HDFC SECURITIES LTD. & ORS. versus STATE OF MAHARASHTRA & ANR.
[2016] 8 S.C.R. 968, Supreme Court of India, 2016
Outcome: Dismissed (Dismissed)
Segment: Facts
A 
B 
c 
[2016] 8 S.C.R. 968 
HDFC SECURITIES LTD. & ORS. 
v. 
STATE OF MAHARASHTRA & ANR. 
(Criminal Appeal No. 1213 of2016) 
DECEMBER 09, 2016 
[PINAKI CHANDRA GHOSE AND AMITAVA ROY, JJ.] 
Constitution of India: Art.227 - Criminal complaint filed by 
respondent no.2 u/s.156(3) alleging execution of unauthorised 
trades in her account without her consent by the appellants -
Magistrate directed registration of FIR against the appellants and 
ordered for a report after investigation - Registration of FIR u/ 
ss.409, 420, 465, 467 rlw s.34 and 120-B, !PC - Writ petitions for 
quashing the FIR - High Court dismissed the writ petitions on the 
ground that same was premature and there was no need for 
D exercising the powers either under Art.227 or uls.482 Cr.P.C. - On 
appeal, held: In the instant case, a fact finding investigation was 
directed - Appellants approached the High Court even before the 
stage of issuance of process - Jn particular, the appellants 
challenged the order passed by the Magistrate uls.156(3), Cr.P. C. 
E - This order u/s.156(3), Cr.P. C. requiring investigation by the police, 
cannot be said to have caused an injury of irreparable nature which, 
at this stage, requires quashing of the investigation - The stage of 
cognizance would arise only after the investigation report is filed 
before the Magistrate - Therefore, at this stage, the High Court 
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correctly held that filing of the petitions u/Art.227 or u/s.482, Cr.P.C., 
at this stage are
nothing but premature - Further, the High Court 
correctly concluded that the inherent powers of the Court uls.482, 
Cr.P.C. should be sparingly used - High Court's order affirmed -
Code of Criminal Procedure, 1973 - ss.482, 156(3). 
Dismissing the appeal, the Court 
HELD: 1. In the present case, a fact finding investigation 
was directed and consequently, FIR was registered against 
appellants No.2 to 4 and also against Relationship Manager of 
the appellant-company. The accused under Indian Criminal Legal 
System, unless proved guilty shall always be given a reasonable 
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HDFC SECURITIES LTD. & ORS. v. STATE OF 
969 
MAHARASHTRA & ANR. 
space and liberty to defend himself in accordance with the law. 
A 
Further, it is always expected from a person accused of an offence 
pleading not guilty that he shall co-operate and participate in 
criminal proceedings or proceedings of that nature before a court 
of law, or other Tribunal before whom he may be accused of an 
'offence' as defined in Section 3(38) of the General Clauses Act, 
B 
i.e., an act punishable under the Penal Code or any special or 
local law. At the. same time, courts, taking cognizance of the 
offence or conducting a trial while issuing any order, are expected 
to apply their mind and the order must be a well reasoned one. If 
on a reading of the complaint, the Magistrate finds that the 
allegations therein disclose a cognizable offence and that the C 
forwarding of the complaint to the police for investigation 
under Section 156(3) will be conducive to justice and save the 
valuable time of the Magistrate from being wasted in enquiring 
into a matter, which was primarily the duty of the police to 
investigate, he will be justified in adopting that course as an D 
alternative to taking cognizance of the offence, himself. [Paras 
15, 21][978-D-F; 982-D-E] 
Lalitha Kumari v. Govt. of Uttar Pradesh 2013 (14) 
SCR 713 : (2014) 2 SCC 1; S.K. Alagh v. State of Uttar 
Pradesh & Ors. 2008 (2) SCR 1088 : (2008) 5 SCC 
662; Maksud Saiyed v. State of Gujrat & Ors. 2007 (9) 
SCR 1113 : (2008)
5 SCC 668; Thermax Limited & 
Ors. v. K. M Johny & Ors. 2011 (14) SCR 154 : (2011) 
13 SCC 412; Sunil Bharti Mittal v. Central Bureau of 
Investigation 2015 (1) SCR 377 : (2015) 4 SCC 609 -
relied on. 
2. The appellants approached the High Court even before 
the stage of issuance of process. In particular, the appellants 
challenged the order passed by the Magistrate under Section 
156(3) of Cr.P.C. This order under Section 156(3) of Cr.P.C. 
requiring investigation by the police, cannot be said to have caused 
an injury of irreparable nature which, at this stage, requires 
quashing of the investigation. The stage of cognizance would 
arise only after the investigation report is filed before the 
Magistrate. Therefore, at this stage the High Court has correctly 
assessed the facts and the law in this situation and held that filing 
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[2016] 8 S.C.R. 
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of the petitions under Article 227 of the Constitution of India or 
under Section 482 of Cr.P.C., at this stage are nothing but 
premature. [Para 24][983-C-F] 
B 
c 
D 
E 
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Anil Kumar v. M K. Aiyappa 2013 (9) SCR 869 : (2013) 
10 SCC 705; Devarapall Lakshminarayana v. V. 
Narayana Reddy & Ors. 1976 (0) Suppl. SCR 524 : 
(1976) 3 SCC 252; Ram Dev Food Products Pvt. Ltd. v. 
State of Gujarat 2015 (5) SCR 283 : (2015) 6 SCC 
439; Iqbal Singh Marwah & Am: v. Meenakshi Marwah 
& Anr. 2005 (2) SCR 708 : (2005) 4 SCC 370; Rukhmni 
Narvekar v. Vljya Statardekar and Ors. 2008 (14) SCR 
271 : (2008) 14 SCC 1; All Cargo Movers (India) (P.) 
Limited v. Dhanesh Badarwal Jain, 2007 (11) SCR 271 
: (2007) 14 SCC 776; Madhavrao Jiwanrao Scindia & 
Ors. v. Sambhajirao Chandrajirao Angle & Ors. (1998) 
1 SCC 692; State of Haryana v. Bhajanlal 1990 (3) 
Suppl. SCR 259 : 1992 Supp (1) SCC 335; Rajiv 
Thapar & Ors v. Madan Lal Kapoor 2013 (3) SCR 52 
: (2013) 3 SCC 330; Rishi Pal Singh v. State of Uttar 
Pradesh & Am: 2014 (6) SCR 1012 : (2014) 7 SCC 
215; R. Kalyani v. Janak C. Mehta & Ors. 2008 (14) 
SCR 1249 : (2009) 1 SCC 516; Sharad Kumar Sanghi 
v. Sangta Rane 2015 (2) SCR 145 : (2015) 12 SCC 
781 - referred to. 
Case Law Reference 
2913 (9) SCR 869 
referred to 
Para 10 
1976 (0) Suppl. SCR 524 
referred to 
Para 12 
2915 (5) SCR 283 
referred to 
Para 12 
2013 (14) SCR 713 
relied on 
Para 14 
2905 (2) SCR 708 
referred to 
Para 16
2008 (14) SCR 271 
referred to 
Para 16 
2007 (11) SCR 271 
referred to 
Para 16 
(1998) 1 sec 692 
referred to 
Para 17 
1990 (3) Suppl. SCR 259 
referred to 
Para 17
HDFC SECURITIES LTD. & ORS. v. STATE OF 
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MAHARASHTRA & ANR. 
2013 (3) SCR 52 
referred to 
Para 17 
A 
2014 (6) SCR 1012 
referred to 
Para 17 
2008 (2) SCR 1088 
relied on 
Para 18 
2007 (9) SCR 1113 
relied on 
Para 18 
2011 (14) SCR 154 
relied on 
Para 18 
B 
2015 (1) SCR 377 
relied on 
Para 18 
2008 (14) SCR 1249 
referred to 
Para 19 
2015 (2) SCR 145 
referred to 
Para 20 
CRlMINALAPPELLATE JURISDrCTION: Criminal Appeal No. 
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1213 of2016. 
From the Judgment and Order dated 16.11.2011 of the High Court 
of Judicature at Bombay in Criminal W. P. No. 672 of201 I. 
Dr. A. M. Singhvi, Sidharth Luthra, Sr. Advs., Kuna! Vajani, Aman 
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Gandhi, Gautam Khazanchi, Ms. Tara Narula, Ms. Bindi Girish Dave, 
Advs. for the Appellants. 
Basava Prabhu S. Patil, Sr. Adv, Anirudh Sanganeria, Chinmay 
Deshpandey, Amjid Maqbook, Mohinder Jit Singh, Kuna! A. Cheema, 
Yogesh K. Ahirrao, Nishant Ramakantrao Katneshwarkar, Advs. for 
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the Respondents. 
The Judgment of the Court was delivered by 
PINAKI CHANDRA GHOSE, J. I. Leave granted. 
2. This appeal has been filed assailing the judgment and order 
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dated 16th November, 2011, passed by the High Court of Judicature at 
Bombay in Criminal Writ Petition No.672 of 2011, whereby the writ 
petitions filed by the appellants were dismissed by the High Court on the 
ground that the filing of the writ petition was premature and there was 
no need for exercising the powers either under Article 227 of the 
Constitution oflndia or under
Section 482 Cr.P.C. 
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3. Brief facts of the case are as follows: appellant No. I - HDFC 
Securities Ltd., is a public liability company (hereinafter referred to as 
"the Company" for short), appellant No.2 is the Managing Director of 
the Company, appellant No.3 is Business Head of the Company, and 
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[2016] 8 S.C.R. 
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appellant No.4 is the Regional head ofMumbai Region of the Company, 
respectively. Respondent No. I is State of Maharashtra and respondent 
No.2 is an individual, who held an account with the Company. The 
Company is engaged in the business of dealing in shares and securities 
on behalf of its constituents and clients on Brokerage Charge and it is 
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also a member ofNational Stock Exchange oflndia Limited (NSE) and 
Bombay Stock Exchange oflndia Limited (BSE). 
4. Respondent No.2, had registered herself with the Company as 
a constituent/client by opening Securities Trading Account vide No.342889 
and was an imperial customer of the Company for about eight years. 
She executed a Member-Client Agreement dated 28th June, 2005. On 
3rd August, 2009, respondent No.2, through a legal Notice dated 
03.08.2009, requested the appellants to make good the losses caused to 
her by indulging in unauthorized and fraudulent trading in her account by 
one Vi nod Koper (Relationship Manager of the company-"RM" in short) 
during the period July, 2008 to June, 2009. This Notice was also sent to 
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RM and one Rohan Raut, Assistant Vice President of the Company, on 
20'h October, 2009. Thereafter, she filed arbitration proceedings before 
NSE Panel of Arbitrators against the Company for a sum of Rs.48.99 
Lacs and costs of Rs.2.5 Lacs, and chose the Arbitrators of her choice, 
being two retired High Court Judges and sought to call RM as a
witness. 
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The Arbitrators passi.:d an award in favour of the Company on 18'h 
August, 20 l 0, recording a shift in the stand of respondent No.2, authorizing 
her husband to trade on her behalf. In the meantime, as the Police did 
not take cognizance of the matter, albeit she filed a complaint on 31" 
march, 20 I 0, against the appellants, RM and AVP, on l 01h June, 20 l 0, 
she also filed a criminal complaint under Section 156(3) of the Code of 
Criminal Procedure, 1973 (hereinafter referred to as Cr.P.C.) before 
l O'h Metropolitan Magistrate, Andheri, bearing Case No.143/20 l 0, 
alleging execution of unauthorized trades in her account without her 
consent by the appellants and claimed that she had thereby suffered 
losses amounting to Rs. 70 Lacs. Specific allegations were levelled against 
RM and appellant No.3 as she was introduced to RM by appellant No.3 
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and was told that RM would handle her investment portfolio honestly 
and efficiently with her prior instructions. General allegations of 
involvement of other appellants were made. On 25'h September, 20 I 0, 
she preferred an appeal before NSE Appellate Panel of Arbitrators, 
being Arbitration REF No.CM/M-213/2009, wherein she disputed the 
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HDFC SECURITIES LTD. & ORS. v. STATE OF 
973 
MAHARASHTRA & ANR. [PINAKI CHANDRA GHOSE, J.] 
trades which had taken place during the period December 2008 to April 
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2009. Being completely oblivious of the Arbitration proceedings, the award 
passed therein and the appeal preferred by respondent No.2, on 
04.01.2011, the learned Metropolitan Magistrate directed registration of 
FIR against the appellants and ordered for a report after investigation. 
5. Pursuant to the order of the learned Metropolitan Magistrate 
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dated 4.01.2011, Juhu Police Station registered the FIR, being MECR 
No. 7of2011 dated 30th January, 2011, under Sections 409, 420, 465, 467 
read with Sections 34 and 120-B of the IPC. Meanwhile, the Appellate 
Tribunal had decided the appeal against respondent No.2, vide its Award 
dated 241h January, 2011. The Appellate tribunal found that respondent 
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No.2 had not denied the fact of having received all the necessary 
documents, including Contract notes, etc. with regard to the transactions 
undertaken by the appellants on her behalf, which were required to be 
issued by the trading member to the investor immediately after the trade 
is undertaken. Thereafter, the appellants filed a writ petition before the 
Bombay High Court, being Criminal Writ Petition No.672 of 2011, inter D 
alia praying for quashing of the said FIR and the same prayer was also 
made in Criminal Writ Petition No.767 of201 I, filed by RM before the 
High Court. The High Court by
itsjudgmentdated 16.11.2011, dismissed 
both the writ petitions as according to it, the filing of the writ petitions 
was premature and there was no need for exercising the powers either 
under Article 227 of the Constitution oflndia orunder Section 482 Cr.P.C. 
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Aggdeved by the aforesaid judgment of the High Court, the appellants 
have approached this Court by filing this appeal by special leave. 
6. The only question that arises for decision in this appeal is whether 
the order dated 04.01.2011 passed by the Court of I O'h Metropolitan 
Magistrate, Andheri, in Private Complaint, C.C. No.143/Misc/20 I 0, filed 
by respondent No.2 for the offences punishable under Sections 409, 
420, 465, 467 read with Sections 34, 120(B) !PC, as well as FIR bearing 
MECR No. 7of2011 dated 30th January, 2011, registered at Police Station, 
Juhu, District Mumbai, are liable to be quashed. 
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7. In order to answer this question, it is necessary to first set out 
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the relevant provisions i.e. Sections 156 and 482 of the Code of Criminal 
Procedure, 1973: 
"156. Police officer's power to investigate cognizable 
case. 
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(1) Any officer in charge of a police station may, without 
the order of a Magistrate, investigate any cognizable 
case which a Court having jurisdiction over the local 
area within the limits of such station would have power 
to inquire into or try under the provisions of Chapter 
XIII. 
(2) No proceeding of a police officer in any such case 
shall at any stage be called in question 011 the ground 
that the case was one which such officer was not 
empowered under this section to investigate. 
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(3) Any Magistrate empowered under Section 190 may 
order such an investigation as above- mentioned. " 
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"482. Saving of inherent power of High Court.-
Nothing in this code shall be deemed to limit or effect 
the inherent powers of the High Court to make such 
orders as may be necessary to give effect to any order 
under this Code, or to prevent abuse of process of any 
Court or otherwise to secure the ends of justice. " 
8. The High Court dismissed the application filed by the appellants 
for quashing and setting aside the order of the Metropolitan Magistrate 
dated 4•h January, 2011, on the ground that the appellants had applied 
before the stage ofissuance of process so to be issued by the Metropolitan 
Magistrate under Section 156(3) of the Criminal Procedure Code. 
According to the appellants, the fundamental rights of the appellants 
would be compromised ifthe order so passed by the Magistrate is allowed 
to be given
effect to. The contention before the High Court on this 
question is that the order so passed by the Metropolitan Magistrate is 
illegal and amounts to abuse of the process of law. On the contrary, 
before the High Court it was submitted on behalf of respondent No.2 
that an order under Section 156(3) of Criminal Procedure Code requiring 
investigation by the police does not cause any injury of irreparable nature 
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which requires quashing of the investigation. It is further stated that the 
stage of cognizance would arise after the investigation report is filed. 
Therefore, the application filed by the appellants before the High Court 
is nothing but prematured and thus there is no need for exercising the 
powers of the High Court either under Article 227 of the Constitution of 
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India or under Section 482 of the Code. Further contention of the
HDFC SECURITIES LTD. & ORS. v. STATE OF 
975 
MAHARASHTRA & ANR. [PINAKI CHANDRA GHOSE, J.] 
respondent before the High Court was that the inherent powers under 
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Section 482 of the Code should be sparingly used. 
9. The High Court held that the direction given to the police by the 
Magistrate under Section 156(3) of the Code for carrying out the 
investigation into the complaint and to submit a report, cannot give a 
right to the appellants for quashing the same since such an order would 
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be based absolutely on speculations upon the report not filed. Further, it 
would result in prejudging the complaint. In these circumstances, the 
High Court dismissed the said application. 
10. Dr. Abhishek Singhvi, learned senior counsel appearing on 
behalf of the appellants submitted that the initiation of proceedings in the c 
instant case is an abuse of process of law and isl iable to be quashed. He 
argued that it is a settled principle that summoning of an accused in a 
criminal case is a serious matter and the criminal law cannot be set in 
motion as a matter of course. Therefore, the order of the magistrate 
must reflect application of mind to the facts of the case and the law 
applicable thereto. In support of this submission, the learned counsel 
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has reli~d upon Anil Kumar Vs. M. K. Aiyappa, (2013) I 0 SCC 705, 
paragraph I I, of which is quoted below: 
"11. The scope of Section 156(3) CrPC came up for 
consideration before this Court in several cases. This 
Court in
Maksud Saiyed case examined the requirement 
of the application of mind by the Magistrate before 
exercising jurisdiction under Section 156(3) and held 
that where jurisdiction is exercised on a complaint filed 
in terms of Section 156(3) or Section 200 CrPC, the 
Magistrate is required to apply his mind, in such a case, 
the Special Judge/Magistrate cannot refer the matter 
under Section 156(3) against a public servant without 
a valid sanction order. The application of mind by the 
Magistrate should be reflected in the order. The mere 
statement that he has gone through the complaint, 
documents and heard the complainant, as such, as 
reflected in the order, will not be sufficient. After going 
through the complaint, documents and hearing the 
complainant, what weighed with the Magistrate to order 
investigation under Section 156(3) CrPC, should be 
reflected in the orde1; though a detailed expression of 
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SUPREME COURT REPORTS 
[2016] 8 S.C.R. 
his views is neither required nor warranted. We have 
already extracted the order passed by the learned 
Special Judge which, in our view, has stated no reasons 
for ordering investigation. " 
11. Learned Magistrate had passed an order on 04.01.2011 holding 
"The bare reading of the complaint and the 
accompanying documents disclose the cognizable 
offence. Therefore in view of the judgement of Hon 'hie 
Supreme Court in case of Srinivas Gunduri & Ors. vs. 
M. S. SEPCO Electric Power Construction & Anr. In 
the matter of criminal appeal No.137712010 and 13781 
2010 decided on 30.07.2010 when the complaint 
discloses a cognizable offence, then the Magistrate 
instead of applying his mind to the complaint for 
deciding whether or not there is sufficient ground for 
proceedings may direct the police for investigation. 
Therefore, considering all these aspects, the complaint 
discloses the commission of cognizable offence. 
Therefore, considering the nature of offence it needs to 
be sent to police for investigation under section 156(3) 
of CrPC." 
12. Dr. Abhishek Singhvi, learned senior counsel appearing on 
behalf of the appellants has relied upon the following decisions of this 
Court to assail the aforesaid order passed by the Magistrate: Devara pall 
Lakshminarayana Vs. V. Narayana Reddy & Ors., (1976) 3 SCC 
252, and Ram Dev Food Products Pvt. Ltd. Vs. State of Gujrat, 
reported in (2015) 6 sec 439.
13. Further, it was submitted by the learned counsel for the 
appellants that there is no merit in the complainant's (respondent No.2) 
contention that the transactions from her trading account were 
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unauthorized. Trading from the complainant's-trading account were being 
carried out by her husband as admitted by the complainant in the complaint 
made before the learned Magistrate, and at the time of opening the 
trading account with appellant No. I, she was made aware of all the 
risks involved and the complainant had agreed to the same and understood 
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that she would be responsible for all the risks and consequences of
HDFC SECURITIES LTD. & ORS. v. STATE OF 
977 
MAHARASHTRA & ANR. [PINAKI CHANDRA GHOSE, J.] 
entering into trades. The relevant clause of the Agreement entered into A 
by complainant is reprocfoced hereinbelow: 
"2. 11 The Client agrees and declares as follows: (i) The 
Client shall be wholly responsible for all the investment 
decisions and trades of the Client; (ii) The Client will 
pay receive applicable daily margins; (iii) Payment of 
margins by the Client does not necessarily imply 
complete satisfaction of all dues; (iv) In spite of 
consistent having paid margins, the Client may, on the 
closing of his trade, be obliged to pay (or entitled to 
receive) such further sums as the market price or an 
instrument of contract may dictate; and (v) The failure 
of a Client to understand the risk involved or the failure 
of the member to explain the risk to the Client shall not 
render a contract as void or voidable and the Client 
shall be and shall continue to be responsible for all the 
risks and consequences for entering into trades in 
Derivatives. " 
14. In the light of the Agreement entered into between complainant-
respondent No.2 and the appellants, the learned counsel for the appellants 
further averred that criminal prosecution of the appellants could not be 
allowed to continue because the criminal prosecution requires a much 
higher standard of proof beyond reasonable doubt, whereas civil matters 
require lower standard of proof - preponderance of probabilities.
He 
drew our attention towards a very recent pronouncement in the case of 
Lalitha Kumari Vs. Govt. of Uttar Pradesh, reported in (2014) 2 
SCC 1, wherein this Court held: 
"Therefore, in view of various counter claims regarding 
registration or non-registration, what is necessary is 
only that the information given to the police must disclose 
the commission of a cognizable offence. In such a 
situation, registration of an FIR is mandatory. However, 
if 110 cognizable offence is made out in the information 
given, then the FIR need not be registered immediately 
and perhaps the police can conduct a sort of preliminary 
verification or inquiry for the limited purpose of 
ascertaining as to whether a cognizable offence has 
been committed. But, if the information given clearly 
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mentions the commission of a cognizable offence, there 
is no other option but to register an FIR forthwith. Other 
considerations are not relevant at the stage of 
registration of FIR, such as, whether the information is 
falsely given, whether the information is genuine, 
whether the information is credible etc. These are the 
issues that have to be verified during the investigation 
of the FIR. At the stage of registration of FIR, what is to 
be seen is merely whether the information given ex facie 
discloses the commission of a cognizable offence. If, 
after investigation, the information given is found to 
be false, there is always an option to prosecute the 
complainant for filing a false FIR. " 
15. We are of the considered opinion that in the present case a 
fact finding investigation was directed by the impugned order. 
Consequently, FIR was registered against appellants No.2 to 4 and against 
RM (Vinod Kopar). The accused under Indian Criminal Legal System, 
unless proved guilty shall always be given a reasonable space and liberty 
to defend himself in accordance with the Jaw. Further, it is always 
expected from a person accused of an offence pleading not guilty that 
he shall co-operate and pai1icipate in criminal proceedings or proceedings 
of that nature before a court of law, or other Tribunal before whom he 
may be accused ofan 'offence' as defined in Section 3(38) of the General 
Clauses Act,
i.e., an act punishable under the Penal Code or any special 
or local law. At the same time, courts, taking cognizance of the offence 
or conducting a trial while issuing any order, are expected to apply their 
mind and the order must be a well reasoned one. 
16. Learned counsel for the appellants has further invited our 
attention to the order of the High Court dismissing the writ petitions. 
According to the learned counsel for the appellants, the High Court, 
relying upon the decision of this Court in Iqbal Singh Marwah & Anr. 
Vs. Meenakshi Marwah & Anr., (2005) 4 SCC 370 and Rukhmni 
G Narvekar Vs. Vijya Statardekar and Ors., (2008) 14 SCC 1, found 
that there was no substance in the argument that respondent No.2 ought 
to have disclosed the arbitration proceedings and the outcome thereof in 
her complaint and that non-disclosure of the same amounts to suppression 
of material facts. Learned counsel for the appellants further submitted 
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that the High Court failed to appreciate that it was within its inherent
HDFC SECURITIES LTD. & ORS. v. STATE OF. 
979 
MAHARASHTRA & ANR. [PINAKI CHANDRA GHOSE, J.] 
jurisdiction under Section 482 Cr.P.C. to consider the correspondence A 
exchanged as well as the admitted documents under the arbitration 
proceedings. In the case of All Cargo Movers (India) (P.) Limited 
Vs. Dhanesh Badarwal Jain, (2007) 14 SCC 776, relied upon ill 
paragraph 17 thereof, it was held by this Court: 
"We are of the opinion that the allegations made in the 
complaint petition, even if given face value and taken 
to be correct in its entirety, do not disclose an offence. 
For the said purpose, This Court may not only take into 
consideration the admitted facts but it is also permissible 
to look into the pleadings of the plaintiff respondent 
No. I in the suit. No allegation whatsoever was made 
against the appellants herein in the notice. What was 
contended was negligence and/or breach of contract 
on the part of the carriers and their agent. Breach of 
contract simplicitor does not constitute an offence. For 
the said purpose, allegations in the complaint petition 
must disclose the necessary ingredients therefor. Where 
a civil suit is pending ·and the complaint petition has 
been filed one year after filing of the civil suit, we may 
for the purpose of finding out as to whether the said 
allegations are prima facie cannot notice the 
correspondences exchanged by the parties and other 
admitted documents. It is one thing to say that the Court 
at this juncture
would not consider the defence of the 
accused but it is another thing to say that for exercising 
the inherent jurisdiction of this Court, it is impermissible 
also to look to the admitted documents. Criminal 
proceedings should not be encouraged, when it is found 
to be ma/a fide or otherwise an abuse of the process of 
the Court. Superior Courts while exercising this power 
should also strive to serve the ends of justice. 
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17. Learned counsel for the appellants further relied upon few 
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more judgments wherein it was well settled that the test to be applied for 
quashing is, whether uncontroverted allegations made, prima facie 
establish the offence. This is because the Court cannot be utilized for 
any oblique purpose and where, in the opinion of the Court, the chances 
of an ultimate conviction are bleak, no useful purpose will be served by 
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[2016) 8 S.C.R. 
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allowing the criminal prosecution to continue. He relied upon the decisions 
of this Court in Madhavrao Jiwanrao Scindia & Ors. Vs. Sambhajirao 
Chandrajirao Angre & Ors., ( 1998) I SCC 692 (para 7-8); State of 
Haryana Vs. Bhajanlal, 1992 Supp (1) SCC 335 (para 102); Rajiv 
Thapar& Ors Vs. Madan Lal Kapoor, (2013) 3 SCC 330 at para 30; 
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Rishi Pal Singh Vs. State of Uttar Pradesh & Anr. (2014) 7 SCC 
215, at para 12-13. 
18. Learned counsel for the respondents have not rebutted this 
issue in any ofhis arguments. With the meticulous understanding of the 
orders of the Courts below in the instant case, we can see that general 
and bald allegations are made in the context of appellant No. I who is a 
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juristic person and not a natural person. The Indian Penal Code, 1860, 
does not provide for vicarious liability for any offence alleged to be 
committed by a company. If and when a statue contemplates creation of 
such a legal fiction, it provides specifically therefor, e.g. Negotiable 
Instruments Act, 1881. Further, reliance was made on S.K. Alagh Vs. 
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State of Uttar Pradesh & Ors., reported in (2008) 5 SCC 662, where 
at paragraph 16, this Court observed that "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. " Further in 
E 
F 
Maksud Saiyed Vs. State of
Gu,jrat & Ors., reported in (2008) 5 
SCC 668, at paragraph 13, this Court observed that 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. Indian 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 and 
G 
Director would arise provided any provision exists in that behalf in the 
statute. Statutes indisputably must contain provision fixing such vicarious 
liability. 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. In Thermax Limited & Ors. 
H
HDFC SECURITIES LTD. & ORS. v. STATE OF 
981 
MAHARASHTRA & ANR. [PINAKI CHANDRA GHOSE, J.] 
Vs. K. M. Johny & Ors., (2011) 13 SCC 412, and in Sunil Bharti A 
Mittal Vs. Central Bureau of Investigation, (20 I 5) 4 SCC 609, at 
para39, this Court held: 
"Apart from the fact that the complaint lacks necessary 
ingredients of Sections 405, 406, 420 read with Section 
34 !PC, it is to be noted that the concept of 'vicarious 
liability' is unknown to criminal law. As observed earlier, 
there is no specific al/ega_tion made against any person 
but the members of the Board and senior executives are 
ioined as the persons looking after the management 
and business of the appellant-Company". 
19. Learned counsel for the appellants has lastly argued in favour 
of the partial quashment of the FIR against the appellants on the 
contention that there was no criminality on their behalf. It has been 
further submitted that the allegations made against them do not amount 
B 
c 
to disclosure of an offence and were made with the purpose of harassing 
the appellants. Additionally, learned counsel contends that vicarious liability D 
cannot be attributed to appellant Nos.2 to 4, while relying upon R. Kalyani 
Vs. Janak C. Mehta & Ors., (2009) 1 SCC 516, wherein it was held: 
"Whereas, thus, no a/legation whatsoever has been 
made against the respondent No.I, the only a/legation 
against the respondent No.2 was that he had forwarded 
the said letter dated JO.I.2002 to National Stock 
Exchange.
The act of forgery on/or fabrication of the 
said letter had been attributed to Respondent No.3. 
Respondent Nos. I and 2 herein were sought to be 
proceeded against on the premise that they are 
vicariously liable for the affairs of the company. 
As Mr. Mani had time and again referred to the 
allegations relating to forgery of the said document 
dated 10.I.2002, we may also notice a disturbing fact. 
Before lodging the said First Information, a notice was 
issued by the appellant against the respondents herein 
on 15.I0.2002, whereas the address of respondent 
Nos.I and 2 were shown as 404, Embassy Centre, 
Nariman Point, Mumbai - 400 021 and 302, Veena 
Chambers, 21, Dalal Street, Fort, Mumbai - 400 001 
E 
F 
G 
H
982 
A 
B 
c 
SUPREME COURT REPORTS 
[2016) 8 S.C.R. 
respectively. However, in the. complaint petition, they 
were shown to be residents of Chennai ". 
20. In Sharad Kumar Sanghi Vs. Sangta Rane, reported in 
(2015) 12 SCC 781 (para 9-11) it is noted by this Court: 
"The allegations which find place against the Managing 
Director in his personal capacity seem to be absolutely 
vague. When a complainant intends to rope in a 
Managing Director or any officer of a company, it is 
essential to make requisite allegation to constitute the 
vicarious liab ii ity. " 
21. Per contra, learned counsel for respondent No.2 submitted 
that the complaint has disclosed the commission of an offence which is 
cognizable in nature and in the light ofLalitha Kumari's Case, (supra),· 
registration of FIR becomes mandatory. We observe that it is clear from 
the use of the words ''may take cognizance" in the context in which 
D they occur, that the same cannot be equated with "must take cognizance". 
E 
F 
The word "may" gives discretion to the Magistrate in the matter. If on a 
reading of the complaint he finds that the allegations therein disclose a 
cognizable offence and that the forwarding of the complaint to the police 
for investigation under Section 156(3) will be conducive to justice and 
save the valuable time of the Magistrate from being wasted in enquiring 
into a matter, which was primarily the duty of the police to investigate, 
he will be justified in adopting that course as an
alternative to taking 
cognizance of the offence, himself. It is settled that when a Magistrate 
receives a complaint, he is not bound to take cognizance if the facts 
alleged in the complaint, do not disclose the commission of an offence. 
22. Learned counsel for the respondents further submitted that 
there is a marked difference between the civil nature of the arbitration 
proceedings and the Criminal nature of the current proceedings and 
relieving the RM on the same day when he had tendered his resignation 
reflects the conduct whereby conspiracy could be proved. It was further 
G argued that respondent No.2 has also sent the legal notice requesting for 
making good the losses caused to her by the appellants of which Criminal 
Court and the Arbitration Tribunal took notice of. Thus, allegations were 
already made against all the appellants. We find no substance in the said 
submission being completely opposed to the settled legal principles. 
Nevertheless, we find patent illegalities which would result in vitiating 
H
HDFC SECURITIES LTD. & ORS. v. STATE OF 
983 
MAHARASHTRA & ANR. [PINAKI CHANDRA GHOSE, J.] 
the entire investigation which would·result in miscarriage of justice. 
A 
23. Mr. Basava Prabhu Patil, learned senior counsel appearing on 
behalf of respondent No.2 submitted that respondent No.2 in her 
complaint had set out the conduct of the appellants and alleged that their 
conduct had caused wrongful loss to her and wrongful gain to the 
appellants and other accused. It is a fact that at the time of summoning 
B 
of the accused, the Courts must be careful to scrutinize the evidence 
brought on record and in elicitation of answers to find out the truthfulness 
of the allegations. 
24. It appears to us that the appellants approached the High Court 
even before the stage of issuance of process. In particular, the appellants c 
challenged the order dated 04.01.20 II passed by the learned Magistrate 
under Section 156(3) ofCr.P.C. The learned counsel appearing on behalf 
of the appellants after summarizing their arguments in the matter have 
emphasized also in the context of the fundamental rights of the appellants 
under the Constitution, that the order impugned has caused grave inequities 
to the appellants. In the circumstances, it was submitted that the order is D 
illegal and is an abuse of the process oflaw. However, it appears to us 
that this order under Section 156(3) of Cr.P.C. requiring investigation by 
the police, cannot be said to have caused an injury of irreparable
nature 
which, at this stage, requires quashing of the investigation. We must 
keep in our mind that the stage of cognizance would arise only after the . E 
investigation report is filed before the Magistrate. Therefore, in our 
opinion, at this stage the High Court has correctly assessed the facts 
and the Jaw in this situation and held that filing of the petitions under 
Article 227 of the Constitution ofindia or under Section 482 ofCr.P.C., 
at this stage are nothing but premature. Further, in our opinion, the High 
Court correctly came to the conclusion that the inherent powers of the 
Court under Section 482 of Cr.P.C. should be sparingly used. In these 
circumstances, we do not find that there is any flaw in the impugned 
order or any illegality has been committed by the High Court in dismissing 
the petitions filed by the appellants before the High Court. Accordingly, 
F 
we affirm the order so passed by the High Court dismissing the writ G 
petitions. The appeal is dismissed. 
Devika Gujral 
Appeal dismissed.