Vikas Soni vs State Of M.P.

(1) The applicant has preferred this petition under Section 482 of the Criminal Procedure Code, 1973 for quashment of First Information Report and all other consequential proceedings with regard to Crime No.13/2016 registered at Police Station Crime Branch, Indore District Indore (MP) against the applicant and other co-accused persons for the commission of offence punishable under Sections 420, 467, 468,471, 201, 431, 432 and 120-B of I.P.C.

(2). Brief facts of the case are that the aforesaid crime has been registered on the basis of FIR lodged by one Usha Jain w/o Surendera Jain, complaining that one Ritesh Ajmera, Director of Phoenix Devcons Private Limited, Indore sold Plot No.1868 situated at Phoenix Township, Indore, measuring 1,000 sq. ft. to her for a consideration of Rs.3,80,000/-. Allegedly, despite entire consideration being paid by her, the possession of plot was not handed over to her and when she went to the spot to find out the location of her plot, it was revealed that no such plot exits on the spot. Usha Jain made a complaint that the accused persons have also got sanctioned forged site maps with regard to the aforesaid scheme in which many plots have been shown available for sale, though not physically exited on the spot. She further complained that the Directors of the company, Ritesh Ajmera, Chirag Shah, and their authorized agent Jitendra Pawar, Yogita Ajmera and Pawan Ajmera etc. are responsible for this cheating and forgery. During the course of investigation, it was revealed that not only complainant Usha Jain, but certain other persons have also been cheated in the manner that plots of land were sold to them despite the plots were not available physically on the spot. The Police, on completion of investigation, filed charge-sheet against fourteen named persons including the applicant and some other unnamed persons.

(3). The present case has been registered against the applicant on the basis of complaint made by Usha Jain; and during investigation, it was revealed that complainant Usha Jain, Balkrishna Solanki and Mrs. Krishna Tiwari have also been cheated in the manner that plot of land was sold to them despite plot was not available physically on the spot.

(4). The contention of the learned counsel for the applicant is that there is no allegation in the entire charge sheet against the applicant that he at any point of time, in any manner, induced any person to part with any money or property with regard to sale of the plot.

(5). It is contended that the applicant was inducted as Non-Executive Director of the company with effect from 01.09.2012 and resigned from the said post on 27.12.2012. Even during the said period he was drawing meagre salary against the post of sales executive. It is further submitted that the statement of the witnesses recorded under Section 161 of Cr.P.C. indicates that there are omnibus and general allegations against the applicant. The applicant did not execute any sale deed and forge any documents, was still roped with the offence, even though he was only working as an employee and acting on the instructions of his superiors. The applicant has been implicated only on the pretext that he was director of the company. If the allegations made in the FIR taken at its face value and accepted in its entirety even no offence will be made out against the applicant. Hence, learned counsel for the applicant prays for quashment of FIR registered against the applicant.

(6). On the other hand, learned counsel for respondent/State as well as objector opposed the prayer by contending that there are allegation against the applicant that the complainant and other persons booked the plots in the Phoenix Devcons Private Limited and they have paid the consideration amount but despite payment of full consideration amount and execution of sale deed they have not get the possession of the plot. The applicant is one of the director of the company at the relevant point of time and he was also involved in the day to day affairs of the company and he has committed fraud with the complainant and other persons. There are ample evidence available on record to connect the applicant with the present crime. Hence, he prays for dismissal of the petition.

(7). I have given my anxious consideration to the facts of the present case and the rival contentions raised by the parties.

(8). The legal principles in regard to quashing of a First Information Report in view of a large number of decisions rendered by the Hon'ble Apex Court now almost well settled.

(9). In State of Haryana & Ors. v. Bhajan Lal & Ors. [1992 Supp.(1) SCC 335], it was held :

"102. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extra-ordinary power under Article 226 or the inherent powers Under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any Court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised.

Where the allegations made in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima-facie constitute any offence or make out a case against the accused.

Where the allegations in the First Information Report and other materials, if any, accompanying the F.I.R. do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code.

Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.

....

Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused.

....

Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge."

(10). In the aforesaid backdrop, I may examine as to whether the FIR lodged by the the complainant makes out any case for proceeding against the applicant. For the said purpose,notice the ingredients of section 415 of I.P.C. Punishable under Section 420 of the I.P.C. which are as follows.

(I). Deception of any persons.

(II) Fraudulently or dishonestly inducing 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 anything which he would not do or omit.

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.

Section 406 of the Indian Penal Code reads, thus :

"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."

(11). From the perusal of the record, it appears that initially the applicant was appointed on 25.06.2010 as executive of the Phoenix Devcons Pvt.Ltd, thereafter he was inducted director of the company on 01.09.2012 and he has resigned from the said post on 27.12.2012. Although the applicant was appointed as director of the company, however, he claims that he never signed any documents on the basis of which he was inducted director of the company and he was drawing salary against the post of "Sales Executive" during the period. Though he was allegedly hold the post of director of the company but he was not concern any manner of the affairs of the company.

(12). I have duly perused the record and I am of the considered opinion that the prosecution has not been able to indicate the involvement of the present applicant in day to day management of the company or the manner in which the applicant was part of fraudulent design devised by Ritesh Ajmera and Chirag Shah. In order to rope in the Director of a company, who is not involving in management of the company requires clear involvement of such director whereas a perusal of the FIR and the contents of the case diary falls short of insinuating the present applicant directly or indirectly.

(13). At this juncture, the observation of the Apex Court in the case of K.K. Ahuja vs V.K. Vora 2009 (10) SCC 48 is worth placing reliance on. The Hon'ble Apex Court has held as :

" Section 291 of the Said Act provides that subject to the provisions of that Act, the Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do. A company though a legal entity can act only through its Board of Directors. The settled position is that a Managing Director is prima facie in charge of and responsible for the company's business and affairs and can be prosecuted for offences by the company. But insofar as other directors are concerned, they can be prosecuted only if they were in charge of and responsible for the conduct of the company's business.

(14). In State of NCT of Delhi through Prosecuting Officer, Insecticides, Government of NCT, Delhi Vs. Rajiv Khurana reported in (2010) 11 Supreme Court Cases 469, it was observed thus at paragraph 17;

"17. The ratio of all these cases is that the complainant is required to state in the complaint how a Director who is sought to be made an accused, was in charge of the business of the company or responsible for the conduct of the company's business. Every Director need not be and is not in charge of the business of the company. If that is the position with regard to a Director, it is needless to emphasise that in the case of non- Director officers, it is all the more necessary to state what were his duties and responsibilities in the conduct of business of the company and how and in what manner he is responsible or liable."

Accordingly, it was held that in absence of such clear averments in respect of the respondent accused being in- charge of and responsible for conduct of business and no role having been specifically attributed to the respondent accused in commission of offence alleged, the accused cannot be compelled to face criminal trial.

(15). In the case of GHCL Employee Stock Option Trust Vs. Central Bureau of Investigation reported in 2013(4) SCC 505, It has been observed in paragraph 12 as follows--

"12. From a bare perusal of the complaint and the allegations made therein, we do not find in any of the paragraphs that the complainant has made specific allegations against Respondents 2 to 7. In Para 2 of the complaint, it is alleged that Respondents 2 to 6 are looking after the day-to-day affairs of the Company. With whom the complainant or its authorised representative interacted has also not been specified. Although in Para 11 of the complaint it is alleged that the complainant on numerous occasions met Accused 2 to 7 and requested to refund the amount, but again the complainant has not made specific allegation about the date of meeting and whether it was an individual meeting or collective meeting. Similarly, in Para 17 of the complaint, there is no allegation that a particular Director or Managing Director fabricated the debit note. In the entire complaint there are bald and vague allegations against Respondents 2 to 7."

(16). In the case of Sunil Bharti Mittal Vs. Central Bureau of Investigation reported in 2015(4) SCC 609, it has been held that--

"if the person or group of persons who control the affairs of the company commit an offence as well as they are "alter ego" of the company. In the present case, however, this principle is applied in an exactly reverse scenario. Here, company is the accused person and the Special Magistrate has observed in the impugned order that since the appellants represent the directing mind and will of each company, their state of mind is the state of mind of company and, therefore, on this premise, acts of the company are attributed and imputed to the appellants. It is difficult to accept it as the correct principle of law. As demonstrated hereinafter, this proposition would run contrary to the principle of vicarious liability detailing the circumstances under which a Director of a company can be held liable".

Observation as made in paragraph 42 is noteworthy in this context which is as follows--

"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 means 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 cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute specifically provides so."

(17). It is alleged that accused persons have sold large number of plots which were not in existence or not located on the land belonging to other owners or on government and they have wrongful gain. However, the applicant has not executed any sale deed during the tenure of his directorship in favour of the complainants. He did not sign the document nor he did endorse same as witness. The complaint does not make any averment so as to infer any fraudulent or dishonest inducement having been made by the applicant pursuant to which the respondent parted with the money. The only allegation against the applicant that when the persons who purchased the plots in the Phoenix Devcons Private Limited, went to the office of the company for taking the possession of the plot, the applicant sends them to site with the employee of the company to show and find out their plots but by doing such act it cannot be said that the applicant has cheated the complainants, therefore, no case for prosecution under Section 420 IPC is made out even prima facie.

(18). Learned counsel for the applicant has also relied upon the judgment of Hridaya Ranjan Pd. Verma and others vs. State of Bihar & another reported in 2000 Cri.L.J. 2983, whereby the Hon'ble Apex Court has held that if a criminal prosecution was to take place arising out of breach of contract then the dishonest intention was to be shown at the beginning of the transaction i.e. at the time of making the promise. The relevant portion of the judgment reads as under:

"16. In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time to inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed.

Therefore it is the intention which is the gist of the offence. To prosecute a person of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed.

(19). In the case of S.W. Palanitkar And Ors vs State Of Bihar And Anr, AIR 2001 SC 2960, it has been held that in order to constitute an offence of cheating, the intention to deceive should be in existence at the time when the inducement was made. It is necessary to show that a person had fraudulent or dishonest intention at the time of making the promise, to say that he committed an act of cheating. A mere failure to keep up promise subsequently cannot be pre-sumed as an act leading to cheating.

(20). So far as the offence under Section 467, 468 and 471 of IPC is concerned, it is admitted that the applicant has not executed any sale deed in favour of the complainant. The term forgery used in under Section 467 is defined under Section 463 of I.P.C. Whoever makes any false document or part of a document, with intent to cause damage or injury to the public or to any person, or to support any claim or title or to cause any person to part with property, or to enter into any express or implied contract, or with intent to commit fraud or that fraud may be committed, commits forgery. Section 464 defining "making a false document" is extracted below:

"464. Making a false document.-A person is said to make a false document or false electronic record-

First.-Who dishonestly or fraudulently -

(a) makes, signs, seals or executes a document or part of a document;

(b) makes or transmits any electronic record or part of any electronic record;

(c) affixes any digital signature on any electronic record;

(d) makes any mark denoting the execution of a document or the authenticity of the digital signature, with the intention of causing it to be believed that such document or a part of document, electronic record or digital signature was made, signed, sealed, executed, transmitted or affixed by or by the authority of a person by whom or by whose authority he knows that it was not made, signed, sealed, executed or affixed; or

Secondly.-Who, without lawful authority, dishonestly or fraudulently, by cancellation or otherwise, alters a document or an electronic record in any material part thereof, after it has been made, executed or affixed with digital signature either by himself or by any other person, whether such person be living or dead at the time of such alternation; or

Thirdly.-Who dishonestly or fraudulently causes any person to sign, seal, execute or alter a document or an electronic record or to affix his digital signature on any electronic record knowing that such person by reason of unsoundness of mind or intoxication cannot, or that by reason of deception practised upon him, he does not know the contents of the document or electronic record or the nature of the alteration.

Explanation 1 - A man's signature of his own name may amount to forgery.

Explanation 2 - The making of a false document in the name of a fictitious person, intending it to be believed that the document was made by a real person, or in the name of a deceased person, intending it to be believed that the document was made by the person in his lifetime, may amount to forgery.

[Note: The words 'digital signature' wherever it occurs were substituted by the words 'electronic signature' by Amendment Act 10 of 2009].

(21). The condition precedent for an offence under sections 467, 468 and 471 is forgery. The condition precedent for forgery is making a false document . However, This case does not relate to execution of any false document by the present applicant. If any officer bearer of company executed sale deed and registered it and even if it is assumed that it did not belong to company, it cannot be said to have made and executed false documents, in collusion with the other accused. There is no allegation that the applicant dishonestly or fraudulently claiming that he is owner of the land executed a sale deed in favour of the complainant, therefore, prima facie no offence under Section 467, 468, 471 is not attracted against the applicant.

(22). Upon commutative consideration of the above, it is apparent without adopting any process of reasoning or analogy that the present applicant has not played any role in the offence as alleged against him. He was the employee of the company and inducted as a director for a short period and during which he has not actively involved in the day to day affairs of the company and merely because he was one of the director of the company at some point of time, the prosecution cannot be permitted. Consequently, criminal proceedings initiated in furtherance to FIR bearing crime No.13/2016 registered at police station- Crime Branch against the present applicant Vikas Soni is hereby quashed. However, this order shall not influence the trial court so far as with respect to other co-accused persons.