminal Procedure, 1973 - Section 482 - Criminal breach of trust and cheating - Complainant alleges that shares were misappropriated by accused, resulting in financial loss - Court upheld the issuance of process against all accused for criminal breach of trust under IPC, dismissing claims of exoneration by the Revisional Court. (Paras 19 and 20)
(B) Criminal proceedings vs. arbitration - Distinction between breach of contract and criminal offence - Mere breach of contract does not constitute cheating unless there is prior deception. (Para 10.3)
(C) Vicarious liability of Directors - Corporate entities can be prosecuted; Directors can be held liable based on their role in the corporate actions leading to the offence alleged. (Para 18)
Facts of the case:
Six writ petitions were filed involving the complainant company against various directors and the accused company regarding the misappropriation of pledged shares that were sold at a significant loss, a claim leading to accusations under the IPC and SEBI Act.
Findings of Court:
The court found a prima facie case against the accused for criminal breach of trust and cheating, reversing earlier revisions that had exonerated some accused.
Issues: The court examined the legality of the exoneration of accused under Sections 420 and 15-HA of the SEBI Act, and the nature of the allegations regarding the misappropriation.
Ratio Decidendi: The court ruled that the complainant had made sufficient prima facie allegations to proceed with the case, emphasizing that arbitration outcomes did not negate criminal liability.
Result: Writ petitions filed by the complainant were allowed, while those filed by the accused were dismissed.
| Table of Content |
|---|
| 1. petitioners' complaints and background context. (Para 1 , 1 , 4) |
| 2. challenges to prior judicial findings (Para 2 , 8) |
| 3. prior inquiry and process issuance (Para 5 , 6) |
| 4. arguments on cheating and breach of trust (Para 7) |
| 5. arguments presented by the accused's counsel. (Para 10) |
| 6. arguments countered with reference to legal precedents. (Para 11 , 12) |
| 7. court's detailed observations and rulings. (Para 14) |
| 8. corporate liability and mens rea (Para 18) |
| 9. final decisions and directives 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 Morg
