Case: Maharashtra State Elect.Distrn.Co.L.&amp;Anr Vs. Datar Switchgear Ltd

2. This appeal, by special leave, is directed against the judgment, dated 9th October 2007, delivered by the High Court of Bombay in Criminal Application No. 3715 of 2005, in a petition filed by the two appellants herein under Section 482 of the Code of Criminal Procedure, 1973 (in short. By the impugned judgment, the High Court has declined to quash a criminal complaint filed by respondents No. 1 to 3 in this appeal against the appellants and others for offences under Sections 192 and 199 read with Section 34 of the Indian Penal Code, 1860 (for short. Shorn of unnecessary details, the facts, material for adjudication of the issue arising in this appeal may be stated thus: Appellant No. 1, viz., Maharashtra State Electricity Distribution Co. Ltd.; constituted in terms of the provisions of the Electricity Act, 2003 is the successor in interest of Maharashtra State Electricity Board (for shortand appellant No. 2 is its Chairman. Respondent No. 1 is an incorporated company, viz., M/s Datar Switchgear Ltd. and respondents No. 2 and 3, senior officials of respondent No. 1, are the complainants and respondents No. 4 to 7 are the co-accused.4. Pursuant to various contracts entered into between respondent No. 1 and MSEB in the year 1993-94 for installation ofTension Load ManagementMSEB issued a work order on 27th March 1997 whereby respondent No. 1 was required to instal at various locations and lease out 47,987 LTLMS to MSEB for a period of 10 years at a monthly rent of Rs. 825/- for the first six years, and about Rs. 650/- per month for the remaining four years.5. Clause 8.1 of the said contract stipulated that respondent No. 1 would send intimation to the Section-in-charge of MSEB regarding the installation of the equipment, and thereafter, a commissioning report was to be prepared in that regard, which was to be signed jointly by the representative of the complainant and the concerned Section-in-charge of the MSEB.6. During the validity period of the contract, various disputes arose between respondent No. 1 and MSEB. On 19th February 1999, respondent No. 1 partially terminated the contract, conveying to MSEB that it would not install any more LTLMS, and would only maintain the installed items.7. On 21st April 1999, respondent No. 1 terminated the contract in entirety. Nevertheless, they offered to maintain the installed objects provided MSEB continued to pay rent during the duration of the work order. As the dispute arose between respondent No. 1 and MSEBvide order dated 5th May 1999, the High Court of Bombay referred the disputes to Arbitral Tribunal.8. The arbitration proceedings commenced on 19th February 1999. The controversy in the instant case pertains to the amended written statement filed by the MSEB on 7th February 2000, the relevant extract of which reads asThe Respondents submit that the claimants are not entitled to claim any amount from the Respondents as claimed or otherwise. In fact, as stated hereinafter, the claimants are bound to refund to the Respondents all the amounts recovered by them from the Respondents along with interest thereon. The Respondents submit that the claimants are guilty of having practised fraud upon the Respondents. The claimants have fabricated documents as also are guilty of misrepresentation of material facts in the matter of commissioning objects, installing them, taking out print outs therefrom and submitting bills in respect thereof.... .... .... .... .... .... .... .... .... .... .... .... ....(a) commissioning/commissioning ReportsThe provisions of Clause 8.1 of the work order provided for installation and commissioning of LTLMS systems in presence of Section-in-charge of every Section. The claimants not only did not inform the concerned/Section-in-charge as required by Clauses (a) and (b) thereof, but submitted commissioning reports for the LM systems making it appear as if the objects were installed on a given date in presence of the representatives of the Section in charge as mentioned in the said reports, and thereafter submitted the same for the signature of the Sections in charge. With a view that the sub divisions, divisions and circles of the Respondents are not able to find out the same, the claimants failed and neglected to send copies of the Commissioning reports as provided in Clause 8.0(d), thereby making it impossible for the officers mentioned in Clause (e) thereof to depute representatives to inspect the commissioned objects in the circle. The claimants thus obtained payments from the dates mentioned in the said reports fraudulently by misrepresentation of the facts....The Arbitral Tribunal passed the final award on 18th June 2004 whereby it directed MSEB to pay Rs. 185,97,86,399/- as damages to respondent No. 1, and pay interest at the rate of 10% p.a. on the sum of Rs. 179,15,87,009/-. The award contained the following observations suggesting that the MSEB had introduced certain fabricated documents asregards the Commissioning Reports produced by the Respondents at Exhs. C-64 and C-74, the claimants submitted, and with considerable merit that the Respondents had indulged in tampering the commissioning reports produced on the record. The submission is correct.On the basis of the said observations in the arbitral award, on 23rd June 2004 respondent Nos. 1 to 3 filed criminal complaint No. 476 of 2004 before the Judicial Magistrate, First Class, Nasik for offences under Sections 192 and 199 read with Section 34 of the IPC. The Judicial Magistrate, First Class, Nasik took cognizance of the said complaint and issued summons against all the accused named in the complaint.11. Being aggrieved by the order of the Magistrate taking cognizance of the complaint, appellants preferred the aforestated petition under Section 482 of the Code before the High Court of Bombay for quashing of the complaint.

Reasoning:
28. A bare perusal of the complaint shows that the gravamen of the allegation is that a fabricated document containing the offending endorsement was tendered in evidence before the Arbitral Tribunal on behalf of MSEB by accused No. 6, who wasof Shirpur Section. It is evident from theparagraphs of the complaint that other accused have been named in the complaint because, according to the complainant,No. 1 was acting under their control and management. It bears repetition that the only averment made against appellant No. 2 is that appellant No. 1, i.e. MSEB was acting under the control and management of appellant No. 2 along with other three accused. There is no denying the fact that appellant No. 2 happened to be the Chairman of MSEB at the relevant time but it is a settled proposition of law that one cannot draw a presumption that a Chairman of a company is responsible for all acts committed by or on behalf of the Company. In the entire body of the complaint there is no allegation that appellant No. 2 had personally participated in the arbitration proceedings or was monitoring them in his capacity as the Chairman of MSEB and it was at his instance the subject interpolation was made in ExhibitAt this stage, we may refer to the extract of a Board resolution, pressed into service by the respondents in support of their plea that appellant No. 2 was responsible for the conduct of business of appellant No. 1. The said resolution merely authorises the Chief Engineer to file counter claim before the Arbitral Tribunal in proceedings between appellant No. 1 and respondent No. 1. It rather demonstrates that it was the Chief Engineer who was made responsible for looking after the interest of the appellant No. 1 in those proceedings. In this regard, it would be useful to advert to the observations made by a three judge bench of this Court in S.M.S. Pharmaceuticalsis no universal rule that a director of a company is in charge of its everyday affairs. We have discussed about the position of a director in a company in order to illustrate the point that there is no magic as such in a particular word, be it director, manager or secretary. It all depends upon the respective roles assigned to the officers in a company. A company may have managers or secretaries for different departments, which means, it may have more than one manager or secretary.It is trite law that wherever by a legal fiction the principle of vicarious liability is attracted and a person who is otherwise not personally involved in the commission of an offence is made liable for the same, it has to be specifically provided in the statute concerned. In our opinion, neither Section 192, IPC nor Section 199, IPC, incorporate the principle of vicarious liability, and therefore, it was incumbent on the complainant to specifically aver the role of each of the accused in the complaint. It would be profitable to extract the following observations made in S.K. Alaghadmittedly, drafts were drawn in the name of the Company, even if the appellant was its Managing Director, he cannot be said to have committed an offence under Section 406 of the Penal Code. If and when a statute contemplates creation of such a legal fiction, it provides specifically therefor. In absence of any provision laid down under the statute, a Director of a Company or an employee cannot be held to be vicariously liable for any offence committed by the Company itself.Therefore, we are of the view that even the Board Resolution, adduced by the complainant, does not establish that appellant No. 2 was involved in the alleged fabrication of false evidence or adducing the same in evidence before the Arbitral Tribunal. In the absence of any such specific averment demonstrating the role of appellant No. 2 in the commission of the offence, we find it difficult to hold that the complaint, even assuming it to be correct in its entirety, discloses the commission of an offence by appellant No. 2 under Sections 192 and 199 of IPC.31. However, insofar as the case of appellant No. 1 company is concerned, bearing in mind the fact that Exhibitwas submitted with the intention to support the averments in the written statement filed on their behalf, which could possibly influence the decision of the Arbitral Tribunal in relation to the conduct of the respondent No. 1 while discharging their obligations under the contract between them and appellant No. 1, we are unable to hold that prima facie, a case of offences under Sections 192 and 199, IPC is not made out against them. It is evident from the observations of the Tribunal quoted in para 9 (supra) that had the Tribunal not doubted the veracity of the said document, it could have made a material difference to the result of the arbitral proceedings.32. It was faintly argued that the arbitral award on the basis whereof the said complaint has been filed has been set aside and therefore, the complaint is liable to be quashed on this ground. The submission is untenable as the offences under Sections 192 and 199, IPC, if made out, exist independent of the final arbitral award. We are, therefore, of the opinion, that it is not a fit case for the exercise of power under Section 482 of the Code, in favour of appellant No. 1.33. We shall now examine whether appellant No. 2 could be made liable for theoffences by operation of Section 34 of IPC. It is trite that Section 34, IPC does not constitute a substantive offence, and is merely in the nature of a rule of evidence, and liability is fastened on a person who may have not been directly involved in the commission of the offence on the basis of aplan between that person and the persons who actually committed the offence. In order to attract Section 34, IPC, the following ingredients must bethere was common intention in the sense of aplan;(ii) the person sought to be so held liable had participated in some manner in the act constituting theChandrakant Murgyappa Umrani & Ors. v. State of Maharashtra, 1998 SCC (Cr.) 698; Hamlet @ Sasi & Ors. v. State of Kerala, V (2003) SLT 33=III (2003) CCR 189 (SC)=(2003) 10 SCC 108 ; Surendra Chauhan v. State of M.P., III (2000) SLT 209=I (2009) CCR 343 (SC)=(2000) 4 SCC 110 ]34. It is manifest that common intention refers to a prior concert or meeting of minds, and though, it is not necessary that the existence of a distinct previous plan must be proved, as such common intention may develop at the spur of the moment, yet the meeting of minds must be prior to the commission of offence suggesting the existence of aplan. Therefore, in order to attract Section 34 of the IPC, the complaint must, prima facie, reflect a common prior concert or planning amongst all the accused. In our opinion, in the present case, the complaint does not indicate the existence of anyplan whereby appellant No. 2 had, in collusion, with the other accused decided to fabricate the document in question and adduce it in evidence before the Arbitral Tribunal. There is not even a whisper in the complaint indicating any participation of appellant No. 2 in the acts constituting the offence, and that being the case we are convinced that Section 34, IPC is not attracted in his case.