Directors of a chit fund sought quashing of cheating and criminal breach of trust prosecution arising from unauthorised chits and dishonoured repayment cheques. Relying on Sangeetaben Mahendrabhai Patel and Sunil Bharti Mittal, the court held the allegations disclosed offences and dismissed the Section 482 petition.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE P.G. AJITHKUMAR
THURSDAY, THE 4TH DAY OF JANUARY 2024 / 14TH POUSHA, 1945
CRL.M.C. NO. 3103 OF 2022
C.C.NO.192/2021 OF THE JUDICIAL MAGISTRATE OF FIRST
CLASS -II, HOSDRUG
CRIME NO.138/2019 OF MELPARAMBA POLICE STATION, KASARGOD PETITIONERS/ACCUSED 1 TO 4:
BY ADVS. P.V.ANOOP M.P.PRIYESHKUMAR PHIJO PRADEESH PHILIP
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RESPONDENTS/STATE & COMPLAINANT:
R1 BY SMT.PUSHPALATHA MK, SR.PUBLIC PROSECUTOR
THIS CRIMINAL MISC. CASE HAVING COME UP FOR FINAL HEARING ON 18.12.2023, THE COURT ON 04.01.2024 PASSED THE FOLLOWING:
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P.G. AJITHKUMAR, J.
----------------------------------------------------------Crl.M.C.No.3103 of 2022
----------------------------------------------------------Dated this the 4th day of January, 2024
O R D E R
This is a petition filed under Section 482 of the Code of Criminal Procedure, 1973 (Code) seeking to quash the entire proceedings in C.C.No.192 of 2021 on the files of the Judicial Magistrate of the First Class-II, Hosdurg. The offences alleged against the petitioners are punishable under Sections 406, 418 and 420 read with Section 34 of the Indian Penal Code, 1860 (IPC).
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chit and the amount she prized of Rs.2,48,000/- was deposited in the said chit funds. On maturity, a cheque was issued to the de facto for repayment, but it was dishoboured for want of funds in the account of the said chit funds. It was
thus alleged that the petitioners have committed the said offences.
de facto complainant, a prosecution for the offence or cheating of breach of trust would not lie against the petitioners.
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that as held in Sunil Bharti Mittal v. Central Bureau of
Investigation [(2015) 4 SCC 604] , no vicarious liability can be fastened to the petitioners for the non-payment of money by
the company, which is an incorporated body. Further, it is submitted that the de facto complainant could initiate a prosecution for an offence under Section 138 of the Negotiable Instruments Act, 1881 alone and that too, if she is able to establish that the petitioners were in charge and responsible for the affairs of the company. In that regard, the learned counsel for the petitioner placed reliance on the decision of the Apex Court in Aneeta Hada and others v. M/s Godfather Travels
& Tours Pvt.Ltd. and another [(2012) 5 SCC 661 : 2012
KHC 4244] . The learned counsel for the petitioners further would submit that in the nature of the allegations in this case, a trial would only be a futile exercise and therefore, the proceedings are liable to be quashed. The law laid down by the Apex Court in Pepsi Foods Ltd. v. Special Judicial Magistrate [(1998) 5 SCC 749] is placed reliance on.
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that,-
“42. No doubt, a corporate entity is an artificial person which acts through its officers, directors, managing director, chairman etc. If such a company commits an offence involving mens rea , it would normally be the intent and action of that individual who would act on behalf of the company. It would be more so, when the criminal act is that of conspiracy. However, at the same time, it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute
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specifically provides so.
In Sunil Bharti Mittal (supra) it was further held,
“It is abundantly clear from the above that the principle which is laid down is to the effect that the criminal intent of the "alter ego" of the company, that is the personal group of persons that guide the business of the company, would be imputed to the company/corporation. The legal proposition that is laid down in the aforesaid judgment is that if the person or group of persons who control the affairs of the company commit an offence with a criminal intent, their criminality can be imputed to the company as well as they are "alter ego" of the company.”
the money, they cannot have a contention that the prosecution is altogether illegal or a futile exercise.
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of Gujarat & another [AIR 2012 SC 2844] , held that,-
“27. Admittedly, the appellant had been tried earlier for the offences punishable under the provisions of Section 138 N.I. Act and the case is sub judice before the High Court. In the instant case, he is involved under Sections 406/420 read with Section 114 IPC. In the prosecution under Section N.I. Act, the mens rea i.e. fraudulent or dishonest intention at the time of issuance of cheque is not required to be proved. However, in the case under IPC involved herein, the issue of mens rea may be relevant. The offence punishable under Section 420 IPC is a serious one as the sentence of 7 years can be imposed. In the case under N.I.Act, there is a legal presumption that the cheque had been issued for discharging the antecedent liability and that presumption can be rebutted only by the person who draws the cheque. Such a requirement is not there in the offences under IPC. In the case under N.I.Act, if a fine is imposed, it is to be adjusted to meet the legally enforceable liability. There cannot be such a requirement in the offences under IPC. The case under N.I.Act can only be initiated by filing a complaint. However, in a case under the IPC such a condition is not necessary.”
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Sd/- P.G. AJITHKUMAR, JUDGE
dkr
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APPENDIX OF CRL.MC 3103/2022
PETITIONER ANNEXURES
ANNEXURE A CERTIFIED COPY OF THE FIR IN CRIME NO.138/2019 OF MELPARAMBA POLICE
ANNEXURE B CERTIFIED COPY OF THE FINAL REPORT IN CRIME NO.138/2019 OF MELPARAMBA POLICE
2 issues framed by the court
Whether proceedings for cheating and criminal breach of trust against company directors in an unauthorised chit fund case can be quashed under Section 482 CrPC.
Whether directors can be personally prosecuted absent vicarious liability, or whether prosecution under Section 138 NI Act alone is maintainable.
Colour shows how this judgement treated each authority
Sunil Bharti Mittal v. Central Bureau of InvestigationReferred¶7
(2015) 4 SCC 604 · Who else cites this
Aneeta Hada and others v. M/s Godfather Travels & Tours Pvt.Ltd. and anotherRelied on
(2012) 5 SCC 661 : 2012 KHC 4244 · Who else cites this
Pepsi Foods Ltd. v. Special Judicial MagistrateReferred¶10
(1998) 5 SCC 749 · Who else cites this
Sangeetaben Mahendrabhai Patel v. State of Gujarat & anotherRelied on¶9
AIR 2012 SC 2844 · Who else cites this
3 provisions across 3 enactments
Rajith Kumar K
Deepesh Melath
Unnikrishnan K.
Nithesh Adukam
State of Kerala
Shakunthala
P.G. AJITHKUMAR
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
