Shi Yang @ Sunny v. A.Kannagi

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED :: 04-10-2007CORAMTHE HONOURABLE MR.JUSTICE S.PALANIVELUCRIMINAL ORIGINAL PETITION No.17967 OF 2007Shi Yang @ Sunny...Petitioner-vs-A.Kannagi...RespondentPetition under Section 482 of the Code of CriminalProcedure.For petitioner : Mr.K.Kumar, Senior Counsel, for M/s.Anand, Abdul & Vonodh Associates.For respondent : Ms.R.SuvithraO R D E RThis petition has been filed to call for the recordspertaining to C.C.No.381 of 2006, pending on the file of JudicialMagistrate No.V, Salem, against the petitioner and to quash thesame.2. Respondent is the complainant. She preferred acomplaint under Section 200 Cr.P.C. before the said Court againstone Mr.Wang and Mr.Charles, General Managers of the company, byname, M/s.Tianjin Tianshi (India) Pvt.Ltd., having its office atChennai. 3. The allegations in the complaint go the effect thatthe company is engaged in marketing of food supplement and cosmeticproducts and selling them through the members, appointed for thepurpose. The complainant is a four star level member in thecompany. Both the accused asked the complainant to become afranchisee for Salem region to stock and sell their products, forwhich she was also promised glorious growth and induced to partwith a sum of Rs.1,53,000/- by means of demand drafts. She alsofulfilled the requirements to become a franchisee, including thatof arranging premises to an extent of 200 sq.ft. to stock and sell https://hcservices.ecourts.gov.in/hcservices/ their products. However, the accused did not take any steps toopen the branch at Salem and, hence, the complainant was demandingthem to open the branch, but in vain. She also issued notices tothem on three occasions. But, no reply was forthcoming. Silenceon the part of the accused prompted the complainant to prefer aprivate complaint against them. 4. First accused, after receiving summons, appearedbefore the Court, but, the second accused failed to appear for thehearings. It was learnt by the complainant that the second accused,by name, Charles quit office and, in his place, the petitioner wasposted and, presently, she is attending to all the affairs of thecompany as General Manager. The fact of the petitioner holding thepost of General Manager transpired from an occasion when sheapproached the complainant in the capacity of General Manager alongwith a demand draft for a sum of Rs.1,53,000/-, requesting her tocome to a compromise, during the pendency of C.C.No.381 of 2006.5. It is pertinent to note that there is nothing onrecord to show that the petitioner is the successor in the officeof second accused and that she could also be held responsible forthe affairs of the company, which were dealt with by the secondaccused.6. The bottomline contention of Mr.K.Kumar, learnedSenior Counsel for the petitioner, is that without impleading thepetitioner in the proceedings and in the absence of any notice fromthe Court, there is no legal basis to issue summons to her, whichis an abuse of process, and that the service of summons to thepetitioner is alien to criminal law.7. Admittedly, there was no petition for impleading thepetitioner in the proceedings nor was there any notice from theCourt before issuing summons. It appears that since the secondaccused did not appear before the Court, on a oral enquiry with thecomplainant, the Judicial Magistrate No.V, Salem, issued summons tothe petitioner, as if she is the accused in the case. However,learned counsel for the respondent justifies the said attitude ofthe Court, while it is assailed by the petitioner. 8. The issue in question has to be decided following thewell settled judicial pronouncements on the subject.9. Ms.R.Suvithra, learned counsel for the respondent,contends that the Judicial Magistrate is well authorised by theprocedures of law to issue process to a person, whether named inthe charge sheet or not, and that the petitioner, in the capacityof General Manager, being a responsible official of the company, https://hcservices.ecourts.gov.in/hcservices/ issuance of summons to her is well within the powers exercisable bya Judicial Magistrate. 10. In support of her contention, the learned counselgarners support from a decision of the Hon'ble Supreme Court inM/s.SWIL Ltd. v. State of Delhi, AIR 2001 SUPREME COURT 2747, inwhich it is held as follows :"Person not joined as accused in thecharge-sheet submitted by the Police, but hisname was shown in column No.2, which is meantfor the accused who are not sent for the trial,such a person can be summoned as an accused byMagistrate at stage of taking cognizance ofoffence. The question of there being additionalevidence under S.319 Cr.P.C. does not arise."11. The learned counsel also places reliance upon adecision of the Karnataka High Court in M/s.PrudentialEngineers/Builders and Developers v. Kuskoor Bharath Ram, 2004CRI.L.J.672, wherein, the order taking cognizance and issuingprocess against all the partners of the firm was held to be properand that the proceedings initiated against the accused could not bequashed by High Court, in exercise of its inherent powers, as nosuch case was made out for that. 12. The said decision was rendered, while dealing with amatter under Section 141 of The Negotiable Instruments Act, whichdealt with a circumstance that if the person committed offenceunder Section 138 is a company, every person, who, at the time ofcommission of offence, was in-charge of and responsible for theconduct of the business of the company as well as the company shallbe deemed to be guilty of the offence and shall be liable to beproceeded and punished accordingly. 13. The language of the Section would clearly indicatethat the person should be in-charge of the affairs of the companyat the time of commission of offence, however, the company isalways liable for the guilt. 14. Concedingly, the petitioner was not at all in-chargeof the post of General Manager at the time of alleged transaction.Merely because she held the post after Charles, by no stretch ofimagination, it could be said that the petitioner is also liableand that she should be deemed to have involved in the offence.15. Mr.K.Kumar, learned Senior Counsel for thepetitioner, draws attention of this Court to a decision of aConstitution Bench of the Hon'ble Apex Court in Standard Chartered https://hcservices.ecourts.gov.in/hcservices/ Bank v. Directorate of Enforcement, AIR 2005 SUPREME COURT 2622, inwhich, a majority view has been rendered in the following lines :"There is no immunity to the companiesfrom prosecution merely because the prosecutionis in respect of offences for which thepunishment prescribed is mandatoryimprisonment. As the company cannot besentenced to imprisonment, the Court cannotimpose that punishment, but when imprisonmentand fine is the prescribed punishment, theCourt can impose the punishment of fine whichcould be enforced against the company. Such adiscretion is to be read into the Section viz.,S.56 of Foreign Exchange Regulation Act (1973)(FERA) and Ss.276-C and 278-B of Income-tax Act(1961) so far as the juristic person isconcerned. Of course, the Court cannotexercise the same discretion as regards anatural person. As regards the company, theCourt can always impose a sentence of fine andthe sentence of imprisonment can be ignored asit is impossible to be carried out in respectof a company. This appears to be the intentionof the Legislature. It can not be said that,there is a blanket immunity for any companyfrom any prosecution for serious offencesmerely because the prosecution would ultimatelyentail a sentence of mandatory imprisonment.The corporate bodies, such as a firm or companyundertake series of activities that affect thelife, liberty and property of the citizens.Large scale financial irregularities are doneby various corporations. The corporate vehiclenow occupies such a large portion of theindustrial, commercial and sociological sectorsthat amenability of the corporation to acriminal law is essential to have a peacefulsociety with stable economy."16. As per the ruling of the Hon'ble Supreme Court, acorporate body cannot be sentenced to imprisonment, but fine couldbe imposed, as it is a juristic person. In the case on hand, thecompany is not on the array of the accused. Both the accused havebeen arraigned in their official capacities alone and they have notbeen portrayed as representing the company. 17. The Apex Court, in the above said decision, alsoobserved that legislative intent to prosecute the corporate bodies https://hcservices.ecourts.gov.in/hcservices/ for the offence committed by them is clear and explicit and thestatute never intended to exonerate them from being prosecuted andthat it is sheer violence to commonsense that the Legislatureintended to punish the corporate bodies for minor and sillyoffences and extended immunity of prosecution to major and graveeconomic crimes.18. The learned Senior Counsel also cites a Full Benchdecision of the Hon'ble Supreme Court in S.M.S.Pharmaceuticals Ltd.v. Neeta Bhalla and Another, JT 2005 (8) SC 450, in which a law hasbeen formulated as under :"20. In view of the above discussion, ouranswers to the questions posed in thereferences are as under :(a) It is necessary to specifically averin a complaint under Section 141 that at thetime the offence was committed, the personaccused was in charge of, and responsible forthe conduct of business of the company. Thisaverment is an essential requirement of Section141 and has to be made in a complaint. Withoutthis averment being made in a complaint, therequirements of Section 141 cannot be said tobe satisfied.(b) The answer to question posed in sub-para (b) has to be in negative. Merely being aDirector of a company is not sufficient to makethe person liable under Section 141 of the Act.A Director in a company cannot be deemed to bein charge of and responsible to the company forconduct of its business. The requirement ofSection 141 is that the person sought to bemade liable should be in charge of andresponsible for the conduct of the business ofthe company at the relevant time. This has tobe averred as a fact as there is no deemedliability of a Director in such cases. (c) The answer to question (c) has to bein affirmative. The question notes that theManaging Director or Joint Managing Directorwould be admittedly in charge of the companyand responsible to the company for conduct ofits business. When that is so, holders of suchpositions in a company become liable underSection 141 of the Act. By virtue of the https://hcservices.ecourts.gov.in/hcservices/ office they hold as Managing Director or JointManaging Director, these persons are in chargeof and responsible for the conduct of thebusiness of the company. Therefore, they getcovered under Section 141. So far as signatoryof a cheque which is dishonoured is concerned,he is clearly responsible for the incriminatingact and will be covered under sub-section (2)of Section 141." 19. If any guilt is alleged against a person, necessaryaverments should be incorporated in the complaint. The functionsof the particular accused person should be spelled out in thecomplaint and the complaint be accurate and unequivocal, pointingout the criminality of the accused person. Those allegations mustbe made so as to satisfy the Judicial Magistrate, who is to takecognizance.20. In order to fasten liability, the averments underpresumptions or guesswork shall not be permitted. The person, whois reported to have cheated the complainant, should have personallypersuaded the complainant with an intention to cheat. The mostimportant factor is that at the time of commission of offence, thesaid person should be in-charge of and responsible for the affairsof the company, which are essential, touching the transactionentered into by the complainant. Since the cardinal principle oflaw requires the complaint to contain relevant allegations, theone, which is devoid of those allegations, could not be legallysupported. Once the complainant deviates from the legal liabilityof incorporating necessary contents in the complaint as to the roleplayed by the accused, no cognizance could be taken and issuance ofsummons could not at all be recognised. Every care must be takenby the complainant in drafting or framing the complaint while anyperson is included in it, in his official capacity, since theconcept of vicarious liability departs from the rule in criminallaw.21. It is well settled that even though it is pleaded inthe complaint that a particular individual is a Director of thecompany, it will not clothe him of any criminal responsibility,but, there must be a specific wording to the effect that hepersonally persuaded the complainant to part with the amount andthat he committed criminal breach of trust.22. Following the principles laid down in the decisionsof the Hon'ble Apex Court in S.M.S.Pharmaceuticals case, it must beheld herein that the complaint is non-est, as far as the petitioneris concerned. https://hcservices.ecourts.gov.in/hcservices/

23. Therefore, in the absence of any allegations in thecomplaint as against the petitioner, issuance of summons to himcannot be acceded to. As such, quashment of the proceedings inC.C.No.381 of 2006 in respect of the petitioner has becomeindispensable. Accordingly, this petition is allowed. Consequently,the connected Criminal M.P.Nos.1 and 3 of 2007 are closed.Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.dixitTo1. The Judicial Magistrate No.V, Salem.2. do thro the Chief Judicial Magistrate, Salem.3. The Inspector of Police, Ammapettai Police Station,Ammapettai.4. The Public ProsecutorHigh Court, Madras.1 cc to M/s. Anand Abdul & vinodh, Associates, SR. 617331 ccs to mr.M. Varatharajan, Advocate, SR. 61539CRL.O.P.No.17967 OF 2007GGK (CO)kk 16/10