SRI NARENDRA KUMAR A. BALDOTA versus THE STATE OF KARNATAKA
[2022] 2 S.C.R. 969, Supreme Court of India, 2022
Outcome: Appeal(s) allowed (Granted)
Segment: Facts
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969
[2022] 2 S.C.R. 969
969
SRI NARENDRA KUMAR A. BALDOTA
v.
THE STATE OF KARNATAKA
(Criminal Appeal No. 429 of 2022)
MARCH 14, 2022
[INDIRA BANERJEE AND J. K. MAHESHWARI, JJ.]
Code of Criminal Procedure, 1973: s. 482 – Quashing of
proceedings – M Company of which appellant is the Chairman and
Managing Director, imported a car for which customs duty and
road tax was paid – Thereafter, differential motor vehicle tax was
demanded in respect of the said vehicle and the same was paid, and
no Dues Certificate was also issued – FIR filed against appellant
that he conspired with Regional Transport Officer to evade payment
of road tax– Petition seeking quashing of proceedings– Dismissed
by the High Court – On appeal, held: Criminal law cannot be set
into motion as a matter of course – Summoning of an accused in a
criminal case is a serious matter - Before summoning, the Magistrate
has to record his satisfaction of a prima facie case against the
Chairman, Managing Director or officer of a company in his/her
own capacity – On facts, there is no whisper of how and in what
manner the appellant abetted the commission of any offence – No
document submitted in connection with the vehicle imported by M
Company being fake or fabricated – Allegations in the FIR read
with the chargesheet filed by the Lokayuktha Police only discloses
short payment of road tax – There is only a vague, bald allegation
of collusion and conspiracy to defraud the State of revenue, which
is devoid of
any material particulars – Thus, proceedings against
the appellant are misconceived, harassive, in abuse of process of
law and have been initiated without proper application of mind –
Prevention of Corruption Act, 1988:ss. 13(1)(c), 13(1)(d), 13(2) –
Penal Code – ss. 120B and 420.
Allowing the appeal , the Court
HELD: 1.1 The appellant is Chairman and Managing
Director of the corporate entity, which purchased the vehicle in
question. There is not a whisper in the chargesheet of the specific
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role played by the appellant or how he committed the offence of
cheating. [Para 24][980-E-F]
1.2. Criminal law cannot be set into motion as a matter of
course. Summoning of an accused in a criminal case is a serious
matter. To set Criminal law into motion, the order of the
Magistrate summoning the accused, must reflect that he has
applied his mind to the facts of the case. Before the Magistrate
issues summons to a Chairman, Managing Director, Director or
any other official of the company, the Magistrate has to record
his satisfaction of a prima facie case against him/her in his/her
own capacity is sine qua non for initiation of criminal proceedings
against a Chairman, Managing Director or officer of a company.
It is well settled that no official of a company can be dragged into
criminal proceedings only in his/her capacity as official of the
company, without any specific role attributed to him/her in relation
to the offence alleged against the company. [Para 25][980-F-H;
981-A]
1.3. Short payment of tax per se is not a criminal offence.
The High Court ordinarily would exercise its jurisdiction under
Section 482 Cr.P.C., if the allegations made in the FIR taken to
be correct in entirety, do not make out any offence. When the
allegations made in the FIR or evidence collected during
investigation do not satisfy the ingredients of an offence, the
superior Courts would not encourage harassment of a person in
a Criminal
Court. [Para 29][984-B-C]
Devendra v. State of U.P. (2009) 7 SCC 495 : [2009]
(7) SCR 872 – referred to.
1.4. In the instant case, the allegations in the FIR read
with the chargesheet filed by the Lokayuktha Police only discloses
short payment of road tax. There is only a vague, bald allegation
of collusion and conspiracy to defraud the State of revenue, which
is devoid of any material particulars. [Para 32][985-D-E]
1.5. The Appellant has not questioned initiation of criminal
proceedings against any of the other accused persons. He has no
intention of stalling proceedings against any person involved in
smuggling cars or forging or fabricating documents or committing
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any other illegal activities. He has questioned the legality of
initiation of proceedings against him for alleged short payment of
road tax in respect of a vehicle owned by the company of which
he is Chairman and Managing Director even though, the alleged
deficit road tax had been paid by the company within one month
of issuance of demand notice. [Para 37][987-C-D]
1.6. There is no whisper of how and in what manner the
appellant has abetted the commission of any offence. It is nobody’s
case that any document submitted in connection with the vehicle
in question imported by M/s MSPL Limited is fake or fabricated.
That is not the charge, so far as the appellant is concerned. It
transpires that in case of some of the cars, the owners had declared
the selling rates at the factory as the value of the car, and not the
on road value which would be about three times the factory value.
[Para 38][987-E-F]
1.7 The mere fact that demand notice may have been issued
and the differential tax realized before institution of the private
complaint is inconsequential. Either the charges disclose an
offence of defrauding the State of revenue or the offence of
defrauding the State of revenue not made out. The question is
whether the materials on record disclose any criminal act on the
part of these Appellants. The answer cannot but be in the negative.
[Para 42][988-D-E]
1.8 It is submitted that the Company had paid full road tax
as charged by the Motor Vehicles Authorities, on
the basis of the
actual invoice value of the car. No further amount was payable.
However, when the RTO raised a notice of demand for Rs. 21
lakh odd in 2012, the company did not raise any dispute since the
amount claimed was a small amount for the Company, which had
a turnover of crores of rupees. [Para 44][988-G-H]
1.9 The proceedings against the appellant are misconceived,
harassive, in abuse of process of law and have been initiated without
proper application of mind. Further proceedings against the
appellants in the Court below, shall remain stayed. [Para 45][989-A]
SRI NARENDRA KUMAR A. BALDOTA v. THE STATE OF
KARNATAKA
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S.V. Nandaraju and others Writ Petition No. 41103/
2016 (GM-RES) dated 19th December, 2019; S.
Rajendran v. State of Karnataka & Others Criminal
Petition No. 3087 of 2018; K.J. Kruruvilla v. State of
Karnataka & Another Criminal Petition No. 344 of
2017; Ravindranatha Bajpe v. Mangalore Special
Economic Zone Limited and Others 2021 SCC Online
SC 806; Maksud Saiyed v. State of Gujarat (2008) 5
SCC 668 : [2007] (9) SCR 1113; State of Haryana v.
Bhajan Lal (1992) Supp (1) SCC 335 : [1990] (3) Suppl.
SCR 259; G. Sagar Suri & Another v. State of U.P. and
Others (2000) 2 SCC 636 : [2000] (1) SCR 417; Joseph
Salvaraj A. v. State of Gujarat and Others (2011) 7
SCC 59 : [2011] (8) SCR 815 - referred to.
Case Law Reference
[2007] (9) SCR 1113
referred to
Para 27
[1990] (3) Suppl. SCR 259
referred to
Para 28
[2009] (7) SCR 872
referred to
Para 29
[2000] (1) SCR 417
referred to
Para 30
[2011] (8) SCR 815
referred to
Para 31
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
429 of 2022.
From the Judgment and Order dated 22.10.2021 of the High Court
of Karnataka, Dharwad Bench in Criminal Petition No.100167 of 2017.
Mukul Rohatgi, Sr. Adv., Mahesh Agarwal, M. S. Ananth,
Anshuman Srivastava, Rohan Talwar, E. C. Agrawala, Advs. for the
Appellant.
Shubhranshu Padhi, Ashish Yadav, Rakshit Jain, Vishal Banshal,
Advs. for the Respondent.
The Judgment of the Court was delivered by
INDIRA BANERJEE, J.
1. Leave granted.
2. This Appeal is
against an order dated 22nd October 2021 passed
by the Dharwad Bench of the High Court of Karnataka dismissing the
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Criminal Petition being CRL.P. No.100167 of 2017 filed by the Appellant
under Section 482 of the Code of Criminal Procedure (“Cr.P.C.”), seeking
to quash the proceedings against the Appellant in Crime No.69/2012 on
the file of the III Additional District and Sessions Judge, Ballari later
numbered as Special Case No.04/2016 for offences punishable under
Sections 13(1)(c) and 13(1)(d) read with Section 13(2) of the Prevention
of Corruption Act, 1988 (hereinafter referred to as “the P.C. Act”) and
Sections 120B and 420 of the Indian Penal Code (“IPC”).
3. The Appellant is the Chairman and Managing Director of M/s
MSPL Limited. In 2010, MSPL Limited imported an Aston Martin Rapide
car for which the Company paid the applicable customs duty. The
Company also paid road tax to the Regional Transport Office (RTO),
Hosapete.
4. One Jagadish B.N., Advocate filed a private complaint in the
Court of XXIII Additional City Civil Sessions Judge, Bangalore City and
Special Judge, Prevention of Corruption Act, Bangalore Urban District,
Bangalore City alleging that there was collusion and conspiracy between
RTOs in Karnataka as a result of which appropriate road tax was not
being collected. It was alleged that cars were being imported in Karnataka
for which RTO was not charging road tax as per the actual cost.
5. By an order dated 7th August 2012, the Court of XXIII Additional
City Civil & Special Judge, Prevention of Corruption Act Bengaluru
passed an order referring the
complaint to the Superintendent of Police,
Lokayuktha, Bengaluru Urban, under Section 156(3) of the Cr.P.C. with a
direction to constitute a team of four Deputy Superintendents of Police
to investigate the matter and report. On 14th August 2012, FIR in respect
of the complaint was registered at the Lokayuktha Police Station, Bengaluru,
Urban and a criminal case being Crime No.69/2012 was started.
6. Some relevant observations and/or findings in the order dated
7th August 2012 of the XXIII Additional City Civil Sessions Judge,
Bangalore City and Special Judge, Prevention of Corruption Act,
Bangalore Urban District, Bangalore City are as follows:
“This complaint is filed under section 200 of Cr.P.C. on
06.08.2012 by the complainant Mr. Jagadeesh B.N, advocate
and the complainant claims that a huge scam has taken place
in connection with imported cars, more particularly Bentley
and Ferari cars.
…
SRI NARENDRA KUMAR A. BALDOTA v. THE STATE OF
KARNATAKA [INDIRA BANERJEE, J. ]
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5. The complaint claims that huge scam has taken place
regarding registration of Foreign cars that are imported to
India more particularly Bentley and Ferari. The complainant
claims that the vehicle dealers, middle man, smugglers across
the country and owners of the imported vehicle at Mangalore
have misquoted and collected the price of Bentley and Ferari
car have come away with the registration, and in the process
have also managed suppress the brand names of the cars.
The complainant claims that he is unable to procure that facts
which have been hidden and buried at high public
functionaries and it is only an authorised investigating agency
that can unearth the fraud taken place regarding the fraud
in the registration.
6. The complainant claims that after a tax investing exposed
the alleged smuggling operation, nervous members of the
super-rich have scrambled to avoid arrest by abandoning
cars, including Bentleys and Astoria Martins on the streets of
New Delhi and it is reported and a copy photograph is made
available. The complainant claims that the said document is
down loaded from the internet.
7. The Complainant claims that more than 500 cars entered
India and majority have been illegal or illegal means and to
general car registered it requires the payment of tax of 18%
of the amount. The complainant claims that to get a car
registered in the passport authorities, and approved procedure
is laid down by the Motor
Vehicles Act, more particularly a
custom duty of 10% should have been paid.
8. Complaint further claims that not less than 500 cars entered
in Karnataka and for name sake 4 to 5 car were mentioned
as Bentley and remaining cars have been registered by
suppressing the brand name and more than 98% have been
registered on the basis of invoice and not on the basis of
cash bill.
…
11. The complainant further claims that the manufacturing
rate of Bentley car is 1.16 crores for basic model and car
which have entered Bangalore range from basic model to top
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end. The selling rate at the factory ord is 86,000 pounds i.e.,
Rs.1,16,00,000/- and on road the value of Bentley car would
go beyond Rs.3 crores for a car and if formalities are properly
complied with. The complainant further claims that top end
model would range up more the Rs.6 crores.
12. The complainant also claims that the racket is done with
extraordinary brilliance and intelligence and it is abetting
come and also influencing the public servant in getting their
car registered and unless proper investigation agency
conducted fair, equal and comprehensive investigation, the
fraud cannot be unearthed……
13. The complainant further claims that the majority of the
dealers who have not disclosed their identity in Bangalore
after receiving the assignment, have based on the documents
only invoice which totally not explained and have cleverly
avoided the cash receipt being given, for the reason that the
majority of the authorized dealer are not entitled to deal with
the vehicle.
…..
20. The complainant claims that the accused persons are
private individual and no sanction is necessary to take
cognizance against them the complainant orally submits that
the accused persons have abetted and influenced the public
servants for committing the offences and the investigating
agency would get the definite picture orally after ascertaining
with the concerned transport authority at different levels and
at different parts of Karnataka, but mainly in Bangalore as
the
cars moved from Bangalore and fabrication and forgery
of documents took place in Bangalore, besides abetments (sic)
to commit offence under prevention of corruption act
complainant further claims that a full scale investigation is
required by independent agency.
…..
24. The complainant further orally submitted that, few vehicles
were registered with take documents in the transport authority
in India and thereafter in Karnataka through Bangalore more
particularly rural areas and thereafter they go away from the
SRI NARENDRA KUMAR A. BALDOTA v. THE STATE OF
KARNATAKA [INDIRA BANERJEE, J. ]
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state and will be applied in different parts it is further submitted
that for registration the documents are necessary and one
the registration is the certificate given by the R.T.O. in that
event the different between the fake and genuine papers
pertaining to the presence of the motors vehicles get vanished.
…
28. The Complainant claims that the accused persons who
are the dealers, distributors in Bangalore, other places have
forged the documents and have successfully abated the public
servants (Transport Authorities) and have got the registration
of the said vehicles illegally and have resulted in the loss of
crores and cores of rupees and in the process have cheated
the Government Public at large. He further submits that mafia
in the form of a ‘net work’ is behind the scam.
...
31. In the cell all context and circumstances of the case and
after recording the complainant his grievance and contents
of the complaint at this stage I am of the sincere view that is it
just and proper that only a comprehensive investigation is
necessary by the superintendent of police, lokayukta
Bangalore urban by constitute a team of four Dy. SP and
entrust the matter to them to investigation and to report. Hence
I proceed to pass the following
ORDER
The complaint is referred to superintendent of Police,
Lokayukta, Bangalore Urban under Section 156(3) of Cr.P.C.
with a direction to constitute a team of four Dy. S.P. for
investigating the
matter and to report. “
7. The Appellant is neither a vehicle dealer nor a middle man nor
a smuggler. He is not even the owner of the vehicle in question but only
the Chairman/Managing Director of M/s MSPL Limited, the Company
which has imported the vehicle, and got the same registered. Neither
the Appellant nor the Company of which the Appellant is the Managing
Director has abandoned any vehicle.
8. On 27th February 2013, the RTO, Hosapete issued a demand
notice to M/s MSPL Limited demanding differential motor vehicle tax of
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Rs.20,44,468/- in respect of the vehicle in question. M/s MSPL Limited
immediately complied with the demand and paid the demanded sum of
Rs.20,44,468/- in full on 20th March 2013, after which the RTO, Hosapete
issued a “No Dues Certificate” to M/s MSPL Limited.
9. On 2nd November 2015, Lokayuktha Police issued a notice
dated 13th October 2015 to the RTO, Ballari. By a letter dated 2nd
November 2015, the RTO informed the Lokayuktha Police that M/s
MSPL Limited had paid the entire deficit tax.
10.  On 8th December 2015, Lokayuktha Police filed an inquiry
report-cum-chargesheet in the aforesaid case being Crime No. 69/2012
under Sections 13(1)(c), 13(1)(d) and 13(2) of the P.C. Act, 1988 and
Sections 120B and 420 of IPC.
11. In the chargesheet, it is alleged that the Appellant had conspired
with one Mr. K. Pampapati, Regional Transport Officer, Hosapete and
Mr. Shanmukh Naik Superintendent, Office of Regional Transport
Officer, Hosapete to evade payment of an amount of Rs.20,44,468/-
towards road tax.
12.  Pursuant to the chargesheet filed by the Lokayuktha Police,
against the Appellant and others, Special Case No.4 of 2016 was started
in the Court of the III Additional District and Sessions Judge, Ballari
sitting at Hosapete.
13. By an order dated 4th November 2016, in Special Case No.4/
2016, the learned III Additional District and Sessions Judge, Ballari sitting
at Hosapete took cognizance and issued summons to the Appellant.
14. Thereafter, the Appellant
filed Criminal Petition No.100167 of
2017 before the Dharwad Bench of the High Court of Karnataka under
Section 482 of the Cr.P.C., praying that the proceedings in Special Case
No.4/2016 on the file of the III Additional District and Sessions Judge,
Ballari sitting at Hosapete be quashed as against the Appellant.
15. Section 8A of the Karnataka Motor Vehicles Taxation Act,
1957 provides as follows:-
“8A. Collection of tax escaping payment.- If at any time it is
found that the amount of tax paid for any period in respect of
any motor vehicle falls short of the tax payable under this
Act, then, notwithstanding any incorrect entry or the absence
of any entry in the certificate of registration relating to the
SRI NARENDRA KUMAR A. BALDOTA v. THE STATE OF
KARNATAKA [INDIRA BANERJEE, J. ]
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motor vehicle regarding the tax payable in respect of such
vehicle or the issue of a taxation card or an entry having
been made in such taxation card regarding the payment of
tax for such period, the taxation authority may, after notice
to the registered owner or person having possession or control
of the motor vehicle and giving him an opportunity of being
heard recover the difference between the tax so paid and the
tax payable by such owner or person”.
16. In the said petition, the Appellant pointed out that short collection
in road tax, if any, could be collected from the owner of the vehicle,
under Section 8A of the Karnataka Motor Vehicles Taxation Act, 1957.
On receipt of demand notice, M/s MSPL Limited, the owner of the
vehicle in question, had paid the differential tax. M/s MSPL Limited had
deposited the entire road tax in full.
17. By an interim order dated 14th February 2017, the Dharwad
Bench of the High Court of Karnataka was pleased to stay the criminal
proceedings against the Appellant. The interim order was extended from
time to time.
18. By the judgment and order dated 22nd October 2021 impugned
in this Court, the High Court dismissed the Criminal Revisional Petition
being CRL.P. No.100167 of 2017.
19. It is the case of the Appellant that on 19th December 2019, the
Bengaluru Bench of the High Court of Karnataka allowed a Writ Petition/
Criminal Revisional Petition filed by one S.V. Nandaraju and others
being
Writ Petition No.41103/2016 (GM-RES) and quashed proceedings initiated
against petitioners in the aforesaid case, S.V. Nandaraju, which arose
from the same chargesheet as in the present case. The High Court
held:-
“23. In that view of the matter, as already noticed, the
occurrence of the events and accrual of cause of action in
the present set of matters were between the years 2003 and
2006. The private complaint under Section 200 of Cr.P.C. was
registered on 06.08.2012, while the FIR was registered on
14.08.2012. It is an admitted fact that except petitioners No.6
and 7, in Crl.P.No.5130/2016, who retired in the year 2013
and 2015 respectively, the other petitioners had already
retired, way back in the year 2006-2007. Some of the
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petitioners continue to serve. However, as noticed earlier the
State Government had declined to sanction prosecution
against the serving employees. It was also observed in the
Government Order that two of the employees had already
retired and therefore the State Government declined to
sanction prosecution. Furthermore, the State Government,
while pointing out to Section B(a) of the Taxation Act, had
observed that if there was short collection of tax, the difference
could be collected from the owners of the vehicles. It is an
admitted fact that the owners of the vehicles were called upon
to pay the difference amount and the same has been paid by
them. Consequently, the criminal proceedings against the
owners of the vehicles were quashed by this Court. Further,
as held by the State Government, since Section 21 of the
Taxation Act protects the Officers who acted in good faith,
and since sanction to prosecute was declined by the State
Government, the same benefit is required to be granted to the
petitioners who are similarly placed. Some of the petitioners
have already got the benefit of the order passed by the
Government.”
20. Mr. Rohatgi, learned Senior Counsel appearing for the
Appellant drew attention of this Court to an order dated 26th September
2019 passed by the Bengaluru Bench of the High Court of Karnatka in
Criminal Petition No.3087 of 2018 titled S. Rajendran v. State of
Karnataka & Others and an order dated 11th December 2019 passed
by another
Bench of the High Court of Karnatka at Bengaluru in Criminal
Petition No.344 of 2017 (K.J. Kruruvilla v. State of Karnataka &
Another). In both the cases, the criminal revisional petitions were
allowed and the proceedings against the petitioners were quashed.
21. In the case of S. Rajendran (supra) he had purchased a
Toyota Prado vehicle, which was registered on 3rd November 2007.
Pursuant to the private complaint filed by the Respondent No. 2, FIR
was registered and chargesheet was filed on 28th November 2016. In
the meanwhile, on 28th July 2010, a notice was issued demanding a sum
of Rs.2,83,480/-. At the time of hearing, the petitioner in Criminal Petition
No.344 of 2017 produced a receipt acknowledging payment of the
aforesaid amount. Taking note of the fact that there was no material
annexed to the chargesheet against the petitioner, S. Rajendran, in
SRI NARENDRA KUMAR A. BALDOTA v. THE STATE OF
KARNATAKA [INDIRA BANERJEE, J. ]
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Criminal Petition No.3087 of 2018, and that payment of differential tax
had been made before filing of the private complaint, the petition was
allowed.
22. In the case of the K.J. Kuruvilla (supra), the petitioner had
purchased a Range Rover which was registered on 30th March 2007. At
the time of Registration, the petitioner was called upon to pay Rs.9,99,628/
- towards Life Time Tax. Later the vehicle was sold on 11th March
2011. Thereafter, the petitioner was called upon to pay differential tax of
Rs.19,045/- which was paid. Relying on S. Rajendran(supra), Criminal
proceedings against K.J. Kuruvilla were also quashed. Under Section
8A of the Karnataka Motor Vehicle Taxation Act, 1957 a notice is
required to be issued to the petitioner to explain how there was shortfall
in collection of tax and thereafter the petitioner is required to pay the
differential amount, if any.
23. The chargesheet filed by the police is totally vague and devoid
of material particulars. The charges in the Chargesheet were identical
stereotype charges. Only the dates of registration and the deficit fee
amount varied from case to case. On such stereotype charge is as follows:-
“On 10.01.2011 at the time of registering the vehicle shown
in Column No.4, indulged with the officers shown in column
No.2 and hatched a criminal conspiracy by paying deficit
fee of Rs.20,44,468/- causing loss of revenue to Government
and thus committed offence of
cheat.”
24. As observed above, the Appellant is Chairman and Managing
Director of the corporate entity, which purchased the vehicle in question.
There is not a whisper in the chargesheet of the specific role played by
the Appellant or how he committed the offence of cheating.
25. Criminal law cannot be set into motion as a matter of course.
Summoning of an accused in a criminal case is a serious matter. To set
Criminal law into motion, the order of the Magistrate summoning the
accused, must reflect that he has applied his mind to the facts of the
case. Before the Magistrate issues summons to a Chairman, Managing
Director, Director or any other official of the company, the Magistrate
has to record his satisfaction of a prima facie case against him/her in
his/her own capacity is sine qua non for initiation of criminal proceedings
against a Chairman, Managing Director or officer of a company. It is
well settled that no official of a company can be dragged into criminal
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proceedings only in his/her capacity as official of the company, without
any specific role attributed to him/her in relation to the offence alleged
against the company.
26. InRavindranatha Bajpe v. Mangalore Special Economic
Zone Limited and Others1, this Court held:-
“……All of them are arrayed as an accused as Chairman,
Managing Director, Deputy General Manager (Civil & Env.),
Planner & Executor, Chairman and Executive Director
respectively. Therefore, as such, in absence of any specific
allegations and the specific role attributed to them, the learned
Magistrate was not justified in issuing process against accused
nos. 1 to 8 for the offences punishable under Sections 427,
447, 506 and 120B read with Section 34 IPC.
26. As observed by this Court in the case of Pepsi Foods
Ltd. v. Special Judicial Magistrate, (1998) 5 SCC 749 and
even thereafter in catena of decisions, summoning of an
accused in a criminal case is a serious matter. Criminal Law
cannot be set into motion as a matter of course. In paragraph
28 in Pepsi Foods Limited (supra), it is observed and held as
under:
“28. Summoning of an accused in a criminal case is a
serious matter. Criminal law cannot be set into motion
as a matter of course. It is not that the complainant has
to bring only two witnesses to support his allegations in
the complaint to have the criminal law set into motion.
The order of the Magistrate summoning the accused
must reflect that he has applied his mind to the facts of
the case and the law applicable thereto. He has to
examine the nature of allegations made in the complaint
and the evidence both oral and documentary in support
thereof and would that be sufficient for the complainant
to succeed in bringing charge home to the accused. It
is not that the Magistrate is a silent spectator at the
time of recording of preliminary evidence before
summoning of the accused. The Magistrate has to
carefully scrutinise the evidence brought on record and
1 2021 SCC Online SC 806
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KARNATAKA [INDIRA BANERJEE, J. ]
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may even himself put questions to the complainant and
his witnesses to elicit answers to find out the truthfulness
of the allegations or otherwise and then examine if any
offence is prima facie committed by all or any of the
accused.”
27. As held by this Court in the case of India Infoline
Limited (supra), in the order issuing summons, the learned
Magistrate has to record his satisfaction about a prima facie
case against the accused who are Managing Director, the
Company Secretary and the Directors of the Company and
the role played by them in their respective capacities which
is sine qua non for initiating criminal proceedings against
them. Looking to the averments and the allegations in the
complaint, there are no specific allegations and/or averments
with respect to role played by them in their capacity as
Chairman, Managing Director, Executive Director, Deputy
General Manager and Planner & Executor. Merely because
they are Chairman, Managing Director/Executive Director
and/or Deputy General Manager and/or Planner/Supervisor
of A1 & A6, without any specific role attributed and the role
played by them in their capacity, they cannot be arrayed as
an accused, more particularly they cannot be held vicariously
liable for the offences committed by A1 & A6.”
27. In Maksud Saiyed v. State of Gujarat2, this Court held:-
“13. Where a jurisdiction is exercised on a complaint petition
filed in terms of Section 156(3) or
Section 200 of the Code of
Criminal Procedure, the Magistrate is required to apply his
mind. The Penal Code does not contain any provision for
attaching vicarious liability on the part of the Managing
Director or the Directors of the Company when the accused
is the Company. The learned Magistrate failed to pose unto
himself the correct question viz. as to whether the complaint
petition, even if given face value and taken to be correct in
its entirety, would lead to the conclusion that the respondents
herein were personally liable for any offence. The Bank is a
body corporate. Vicarious liability of the Managing Director
2 (2008) 5 SCC 668
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and Director would arise provided any provision exists in that
behalf in the statute. Statutes indisputably must contain
provision fixing such vicarious liabilities. Even for the said
purpose, it is obligatory on the part of the complainant to
make requisite allegations which would attract the provisions
constituting vicarious liability.”
28. In State of Haryana v. Bhajan Lal3 this Court 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 extraordinary 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.
(1) 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.
….
(3) 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.
….
(5) 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.
…..
3 (1992) Supp (1) SCC 335
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(7) 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.”
29. Short payment of tax per se is not a criminal offence, as held
by this Court in Devendra v. State of U.P.4. The High Court ordinarily
would exercise its jurisdiction under Section 482 of Cr.P.C., if the
allegations made in the FIR taken to be correct in entirety, do not make
out any offence. When the allegations made in the FIR or evidence
collected during investigation do not satisfy the ingredients of an offence,
the superior Courts would not encourage harassment of a person in a
Criminal Court.
30. In G. Sagar Suri & Another v. State of U.P. and Others5,
this Court adjudicating the liability of a Director in a proceedings under
Section 420 of the IPC held:-
“8. Jurisdiction under Section 482 of the Code has to be
exercised with great care. In exercise of its jurisdiction the
High Court is not to examine the matter superficially. It is to
be seen if a matter, which is essentially of a civil nature, has
been given a cloak of criminal offence. Criminal proceedings
are not a short cut of other remedies available in law. Before
issuing process a criminal court has to exercise a great deal
of caution. For the accused it is a serious matter. This Court
has laid certain
principles on the basis of which the High
Court is to exercise its jurisdiction under Section 482 of the
Code. Jurisdiction under this section has to be exercised to
prevent abuse of the process of any court or otherwise to secure
the ends of justice.
…
14. We agree with the submission of the appellants that the
whole attempt of the complainant is evidently to rope in all
the members of the family particularly those who are the
parents of the Managing Director of Ganga Automobiles Ltd.
in the instant criminal case without regard to their role or
4 (2009) 7 SCC 495
5 (2000) 2 SCC 636
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participation in the alleged offences with the sole purpose of
getting the loan due to the Finance Company by browbeating
and tyrannising the appellants with criminal prosecution. A
criminal complaint under Section 138 of the Negotiable
Instruments Act is already pending against the appellants and
other accused. They would suffer the consequences if offence
under Section 138 is proved against them. In any case there
is no occasion for the complainant to prosecute the appellants
under Sections 406/420 IPC and in his doing so it is clearly
an abuse of the process of law and prosecution against the
appellants for those offences is liable to be quashed, which
we do.”
31. In Joseph Salvaraj A. v. State of Gujarat and Others6, this
Court held that even if chargesheet had been filed, Magistrate could still
examine whether the offences alleged to have been committed by the
accused were prima facie made out from the complainant’s FIR,
chargesheet, documents, etc. or not.
32. In the instant case, the allegations in the FIR read with the
chargesheet filed by the Lokayuktha Police only discloses short payment
of road tax. There is only a vague, bald allegation of collusion and
conspiracy to defraud the State of revenue, which is devoid of any material
particulars.
33. The Appellant filed the Criminal Revisional Petition under
Section 482 of the Cr.P.C. praying that the proceedings in Special Case
No.4 of 2016 on the file of the IIIrd Additional District and Sessions
Judge, Ballari sitting at Hosapete be quashed in so far as the Appellant is
concerned.
34. In the said petition the Appellant contended:-
(i)
The Appellant is not in charge of the day to day affairs of
the company, M/s MSPL limited;
(ii)
The Appellant had not signed the application for registration
of the vehicle in question;
(iii)
Even though the vehicle is owned and registered in the name
of the Company, no complaint has been filed against the
Company but only against the Appellant;
6 (2011) 7 SCC 59
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(iv)
No notice was issued to the Appellant during the
investigation and no opportunity was given to the Appellant
or to the Company.
(v)
The Company M/s MSPL Limited had paid the entire tax
amount, as was evident from “no dues certificate” issued
by the RTO, Hosapete dated 16th August, 2016.
(vi)
The Appellant has not gained any pecuniary benefit, nor
has the company gained any pecuniary benefit;
(vii)
The Appellant never met any official of the road transport,
the question of conspiracy involving the Appellant did not
arise.
35. The Appellant claims that he has never been involved in any
criminal offence in his life time. The false implication of the Appellant
would damage the reputation of the Appellant. There being absolutely
no materials against the Appellant anywhere in the chargesheet, the
proceedings as against the Appellant are liable to be quashed. The filing
of the chargesheet against the Appellant is arbitrary, harassive and
unsupported by any materials on record.
36. None of the aforesaid contentions have been considered by
the High Court. The High Court observed:-
“14. On going through the charge sheet filed by the
investigation officer, which is referred to above, discloses that
accused Nos.1 and 2 have involved in evasion of the tax and
admittedly, the difference tax of Rs.20,44,468/- was collected
from accused No.2 only on 20.03.2013, whereas, the R.C.
was issued on 10.01.2011 by collecting nominal tax
of Rs.21,98
,801/- only. The allegation is of serious nature and these facts
are not disputed. Under such circumstances, it cannot be
concluded that the criminal proceeding was initiated against
the accused Nos.1 and 2 without any basis. The contention of
the learned counsel for accused No.1 that he was not knowing
the value of the vehicle and he accepted the value as declared
by accused No.2 and therefore, he demanded lesser amount
of tax, cannot be accepted at this stage. Similarly, the
contention of the learned counsel for accused No.2 that he
was not knowing either the value of the vehicle or the tax
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and whatever tax demanded by accused No.1 was paid by
him and therefore, he was not committed any offence also
cannot be accepted at this stage. When there is specific
allegation made against various accused including the present
petitioners, regarding evasion of tax systematically showing
the value of the imported vehicles at a lesser value, the same
cannot be ignored. Therefore, I am of the opinion that the
petitioners are not entitled for the relief they are claimed in
the present petitions and they are required to answer the
charges and face the trial.”
37. The Appellant has not questioned initiation of criminal
proceedings against any of the other accused persons. He has no intention
of stalling proceedings against any person involved in smuggling cars or
forging or fabricating documents or committing any other illegal activities.
He has questioned the legality of initiation of proceedings against him
for alleged short payment of road tax in respect of a vehicle owned by
the company of which he is Chairman and Managing Director even
though, the alleged deficit road tax had been paid by the company within
one month of issuance of demand notice.
38. There is no whisper of how and in what manner the Appellant
has abetted the commission of any offence. It is nobody’s case that any
document submitted in connection with the vehicle in question imported
by M/s MSPL Limited is fake or fabricated. That is not the charge, so
far as the Appellant is concerned.
From Paragraph 11 of the order dated
7th August 2012, it transpires that in case of some of the cars, the owners
had declared the selling rates at the factory as the value of the car, and
not the on road value which would be about three times the factory
value.
39. Mr. Rohatgi emphatically argued that the company of which
the Appellant is the Chairman and Managing Director, M/s. MSPL
Limited, had paid road tax as charged by the Motor Vehicle Authorities
on the basis of the value of the vehicle as given in the invoice. The
Appellant has annexed a copy of the invoice which shows that the vehicle
in question was purchased by the Company from Aston Martin Brussels
by the Manager of M/s MSPL Limited at a total cost of 162,465,00
Euros, the Appellant has also annexed the application form for registration
of the vehicle. It is pointed out that all the required information was
provided in the application for registration.
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40. Opposing the appeal, Mr. Subhranshu Padhi, learned counsel
appearing on behalf of the State of Karnataka emphasized the gravity
of the allegations in the complaint. Mr. Padhi submitted that there was
a racket in operation to defraud the State of revenue of crores of
rupees. Mr. Padhi submitted that this Court ought not to quash the
proceedings.
41. Mr. Padhi tried to distinguish the judgments of the High Court
cited by the Appellant, that is, the judgments/orders in the cases of S.V.
Nandaraju (supra), S. Rajendran (supra) and K.J. Kuruvilla (supra).
Mr. Padhi pointed out that in the cases of S. Rajendran (supra)and
K.J. Kuruvilla (supra),wherethe High Court had quashed the criminal
proceedings, the demand notice for deficit tax had been issued and the
deficit tax had also been realized before the private complaint filed by
the Respondent No.2 was registered.
42. The mere fact that demand notice may have been issued and
the differential tax realized before institution of the private complaint is
in our view inconsequential. Either the charges disclose an offence of
defrauding the State of revenue or the offence of defrauding the State
of revenue not made out. The question is whether the materials on record
disclose any criminal act on the part of these Appellants. The answer
cannot but be in the negative.
43. The judgment dated 19th December, 2019 in the case of S.V.
Nandarajuand others (supra) is distinguishable
and has no application
to the facts of this case. The accused were officers and/or employees
of the Motor Vehicles Department, some of whom had retired long before
the complaint was lodged. In some of the cases, proceedings had been
quashed on the ground that sanction under Section 17 of the P.C. Act to
prosecute had been declined by the State Government.
44. Mr. Rohatgi argued with force that the Company had paid full
road tax as charged by the Motor Vehicles Authorities, on the basis of
the actual invoice value of the car in question. No further amount was
payable. However, when the RTO raised a notice of demand for Rs. 21
lakh odd in 2012, the company did not raise any dispute since the amount
claimed was a small amount for the Company, which had a turnover of
crores of rupees.

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45. This Court is of the view that the proceedings against the
Appellant are misconceived, harassive, in abuse of process of law and
have been initiated without proper application of mind. This appeal is,
therefore, allowed. Further proceedings against these Appellants in the
Court below, shall remain stayed.
Nidhi Jain
Appeal allowed.
(Assisted by : Tamana, LCRA)
SRI NARENDRA KUMAR A. BALDOTA v. THE STATE OF
KARNATAKA [INDIRA BANERJEE, J. ]