MIME-Version: 1.0 Content-Location: file:///C:/232BAD12/SCJudgementdated12.08.2010-M.A.A.Annamalaivs.StateofKerala&another.htm Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii" SC Judgement

 

        =             &nb= sp;            =             REPORTABLE

 

 

 

        =    IN THE SUPREME COURT OF INDIA

 

        =   CRIMINAL APPELLATE JURISDICTION

 

        =   CRIMINAL APPEAL NO. 1504 OF 2010

         (Arising out of SLP (Crl) No.5768 of 200= 8)

 

M.A.A. Annamalai        =             &nb= sp;          .. Appellant

 

        =   Versus

 

State of Karnataka & An= other        =            .. Respondents

 

 

 

 

        =             &nb= sp; JUDGMENT

 

 

 

Dalv= eer Bhandari, J.

 

1.   Leave granted.

 

 

2.   This appeal is directed agai= nst the judgment and order

 

dated= 26.05.2008 passed by the High Court of Karnataka at

 

Bangalore in Criminal Petition No.2625 of 2004.


        =             &nb= sp;            =             &nb= sp;            =       2

 

 

 

3.   Brief facts of the case are = as under:-

 

     The appellant, who was one of the Directors of R.P.S.

 

Benefit   Fund   Ltd.   submitte= d      his   resignation   letter   on

 

8.12.1997 which became ef= fective from the date of filing of

 

Form 32 (27.12.1997) with= the Registrar of Companies. The

 

said<= /span> Form has been filed with this petition.

 

 

4.   Respondent no.2 filed a comp= laint with the Indira Nagar

 

Police Station, Bangalore, alleging:

 

     - that RPS Benefit Fund had invited deposits from

       the public vide circular dated 06.12.1998 and

       that monies had been invested by the Petitioner

       and his wife in the Pensioner's Benefit Fund,

       pursuant to the approval of the scheme by the

       Rese= rve Bank of India;

     - that the Company had issued letters on

       18.0= 5.1999 and 14.06.1999 to the investors not

       to present their interest warrants and that=

       payments of interests would be made by August

       1999= ;

     - that the company had since closed its business

       and the amount due to the Respondent No.2 was

       about Rs.2,91,778/-;

 

 

5.   The Respondent No.2 lodged a= First Information Report

 

on 15.10.1999 with the Indira Nagar Police Station alleging the

 

offen= ce under section 420 Indian Penal Code read with


        =             &nb= sp;            =                      =           3

 

secti= ons 3, 4, 5 and 6 of the Money Circulation and Banning

 

Act, 1978." In the FIR, it was stated that the alleged offences,

 

if any, were committed during the period between 24.05.1998

 

and 17.09.1999.

 

6.      According = to the appellant, he ceased to be a Director of

 

the     company    from   27.12.1997,   therefore,   he   was       not<= o:p>

 

respo= nsible in any manner for what had happened in the

 

compa= ny after he had resigned as a Director of the company.

 

 

7.      The First Information Report was lodged by respondent

 

no.2<= /span>     and   consequently   the   then   Xth   Additional     Chief=

 

Metropolitan Magistrate, = Bangalore issued = a non bailable

 

warra= nts against the appellant.

 

 

8.       On C= ompany Petition filed at the instance of the

 

credi= tors, the Company Court on 23.7.2002 directed the

 

windi= ng up of the company.        =   In the winding up petition,

 

nothi= ng had been mentioned about the appellant because he

 

was not the Director of the company at the relevant point of

 

time<= /span>.


        =             &nb= sp;            =             &nb= sp;            =   4

 

9.    The    Karnataka   High   Court   on   10.6.2004   directed

 

quash= ing of the entire proceedings in Criminal Petition

 

No.4007 of 2002 regarding= the erstwhile Directors of the

 

compa= ny. The proceedings before the Xth Additional Chief=

 

Metropolitan Magistrate w= ere based on the complaint filed by

 

respo= ndent no.2 stating that he and his wife had invested in

 

the Short Term Deposit Scheme with the company.

 

 

10.   The High Court held that som= e of the Directors of the

 

compa= ny had retired in April 1999 and that the non-payment

 

of matured funds and non payment of interest amount had

 

taken= place after April 1999. According to the appellant, he is

 

in no manner responsible for company's non payment of either

 

the mature funds and interest amount.        =     The appellant

 

submi= tted that the petition had been filed for some collateral

 

purpo= ses for unnecessary exerting the pressure on the former

 

Direc= tors.

 

 

11.   The learned Judge also held t= hat material ingredients of

 

the offence of cheating had not been made out. The appellant

 

filed= a petition before the High Court of Karnataka under

 

secti= on 482 of the Code of Criminal Procedure seeking to


        =             &nb= sp;            =             &nb= sp;            =       5

 

quash= the proceedings initiated on the basis of the complaint

 

regis= tered as CC 22656 of 2001 arising out of the Crime

 

No.425/1999     pending    before   the   Xth   Additional      Chief=

 

Metropolitan Magistrate, = Bangalore.

 

 

12.   The appellant submitted that= he cannot be held liable or

 

respo= nsible for any of the alleged illegalities committed by the

 

compa= ny after he had resigned from the company. The

 

appel= lant's main grievance is that in the impugned judgment,

 

the learned Single Judge has not dealt with this principal

 

argum= ent advanced by the appellant.        =      In the impugned

 

judgm= ent the court observed:-

 

      "It is needless to say that there are some documents

      produced by the petitioner to show that at the

      relevant point of time he was not the Director of the<= o:p>

      Company. It is also his case that he also being an

      investor, the ratio followed by this court in the case=

      of similarly situate persons, applies to his case also= .

      However, i= t is for the trial court to ascertain as to

      whether there is investment by the petitioner or not,<= o:p>

      when he was appointed as a Director, when he

      resigned and whether the alleged incident has taken

      place during his directorship and further, to

      ascertain the preliminary aspect as to whether there

      is a prima facie case against him and whether he<= /o:p>

      has participated in the proceeding or not as in-<= /o:p>

      charge and managing affairs keeping in view the

      various decisions and pass orders in accordance

      with law."


        =             &nb= sp;            =             &nb= sp;            =   6

 

13.   The court further observed t= hat the petition was disposed

 

of with a direction to the appellant to approach the trial court

 

seeki= ng for order of discharge.

 

 

14.   According to the appellant, = even according to the

 

averm= ents of the complaint in the First Information Report

 

there= were no allegations whatsoever against the appellant, in

 

that<= /span> event, the High Court ought to have quashed the

 

proce= edings against the appellant instead of compelling him to

 

appro= ach the Trial Court for obtaining the order of discharge.

 

The casual approach of th= e High Court has led to grave

 

misca= rriage of justice.

 

 

15.   According to the appellant, respondent no.2 had invested

 

in the Pensioner's Benefit Fund after approval of the scheme

 

by the Reserve Bank of Indi= a and therefore, in any event, the

 

eleme= nt of cheating as alleged cannot be made out by any

 

stret= ch   of   imagination.   The   complaint   and   the   First

 

Information Report, as aforementioned, do not make out any

 

case<= /span> against the appellant.


        =             &nb= sp;            =             &nb= sp;            7

 

16.   In the facts and circumstances of this case, the High

 

Court was not justified in refusing to quash the complaint

 

again= st the appellant and compelling him to go to the trial

 

court= for seeking an order of discharge.

 

 

 

17.   We have heard the learned co= unsel for the parties. The

 

learn= ed counsel appearing for the State has failed to point out

 

any specific allegation or averment against the appellant.

 

Admittedly, the appellant= had resigned from the Board of

 

Directors of the Company = with effect from 27.12.1997 and

 

there= fore, cannot be held responsible for any activities of the

 

compa= ny after he ceased to be a Director of the company.

 

Even, according to the al= legation of respondent no.2, no

 

crimi= nal case can be made out against the appellant.

 

 

18.   It may be pertinent to menti= on that a letter has been

 

place= d on record which was sent by respondent no.2, R.

 

Nara= yanamurthy to the Inspector of Police, Indranagar Police

 

Station, Indranagar, Bangalore which reads as under:-


        =             &nb= sp;         =             &nb= sp;            =          8

 

"From:

 

R. N= arayanamurthy,

S/o Late N.A. Ramaswamy,

105, Second Main Road,

4th Cross, Sadanandnagar,

NGEF Layout,

Bangalore - 560038

 

To

The Inspector of Police,<= o:p>

Indr= anagar Police Station,

Indr= anagar,

Bangalore-560033

 

Dear Sir,

Sub: Complaint against RPS Benefit Fund Ltd. and Mr.

     M.A.A. Annamalai, Director of the company.

I wish to inform you that= I am withdrawing all my charges

again= st the abovesaid company and its director M.A.A.

Anna= malai, s/o Annamalai Chettiar residing at No.1,

<= st1:address w:st=3D"on">Velayudam Street, Nungambakkam, Chennai -6000034.

I further wish to inform = you that I am withdrawing all my

crimi= nal cases against Mr. M.A.A. Annamalai and other

direc= tors because of my advanced age and ill health and also

as I have received 55% of the deposited amount from the

Official Liquidator, High= Court of Madras at Chennai and I

am also confident to receive further amounts in due course.

I also understand that Mr= . M.A.A. Annamalai resigned from

the Board of RPS benefit Fund Ltd. on 8/12/1997 whereas I

have<= /span> deposited my money with the company only in

Decem= ber 1998 and in the year 1999. His name has been

inadv= ertently included as an accused by the Investigating

Offic= er.

Hence I am withdrawing al= l my criminal charges against Mr.

M.A.A= . Annamalai and the company.

Thanking you,<= /p>

        =             &nb= sp;            =            Yours faithfully,

        =             &nb= sp;            =             &nb= sp;          Sd/-

        =             &nb= sp;            =       (R. Narayanamurthy)

Date: 16/09/09"=


        =             &nb= sp;            =             &nb= sp;            =         9

 

19.   This   letter   indicates   that   respondent   no.2   is       not<= o:p>

 

inter= ested in prosecuting the appellant.         According to the

 

appel= lant, the proceedings initiated against the appellant in

 

this<= /span> case are liable to be quashed.

 

20.   It may be pertinent to menti= on that respondent no. 2 also

 

filed= an affidavit on 16.9.2009 before this Court. In this

 

affid= avit, reference has also been made to the affidavit filed

 

befor= e the High Court on 24.6.2009 in which he prayed that

 

all cases against the Company and the Directors be withdrawn

 

as he had already received 55% of the deposit amount from

 

the Official Liquidator, High Court of Madras at Chennai. In

 

the said affidavit filed before this Court, it was also mentioned

 

that<= /span> the appellant had resigned as Director from RPS Benefit

 

Fund Ltd. on 8.12.1997 bu= t his name had been included as

 

one of the accused by the Investigating Officer.        =      In this

 

conne= ction, he had also mentioned that the deponent was to

 

withd= raw the charges of cheating against all the Directors of

 

the RPS Benefit Fund Ltd., including the appellant pending

 

befor= e the 10th Additional Chief Metropolitan Magistrate,

 

Bangalore.


        =             &nb= sp;            =             &nb= sp;            =         10

 

21.   The learned counsel for the appellant submitted that,

 

apart= from the affidavit of respondent no. 2, no case under

 

secti= on 420 IPC is made out against the appellant.        =         The

 

prima= ry requirement to make out an offence of cheating under

 

secti= on     415   punishable     under    section    420    IPC        is

 

disho= nest/fraudulent intention at the time of inducement is

 

made<= /span>.     In order to appr= eciate the controversy in proper

 

persp= ective, we deem it appropriate to reproduce section 415

 

IPC.<= /span> The same reads as under:

 

      "415. Cheating.- Whoever, by deceiving any person,

      fraudulently or dishonestly induces the person so=

      deceived to deliver any property to any person, or to<= o:p>

      consent that any person shall retain any property, or<= o:p>

      intentionally induces the person so deceived to do or<= o:p>

      omit to do anything which he would not do or omit if h= e

      were not so deceived, and which act or omission causes=

      or is likely to cause damage or harm to that person in=

      body, mind, reputation or property, is said to "cheat"."

 

 

22.   Two main ingredients of sect= ion 420 IPC are dishonest

 

and fraudulent intention. The Indian Penal Code has defined

 

the word "dishonestly" in section 24 IPC. Section 24 IPC reads<= /p>

 

as under:

 

      "24. Dishonestly - Whoever does anything with the

      intention of causing wrongful gain to one person or

      wrongful loss to another person, is said to do that th= ing

      "dishonestly"."


        =             &nb= sp;            =             &nb= sp;             11

 

23.   The word "fraudulently&= quot; has also been defined in section

 

25 IP= C. Section 25 IPC reads as under:

 

      "25. Fraudulently - A person is said to do a thing

      fraudulently if he does that thing with intent to=

      defraud but not otherwise."

 

 

24.   In the instant case, according to the appellant there has

 

been<= /span> no dishonest intention nor have any allegations as to the

 

exten= t of such a dishonest intention been made in the

 

compl= aint and FIR. In fact, no material whatsoever has been

 

produ= ced by the respondent no.2 which would indicate any

 

such<= /span> dishonest/fraudulent intention at any stage leave alone

 

at the stage of the alleged inducement of inviting depositors to

 

depos= it money with the company.        =       Furthermore, the

 

compl= aint against the Chairman and the Managing Director

 

itsel= f has been quashed by an order of the High Court for the

 

very<= /span> reason that such dishonest/fraudulent intention was

 

not made out in this case. The judgment of the High Court

 

acqui= red finality before no appeal was preferred before this

 

Court.

 

 

25.   It is submitted that the FIR merely alleged a violation

 

under= the Money Circulation and Banning Act without giving


        =             &nb= sp;            =             &nb= sp;            =   12

 

any basis or material for the same, cannot be sustained. In

 

the instant case, a company was operating under license from

 

the Reserve Bank of Indi= a and was so carrying on a legitimate

 

busin= ess under a license by the statutory authority. The mere

 

fact<= /span> that the company got into financial distress and went into

 

liqui= dation would not in any manner make the activity carried

 

out by them unlawful so as to invoke sections 3 to 6 of the

 

Money Circulation and Banning Act.     In fact, to fall within the

 

misch= ief of the Act, it must be shown that the activity ought to

 

be an unlawful one to make quick and easy money and a

 

lawfu= l activity duly approved by the Reserve Bank of India

 

canno= t fall under the mischief of the said Act.

 

 

26.   According to the appellant, = the company started its

 

activ= ities only after getting license from the Reserve Bank of

 

India and the depositors were legally invited to invest in the

 

compa= ny thereafter and respondent no.2 was one of the

 

depos= itors. Admittedly, in the liquidation proceedings, more

 

than<= /span> 55% of outstanding company's liabilities had been

 

clear= ed despite the company having been wound up.


        =             &nb= sp;            =             &nb= sp;             13

 

27.   The appellant submitted that= a complaint under section

 

420 IPC stands on a diffe= rent footing than a complaint under a

 

speci= al statute.   Unlike special statutes, like the Negotiable

 

Instruments Act which cas= ts a vicarious liability on officers in

 

charg= e of and responsible for the company in an offence under

 

the Indian Penal Code, there is no role for vicarious liability.

 

The appellant has also al= leged that even assuming that the

 

compa= ny can be said to have committed an offence, this would

 

not be enough to sustain a complaint against any officer of the

 

compa= ny for an offence under the Indian Penal Code unless an

 

alleg= ation or material of the said officer having been involved

 

in the commission of the offence is made out.       Any special

 

provi= sion like section 141 of the Negotiable Instruments Act, a

 

deeme= d provision is included where if the offence is committed

 

by a company, the officers responsible for the conduct of the

 

busin= ess of the company are deemed to be liable and a

 

presu= mption of their liability arise unless duly discharged by

 

them<= /span>.    There is no such presu= mption under the Indian Penal

 

Code and while so necessa= ry allegation/ material must be

 

avail= able not merely against the company but also against the

 

accus= ed persons as having participated in such offence.         In


        =             &nb= sp;            =             &nb= sp;             14

 

the instant case, there is not even a whisper anywhere either

 

in the complaint or in any material collected to show a direct

 

parti= cipation of the appellant who was merely included on the

 

groun= d that, once upon a time, he was one of the Directors of

 

the company.

 

 

28.   The appellant also submitted= that even assuming that

 

there= could have been a vicarious liability thrust on the

 

appel= lant, even then there cannot be any such vicarious

 

liabi= lity in absence of any allegations and material to show

 

that<= /span> the appellant was in charge of or responsible for the

 

condu= ct of the company's business which had given rise to the

 

offen= ce.   In the instant case, the appellant = ceased to be the

 

Director of the company <= span class=3DSpellE>w.e.f. 27.12.1997 following his

 

resig= nation on 8.12.1997, which fact was also recorded in the

 

Statutory Form 32 filed b= efore the Registrar of Companies.

 

The complaint itself expr= essly stated that the offence had

 

taken= place only thereafter and in fact the FIR expressly stated

 

that<= /span> the occurrence of offence was between 24.5.1998 and

 

17.9.1999. At that stage,= the appellant had admittedly ceased

 

to be a Director of the company and was not even connected

 

with<= /span> the company in any manner at the time when the alleged


        =             &nb= sp;            =             &nb= sp;            15

 

offen= ce was committed and cannot be prosecuted in respect of

 

such<= /span> acts of the company.

 

 

29.   The appellant, in order to strengthen his stand, has

 

place= d reliance on a numbers of judgments of this Court.

 

Reliance has been placed = on the case of Hira Lal Hari Lal

 

Bhagwati v. CBI, New Delhi (2003) 5 SCC 257. In t= his case,

 

the Court has observed that for establishing the offence of

 

cheat= ing, the complainant is required to show that the

 

accus= ed had fraudulent or dishonest intention at the time of

 

makin= g promise or representation. From his failure to keep

 

promi= se subsequently, such a culpable intention right at the

 

begin= ning cannot be presumed.

 

 

30.   Reliance has also been place= d on another case between

 

Uma<= /span> Shankar Gopalika v. State= of Bihar & Another (2005)

 

10 SCC 336, in which this= Court observed that it is well

 

settl= ed that every breach of contract would not give rise to an

 

offen= ce of cheating and only in those cases breach of contract

 

would= amount to cheating where there was any deception

 

playe= d at the very inception.    If the intention to cheat has

 

devel= oped later on, the same cannot amount to cheating.


        =             &nb= sp;            =             &nb= sp;            =        16

 

31.   The learned counsel for the appellant also relied on the

 

case<= /span> of S.V.L. Murthy etc. v. State represented by CBI,

 

Hyderabad (2009) 6 SCC 77, in which this Court observed as

 

under= :

 

      "41. = An offence of cheating cannot be said to have

      been made out unless the following ingredients are

      satisfied:

      (i)   =   deception of a person either by making a = false

        =       or misleading representation or by other = action

        =       or omission;

      (ii)    fr= audulently or dishonestly inducing        any

        =       person to deliver any property; or

      (iii)   to consent that any person shall retain any

        =       property and finally intentionally induci= ng that

        =       person to do or omit to do anything which= he

        =       would not do or omit.

      For the pu= rpose of constituting an offence of

      cheating, the complainant is required to show that

      the accused had fraudulent or dishonest intention=

      at the time of making promise or representation.<= /o:p>

      Even in a = case where allegations are made in regard

      to failure on the part of the accused to keep his=

      promise, in the absence of a culpable intention at

      the time of making initial promise being absent, no

      offence under Section 420 of the Penal Code can be

      said to have been made out."

 

32.   In Vir Prakash Sharma v. Ani= l Kumar Agarwal (2007)

 

7 SCC 373, this Court obs= erved as under:

 

      "13. = The ingredients of Section 420 of the Penal

      Code are as follows:

        =       (i)&nbs= p;  Deception of any persons;


        =             &nb= sp;            =             &nb= sp;            =      17

 

        =    (ii)    Fraudulently or dishonestly inducin= g any

        =            person to deliver any property; or

        =    (iii)   To consent= that any person shall retain

        =            any property and finally intentionally

        =            inducing that person to do or omit to do<= o:p>

        =            anything which he would not do or omit.

        =     No act of inducement on the part of the

      appellant has been alleged by the respondent. No<= /o:p>

      allegation has been made that he had an intention=

      to cheat the respondent from the very inception."=

 

33.   This Court in Pepsi Foods Lt= d. & Anr. v. Special

 

Judic= ial Magistrate & Ors. (1998) 5 SCC 749 observed as

 

under= :

 

      "28. Summoning of an accused in a criminal case is

      a serious matter. Criminal law cannot be set into=

      motion as a matter of course. It is not that the<= /o:p>

      complainant has to bring only two witnesses to

      support his allegations in the complaint to have the

      criminal law set into motion. The order of the

      Magistrate summoning the accused must reflect

      that he has applied his mind to the facts of the case<= o:p>

      and the law applicable thereto. He has to examine=

      the nature of allegations made in the complaint and

      the evidence both oral and documentary in support=

      thereof and would that be sufficient for the

      complainant to succeed in bringing charge home to=

      the accused. It is not that the Magistrate is a silent=

      spectator at the time of recording of preliminary=

      evidence before summoning of the accused. The

      Magistrate= has to carefully scrutinise the evidence=

      brought on record and may even himself put<= /p>

      questions to the complainant and his witnesses to=

      elicit answers to find out the truthfulness of the

      allegations or otherwise and then examine if any<= /o:p>

      offence is prima facie committed by all or any of the<= o:p>

      accused."


        =             &nb= sp;            =             &nb= sp;            =     18

 

34.   The learned counsel appearin= g for the State of Karnataka

 

suppo= rted the impugned judgment of the High Court and

 

submi= tted that no interference is called for by this court.    He

 

place= d reliance on the case of State of Haryana & = Others v.

 

Bhaj= an Lal & Others 1992 Supp (1) SCC 335 in which this<= o:p>

 

Court observed as under:<= o:p>

 

      "....= .that the power of quashing a criminal

      proceeding should be exercised very sparingly and=

      with circumspection and that too in the rarest of=

      rare cases; that the court will not be justified in

      embarking upon an enquiry as to the reliability or

      genuineness or otherwise of the allegations made in

      the FIR or the complaint and that the extraordinary

      or inherent powers do not confer an arbitrary

      jurisdiction on the court to act accordingly to its

      whims or caprice."

 

 

35.   The learned counsel for the = State also submitted that, in

 

the instant case, the FIR was not only registered under section

 

420 IPC but under section= s 3, 4, 5 and 6 of the Prize Chits

 

and Money Circulation Schemes (Banning) Act, 1978.

 

 

36.   He also placed reliance on t= he case of Rajesh Bajaj v.

 

State NCT of Delhi & Others (1999) 3 SCC 259, in= which

 

this<= /span> Court, while dealing with section 482 Cr.P.C. h= as held as

 

under= :


        =             &nb= sp;            =             &nb= sp;            =        19

 

      "It i= s not necessary that a complainant should

      verbatim reproduce in the body of his complaint all

      the ingredients of the offence he is alleging. Nor is it

      necessary that the complainant should state in so=

      many words that the intention of the accused was<= /o:p>

      dishonest or fraudulent. Splitting up of the

      definition into different components of the offence to=

      make a meticulous scrutiny, whether all the=

      ingredients have been precisely spelled out in the

      complaint, is not the need at this stage. If factual

      foundation for the offence has been laid in the

      complaint the court should not hasten to quash

      criminal proceedings during investigation stage

      merely on the premise that one or two ingredients=

      have not been stated with details. For quashing an

      FIR (a step which is permitted only in extremely rare

      cases) the information in the complaint must be so

      bereft of even the basic facts which are absolutely

      necessary for making out the offence".=

 

 

37.   The learned counsel for the = State further submitted that

 

the mere settlement of the case with the complainant on

 

whose= complaint the initial FIR was lodged does not dislodge a

 

crimi= nal prosecution by the State.       Seve= ral other witnesses

 

exist= who would testify to the transactions and it would be up

 

to the trial court to test the prosecution case.

 

 

38.   Reliance was also placed on = the case of Medchl

 

Chemicals & Pharma (P) Ltd. v. Biological E.= Ltd. &

 

Ors.(= 2000) 3 SCC 269, wherein this Court observed as under:


        =             &nb= sp;            =                   =             &nb= sp;    20

 

      "Need= less to record however and it being a settled

      principle of law that to exercise powers under Section=

      482 of the= Code, the complaint in its entirety shall have

      to be examined on the basis of the allegation made in<= o:p>

      the complaint and the High Court at that stage has no<= o:p>

      authority or jurisdiction to go into the matter or

      examine its correctness. Whatever appears on the face

      of the complaint shall be taken into consideration

      without any critical examination of the same. But the<= o:p>

      offence ought to appear ex facie on the complaint"= ;.

 

 

39.   It is further submitted by t= he counsel for the State that

 

the complaint clearly disclosed the offences under sections 3,

 

4, 5 = and 6 of the Act and also offence under section 420 IPC.

 

 

40.   Reliance has been placed by = the learned counsel for the

 

State that this Court in = Kuriachan Chacko & Ot= hers v.

 

State of Kerala (20= 08) 8 SCC 708, while dealing with the

 

Prize Chits and Money Cir= culation Schemes (Banning) Act, has

 

held<= /span> that:

 

      "21. = The Preamble of the 1978 Act declares that it has

      been enacted "to ban the promotion or conduct of = prize

      chits and money circulation schemes and for matters

      connected therewith and incidental thereto".=

      22. Sectio= n 2 is legislative dictionary and defines certain

      terms. The phrase "money circulation scheme"= is

      defined in clause (c) which reads as under:=

        =     2.(c) `money circulation scheme' means an= y

        =     scheme, by whatever name called, for the<= o:p>

        =     making of quick or easy money, or for the=

        =     receipt of any money or valuable thing as= the

        =     consideration for a promise to pay money,= on

        =     any event or contingency relative or=

        =     applicable to the enrolment of members in= to


        =             &nb= sp;            =             &nb= sp;            =           21

 

        =    the scheme, whether or not such money or<= o:p>

        =    thing is derived from the entrance money = of

           the members of such scheme or periodical

        =    subscriptions;

 

      In this ca= se, it was further held that:

 

      "39. = We are unable to agree with the learned counsel.

      The courts= below rightly held that prima facie case had

      been made out against the accused. Both the=

      ingredients necessary for application of Section 2(c) = of

      the Act are present in the case on hand. The trial cou= rt,

      for coming to that conclusion, referred to certain

      documents. The advertisement clearly declared that a

      member would get double the amount when after his=

      enrolment, two members were enrolled under him and

      thereafter, 4 other persons were enrolled and after th= e

      enrolled 4 persons, 8 persons were enrolled under them= .

      Thus, only= after 14 persons under the first enrolled

      person become members under the Scheme, the first=

      person would get Rs.1250 i.e. double the amount of

      Rs.625 (1+2+4+8). The trial court also noted that=

      Kuriachan Chacko (Accused= 1) who proposed the

      project for implementation, described how the project<= o:p>

      would work from which also it is clear that the double=

      amount will be given to a person who purchases a unit<= o:p>

      only after 14 persons are enrolled subsequent to him.&= quot;

 

 

41.   We have carefully considered= the rival contentions.        =         It

 

emerg= es that:

 

      a) In the instant case, the appellant ceased to be a

 

        Director    o= f    the   company     from      27.12.1997=

 

        whereas     the    alleged   offences,   if   any,   were

 

        committed during the period from 24.5.1998 to

 

        17.9.1999.


        =             &nb= sp;            =             &nb= sp;         22

 

b) Admittedly, there are = no allegations against the

 

  appellant in the First Information Report.

 

 

c) The company had invited investment from the

 

  depositors to invest in the business/benefit funds

 

  after r= eceiving due approval of the scheme from

 

  the Res= erve Bank of India.      Therefore,= in any

 

  event, = the element of cheating as alleged cannot

 

  be made= out by any stretch of imagination.

 

 

d) The complainant/respon= dent no.2 submitted in

 

  writing= to this Court that he does not want to

 

  proceed= against the appellant because according

 

  to him = the appellant has been inadvertently

 

  included as an accused by the Investigating

 

  Officer. He further mentioned in the letter that

 

  he had = already received 55% of the deposited

 

  amount = from the Official Liquidator and he did

 

  not wan= t to proceed against the appellant.


        =             &nb= sp;            =             &nb= sp;            =   23

 

      e) Even as= suming that there could have been a

 

        vicarious liability thrust on the appellant, even=

 

        then there cannot be any such vicarious liability=

 

        in absence of any allegations and material to

 

        show that the appellant was in-charge of or=

 

        responsible for the conduct of the company's

 

        business which had given rise to the offence.

 

        From any angle of the matter, the appellant

 

        cannot be compelled to face the criminal trial in=

 

        this case.

 

 

42.   The inherent power should no= t be exercised to stifle the

 

legit= imate prosecution but at the same time no person be

 

compe= lled to face criminal prosecution if basic ingredients of

 

the alleged offence against him are altogether absent.

 

 

 

43.   On consideration of the tota= lity of the facts and

 

circu= mstances of this case, the impugned judgment of the

 

High Court is set aside a= nd the appeal is allowed and the

 

proce= edings initiated against the appellant on the basis of the

 

compl= aint registered as CC 22656 of 2001 pending before the


        =             &nb= sp;            =             &nb= sp;            =             24

 

Xth<= /span> Addl. Chief Metropolitan Magistrate, Bangalore, are

 

quash= ed.

 

 

 

44.   As a result, this appeal is allowed.

 

 

 

        =             &nb= sp;            =       .................................J.

        =             &nb= sp;            =       (Dalveer Bhandari)

 

 

 

        =             &nb= sp;            =       .................................J.

        =             &nb= sp;            =       (A.K. Patnaik)

New Delhi;

August 12, 2010.