Directors Cannot Be Prosecuted Without Arraigning The Company As Accused

IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.1584 OF 2007
Sharad Kumar Sanghi
Appellant
VERSUS
Sangita Rane
Respondent
J U D G M E N T
DIPAK MISRA, J.
Calling in question the legal validity of the order dated
30.11.2006 passed by the learned Single Judge of the High
Court of Madhya Pradesh at Jabalpur in M.Cr.C.No.1922 of 2002
whereby the learned Judge had declined to exercise the power
under Section 482 of the Code of Criminal Procedure (Cr.P.C.)
for quashing of the proceedings in Criminal Case No.895 of
2001 pending in the court of Judicial Magistrate First Class,
Betul which has been registered under Section 420 of the
Indian Penal Code against the appellant, the present appeal
has been preferred by special leave.
2.
Bereft
of
unnecessary
details,
the
facts
which
are
necessary to be stated are that the appellant who is the

Managing Director M/s. Sanghi Brothers (Indore) Ltd., Indore
Signature Not Verified
which is a registered company duly incorporated and registered
Digitally signed by
Gulshan Kumar Arora
Date: 2015.02.21
12:13:52 IST
Reason:
under the Companies Act, 1956 and is engaged in the business

of automobile sale, finance and shipping etc. having branches
2
at
various
places
including
the
city
of
Bhopal.
The
respondent-complainant obtained a quotation from the Bhopal

Branch for purchase of a TATA Diesel vehicle model SFC 709/38
LB in the month of April 1998 and the vehicle was delivered to
the respondent on 01.05.1998 on payment of the price deposited
at Bhopal vide Bank Draft issued from the State Bank of India,
Sarni,
Betul.
The
respondent
faced
difficulty
with
the
vehicle and eventually he came to know in the month of August

2000 that there was a discrepancy in the engine number of the
invoice issued to him.
On further enquiry, he found that
there is a letter issued by Tata Engineering and Locomotive

Company (TELCO) on 7.11.2000 that in the course of transit
from the company to Bhopal, the said vehicle had met with an
accident as a result of which the engine was replaced by
another engine.
Coming to know of this, the respondent filed
a complaint under Section 200 of the Cr.P.C. alleging that M/s

Sanghi Brothers (Indore) Ltd., Indore being represented by the
Managing Director, Sharad Kumar Sanghi, had suppressed the
information and deliberately cheated the respondent.
3.
The learned Magistrate, after following the procedure as
contemplated under Section 202 of the Cr.P.C., took cognizance

of the offence to which we shall advert to at a later stage.
4.
After cognizance was taken and summons were issued, the
appellant filed a revision before the learned Sessions Judge,

Betul which was dismissed on 27.02.2002.
3
5.
Being aggrieved by the aforesaid order, he preferred an
application under Section 482 of the Cr.P.C. before the High

Court.
It
was
contended
before
the
High
Court
that
the
learned Magistrate had no territorial jurisdiction; that there

was no deceit by the respondent; that the company was not made
an accused in the complaint and, therefore, the complaint was
not maintainable; and that there was no mens rea.
The High
Court, as is manifest from the order impugned repelled all the

submissions and dismissed the application for quashment.
6.
We have heard Mr. Sidharth Luthra, learned senior counsel
for the appellant and Mr. Akshat Shrivastava, learned counsel

for the respondent.
7.
It is not in dispute that the vehicle was purchased by
the
respondent
on
01.05.1998.
The
invoice
contained
different engine number than the engine that was fitted into
the
vehicle.
08.05.2001.
The
To
respondent
satisfy
lodged
ourselves
the
whether
complaint
there
has
on
been
specific allegation against the appellant, we have carefully

perused the complaint filed under Section 200 of the Cr.P.C.
English
record.
translation
of
the
complaint
has
been
brought
on
The original complaint which is in Hindi has also
been filed.
The allegations made against the appellant read
as follows :
That the proprietor of M/s Sanghi Brothers
Indore
accused
Sharad
S/o
Sohan
Sanghi
4
negligently prepare the accidental vehicle
no.709 L.M. & projected the same as new to
deliver the complainant causing gain to self
and
loss
to
the
complainant
which
is
punishable U/s 420 of the I.P.C.
8.
Barring the aforesaid allegation in the initial statement
made under Section 200 of the Cr.P.C., the complainant after

inheriting the fact, has stated thus :
Sanghi Brothers Limited run by Mr. Sharad
Sanghi committed cheating with the Applicant
by delivering accidented vehicle in place of a
new one and caused gross financial loss.
Applicant is operating the vehicle after
borrowing loan from Bank and the vehicle is
not worth operating at present due to said
defects. I have filed the Photostat copies of
the concerning documents in the case.
9.
The allegations which find place against the Managing
Director
vague.
in
his
personal
capacity
seem
to
be
absolutely
When a complainant intends to rope in a Managing
Director or any officer of a company, it is essential to make

requisite allegation to constitute the vicarious liability.
In Maksud Sajyad vs. State of Gujarat1, it has been held,
thus:
Where a jurisdiction is exercised on a
complaint petition filed in terms of Section
156(3) or Section 200 of the Code of Criminal
Procedure, the Magistrate is required to apply
his mind. The Penal Code does not contain any
provision for attaching vicarious liability on
the part of the Managing Director or the
1
(2008) 5 SCC 668
5
Directors of the Company when the accused is
the Company. The learned Magistrate failed to
pose unto himself the correct question viz. as
to whether the complaint petition, even if
given face value and taken to be correct in
its entirety, would lead to the conclusion
that the respondents herein were personally
liable for any offence.
The Bank is a body
corporate.
Vicarious
liability
of
the
Managing Director and Director would arise
provided any provision exists in that behalf
in the statute.
Statutes indisputably must
contain
provision
fixing
such
vicarious
liabilities. Even for the said purpose, it is
obligator on the part of the complainant to
make requisite allegations which would attract
the
provisions
constituting
vicarious
liability.
10. The same principle has been reiterated in S.K. Alagh vs.
State
of
UP2;
Maharashtra
State
Electricity
Distribution
Company Ltd. vs. Datar Switchgear Ltd.3; and GHCL Employees

Stock Option Trust vs. India Infoline Ltd.4.
11.
In
statement
the
case
would
at
hand
reflect,
the
as
the
complainant's
allegations
are
initial
against
the
company, the company has not been made a party and, therefore,
the allegations are restricted to the Managing Director.
As
we have noted earlier, allegations are vague and in fact,

principally the allegations are against the company.
There is
no specific allegation against the Managing Director.

12.
At this juncture, it is interesting to note, as we have
stated earlier, the learned Magistrate while passing the order

dated 22.10.2001, had opined, thus :
2
3
4
(2008) 5 SCC 662

(2010) 10 SCC 479
(2013) 4 SCC 505
6
It appears prima-facie from the complaint
filed by the complainant, documents, evidence
and
arguments
that
accused
company
has
committed cheating with the complaint by
delivering old and accidented vehicle to her
at the cost of a new truck.
Accordingly,
prima-facie
sufficient
grounds
exist
for
registration of a complaint against the
accused U/s. 420 of I.P.C. and is accordingly
registered.
13.
When the company has not been arraigned as an accused,
such an order could not have been passed.

the sake of completeness.
We have said so for
In the ultimate analysis, we are of
the considered opinion that the High Court should have been
well
advised
to
quash
the
criminal
proceedings
initiated
against the appellant and that having not been done, the order
is sensitively vulnerable and accordingly we set aside the
same
and
quash
the
criminal
proceedings
initiated
by
the
respondent against the appellant.

14.
The appeal stands allowed accordingly.
................,J.
(Dipak Misra)
................,J.
(Adarsh Kumar Goel)
New Delhi;
February 10, 2015.
ITEM NO.1
COURT NO.5
S U P R E M E C O U R T O F
RECORD OF PROCEEDINGS
Criminal Appeal
SECTION IIA
I N D I A
No(s). 1584/2007
SHARAD KUMAR SANGHI
Appellant(s)
VERSUS
SANGITA RANE
Respondent(s)
(With appln.(s) for Stay, early hearing and office report)

Date : 10/02/2015 This appeal was called on for hearing today.
CORAM :
HON'BLE MR. JUSTICE DIPAK MISRA

HON'BLE MR. JUSTICE ADARSH KUMAR GOEL
For Appellant(s)
Mr. A. V. Rangam,Adv.
For Respondent(s)
Ms. Manjeet Kirpal,Adv.
UPON hearing the counsel the Court made the following

O R D E R
(Gulshan Kumar Arora)
Court Master
(H.S. Parasher)
Court Master

Directors Cannot Be Prosecuted Without Arraigning The Company As Accused

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IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

necessary to be stated are that the appellant who is the

which is a registered company duly incorporated and registered

under the Companies Act, 1956 and is engaged in the business

respondent-complainant obtained a quotation from the Bhopal

vehicle and eventually he came to know in the month of August

On further enquiry, he found that

there is a letter issued by Tata Engineering and Locomotive

Coming to know of this, the respondent filed

a complaint under Section 200 of the Cr.P.C. alleging that M/s

The learned Magistrate, after following the procedure as

contemplated under Section 202 of the Cr.P.C., took cognizance

After cognizance was taken and summons were issued, the

appellant filed a revision before the learned Sessions Judge,

Being aggrieved by the aforesaid order, he preferred an

application under Section 482 of the Cr.P.C. before the High

learned Magistrate had no territorial jurisdiction; that there

Court, as is manifest from the order impugned repelled all the

We have heard Mr. Sidharth Luthra, learned senior counsel

for the appellant and Mr. Akshat Shrivastava, learned counsel

It is not in dispute that the vehicle was purchased by

specific allegation against the appellant, we have carefully

The original complaint which is in Hindi has also

The allegations made against the appellant read

Barring the aforesaid allegation in the initial statement

made under Section 200 of the Cr.P.C., the complainant after

The allegations which find place against the Managing

When a complainant intends to rope in a Managing

Director or any officer of a company, it is essential to make

Company Ltd. vs. Datar Switchgear Ltd.3; and GHCL Employees

we have noted earlier, allegations are vague and in fact,

no specific allegation against the Managing Director.

At this juncture, it is interesting to note, as we have

stated earlier, the learned Magistrate while passing the order

(2008) 5 SCC 662

When the company has not been arraigned as an accused,

such an order could not have been passed.

We have said so for

In the ultimate analysis, we are of

respondent against the appellant.

The appeal stands allowed accordingly.

SHARAD KUMAR SANGHI

(With appln.(s) for Stay, early hearing and office report)

HON'BLE MR. JUSTICE DIPAK MISRA

UPON hearing the counsel the Court made the following

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