S.K.

AlaghVersusStateOfUttarPradesh

2008 (0) AIJEL-SC 40538

SUPREME COURT OF INDIA

(ALLAHABAD HIGH COURT)

Hon'ble Judges:S.B.Sinha and V.S.Sirpurkar JJ.

S.K.Alagh Versus State Of Uttar Pradesh

CRIMINAL APPEAL No. 317 of 2008 ; *J.Date :- FEBRUARY 15, 2008

INDIAN PENAL CODE, 1860 Section - 405 , 406

Indian Penal Code, 1908 - S. 405, 406 - offence under - dealership agreement - whether complaint
petition, even if given face value and taken to be correct in its entirety, disclosed an offence as against the
appellant u/s. 406 - held, drafts were drawn in the name of the company, even if appellant was its
Managing Director, he cannot be said to have committed an offence u/s. 406 - if and when a statute
contemplates creation of such a legal fiction, it provides specifically therefor - in absence of any provision
in IPC, Director of a company or an employee cannot be held to be vicariously liable for any offence
committed by company itself - High Court committed a manifest error in passing the impugned
judgment - impugned order set aside - appeal allowed.

Imp.Para: [ 17 ] [ 20 ] [ 21 ]

Cases Referred To :

1. Maksud Saiyed V/s. State Of Gujarat And Ors., 2007 11 SCALE 318 : 2008 (5) SCC 668 : 2007 (11)
Scale 318 : 2007 (9) SCR 1113 : JT 2007 (11) 276
2. Sabitha Ramamurthy And Anr. V/s. R.B.S. Channabasavaradhya, 2006 10 SCC 581 : 2006 AIR SC
3086 : 2006 (9) Scale 212 : 2006 SCR 126 : JT 2006 (12) 20
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Cited in :

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RCR(Cri) 207 : 2016 (4) Crimes 395 : 2016 (6) RecApexJ 651 : 2017 (1) EastCrC(SC) 186 : 2017
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CalCriLR 604 : 2017 (67) OrissaCriR 961 : 2016 RajCriC 1096 : 2017 (1) MadWN(Cri) 1 : 2017 (1)
MhLJ(Cri) 693 : 2017 (1) PCCR(SC) 24 : 2017 (1) BankCas 212 : 2017 (1) KerLJ 44 : 2017 (1)
NCC 386 : 2017 AllSCR(Cri) 32 : 2017 (1) LW(Cri) 790 : 2017 (1) AllCriRulings 131 : AIRBomR
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SCW 6151 : 2010 (7) Supreme 470 : 2011 (1) SCC(Cri) 68 : 2010 (9) UJ 4480 : 2011 CrLJ 8 : 2010
(95) AIC 9 : 2010 CrLR(SC) 927 : 2010 (4) RCR(Cri) 848 : 2010 (6) RecApexJ 291 : 2011 (1) WLC
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MhLJ(Cri) 664 : 2011 (105) SCL 223 : 2010 JX(SC) 478 : 2010 AIJEL_SC 48948
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2010 (12) SCR 736 : JT 2010 (11) SC 123 : 2010 (7) Supreme 842 : 2011 (1) SCC(Cri) 85 : 2010
CrLR(SC) 349 : 2010 (4) RCR(Cri) 78902 : 2010 (4) Crimes 318 : 2010 (4) EastCrC(SC) 206 : 2011
(1) WLC 93 : 2011 (1) BBCJ(SC) 125 : 2011 (1) CriCC 201 : 2011 (2) MLJ(Cri) 388 : 2010 (6) RAJ
148 : 2011 (1) CalCriLR 302 : 2011 (1) BCR(Cri) 436 : 2011 (Supp) CutLT(Cri) 458 : 2010 (3)

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GCD 2469 : 2011 (1) OrissaLR 249 : 2010 (4) KerLT(SN) 41 : 2011 (1) NCC 185 : 2010 JX(SC)
479 : 2010 AIJEL_SC 48949
6. (Referred To) :- Thermax Limited Vs. K.M.Johny, 2011 (11) SCC 128 : 2012 (12) SCC 754 : 2011
(13) SCC 412 : 2011 (11) Scale 128 : 2011 (14) SCR 154 : JT 2011 (11) SC 241 : 2011 AIR SCW
5952 : 2011 (6) Supreme 548 : 2012 (2) SCC(Cri) 650 : 2011 (6) UJ 3695 : 2012 CrLJ 438 : 2012
(110) AIC 10 : 2011 (4) RCR(Cri) 409 : 2011 (9) SLT 34 : 2011 (4) Crimes 179 : 2012 (1) AWC 240
: 2011 (5) RecApexJ 288 : 2012 (76) ACrC 774 : 2012 (1) MLJ 393 : 2012 (1) BBCJ(SC) 178 : 2011
(4) CriCC 761 : 2012 (1) ALD(Cri) 655 : 2012 (1) MLJ(Cri) 393 : 2012 (1) ACR 399 : 2011
AllMR(Cri) 3603 : 2012 (1) CalCriLR 37 : 2012 (2) MadWN(Cri) 30 : AIR 2011 SC 2349 : 2011 (3)
UC 2049 : 2011 (4) MhLR 684 : AIRBomHCR 2012 99 : 2012 (Supp) CutLT(Cri) 243 : 2011 (4)
JCC 2893 : 2011 (2) NCC 804 : 2012 (2) ChhatLJ 541 : 2011 JX(SC) 698 : 2011 AIJEL_SC 50421
7. (Referred To) :- Sunil Bharti Mittal Vs. Central Bureau Of Investigation, 2015 (4) SCC 609 : AIR
2015 SC 923 : 2015 (1) Scale 140 : JT 2015 (1) SC 258 : JT 2015 (1) SC 2258 : 2015 AIR SCW 642
: 2015 (1) Supreme 422 : 2015 (2) SCC(Cri) 687 : 2015 CrLJ 1130 : 2015 CrLR(SC) 230 : 2015 (2)
RCR(Cri) 1 : 2015 (1) Crimes 135 : 2015 (1) RecApexJ 473 : 2015 (2) AICLR 21 : 2015 (1)
BBCJ(SC) 211 : 2015 (1) LawHerald(SC) 417 : 2015 (1) LawHerald(SC) 17 : 2015 (1) MLJ(Cri) 231
: 2015 (1) ALT(Cri)(SC) 337 : 2015 AllMR(Cri) 812 : AIRJharHCR 2015 806 : 2015 (3) RajLW
1894 : 2015 (3) CalCriLR 55 : 2015 (60) OrissaCriR 734 : 2015 RajCriC 29 : 2015 (191) CC 177 :
AIR 2015 SC 455 : 2015 (4) CompLJ 31 : 2015 (1) AirKarR 690 : 2015 (2) JBCJ(SC) 174 : 2015
(Supp) CutLT(Cri) 383 : 2016 (2) MhLJ(Cri) 122 : 2015 (1) KerLT(SN) 94 : 2015 (1) JCC 759 :
2015 (1) CCR 188 : 2015 (132) SCL 56 : 2015 (126) CorLA 214 : AIRBomR 2015 Cri 588 : 2015
(2) DLT(CRL) 116 : 2015 (2) ADR 208 : 2015 (1) ABR(Cri) 588 : 2015 JX(SC) 16 : 2015
AIJEL_SC 56087
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SC 3210 : 2013 (8) Scale 140 : 2013 (7) SCR 69 : JT 2013 (9) SC 258 : 2013 AIR SCW 4161 : 2013
(5) Supreme 376 : 2013 (4) SCC(Cri) 241 : 2013 CrLJ 3743 : 2013 (130) AIC 265 : 2013 CrLR(SC)
657 : 2013 (2) ApexCJ(SC) 581 : 2013 (3) RCR(Cri) 686 : 2013 (6) SLT 523 : 2013 (3) RCR(Civ)
680 : 2013 (4) RecApexJ 254 : 2013 (4) AICLR 680 : 2013 (83) ACrC 576 : 2013 (10) AD(SC) 505 :
2013 (4) LawHerald(SC) 2947 : 2013 (3) CivCC 712 : 2013 (3) CriCC 843 : 2013 (3) KerLT 190 :
2013 (2) ALD(Cri) 1023 : 2014 (1) CIVLJ 497 : 2013 (2) ACR 2169 : 2013 (4) BCR 879 : 2014 (1)
MhLJ 1 : 2014 (1) MPLJ 42 : 2013 (2) MadWN(Cri) 97 : AIR 2013 SC 1724 : 2013 (2) UC 1249 :
2013 (3) BCR(Cri) 317 : 2013 (3) CompLJ 449 : AIRBomHCR 2013 119 : AIRKarR 2013 560 :
2013 (4) MhLJ(Cri) 1 : 2013 (3) WLN 105 : 2013 (3) JCC 169 : 2013 (3) BankCas 491 : 2013 (3)
CCR 287 : 2013 (3) BankJ 27 : 2013 (3) KerLJ 331 : 2013 (5) LW 38 : 2013 (2) NCC 548 : 2013 (3)
KHC 152 : 2014 (118) CorLA 92 : 2014 (1) MPHT 1 : 2013 (2) LW(Cri) 454 : 2013 (2) DCR 417 :
2013 (3) HimLR 1763 : 2013 (3) KLJ 331 : 2013 (2) NIJ 160 : 2013 ACD 953 : 2013 JX(SC) 388 :

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2013 AIJEL_SC 54153

9. (Relied on) :- Sharad Kumar Sanghi Vs. Sangita Rane, 2015 (12) SCC 781 : 2015 (3) Scale 126 :
2015 AIR SCW 4202 : 2015 (3) Supreme 77 : 2016 (1) SCC(Cri) 159 : 2015 (149) AIC 134 : 2015
(1) ApexCJ(SC) 613 : 2015 (2) RCR(Cri) 120 : 2015 (1) Crimes 271 : 2015 (2) RecApexJ 54 : 2015
(2) AICLR 862 : 2015 (89) ACrC 702 : 2015 (3) LawHerald(SC) 1924 : 2015 (2) LawHerald(SC)
1289 : 2015 AllMR(Cri) 2405 : 2015 (2) MadWN(Cri) 39 : AIR 2015 SC 1636 : 2015 (2) JCC 1277 :
AIRBomR 2016 Cri 501 : 2015 JX(SC) 285 : 2015 AIJEL_SC 56427

Equivalent Citation(s): 2008 (5) SCC 662 : AIR 2008 SC 1731

JUDGMENT :-
S.B.Sinha, J.

1 Leave granted.

2 M/s. Akash Traders was an Area Wholesale dealer of Britannia Industries Limited (the Company) for
Azamgarh, U.P. Dealership of Respondent No.2 was terminated by the said company. It was earlier informed
that goods will be delivered only upon receipt of demand drafts issued by it. Complainant sent two demand
drafts for a sum of Rs. 18,000.00 and Rs. 1,50,000.00 for supply of goods on 14.9.2000 despite the fact that the
dealership had been terminated earlier.

3 The said demand drafts were sent to the appellant through the local Sales In-charge of the Company. It is
stated that the complainant refused to take the same back.

4 A new Area Wholesaler for Azamgarh was appointed by the company.

5 A demand was made by the complainant to deliver goods by a letter dated 24.9.2000 stating that the company
owes him a sum of Rs. 1,00,000.00. The stand of the company that his dealership had been terminated was
reiterated by a letter dated 25.9.2000.

6 Ashok Kumar Aggarwal, purported to be the proprietor of the firm M/s. Akash Traders, filed a complaint
petition in the court of Chief Judicial Magistrate, Azamgarh against the appellant herein for commission of an
offence u/s. 406 of the Indian Penal Code. Britania Industries Ltd. was not impleaded as an accused therein.

7 On or about 17.2.2001, i.e., after filing of the complaint petition, the dealer accepted the said demand drafts
being dated 8.1.2002 for a sum of Rs. 1,68,000.00. On or about 25.2.2001, Ashok Kumar Aggarwal, the

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original complainant expired. A substitution application was filed by the second respondent-Alok Kumar
Aggarwal on or about 19.4.2001.

8 Inter alia, relying on or on the basis of the allegations made in the complaint petition that 'the company with
mala fide intention neither sent the goods, nor returned the money'; an order for summoning the appellants was
passed on 8.5.2001. A publication to that effect was also made in an article in a local newspaper.

9 An application for recalling the order summoning before the learned Chief Judicial Magistrate was filed by
the appellant. The learned Chief Judicial Magistrate, by an order dated 13.12.2001 discharged the accused in
terms of Sec. 245(2) of the Code of Criminal Procedure, holding :

"From the perusal of the record, this fact has come to light that in between the complainant M/s.
Akash Traders, Azamgarh and Britannia Industries Ltd., Kolkata an agreement was made. M/s.
Akash Traders were the authorized agent of Britannia Industries Ltd. and according to terms and
conditions of the Agreement, Britannia Industries Ltd. used to supply biscuit to M/s. Akash Traders,
Azamgarh. On 8.9.2000, Britannia Industries Ltd. terminated the agency regarding agreement as a
result of which in between the parties dispute arose. It is the submission of the complainant that on
13.9.2001 bank draft of Rs. 1,68,000.00 was sent in favour of Britannia Industries Ltd. but on behalf
of the accused the above amount did not return till 7.2.2001 to the complainant. The pleading on
behalf of the accused is that the bank draft of Rs. 1,68,000.00 was returned to M/s. Akash Traders on
8.1.2001 and its payment was received by the complainant on 19.2.2001 under protest. Both the
parties regarding the above reference after the case being decided this legal position has been made
clear that if in any matter civil or criminal case is made out then on the basis of obtaining civil relief
the proceedings of the suit could not be terminated. In the present matter, it has to be decided that
whether in between both the parties during the business transactions prima facie criminal case was
found? If in the present case any criminal case is not found then u/s. 245(2) of the Code of Criminal
Procedure the accused could be released at any stage. After the termination of agreement in between
the accused and the complainant regarding agency on 13.9.2001 bank draft for an amount of Rs.
1,68,000.00 was sent to Britannia Industries Ltd. for the supply of biscuits. Prior to this also
agreement dated 8.9.2000 has already been terminated regarding the agency in favour of M/s. Akash
Traders Azamgarh. The complainant for receiving back an amount of Rs. 1,68,000.00 sent letters
dated 11.10.2000 and 21.10.2000 but till 7.2.2001, the complainant did not receive back the above
amount of Rs. 1,68,000.00. But from the perusal of the photo copy of the letter enclosed with the file
of bank draft of State Bank of India, Keshavpuram, Delhi it has become clear that bank draft No.
597805 dated 8.1.2001 for an amount of Rs. 1,68,000.00 had already been prepared in favour of M/s.
Akash Traders, Azamgarh and after the departmental proceedings of clearance on 19.2.2001 the

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complainant had received back the amount on 19.2.2001. Thus, it is clear that the applicant/accused
had transferred an amount of Rs. 1,68,000.00 on 8.1.2001 in favour of the complainant M/s. Akash
Traders through Bank Draft, thus, in transaction whatever delay was made in returning back the
amount of bank draft that has been committed due to proceedings relating to payment being done due
to banking process and looking to the aforesaid facts it becomes clear that on the side of
applicant/accused there was no intention of criminal misappropriation and, thus, there is no
appropriate basis to initiate any action against the accused.

Therefore, u/s. 245(2) of the Code of Criminal Procedure the proceedings of the case are terminated
and the accused is released."

10 A revision application was filed thereagainst by the complainant which, by reason of an order dated
5.6.2002, was allowed, stating :

"It is clear from the perusal of the file that the learned Chief Judicial Magistrate in the impugned
order dated 13.12.2001 has not granted any opportunity of adducing the evidences in detail under the
provisions of Sec. 244 of the Code of Criminal Procedure but by not granting any opportunity to
adduce the evidences by the complainant u/s. 244 of the Code of Criminal Procedure has passed the
impugned order under the provisions of Sec. 245(2) of the Code of Criminal Procedure which is not
legal and proper. Under the provisions of Sec. 244 of the Code of Criminal Procedure the
complainant must be granted opportunity of filing the evidences in detail as per the law. Under the
above, provisions, the charges are framed against the accused persons after the evidences are taken
on record otherwise not, that is to say, passing of order u/s. 245 of the Code of Criminal Procedure
would be proper and justifiable."

11 An application filed by the appellant before the High Court in terms of Sec. 482 of the Code of Criminal
Procedure was dismissed by the High Court by reason of the impugned judgment, stating :

"From the perusal of the allegations made against the applicants and from the perusal of the
impugned order, it appears that prima facie offence is made out against the applicant and there is no
procedural mistake in taking cognizance and summoning the applicants, therefore, the prayer for
quashing the impugned orders dated 8.5.2001 passed by the learned Magistrate, Azamgarh and
5.6.2002 passed by the learned Additional Sessions Judge, Fast Track Court No.2, Azamgarh is
refused.

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The interim stay order dated 3.7.2002 is vacated.

Accordingly, this application is dismissed."

12 The short question which arises for consideration is as to whether the complaint petition, even if given face
value and taken to be correct in its entirety, disclosed an offence as against the appellant u/s. 406 of the Indian
Penal Code.

13 Section 405 defines 'criminal breach of trust' to mean :

Section 405. "Criminal breach of trust" Whoever, being in any manner entrusted with property, or
with any dominion over property, dishonestly misappropriates or converts to his own use that
property, or dishonestly uses or disposes of that property in violation of any direction of law
prescribing the mode in which such trust is to be discharged, or of any legal contract, express or
implied, which he has made touching the discharge of such trust, or wilfully suffers any other person
so to do, commits "criminal breach of trust"."

14 Appellant No.1 is the Managing Director of the Company. Respondent No.3 was its General Manager.
Indisputably, the company is a juristic person. The demand drafts were issued in the name of the company. The
company was not made an accused. The dealership agreement was by and between M/s. Akash Traders and the
company.

15 Mr. Pramod Swarup, learned counsel appearing on behalf of Responent No.2, in support of the order passed
by the learned Chief Judicial Magistrate as also the High Court, submitted that as, prima facie, the appellant
was in charge of and was in control of the business of the company, he would be deemed to be liable for the
offence committed by the company.

16 Indian Penal Code, save and except some provisions specifically providing therefor, does not contemplate
any vicarious liability on the part of a party who is not charged directly for commission of an offence.

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

18 Ingredients of the offence u/s. 406 are :

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"(1) a person should have been entrusted with property, or entrusted with dominion over property;

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

(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."

19 As, admittedly, drafts were drawn in the name of the company, even if appellant was its Managing Director,
he cannot be said to have committed an offence u/s. 406 of the Indian 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 and Anr. V/s. R.B.S. Channabasavaradhya,
2006 10 SCC 581.

20 We may, in this regard, notice that the provisions of the Essential Commodities Act, Negotiable Instruments
Act, Employees' Provident Fund (Miscellaneous Provision) Act, 1952 etc. have created such vicarious liability.
It is interesting to note that Sec. 14A 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 Sec. 405 of the Indian 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 u/s. 406 of the Indian Penal Code vicarious liability has been
held to be not extendable to the Directors or officers of the company. See Maksud Saiyed V/s. State of Gujarat
and Ors., 2007 11 SCALE 318.

21 The High Court, therefore, committed a manifest error in passing the impugned judgment.

22 For the reasons aforementioned, the impugned judgment cannot be sustained. It is set aside accordingly. The
appeal is allowed. Respondent No.2 is liable to bear the costs of the appellant for causing harassment to him
which is quantified at Rs. 1,00,000.00 (Rupees one lac only).

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