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Criminal Petition No. 189 & 192 OF 2016 Page 1 of 26
IN THE GAUHATI HIGH COURT
(THE HIGH COURT OF ASSAM: NAGALAND: MIZORAM & ARUNACHAL PRADESH)
CRIMINAL PETITION NO. 189 of 2016 Sri Kailash Chandra Lohia, Son of Late Rameshwarlal Lohia, Residing at “Matrikunj”, M.S. Road, Fatasil, Guwahati, Assam.
----- Petitioner – VERSUS –
1. State of Assam, Represented by the Chief Secretary, To the Government of Assam,, Dispur-6, Assam. 2. Central Bureau of Investigation, Represented by its Head of Branch CBI, ACB, Betkuchi, P.O.-Gorchuk, Guwahati, Assam, Pin-781035.
----- Opposite Parties
CRIMINAL PETITION NO. 192 of 2016 1. Sri Bijay Kumar Garodia, Son of Late Ram Gopal Garodia, Residing at Block CF361, Sector-I, Salt Lake City, Kolkata-700064. 2. Mahendra Kumar Agarwal, Son of late Nirmal Kumar Agarwal, Block BE 77, Salt Lake City, Sector-I, Kolkata 700064, W.B. 3. Ramawatar Agarwala, Son of Late Prasad Chand Agarwala, Residing at 19 Arunoday Path, RK Choudhury Road, Narayan Nagar, Kumarpara, Guwahati-9. 4. Girdharilal Bathwal, Son of Biswanath Bathwal, Residing at H 131/132 Ankit Wood Wool Industries, Old Ricco Area Bagru,
Criminal Petition No. 189 & 192 OF 2016 Page 2 of 26
Jaipur 303 007.
----- Petitioners – VERSUS –
1. State of Assam, Represented by the Chief Secretary, To the Government of Assam,, Dispur-6, Assam. 2. Central Bureau of Investigation, Represented by its Head of Branch CBI, ACB, Betkuchi, P.O.-Gorchuk, Guwahati, Assam, Pin-781035.
----- Opposite Parties
B E F O R E
Hon’ble Mr. Justice Hitesh Kumar Sarma
Advocates for the Petitioners : Mr. D Das, learned Senior Counsel, Mr. S Banerjee, Mr. B Ghosh, Mr. SSS Rahman,
Mr. SB Rahman, Mr. MR Sodial, Mr. AP Roy and Mr. N Chakrabaorty.
Advocate for Respondent No.1: Mrs. S Jahan, Additional Public Prosecutor. Advocate for Respondent No. 2:Mr. SC Keyal, Standing Counsel, CBI Date of hearing :27th of July, 2017.
Date of Judgment : 5th of September, 2017.
JUDGMENT & ORDER (CAV)
By way of this common judgment and order, I propose to
dispose of the Criminal Petition No. 189/2016 and Criminal Petition No.
192/2016 preferred under Section 482 of the Code of Criminal Procedure.
[2] It may be mentioned at the outset that both these cases were
heard and reserved for verdict. However, certain discrepancy was noticed in the
nomenclature of the case, sought to be quashed, hence the discrepancy was
brought to the notice of learned Senior Counsel for the petitioners. The learned
Criminal Petition No. 189 & 192 OF 2016 Page 3 of 26
Senior Counsel for the petitioners, having realized the error, sought to file a
correction/modification application and accordingly vide I.A (Crl) No. 603/2017
in Criminal Petition No. 189/2016 and I.A (Crl) No. 608/2017 in Criminal
Petition No. 192/2016 amendments were sought to be introduced.
[3] The amendments, sought to be introduced in Criminal Petition
No. 189/2016 and Criminal Petition No. 192/2016, were heard on 24.08.2017
and after considering that the proposed amendments are only clarificatory in
nature, prayers in both the Interlocutory Applications were allowed. The
amendments in Criminal Petition No. 189/2016 and Criminal Petition No.
192/2016 shall now be read as part of original petitions.
[4] The amendments, sought for, can be precisely stated as follows:
i. The Case No. in the original application was mentioned as CR
854/2016 which has been amended as GR 854/2016
ii. In the cause title as well as in the body of the petition it was
stated that the case is presently pending in the Court of learned
Chief Judicial Magistrate, Kamrup (Metro), Guwahati which
has, now, been corrected as learned Special Judicial Magistrate,
Assam, Guwahati
[5] Having dealt with the clarificatory aspects of the case I now
proceed to decide the case as follows;
[6] The petitioners 1, 2 and 3 in Criminal Petition No. 192/2016 are
the Directors of Meghalaya Cements Ltd, a company registered under the
Companies Act, 1956 and the petitioner No. 4 is an employee of the said
Company. On the other hand, the petitioner in Criminal Petition No. 189/2016
Criminal Petition No. 189 & 192 OF 2016 Page 4 of 26
is the Chairman of said Meghalaya Cements Ltd. On a reading of the chargesheet
dated 27.3.2014, appended as Annexure 4 to this petition, the allegation against
the petitioners is that during the period of 2008-2011 some officials of North
Eastern Coal Fields, CIL, (hereinafter referred to NEC, CIL) entered into criminal
conspiracy with Sri Kailash Chand Lohia, Director of Meghalaya Cements Ltd. to
facilitate misuse of coal supplied from NEC, CIL under subsidized rates as per
National Coal Distribution Policy of Govt. of India. As per the Fuel Supply
Agreement done between NEC/CIL and Sri Kailash Chand Lohia for Meghalaya
Cements Ltd, coal to the tune of 38,000 metric tonnes per annum was allotted
to the Unit. Accordingly, the firm had lifted 70,413 metric tonnes of coal from
NEC, CIL but instead of transporting the said coal to Meghalaya Cements Ltd the
Director diverted the said coal for use in M/s K.D. Coke, Jorabat. The coal was
allotted and lifted at the rate of Rs 3680/- per tonne and rate fixed under E-
auction is Rs 3851. The quantity of coal lifted by Meghalaya Cements Ltd would
have fetched an amount of Rs 15,50,25,136/- to the CIL if sold through e-auction
open market. Hence, wrongful loss was caused to CIL. Apart from the
allegations of cheating there are some other allegations that the petitioners
having entered into conspiracy created forged documents and used those
documents for the purpose of cheating. A chargesheet, thus, for the offences
under Section 420/468 read with Section 120B IPC has been laid against the
petitioners in both the cases.
[7] An FIR was lodged in this regard by Mr. H.C. Nath, IPS, Head of
Branch, CBI/ACB/Guwahati on 12.4.2011. The FIR was investigated, and after
investigation, a closure report, under Section 173 CrPC, was laid on 27.6.2012.
Criminal Petition No. 189 & 192 OF 2016 Page 5 of 26
[8] As against the Closure Report, under Section 173 CrPC, the
impugned order, dated 4.8.12, was passed by learned Special Judge, Assam,
Guwahati, holding that since many aspects were left out during investigation the
Closure report cannot be accepted, and thereafter, the learned Special Judge
ordered re-investigation to be conducted by S.P, CBI/ACB and to entrust a
competent officer other than Mr. R.C. Basumatary, to investigate the case and
submit report in final form.
[9] In the investigation that ensued thereafter, the impugned
chargesheet, Annexure 4, was laid against the petitioners in both the cases. Since
no materials against any public servants were found, the charges under the
Prevention of Corruption Act, 1988, were dropped and hence, the chargesheet
was submitted in the Court of Special Judicial Magistrate, Assam, Guwahati, for
offences under Section 120B/420/409 IPC against the petitioners in both the
cases.
[10] Heard Mr. Diganta Das, learned Senior Counsel, appearing for
the petitioners in both the cases and also Mr. S.C. Keyal, learned Standing
Counsel, CBI.
[11] In the course of arguments, Mr. Das, learned Senior Counsel for
the petitioners laid emphasis on three aspects of law:
Firstly, the learned Special Judge could not have ordered re-investigation
of the case as re-investigation means fresh investigation, and hence, could
not have been so ordered
Criminal Petition No. 189 & 192 OF 2016 Page 6 of 26
Secondly, for the offence committed by Company, if any, no vicarious
liability can be attached to the petitioners being Chairman, Directors and
employee of the Company
Thirdly, that, even if the allegations are taken on its face value yet no
offence is made out, and therefore, the chargesheet needs to be quashed.
[12] On the other hand, the learned Standing Counsel, CBI argued
that it is within the ambit of a Court sitting on a report under Section 173 CrPC
to reject the report an order further investigation.
[13] The learned Senior Counsel for the petitioners has placed reliance
on the cases of Vinay Tyagi v. Irshad Ali, reported in (2013) 5 SCC 762, Anju
Chaudhary v. State of U.P., reported in (2013) 6 SCC 384, Rama Chaudhary v.
State of Bihar, reported in (2009) 6 SCC 346, Chandra Babu v. State, reported in
(2015) 8 SCC 774, and State of Orissa v. Mahima, reported in (2007) 15 SCC
580.
[14] In Mahima (supra), the Orissa High Court had quashed a further
investigation done by the Crime Branch on the ground of abuse of process. As
against the order of the Orissa High Court, the State preferred an appeal. In the
context of the factual scenario, the Hon’ble Supreme Court re-iterated the law
laid down in Hemant Dhasmana vs CBI, reported in (2001) 7 SCC 536 holding
that power of police to conduct further investigation in terms of Section 173 (8)
Cr.PC is unfettered.
[15] In Rama Chaudhary (supra), the police after investigation had laid
a charge sheet against the accused persons. In the course of trial, a
supplementary charge sheet was laid against the accused person, wherein the
Criminal Petition No. 189 & 192 OF 2016 Page 7 of 26
Investigating Agency had mentioned the name of 8 new witnesses. The prayer of
the prosecution to examine those witnesses was allowed by the Sessions Judge.
Aggrieved by the order of Sessions Judge, the accused preferred a Criminal
Revision before the Hon’ble High Court of Patna.The order of Sessions Judge
was upheld by the Hon’ble High Court. As against the order of High Court, the
accused approached the Supreme Court. The Supreme Court, while upholding
the order of High Court as well as the Court of Session, held that it is settled law
that carrying out further investigation, even after filing of the charge-sheet, is a
statutory right of the police. The material collected in further investigation
cannot be rejected only because it has been filed at the stage of the trial.
[16] The other relevant observation of the Hon’ble Supreme Court in
Rama Chaudhary (supra), was that the police has a right to “further”
investigation under sub-section (8) of Section 173 but not “fresh investigation” or
“reinvestigation”. The meaning of “further” is additional, more, or
supplemental. “Further” investigation, therefore, is the continuation of the
earlier investigation and not a fresh investigation or reinvestigation to be started
ab initio wiping out the earlier investigation altogether. It further held that Sub-
section (8) of Section 173 clearly envisages that on completion of further
investigation, the investigating agency has to forward to the Magistrate a
“further” report and not a fresh report regarding the “further” evidence
obtained during such investigation.
[17] In Vinay Tyagi v. Irshad Ali, reported in (2013) 5 SCC 762, as
relied upon by the learned Senior Counsel for the petitioners, the following
questions came up for consideration before the Supreme Court:
Criminal Petition No. 189 & 192 OF 2016 Page 8 of 26
(i) Whether in exercise of its powers under Section 173 of the Code
of Criminal Procedure, 1973 (for short “the Code”), the trial court
has the jurisdiction to ignore any one of the reports, where there are
two reports by the same or different investigating agencies in
furtherance of the orders of a court? If so, to what effect?
(ii) Whether the Central Bureau of Investigation (for short “CBI”) is
empowered to conduct “fresh”/ “reinvestigation” when the
cognizance has already been taken by the court of competent
jurisdiction on the basis of a police report under Section 173 of the
Code?
[18] In the course of deliberations, the Hon’ble Supreme Court in
Vinay Tyagi v. Irshad Ali, reported in (2013) 5 SCC 762, held that investigation
can be of the following kinds:
(i) Initial investigation,
(ii) Further investigation,
(iii) Fresh or de novo or reinvestigation.
[19] The “initial investigation” is the one which the empowered police
officer shall conduct in furtherance of registration of an FIR. Such investigation
itself can lead to filing of a final report under Section 173(2) of the Code and
shall take within its ambit the investigation which the empowered officer shall
conduct in furtherance of an order for investigation passed by the court of
competent jurisdiction in terms of Section 156(3) of the Code.
Criminal Petition No. 189 & 192 OF 2016 Page 9 of 26
[20] “Further investigation” is where the investigating officer obtains
further oral or documentary evidence after the final report has been filed before
the court in terms of Section 173(8). This power is vested with the executive. It is
the continuation of previous investigation, and therefore, is understood and
described as “further investigation”. The scope of such investigation is restricted
to the discovery of further oral and documentary evidence. Its purpose is to
bring the true facts before the court even if they are discovered at a subsequent
stage to the primary investigation. It is commonly described as “supplementary
report”. “Supplementary report” would be the correct expression as the
subsequent investigation is meant and intended to supplement the primary
investigation conducted by the empowered police officer. Another significant
feature of further investigation is that it does not have the effect of wiping out,
directly or impliedly, the initial investigation conducted by the investigating
agency. This is a kind of continuation of the previous investigation. The basis is
discovery of fresh evidence and in continuation of the same offence and chain of
events relating to the same occurrence incidental thereto. In other words, it has
to be understood in complete contradistinction to a “reinvestigation”, “fresh” or
“de novo” investigation.
[21] However, in the case of a “fresh investigation”, “reinvestigation”
or “de novo investigation” there has to be a definite order of the court. The
order of the court unambiguously should state as to whether the previous
investigation, for reasons to be recorded, is incapable of being acted upon.
Neither the investigating agency nor the Magistrate has any power to order or
conduct “fresh investigation”. This is primarily for the reason that it would be
opposed to the scheme of the Code. It is essential that even an order of
Criminal Petition No. 189 & 192 OF 2016 Page 10 of 26
“fresh”/“de novo” investigation passed by the higher judiciary should always be
coupled with a specific direction as to the fate of the investigation already
conducted. The cases where such direction can be issued are few and far
between. This is based upon a fundamental principle of our criminal
jurisprudence which is that it is the right of a suspect or an accused to have a just
and fair investigation and trial. This principle flows from the constitutional
mandate contained in Articles 21 and 22 of the Constitution of India. Where the
investigation ex facie is unfair, tainted, mala fide and smacks of foul play, the
courts would set aside such an investigation and direct fresh or de novo
investigation and, if necessary, even by another independent investigating
agency.
[22] In Chandra Babu v. State, reported in (2015) 8 SCC 774, also
relied upon by the learned Standing Counsel, CBI, again an occasion arose
before the Hon’ble Supreme Court regarding the powers of Magistrate to pass
orders on further investigation and re-investigation. The Supreme Court
eventually held that under the Code of Criminal Procedure a Magistrate has
power to order further investigation but not reinvestigation.
[23] In view of the cases relied upon by the learned Senior Counsel, I
believe, it is not in dispute that once the Magistrate receives a report under
Section 173 CrPC on completion of investigation, ordering further investigation
is one of the courses open to the Magistrate.
[24] I may recall here the case of Abhinandan Jha v. Dinesh Mishra,
reported in (AIR 1968 SC 117) wherein the Supreme Court had the occasion to
deal with the question as to what is the position, when the Magistrate is dealing
Criminal Petition No. 189 & 192 OF 2016 Page 11 of 26
with a report submitted by the police, under Section 173, that no case is made
out for sending up an accused for trial, which report is called as a ‘final report’?
[25] It was held in Abhinandan Jha (supra), that even in those cases, if
the Magistrate agrees with the said report, he may accept the final report and
close the proceedings. But there may be instances when the Magistrate may take
the view, on a consideration of the final report, that the opinion formed by the
police is not based on a full and complete investigation in which case the
Magistrate will have ample jurisdiction to give directions to the police, under
Section 156(3), to make a further investigation. That is, if the Magistrate feels,
after considering the final report, that the investigation is unsatisfactory, or
incomplete, or that there is scope for further investigation, it will be open to the
Magistrate to decline to accept the final report and direct the police to make
further investigation, under Section 156(3). The police, after such further
investigation, may submit a charge-sheet, or, again submit a final report,
depending upon the further investigation made by them. If, ultimately, the
Magistrate forms the opinion that the facts, set out in the final report, constitute
an offence, he can take cognizance of the offence, under Section 190(1)(b),
notwithstanding the contrary opinion of the police, expressed in the final report.
[26] Now, when the report, forwarded, under Clause (i) of Sub-
Section (2) of Section 173, by the officer-in-charge of a police station to the
Magistrate, comes up for consideration by the Magistrate, one of two different
situations may, as pointed out in Bhagwant Singh v. Commr. of Police, reported
in (1985) 2 SCC 537 may arise. The report may conclude that an offence appears
to have been committed by a particular person or persons and, in such a case,
the Magistrate may do one of three things: (i) he may accept the report and take
Criminal Petition No. 189 & 192 OF 2016 Page 12 of 26
'cognizance' of the offence or offences, as the case may be, and issue process or
(ii) he may disagree with the report and drop the proceeding or (iii) he may
direct 'further investigation' under sub-section (3) of Section 156 and require the
police to submit a further report.
[27] In the case of Mithabhai Pashabhai Patel v. State of Gujarat,
reported in (2009) 6 SCC 332, the Hon’ble Supreme Court held that it is,
however, beyond any cavil that “further investigation” and “reinvestigation”
stand on different footing. It may be that in a given situation a superior court in
exercise of its constitutional power, namely, under Articles 226 and 32 of the
Constitution of India could direct a “State” to get an offence investigated and/or
further investigated by a different agency. Direction of a reinvestigation,
however, being forbidden in law, no superior court would ordinarily issue such
a direction. A distinction, therefore, exists between a reinvestigation and further
investigation.
[28] The relevant observations of Hon’ble Supreme Court, in
Mithabhai Pashabhai Patel (supra), are reproduced as follows:
“13. It is, however, beyond any cavil that “further investigation”
and “reinvestigation” stand on different footing. It may be that in
a given situation a superior court in exercise of its constitutional
power, namely, under Articles 226 and 32 of the Constitution of
India could direct a “State” to get an offence investigated and/or
further investigated by a different agency. Direction of a
reinvestigation, however, being forbidden in law, no superior
court would ordinarily issue such a direction.”
[29] The discussions, made above, may be summarized in the
following manner:
Criminal Petition No. 189 & 192 OF 2016 Page 13 of 26
(i) That, police has a right to “further” investigation under sub-section
(8) of Section 173 but not “fresh investigation” or “reinvestigation”.
The meaning of “further” is additional, more, or supplemental.
“Further” investigation, therefore, is the continuation of the earlier
investigation and not a fresh investigation or reinvestigation to be
started ab initio wiping out the earlier investigation altogether.
(ii) In the case of a “fresh investigation”, “reinvestigation” or “de
novo investigation” there has to be a definite order of the court. The
order of the court unambiguously should state as to whether the
previous investigation, for reasons to be recorded, is incapable of
being acted upon. Neither the investigating agency nor the
Magistrate has any power to order or conduct “fresh investigation”.
It is essential that even an order of “fresh”/“de novo” investigation
passed by the higher judiciary should always be coupled with a
specific direction as to the fate of the investigation already
conducted.
(iii) If the Magistrate feels, after considering the final report, that the
investigation is unsatisfactory, or incomplete, or that there is scope
for further investigation, it will be open to the Magistrate to decline
to accept the final report and direct the police to make further
investigation, under Section 156(3). The police, after such further
investigation, may submit a charge-sheet, or, again submit a final
report, depending upon the further investigation made by them.
(iv) If in a given situation a superior court in exercise of its
constitutional power, namely, under Articles 226 and 32 of the
Criminal Petition No. 189 & 192 OF 2016 Page 14 of 26
Constitution of India directs a “State” to get an offence investigated
and/or further investigated by a different agency wiping out previous
investigation such investigation would be called re-investigation.
Direction of a reinvestigation, however, being forbidden in law, no
superior court would ordinarily issue such a direction. A distinction,
therefore, exists between a reinvestigation and further investigation
[30] Thus, in the light of the cases, discussed hereinbefore, what
emerges is that if the Investigating Agency, after conducting investigation, lays a
charge sheet against the accused persons upon which Magistrate takes cognizance
and trial proceeds, what is permissible for the Police is to submit only additional
and further reports u/s 173 (8) Cr.PC and not a new and fresh report. However,
the said scenario cannot be conceived of in a situation where the Magistrate is
ordering further investigation in exercise of powers u/s 156(3) CrPC by rejecting
the opinion of Investigating Officer. Once such further investigation is ordered a
fresh investigation can be conducted and a new report can be filed and there
appears no hindrance in law that new opinion cannot be given. If it is argued
that even after ordering further investigation the Investigating Agency must stick
to its previous opinion, then the very purpose of further investigation would be
rendered nugatory.
[31] In the present case so far as the order of the learned Special Judge
is concerned he had ordered a re-investigation by the CBI and by a different
Officer. Keeping aside the use of expression re-investigation in the context of the
order, I may point out that the practice of ordering that investigation shall be
carried out by a particular Officer also came up for discussion in Hemant
Dhasmana v. CBI, reported in (2001) 7 SCC 536, wherein the Supreme Court
Criminal Petition No. 189 & 192 OF 2016 Page 15 of 26
held in clear terms that it is not within the province of the Magistrate while
exercising the power under Section 173(8) to specify any particular officer to
conduct such investigation, not even to suggest the rank of the officer who
should conduct such investigation. Hence, the order of the learned Special Judge,
that investigation should be conducted by an officer other that Mr. R.C.
Basumatary, was not proper though on this count the order would not stand
vitiated.
[32] Now, coming to the use of expression re-investigation indeed in
view of the law laid down it would not have been permissible for the Special
Judge, to order re-investigation. But, the question which needs to be determined
here is whether by the impugned order a re-investigation has been conducted?
[33] The first test of re-investigation is that a fresh investigation
should, ordinarily, be conducted by an agency other than the one which has
already conducted investigation. The second aspect of re-investigation is
observation regarding previous mala fide investigation.
[34] In the present case, the learned Special Judge has only ordered re-
investigation by CBI, the same agency that conducted the previous investigation.
Secondly, there is no observation regarding any mala fides on the part of the
investigating agency regarding previous investigation. Hence, even though the
expression used is re-investigation, infact, what the learned Special Judge meant
was further investigation. The use of expression re-investigation, in the context
of present case, has to be termed as misnomer or a legally inaccurate expression.
Thus, not much can be read and should be read into the expression re-
investigation when otherwise only further investigation has been conducted in
Criminal Petition No. 189 & 192 OF 2016 Page 16 of 26
terms of the power conferred by Section 156(3) CrPC which the learned Special
Judge possessed.
[35] Thus, the order of the learned Special Judge, cannot be assailed
on this ground.
[36] Now, coming to the other leg of arguments, made by the learned
Senior Counsel for the petitioners, about corporate criminal liability how far a
juristic person can be made criminally liable for offences remained an unsettled
issue till the case of Iridium India Telecom Ltd. v. Motorola Inc., reported in
(2011) 1 SCC 74. In this case, Iridium India had filed a criminal complaint against
Motorola Inc. alleging commission of offence under Section 420/120B IPC. The
complaint was quashed by the Bombay High Court. When the matter was
challenged in Hon’ble Supreme Court, by Iridium India, one of the grounds
taken by them was that the respondent Company cannot hide behind the
defence that the Company is incapable of possessing the necessary mens rea for
commission of the offence of cheating. While answering the rival arguments
made on the point of criminal liability of a corporate body the Hon’ble Supreme
Court, in Iridium India Telecom Ltd. (supra), held in categorical terms that a
corporation is virtually in the same position as any individual and may be
convicted of common law as well as statutory offences including those requiring
mens rea. The criminal liability of a corporation would arise when an offence is
committed in relation to the business of the corporation by a person or body of
persons in control of its affairs. In such circumstances, it would be necessary to
ascertain that the degree and control of the person or body of persons is so
intense that a corporation may be said to think and act through the person or
Criminal Petition No. 189 & 192 OF 2016 Page 17 of 26
the body of persons. Mens rea is attributed to corporations on the principle of
“alter ego” of the company.
[37] The relevant paragraph in Iridium India Telecom Ltd. (supra), is
reproduced as follows;
63… it becomes evident that a corporation is virtually in the
same position as any individual and may be convicted of
common law as well as statutory offences including those
requiring mens rea. The criminal liability of a corporation would
arise when an offence is committed in relation to the business of
the corporation by a person or body of persons in control of its
affairs. In such circumstances, it would be necessary to ascertain
that the degree and control of the person or body of persons is so
intense that a corporation may be said to think and act through
the person or the body of persons. The position of law on this
issue in Canada is almost the same. Mens rea is attributed to
corporations on the principle of “alter ego” of the company.
[38] It was further held that a company/corporation cannot escape
liability for a criminal offence merely because the punishment prescribed is that
of imprisonment and fine.
[39] The learned Senior Counsel for the petitioners has referred to the
cases of Sunil Bharti Mittal vs CBI, reported in (2015) 4 SCC 609, Thermax
Limited vs K.M. Johny, reported in (2011) 13 SCC 412, Asoke Basak v. State of
Maharashtra, reported in (2010) 10 SCC 660, Maksud Saiyed vs State of Gujrat,
Criminal Petition No. 189 & 192 OF 2016 Page 18 of 26
reported in (2008) 5 SCC 668, and S.K. Alagh vs State of U.P, reported in
(2008) 5 SCC 662.
[40] In Sunil Bharti Mittal (supra), a charge sheet was laid against 4
persons. However, when the matter was taken up for the cognizance, the Special
Judge held that Mr Sunil Bharti Mittal was Chairman-cum-Managing Director of
Bharti Cellular Ltd., Mr. Asim Ghosh was Managing Director of Hutchison Max
Telecom (P) Ltd. and Mr Ravi Ruia was a Director in Sterling Cellular Ltd., who
used to chair the meetings of its Board. According to him, in that capacity, these
persons, prima facie, could be treated as controlling the affairs of the respective
companies and represent the directing mind and will of each company. They
were, thus, “alter ego” of their respective companies and the acts of the
companies could be attributed and imputed to them. On this premise, the
Special Judge felt that there was enough material on record to proceed against
these three persons as well. Thus, while taking cognizance of the case, he
decided to issue summons not only to the four accused named in the charge-
sheet but the aforesaid three persons as well.
[41] On the facts of the case in Sunil Bharti Mittal (supra) itself it can
be said that this case may not be of any assistance to decide the present subject
matter as it is not the case of the petitioners that without they being named in
the charge sheet, processes have been issued against them without recording a
prima facie observation regarding their liability. The admitted position is that
petitioners have been charge sheeted as accused in the case in hand.
[42] In any view of the matter, the Hon’ble Supreme Court in Sunil
Bharti Mittal (supra), elucidated the law laid down in Iridium India (supra), and
held that the legal proposition that is laid down in the aforesaid judgment in
Criminal Petition No. 189 & 192 OF 2016 Page 19 of 26
Iridium India (supra) 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.
[43] The cases of Thermax Ltd. v. K.M. Johny, reported in (2011) 13
SCC 412, Asoke Basak v. State of Maharashtra, reported in (2010) 10 SCC 660,
Maksud Saiyed v. State of Gujarat, reported in (2008) 5 SCC 668 andAsoke
Basak v. State of Maharashtra, reported in (2010) 10 SCC 660 do not seem to
have deviated from the law laid down in Iridium India (supra), rather on factual
analysis the Hon’ble Supreme Court found that no case is made out. Whether in
the present case offence is made out against the petitioners is being discussed
hereinafter.
[44] In S.K. Alagh v. State of U.P., reported in (2008) 5 SCC 662, a
criminal complaint was filed against the Managing Director and the General
Manager of Britannia Industries Ltd for offence under Section 405 IPC. The
company itself was not made an accused. It was in these context the Hon’ble
Supreme Court had held that as, admittedly, drafts were drawn in the name of
the Company, the Managing Director, 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.
[45] The ratio of S.K. Alagh (supra) is not found to be applicable in
the present case because in S.K. Alagh (supra), it was the company which was
alleged to have committed the offence, but instead of making the company as
Criminal Petition No. 189 & 192 OF 2016 Page 20 of 26
accused its Managing Director was impleaded as accused on the principles of
vicarious liability. However, in the present case company has been made accused
and the petitioners are alleged to be the directing mind and will of the company
as its Directors.
[46] What emerges from the discussion undertaken hereinbefore is as
follows:
(i) A corporation is virtually in the same position as any individual
and may be convicted of common law as well as statutory offences
including those requiring mens rea. The criminal liability of a
corporation would arise when an offence is committed in relation to
the business of the corporation by a person or body of persons in
control of its affairs. In such circumstances, it would be necessary to
ascertain that the degree and control of the person or body of
persons is so intense that a corporation may be said to think and act
through the person or the body of persons.
(ii) If the company is not impleaded as an accused its Managing
Director or any other Official cannot be made vicariously liable for
the acts committed by the company
(iii) If on a reading of uncontroverted facts no offence is made out a
complaint or proceeding can be quashed.
[47] It now needs to be seen as to what is the nature of allegations
against the petitioners.
[48] The petitioners 1, 2 and 3 in Criminal Petition No. 192/2016 are
the Directors of Meghalaya Cements Ltd, a company registered under the
Criminal Petition No. 189 & 192 OF 2016 Page 21 of 26
Companies Act, 1956 and the petitioner No. 4 is an employee of the said
Company. On the other hand, the petitioner in Criminal Petition No. 189/2016
is the Chairman of said Meghalaya Cements Ltd. On a reading of the
chargesheet, dated 27.3.2014, appended as Annexure 4 to this petition, the
allegation against the petitioners is that during the period of 2008-2011 some
officials of North Eastern Coal Fields, CIL, entered into criminal conspiracy with
Sri Kailash Chand Lohia, Director of Meghalaya Cements Ltd. to facilitate misuse
of coal supplied from NEC, CIL under subsidized rates as per National Coal
Distribution Policy of Govt. of India. As per the Fuel Supply Agreement, done
between NEC/CIL and Sri Kailash Chand Lohia for Meghalaya Cements Ltd, coal
to the tune of 38,000 metric tonnes per annum was allotted to the Unit.
Accordingly, the firm had lifted 70,413 metric tonnes of coal from NEC, CIL.But,
instead of transporting the said coal to Meghalaya Cements Ltd, the Director
diverted the said coal for use in M/s K.D. Coke, Jorabat. The coal was allotted
and lifted at the rate of Rs 3680/- per tonne and rate fixed under E-auction
wasRs 3851/-. The quantity of coal lifted by Meghalaya Cements Ltd would have
fetched an amount of Rs 15,50,25,136/- to the CIL it sold through e-auction
open market. Hence, wrongful loss was caused to CIL.
[49] As against the heading “Charge” in Annexure 4, an elaborate
factual allegations have been portrayed. Though there are enough incriminating
circumstances as to how the coal obtained at subsidized rate was misused for
purpose other than the purpose meant for Meghalaya Cements Ltd. it would be
sufficient for the purpose of present adjudication if some sets of allegations are
brought on record.
Criminal Petition No. 189 & 192 OF 2016 Page 22 of 26
[50] One of the allegation is that during investigation it was revealed
that consignment of coal lifted from NEC, CIL had to be transported through
Taxation Check Gate, Byrnihat, Megahalaya. It was revealed that a total of 2956
numbers of trucks was shown to have crossed Byrnihat Check gate carrying coal
from NEC, CIL in the name of Meghalaya Cements Ltd to its factory premises
Topcem Cements. These movements of trucks were verified with the
Commissioner of Taxes, Meghalaya, Shillong with a request to verify whether
the alleged movement of 2956 numbers of trucks infact took place. The
Commissioner of Taxes in his communications to CBI informed that a total of
295 numbers of truck had crossed the Taxation Check Gate. The Superintendent
of Taxes, however, informed that a total of 278 numbers of truck had crossed
the check Gate during the period of 1/7/2008 to 31/03/2011. Again, as per the
information received from the Superintendent of Taxes, of the total 278 trucks
not all the trucks had transported coal, rather; some of the trucks had
transported Fly Ash, Coke, LPG etc though the road permits show that coal was
transported. The Investigating Agency, thus, infers that if one truck can transport
23 MT coal, then 295 trucks could transport only 6785 MT of coal, thereby
showing, that 63,628 MT coal was diverted by Meghalaya Cements Ltd.
[51] The other allegation is that Office Stamp of Taxation Check Gate,
the Seal impression of Taxation Inspector appearing on the Road Challan,
Permits, Transport Documents of the Meghalaya Cements Ltd. transporting the
coal, were fake stamp and fake stamp signatures.
[52] These two sets of allegations, among a host of other allegations
are quite incriminating in nature. In State of Haryana v. Bhajan Lal, reported in
1992 Supp (1) SCC 335, certain circumstances were laid down by the Hon’ble
Criminal Petition No. 189 & 192 OF 2016 Page 23 of 26
Supreme Court when a complaint/FIR can be quashed. Those circumstances are
as follows:
(i) 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.
(ii) Where the allegations in the first information report and other
materials, if any, accompanying the FIR 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.
(iii) 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.
(iv) Where, the allegations in the FIR do not constitute a cognizable
offence but constitute only a non-cognizable offence, no investigation
is permitted by a police officer without an order of a Magistrate as
contemplated under Section 155(2) of the Code.
(v) 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.
Criminal Petition No. 189 & 192 OF 2016 Page 24 of 26
(vi) Where there is an express legal bar engrafted in any of the
provisions of the Code or the concerned Act (under which a criminal
proceeding is instituted) to the institution and continuance of the
proceedings and/or where there is a specific provision in the Code or
the concerned Act, providing efficacious redress for the grievance of
the aggrieved party.
(vii) 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.
[53] Applying the test laid down in the case of Bhajan Lal (supra) it
cannot be said, in the context of present case, that even uncontroverted
allegations do not make out any case. As there are strong prima facie materials
of tax evasion, cheating, and forgery, on facts, no case is made out for quashing
the proceedings.
[54] There is yet another aspect on which arguments have been
advanced and which needs appreciation. It is the contention of petitioners,
particularly in Criminal Petition No. 192/2016, that petitioner No. 4 Sri
Girdharilal Bathwal is only a Manager (Stores) and that he has been wrongly
implicated in this case. However, on perusal of charge sheet, Annexure 4, it is
found that petitioner No. 4, as Senior Manager (Stores), created false records of
receipt of coal consignments. I believe, embarking into any kind of inquiry to
ascertain the truthfulness of such allegations, at this stage, would be highly
prejudicial to the prosecution case. Hence, the argument has no force.
Criminal Petition No. 189 & 192 OF 2016 Page 25 of 26
[55] As to the culpability of the petitioners, in both the cases, I may
point out certain observation of Courts in England, which have quoted with
approval in Iridium India (supra).
[56] In Director of Public Prosecutions v. Kent and Sussex Contractors
Ltd. reported in (1944) 1 All ER 119 (DC) it was held that a body corporate is a
“person” to whom, amongst the various attributes it may have, there should be
imputed the attribute of a mind capable of knowing and forming an intention —
indeed it is much too late in the day to suggest the contrary. It can only know or
form an intention through its human agents, but circumstances may be such that
the knowledge of the agent must be imputed to the body corporate.
[57] Lord Denning in Bolton (H.L.) (Engg.) Co. Ltd. v. T.J. Graham &
Sons Ltd. reported in (1957) 1 QB 159 summarized his findings in the following
words:
A company may in many ways be likened to a human body. They have a
brain and a nerve centre which controls what they do. They also have
hands which hold the tools and act in accordance with directions from
the centre. Some of the people in the company are mere servants and
agents who are nothing more than hands to do the work and cannot be
said to represent the mind or will. Others are directors and managers
who represent the directing mind and will of the company, and control
what they do. The state of mind of these managers is the state of mind of
the company and is treated by the law as such. So you will find that in
cases where the law requires personal fault as a condition of liability in
tort, the fault of the manager will be the personal fault of the company.
That is made clear in Lord Haldane’s speech in Lennard’s Carrying Co.
Criminal Petition No. 189 & 192 OF 2016 Page 26 of 26
Ltd. v. Asiatic Petroleum Co. Ltd. So also in the criminal law, in cases
where the law requires a guilty mind as a condition of a criminal offence,
the guilty mind of the directors or the managers will render the company
themselves guilty.
[58] The petitioners being directly involved in the affairs of Meghalaya
Cements Ltd, and admittedly holding positions like Chairman and Directors of
the Company cannot get any reprieve by way of an application under Section
482 Cr.PC because of the nature of materials unearthed during investigation. It
would, thus, not be proper to invoke the jurisdiction vested in this Court under
Section 482 Cr.PC and quash the proceedings of GR 854/2014 pending in the
Court of Special Judicial Magistrate, Assam, Guwahati.
[59] Lastly, an argument has been made with reference to the order in
WP (C) 243/12 of this Court in order to show that dispute is civil in nature.
However, in view of the incriminating materials, already discussed hereinbefore,
this Court is not inclined to go into deeper aspects of the merits of defence. The
petitioners will be able to take all such defences as would be available to them
under law when the trial proceeds.
[60] In the result, the petitions are dismissed. The interim order passed
earlier stands vacated.
JUDGE
Nilakhi