Partly allowed

B.Jagadeesh v. Deputy Superintendent of

Madras HC12 Apr 2011CRL OP/6419/2007

Case brief

AI extract

What is this about?

Petitioners, accused directors of a defunct company, sought quashing of criminal proceedings alleging cheating. The High Court held that under the IPC, directors face no vicarious liability absent specific statutory provisions. Finding no material to show active involvement or common intention against those petitioners, the court quashed the proceedings.

What did the court decide?

Criminal proceedings in C.C.No.7280/2006 quashed against petitioners accused Nos.2, 5, 6, 7, and 8. Proceedings against the deceased accused abated.

B.Jagadeesh Vs Deputy Superintendent of — Corruption | Madras HC (2011)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED:12.04.2011

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CORAM

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THE HONOURABLE MR.JUSTICE S. NAGAMUTHU

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Crl.O.P.No.6419 of 2007

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B.Jagadeesh

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K.N.Kannan Chettiar (died)

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M.Premkumar

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P.Sukumar

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V.P.Subramanian 6. A.G.P.R.Ravindran ... Petitioners/Accused

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Vs.

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The Deputy Superintendent of Police, EOW II, Namakkal. ... Respondent . . .

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PRAYER: Criminal Original Petition filed under Section 482 Cr.P.C. to call for the records in C.C.No.7280/2006 on the file of the Chief Metropolitan Magistrate, Egmore, Chennai and quash the same and all further proceedings.

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For Petitioner : Mr.A.Ramesh, Senior Counsel for M/s.Ram and Ram

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For respondent : Mr.P.Kumaresan,

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Additional Public Prosecutor assisted by Mr.V.Rajagopal, Government Advocate

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The petitioners are the accused Nos.2 and 4 to 8 in C.C.No.7280

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of 2006 on the file of the Chief Metropolitan Magistrate, Egmore, Chennai. Altogether, there are 9 accused. The 1^st accused, namely, S.R.Velanandan is not before this Court and this Court is informed that he is absconding. The 3^rd accused B.S.Kantharaj Chetty and the 9^th accused V.Thangavel are also not before this Court. The 2^nd petitioner (the 4^th accused) Mr.K.N.Kannan Chettiar died on 12.6.2007. The remaining petitioners 1, 3, 4, 5 and 6 are the accused Nos.2 and

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5 to 8 in the said case. Seeking to quash the said case as against them, these petitioners are before this Court with this petition under Section 482 of Cr.P.C.

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The case of the prosecution in brief is as follows:

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A company known as 'Associated Business Credits Limited' was incorporated as per the provisions of the Indian Companies Act on 18.10.1982. The Directors of the said company on the day of its incorporation were Mr.Velanandan (1^st accused) who was the Managing Director, Mr.Premkumar (the 5^th accused), one Dwarakanathan and Mr.Ravindran (the 8^th accused). Between 1982 to 1988, the company was doing business well. During that period, it is alleged that the company collected a total sum of Rs.39,20,776/- from 34 depositors, promising them to repay the same with fabulous interest. Subsequently, there were changes in the management of the company about which I would make reference at the appropriate place. But the company did not repay the amounts to the depositors as promised. In those circumstances, one Mr.P.Patrica Ireland, a resident of Kilpauk, Chennai, preferred a complaint to the Inspector of Police, EOW-II, Namakkal, on 28.1.2004 alleging that the said company, namely, Associated Business Credits Limited, had failed to pay her deposit amount of Rs.3,30,000/- on maturity and thus cheated her. The deposit matured in the year 2001. But the same was not paid till the date of complaint. Based on the said complaint, a case was registered by the respondent police in Crime No.7/2004 on 28.1.2004 under Section 409 of IPC against the company, namely, Associated Business Credits Limited.

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During investigation, it turned out that a total number of 34 depositors had been cheated to the tune of Rs.39,20,776/-. The Investigating Officer examined those depositors, collected deposit receipts and finally, laid charge sheet against the above stated 9 accused. It needs to be noted that the company against which the case was registered has not been arrayed as an accused in this case. It is alleged in the final report that the Director by name Dwarakanathan resigned from the company and therefore, the accused 1, 5 and 8 were the Directors. It is further alleged that subsequently, the other accused also became the Directors of the company at various points of time. It is, on these allegations it is alleged in the final report that the petitioners are responsible for the conduct of the company, namely, Associated Business Credits Limited. In the final report, it is alleged that these accused have committed offences under Sections 120-B read with 420 IPC and 409 read with 34 of IPC. The learned Chief Metropolitan Magistrate, Egmore, Chennai has taken cognizance on the same. It is this proceedings, that the petitioners want to quash.

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I have heard Mr.A.Ramesh, learned Senior Counsel appearing for the petitioners and Mr.P.Kumaresan, learned Additional Public

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Prosecutor and also perused the materials available on record carefully.

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It is the contention of the learned Senior Counsel for the petitioners that though it is true that the petitioners were the Directors of the company at one point of time or the other, absolutely, there is no material on record to show that the petitioners had in any manner either actively involved in the day-today affairs of the company, namely, Associated Business Credits Limited, or did they induce the depositors to make deposit by giving any false promise. The learned Senior Counsel would further submit that absolutely, there is no material to invoke even Section 34 of IPC as against these accused. In respect of the charge for conspiracy, the learned Senior Counsel would submit that there is no material, even to make out a prima facie case for conspiracy on the part of these accused. The learned Senior Counsel would also point out that in criminal law, there is no question of vicarious liability unless it is specifically provided for. In this case, the records submitted by the respondent police along with the final report would only make out a prima facie case that it was the company which made the promise, collected deposits from the depositors and failed to repay the matured amount as promised. Therefore, according to the learned Senior Counsel, if at all there is one, which can be held liable for punishment under any of the provisions as enumerated in the charge, it is only the company, namely, Associated Business Credits Limited itself. The learned Senior Counsel would further submit that the term 'person' as defined in Section 2 of the IPC would include a company, an association of persons or body of persons. Therefore, in this case, since Associated Business Credits Limited is a company, that itself would fall within the definition of 'person' as defined in Section 2 of the IPC and as such, the company should have been added as an accused. For the act of the company, the Directors cannot be held liable. He would further submit that though under civil law, for the act of the company, the directors may even be held responsible on the principle of vicarious liability or constructive liability, such a course is not available in criminal law. The learned Senior Counsel would also submit that it is on record that the company was fully run as a one man show, only by the 1^st accused by name S.R.Velanandan. After the company had failed to repay the deposits, this Court appointed two Administrators on 12.3.2002 to administer the company as per the order in A.S.No.185/2001. The learned Senior Counsel would further bring it to the notice of this Court that the Administrators submitted 3 reports to this Court wherein it is stated that the Managing Director Mr.S.R.Velanandan was running the company as a single man show. The reports would further state that in fact, none of the advance made was even approved by the Directors which is in violation of their resolution. It is further stated that most of the advances are not covered by adequate security and approval of such loans are far from

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satisfactory and most of the documents are incomplete. It is further stated in one of the reports in paragraph No.6 as follows:

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“6. The above facts and figures will reveal the total mismanagement of the affairs of the company by the Managing Director, S.R.Velanandam, who is now absconding for nearly one year. We have informed the Police authorities through the letter dated 26.12.2002 about the fact of absconding. 1. Sri.P.Sukumar 2. Sri.V.P.Subramaniam 3. Sri. R.Raveendran 4. Sri M.Premkumar 5. Sri.B.Jagadeesh who were directors at that time are extending their utmost co-operation. But they are unable to provide any useful guidance and information in the administration of the company for recovering the debts and settling the dues.”

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The learned Senior Counsel for the petitioners would bring to the notice of this Court that the Administrators ultimately said that it was too difficult to run the administration of the company, because the 1^st accused S.R.Velanandan was absconding and he was not extending any co-operation besides the fact that these petitioners/accused did not know anything about the affairs of the company, since they were not in the administration of the company. The learned Senior Counsel would also submit that relying on the above report, the liquidation proceedings were initiated before this Court and in the said Proceedings, a Liquidator has also been appointed. Now, the Liquidator is taking steps to collect the amounts due to the company and also to pay back the deposits to the creditors. The learned Senior Counsel would further submit that now all the properties of the company are in the hands of the Liquidator and as a matter of fact, the amount payable to the depositors in question in this case is now lying in the hands of the Official Liquidator.

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The learned Senior Counsel would further submit that the petitioners have got no claim over the properties of the company or any amount which is now lying in the hands of the Official Liquidator. He would further submit that the petitioners would not make any claim in respect of the properties which have already been either attached or sold or in the hands of the Official Liquidator. To this effect, these petitioners have also filed affidavits before this Court. Therefore, the learned Senior Counsel appearing for the petitioners would conclude his argument that on legal sense, since there is no material available on record making out any offence against all these accused, the prosecution against them is liable to be quashed.

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The learned Additional Public Prosecutor would however oppose this petition stoutly. According to him, whether these petitioners had any role to play in the day-to-day affairs of the

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company or not is a matter to be decided only at the time of trial of the case, because, at this preliminary stage it cannot be decided whether these petitioners had any connection with the day-to-day affairs of the company. The learned Additional Public Prosecutor would further submit that these petitioners also induced the depositors to make deposits and therefore, they are also liable for the act of the company in failing to pay back the matured amount to the respective creditors. In respect of the fact that the company, which itself is a person, has not been arrayed as an accused, the learned Additional Public Prosecutor would submit that such noninclusion of the company as an accused in this case cannot be a ground to exonerate these accused/petitioners who are the Directors of the company, namely, Associated Business Credits Limited. In respect of the reports submitted by the Administrators and the Liquidation Proceedings, the learned Additional Public Prosecutor has no quarrel factually. He would further submit that the reports of the Administrators have got no relevance at this stage in this petition because the correctness of the same is to be tested only at the time of trial. However, on verification with the respondent, the learned Additional Public Prosecutor would submit that the properties belonging to the company are in the hands of the Official Liquidator and as a matter of fact, a huge sum, now lying in the account of the Official Liquidator, is being disbursed to the creditors as per the proceedings before this Court in the Company Petition. He would pray for dismissal of this petition.

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I have considered the above submissions.

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At the outset, I have to state that while considering a petition for discharge under Section 227 of Cr.P.C. by a Court of Sessions or by a Magistrate, the trial court cannot refer to any document other than the documents and other materials placed along with the final report by the police. However, in so far as a petition under Section 482 of Cr.P.C. is concerned, where this Court is called upon to invoke its inherent jurisdiction to quash a criminal proceeding pending before a subordinate court, in rarest of rare cases, this Court can look into the documents produced by the accused which are unimpeachable in character. In this regard, we may refer to the judgment of the Honourable Supreme Court in State of Orissa vs. Debendranath Padhi reported in 2004 AIR SCW Page 6813 wherein in para 21, the Honourable Supreme Court has held as follows :

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"21. It is evident from the above that this Court was considering the rare and exceptional cases where the High Court may consider unimpeachable evidence while exercising jurisdiction for quashing under Section 482 of the Code. In the present case, however, the question involved is not about the exercise of jurisdiction under Section 482 of the Code where along with the petition, the accused may file

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unimpeachable evidence of sterling quality and on that basis seek quashing, but is about the right claimed by the accused to produce material at the stage of framing of charge."

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In view of the settled position of law as referred to above, if the reports of the Administrators are considered to be unimpeachable, then they can very well to be considered by this Court in this petition.

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In my considered opinion, having regard to the nature of the said reports submitted by the Administrators which have also been accepted by the Company Court (High Court), I am of the view that the said reports are an unimpeachable documents which could be considered in this proceedings. Now, if one looks into the said report, as I have already extracted, it goes to show that the company was run only by the 1^st accused, namely, S.R.Velanandan. These accused were Directors of the company at one point of time or the other. But they had nothing to do with the day-to-day affairs of the company. To this extent, even the final report submitted by the police nowhere states that these accused did actively participate in the day-to-day affairs of the company. There is no material placed along with the final report to show that these accused either introduced the depositors or made false promise to the depositors to make deposits thereby assuring to return the amount with fabulous interest. The entire materials placed on record would only go to show that it was only the accused company, which induced the depositors to make deposits thereby promising them to repay the said amount with fabulous interest on the maturity of the deposits. Thus, there is a primafacie case that the company has committed the offences by failing to repay the amount and since the 1^st accused was running the company as a one man show, there is a prima facie case against him also for trial. But in so far as these accused are concerned, in the police report, as I have already stated, there is absolutely no material to show that these accused committed any of the offences.

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The learned Additional Public Prosecutor would submit, assuming that the accused had no direct role to play in the collection of deposits and in the failure to repay the same, they can be held to have constructively committed the offences on the principle of vicarious liability. He would further submit that Section 34 of IPC creates constructive liability and therefore, these accused cannot escape from the trial of the case.

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Per contra, it is the contention of the learned Senior Counsel for the petitioners that the concept of vicarious liability is unknown to criminal law, more particularly, to the Indian Penal Code. However, he would be fair to point out that there are certain

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special enactments in which for the offences committed by a company, the Directors are also made liable for punishment. For instance, the learned Senior Counsel would point out that under Section 141 of the Negotiable Instruments Act for an offence committed by the company, the company as well as the Directors of the company, who are responsible for the day-to-day administration of the company, are also liable for punishment. Similar provision is also found in other enactments like Essential Commodities Act, Drugs and Cosmetics Act and Indian Electricity Act etc. The learned Senior Counsel would submit that in so far as the Indian Penal Code is concerned, there is no such provision creating an offence on the principle of vicarious liability.

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I have given my anxious consideration to the above rival submissions of the learned Counsel on either side.

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As it has been rightly pointed out by the learned Counsel for the petitioners that in few Special Enactments such as Negotiable Instruments Act, the Drugs and Cosmetics Act and the Indian Electricity Act etc., there are specific provisions made by the legislature making the directors of a company also liable for punishment for the offence committed by the company. But, in the Indian Penal Code, there is no such penal provision making the directors of the company also liable for punishment for the offence committed by the company. As I have already pointed out, the company itself is a person as defined in Section 2 of the IPC. Therefore, the company can be prosecuted for the offences under the Indian Penal Code. The contention of the learned Additional Public Prosecutor that Section 34 of IPC creates a constructive liability and invoking the same, the Directors can also be prosecuted cannot be countenanced at all. The primary requirement to invoke Section 34 of IPC is sharing of common intention between the accused which essentially requires pre-meeting of mind and a common design to commit a crime. Mere common intention itself would not be sufficient to create such a constructive liability under Section 34 of the IPC for which it requires an act done in furtherance of the said common intention. Here, let us not confuse between the expression "common object" as stated in Section 149 of the IPC and the expression "common intention" as defined in Section 34 of IPC. I do not wish to elaborate the difference between these two phrases as the Honourable Supreme Court, on several occasions, has explained the distinction between these two phrases and the applicability of these two phrases in two different situations. I can only say, for the sake of completion, that common object and common intention are two different concepts and they operate in two different spheres. So far as the term "common intention" is concerned as enumerated in Section 34 of IPC, the accused should have done something in furtherance of the common intention whereas so far as the term "common object" is concerned as enumerated in Section 149 of IPC, it should be suffice,

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if the accused was a member of an assembly which had a common object to commit a crime. In the case on hand, though an attempt has been made by the learned Additional Public Prosecutor that the constructive liability under Section 34 of IPC can be fastened on these petitioners, I am of the view that in the absence of any material to infer or even to suggest that there was a common intention between the 1^st accused and these accused and that these accused committed some act in furtherance of the said common intention amounting to a crime, it is not at all possible to invoke Section 34 of the IPC against these accused. As I have already stated the reports submitted by the administrators would clearly reveal that these accused had nothing to do with the administration of the company and as such, there is no material available on record as of now that these accused had anything in common with the 1^st accused or with the company to constitute a common intention. It is also not available on record that these accused committed any act in furtherance of any such common intention to commit a crime. Therefore, the question of invoking Section 34 of IPC does not arise at all in this case.

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In this regard, the learned Senior Counsel appearing for the petitioners has relied on two judgments of the Honourable Supreme Court. The first one is in Sharon Michael And others vs. State of Tamil Nadu and another reported in (2009) 3 Supreme Court Cases 375 wherein in paragraph Nos.13 to 16, the Honourable Supreme Court has held as follows:

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“13. The ingredients of an offence as contained in Section 420 IPC are as under:

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(i) deception of any person:

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(ii) fraudulently or dishonestly inducting any person to deliver any property; or

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(iii) to consent that any person shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit.

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Criminal breach of trust is defined in Section 405 IPC. The ingredients of an offence of the Criminal breach of trust are:

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“1. Entrusting any person with property or with any dominion over property.

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That person entrusted (a) dishonestly misappropriating or converting to his own use that property; or (b) dishonestly using or disposing of that property or wilfully suffering any other person to do do in violation-

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(i) of any direction of law prescribing the mode in which such trust is to be discharged or

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(ii) of any legal contract made touching the discharge of such trust.”

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Ingredients of Section 409 IPC read as under : “(i) The accused must be a public servant;

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(ii) He must have been entrusted in such capacity with property;

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(iii) He must have committed breach of trust in respect of such property.”

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The first information report contains details of the terms of contract entered into by and between the parties as also the mode and manner in which they were implemented. Allegations have been made against the appellants in relation to execution of the contract. No case of criminal misconduct on their part has been made out before the formation of the contract. There is nothing to show that the appellants herein who hold different positions in the appellant company made any representation in their personal capacities and, thus, they cannot be made vicariously liable only because they are employees of the company.”

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After referring to the earlier judgment of the Honourable Supreme Court, in R.Kalyani vs. Jannak C. Mehta reported in (2009) 1 SCC 516, in paragraph No.18, the Honourable Supreme Court has held as follows:

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“Section 406 of the Penal Code reads thus:

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406 Punishment for criminal breach of trust-whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or, with fine, or with both.”

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Then, the learned Senior Counsel for the petitioners would rely on paragraph Nos.32 and 33 of the said judgment, wherein the Honourable Supreme Court has held as follows:

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“32. Allegations contained in the FIR are for commission of offences under a general statute. A vicarious liability can be fastened only by reason of a provision of a statute and not otherwise. For the said purpose, a legal fiction has to be created. Even under a special statute when the vicarious criminal liability is fastened on a person on the promise that he was in charge of the affairs of the company and responsible to it, all the ingredients laid down under the statute must be fulfilled. A legal fiction must be confined to the object and purport for which it has been created.

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In sham Sunder vs. State of Haryana, this Court held (SCC p.632, para9)

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“9. But we are concerned with a criminal liability under penal provision and not a civil liability. The penal provisions must be strictly construed in the first place.

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Secondly, there is no vicarious liability in criminal law unless the statute takes that also within its fold. Section 10 does not provide for such liability. It does not make all the partners liable for the offence whether they do business or not.”

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Then, referring to various other judgments, in paragraph No.41 of the said judgment, the Honourable Supreme Court has held as follows:

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“If a person, thus, has to be proceeded with as being vicariously liable for the acts of the company, the company must be made an accused. In any event, it would be a fair thing to do so, as legal fiction is raised both against the company as well as the person responsible for the acts of the company.”

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The next judgment relied on by the learned Senior Counsel for the petitioners is the decision of the Honourable Supreme Court in S.K.Alagh vs. State of Uttar Pradesh and Others reported in (2008) 5 Supreme Court Cases 662 wherein in paragraph Nos.17 to 20, it has been held as follows:

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“17. A criminal breach of trust is an offence committed by a person to whom the property is entrusted.

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Ingredients of the offence under Section 406 are “(1) a person should have entrusted with property, or entrusted with documents over property;

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(2) the person should dishonestly misappropriate or convert to his own use that property, or dishonestly use or dispose of that property or wilfully suffer any other person to do so;

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(3) that such misappropriation, conversion, use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of such trust”

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As, admittedly, drafts were drawn in the name of the Company, even if the appellant was its Managing Director, he cannot be said to have committed an offence under Section 406 of the Penal Code. If and when a statute contemplates creation of such a legal fiction, it provides specifically therefor. In absence of any provision laid down under the statute, a Director of a Company or an employee, cannot be held to be vicariously liable for any offence committed by the Company itself. (See Sabitha Ramamurthy v. R.B.S.Channabasavaradhya)

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We may, in this regard, notice that the provisions of the Essential Commodities Act, the Negotiable Instruments Act, the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 etc. have created such vicarious liability. It is interesting to note the Section 14-A of the 1952 Act specifically creates an offence of criminal breach of trust in respect of the amount deducted from the employees by the company. In terms of the Explanations appended to Section 405 of the Penal Code, a legal fiction has been created to the effect that the employer shall be deemed to have committed an offence of criminal breach of trust. Whereas a person in charge of the affairs of the company and in control thereof has been made vicariously liable for the offence committed by the company along with the company but even in a case falling under Section 406 of the Penal Code vicarious liability has been held to be not extendable to the Directors or officers of the company. (See Maksud Saiyed v. State of Gujarat)”

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The learned Senior Counsel nextly relies on the judgment of the Honourable Supreme Court in Maksud Sayed vs. State of Gujarat and others reported in (2008) 5 SCC 668 wherein in paragraph No.13, it is held as follows:

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“...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 obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability.”

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A close reading of the above judgments would make it clear without any doubt that unless and until, a provision is made, making the Directors of a company vicariously liable for the offence committed by the company, it is not legal to prosecute the directors of the company.

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At this juncture, it would be worthwhile to extract the statement of charges made by the Investigating Officer in the final report which is thus :

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“The investigation further disclosed that the accused A1 to A9 issued pamphlets inviting deposits form the public promising higher rate of interest. The accused A1 to A9 collected deposits from 1996 but defaulted on repayment to the depositors those who have deposited during the year 1996 to 2000. This police report is conformed to the period from 1996 to 2000 since there was no complaint prior to

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The investigation further discloses that the accused A1 to A9 have collected from 34 depositors a total sum of Rs.39,20,776/-.

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The accused A1 to A9 having been thus entrusted with the amount and having domination over the property converted to their own use and thus misappropriated.

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"CHARGE NO.1 U/S.120(B) R/W.420 AND 409 IPC

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The accused A1 to A9 Directors of Associated Business Credits Ltd between 1996 to 2000 agreed to commit or caused to be done illegal acts to with; to issue pamphlets promising higher rate of interest and thus deceiving the public to collect money by way of deposits and to dishonestly misappropriate the amount collected by converting to their own use and the accused A1 to A9 in pursuance of the conspiracy collected a sum of Rs.39,20,776/- from 34 depositors between 1996 and 2000 and misappropriated the amount."

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"CHARGE NO.II 420R/W.34 IPC AGAINST A1 TO A9

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The accused A1 to A9 in pursuance of the conspiracy mentioned in charge No.1 at the same time and place and in the course of the same transaction and in furtherance of the common intention of them issued pamphlets promising higher rate of interest and thus deceiving the public collected a sum of Rs.39,20,776/- from 34 depositors and thus A1 to A9 are guilty of an offence under Section 420 read with 34 of IPC."

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"CHARGE NO.III U/S.409 READ WITH 34 OF IPC AGAINST A1 TO A9:

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The accused A1 to A9 in pursuance of the conspiracy mentioned in charge No.1 at the same time and place and in the course of the same transaction and in furtherance of the common intention of them being the Directors of Associated business Credits Ltd. And in such capacity having been entrusted with sum of Rs.39,20,776/dishonestly misappropriated the amount by converting to their own use and thus A1 to A9 are guilty of an offence under Section 409 r/w.34 of IPC and thus, A1 to A9 appear to have committed an offence u/s.120(B) r/w.34 IPC.”

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Though, it is alleged that these accused also issued pamphlets inviting deposits from the public, promising higher rate of interest, absolutely there are no materials on record to make out

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such prima facie allegation. When a specific query was made to the learned Additional Public Prosecutor to point out the material on which basis this allegation has been made in the final report, the learned Additional Public Prosecutor is not in a position to demonstrate any such material record to make out a prima facie case. To be precise, as I have already stated, in respect of the 1^st charge under Section 120-B r/w.420 and 409 of IPC, absolutely, there is no material on record and the learned Additional Public Prosecutor is not in a position to point out any material on record to substantiate this allegation. In respect of the constructive liability under Section 34 of IPC as I have already concluded, Section 34 has got no role to play in the matter and in respect of vicarious liability, as I have already stated, in so far as the Indian Penal Code is concerned, there can be no vicarious liability fastened on the Directors of the company for the offence committed by the company for want of any penal provision making the directors also vicariously liable for punishment. That is the view consistently taken by the Honourable Supreme Court in the judgments which I have referred to supra. Therefore, in my considered opinion, as of now, the prosecution of these petitioners is not maintainable.

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Now coming to the scope of the inherent power of this Court under Section 482 of Cr.P.C., I have to necessarily refer to the judgment of the Honourable Supreme Court in Bhajanlal Vs. State of Hariyana reported in (1992) SCC Crl. 426 wherein the Honourable Supreme Court has enlisted certain circumstances under which criminal prosecution can be quashed by this Court by invoking the inherent jurisdiction. As per the said judgment, if the entire case is based on no material, allowing the case to proceed further will be a waste of judicial time and no purpose would be served in allowing the criminal prosecution to go further. On this ground, as held by the Honourable Supreme Court in the instant case, the proceedings are liable to be quashed in respect of these petitioners.

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Yet another fact which needs to be mentioned herein is that as of now, the company has gone for liquidation and the Official Liquidator has taken charge of the properties of the company. It is also reported to this Court that a huge sum is lying in the hands of the Official Liquidator and therefore, the interest of the depositors in question has been very much secured. The affidavits filed by these petitioners before this Court to the effect that they will not make any claim in respect of the properties of the company and the amount lying in the hands of the Liquidator or any other property to be secured by the Official Liquidator from any third party, also need to be considered. At any cost, the interest of the depositors should be protected. In this regard, I have to state that the interest of the depositors has been sufficiently protected. The affidavits filed by these petitioners shall form part of the records of this Court.

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In view of all the above, the Criminal Original Petition is allowed and the criminal proceedings pending in C.C.No.7280/2004 on the file of the learned Chief Metropolitan Magistrate, Egmore, Chennai is quashed as against these petitioners/Accused 2, 5, 6, 7 and 8 alone. The said case as against the 4^th accused, K.N.Kannan Chettiar, stands abated since he is dead. The quashing of the proceedings against these petitioners shall not be in any manner an impediment for the learned Metropolitan Magistrate to proceed with the rest of the accused.

¶106

Sd/
Asst.Registrar
/true copy/
Sub Asst.Registrar
tsi
To
1. The Deputy Superintendent of Police,
EOW II, Namakkal.
2. The Chief Metropolitan Magistrate, Egmore, Chennai.
3.The Public Prosecutor, High Court, Chennai.
1 cc To Mr.Ram & Ram, Advocate, SR.26986
Crl.O.P.No.6419 of 2007
MBS(CO)
sra 09/05/2011

¶107

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B.Jagadeesh v. Deputy Superintendent of

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B.Jagadeesh v. Deputy Superintendent of

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