Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd.

D.K Jain, J.— Leave granted. This appeal, by special leave, is directed against the judgment dated 9-10-2007, 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 “the Code”). By the impugned judgment, the High Court has declined to quash a criminal complaint filed by Respondents 1 to 3 in this appeal against the appellants and others for offences under Sections 192 and 199 read with Section 34 of the Penal Code, 1860 (for short “IPC”).

2. Shorn of unnecessary details, the facts, material for adjudication of the issue arising in this appeal may be stated thus: Appellant 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 the Maharashtra State Electricity Board (for short “MSEB”) and Appellant 2 is its Chairman. Respondent 1 is an incorporated company viz. M/s Datar Switchgear Ltd. and Respondents 2 and 3, senior officials of Respondent 1, are the complainants and Respondents 4 to 7 are the co-accused.

3. Pursuant to various contracts entered into between Respondent 1 and MSEB in the year 1993-1994 for installation of “Low Tension Load Management Systems” (for short “Ltlms”), MSEB issued a work order on 27-3-1997 whereby Respondent 1 was required to install 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.

4. Clause 8.1 of the said contract stipulated that Respondent 1 would send intimation to the Section Incharge 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 Section Incharge concerned of MSEB.

5. During the validity period of the contract, various disputes arose between Respondent 1 and MSEB. On 19-2-1999, Respondent 1 partially terminated the contract, conveying to MSEB that it would not install any more Ltlms, and would only maintain the installed items.

6. On 21-4-1999, Respondent 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 1 and MSEB vide order dated 5-5-1999, the High Court of Bombay referred the disputes to the Arbitral Tribunal.

7. The arbitration proceedings commenced on 19-2-1999. The controversy in the instant case pertains to the amended written statement filed by MSEB on 7-2-2000, the relevant extract of which reads as follows:

“9-A. The 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 printouts therefrom and submitting bills in respect thereof….

(a) Commissioning/Commissioning Reports

The provisions of Clause 8.1 of the work order provided for installation and commissioning of Ltlms systems in presence of Section Incharge of every Section. The claimants not only did not inform the Section Incharge concerned 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 Incharge as mentioned in the said reports, and thereafter submitted the same for the signature of the Section Incharge. 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….”

8. The Arbitral Tribunal passed the final award on 18-6-2004 whereby it directed MSEB to pay Rs. 1,85,97,86,399 as damages to Respondent 1, and pay interest at the rate of 10% p.a on the sum of Rs. 1,79,15,87,009. The award contained the following observations suggesting that MSEB had introduced certain fabricated documents as evidence:

“As regards the commissioning reports produced by the respondents at Exts. 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.”

9. On the basis of the said observations in the arbitral award, on 23-6-2004 Respondents 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 IPC. The Judicial Magistrate, First Class, Nasik took cognizance of the said complaint and issued summons against all the accused named in the complaint. Being aggrieved by the order of the Magistrate taking cognizance of the complaint, the appellants preferred the aforestated petition under Section 482 of the Code before the High Court of Bombay for quashing of the complaint.

10. As stated above, the High Court, vide the impugned judgment has dismissed the said petition. The High Court has inter alia observed that a prima facie case has been made out against the accused and the complaint clearly establishes the joint action of the accused to attract vicarious liability under IPC. Hence, the present appeal by two of the accused.

11. Mr Vikas Singh, learned Senior Counsel appearing on behalf of the appellants assailed the impugned judgment on the ground that the dispute between the parties was purely civil in nature, and the criminal justice system has been set in motion only to pressurise the appellants. In order to buttress the contention that the High Court would be justified in exercising its powers under Section 482 of the Code to quash a vexatious criminal complaint to prevent an abuse of the process of the court, the learned counsel commended us to the decisions of this Court in Inder Mohan Goswami v. State of Uttaranchal (2007) 12 SCC 1, K.L.E Society v. Siddalingesh (2008) 4 SCC 541, Baijnath Jha v. Sita Ram (2008) 8 SCC 77, Suneet Gupta v. Anil Triloknath Sharma (2008) 11 SCC 670 and G. Sagar Suri v. State of U.P (2000) 2 SCC 636

12. Relying on the decisions in Pepsi Foods Ltd. v. Judicial Magistrate (1998) 5 SCC 749, S.M.S Pharmaceuticals Ltd. v. Neeta Bhalla (2005) 8 SCC 89 and Keki Hormusji Gharda v. Mehervan Rustom Irani (2009) 6 SCC 475, the learned counsel contended that IPC, save and except in some specific cases, does not contemplate vicarious liability of a person who is not directly charged for the commission of an offence, and a person cannot be made an accused merely by reason of his official position.

13. Further, it was contended that in order to launch prosecution against the officers of a company, the complainant must make specific averments as to the role played by each of the officials accused in the complaint. In order to buttress the contention, the learned counsel placed reliance on the decisions of this Court in N.K Wahi v. Shekhar Singh (2007) 9 SCC 481, Sharon Michael v. State of T.N (2009) 3 SCC 375, S.K Alagh v. State of U.P (2008) 5 SCC 662 and Maksud Saiyed v. State of Gujarat (2008) 5 SCC 668.

14. Mr Ashok Desai, learned Senior Counsel appearing for Respondents 1 and 2, on the other hand, while emphasising that power under Section 482 of the Code is to be exercised sparingly and with circumspection, argued that in the instant case, in light of the averments in the complaint, a prima facie case is made out against the appellants and, therefore, the High Court was fully justified in declining to exercise its jurisdiction under the said provision. In the written submissions filed on behalf of the respondents reliance is placed on the decisions of this Court in Sunita Jain v. Pawan Kumar Jain (2008) 2 SCC 705 and Som Mittal v. Govt. of Karnataka (2008) 3 SCC 574 to contend that the present case does not fall in the category of the “rarest of rare” cases, warranting exercise of jurisdiction by the High Court under Section 482 of the Code. The learned counsel contended that the offence of fabrication of false evidence cannot be described as a civil act, and in any event, the existence of a civil remedy does not preclude the maintainability of criminal complaint.

15. Relying on the decisions of this Court in Tarun K. Shah v. C.R Alimchandani (2001) 9 SCC 728 and K.M Mathew v. K.A Abraham (2002) 6 SCC 670, it was next contended that it was not necessary to allege an overt act by each of the accused, and in that regard, the averments in the complaint were sufficient. Moreover, the use of the expression “whoever causes any circumstance to exist” in Section 192 IPC indicates that vicarious liability is inbuilt within the Section, and the complaint contains specific averments to that effect.

16. The learned counsel urged that the offences under Sections 192 and 199 IPC were complete when the accused had adduced the fabricated commissioning reports in proceedings before the arbitrators, who had adversely commented on the conduct of the appellants. It was argued that the said offences would survive irrespective of the sustenance or otherwise of the arbitral award. Commending us to the decisions of this Court in Suo Motu Proceedings against R. Karuppan, Advocate, In re (2001) 5 SCC 289, Sushil Kumar v. Rakesh Kumar (2003) 8 SCC 673 and Murray & Co. v. Ashok Kr. Newatia (2000) 2 SCC 367, the learned counsel pleaded that the offences of perjury and fabrication of false evidence require stern action to be taken against persons indulging in such acts.

17. Before embarking on an evaluation of the rival submissions, it would be apposite to briefly examine the nature of the power of the High Court under Section 482 of the Code.

18. It is well settled that though the inherent powers of the High Court under Section 482 of the Code are very wide in amplitude, yet they are not unlimited. However, it is neither feasible nor desirable to lay down an absolute rule which would govern the exercise of inherent jurisdiction of the Court. Nevertheless, it is trite that powers under the said provision have to be exercised sparingly and with caution to secure the ends of justice and to prevent the abuse of the process of the court. Where the allegations in the first information report or the complaint taken at its face value and accepted in their entirety do not constitute the offence alleged, the High Court would be justified in invoking its powers under Section 482 of the Code to quash the criminal proceedings. (See R.P Kapur v. State of Punjab AIR 1960 SC 866, 1960 Cri LJ 1239 and Rupan Deol Bajaj v. Kanwar Pal Singh Gill (1995) 6 SCC 194.)

19. In Som Mittal (2008) 3 SCC 574 a three-Judge Bench of this Court, while holding that the power under Section 482 of the Code to quash criminal proceedings should be used sparingly and with circumspection in the “rarest of rare cases”, observed that:

“9. When the words ‘rarest of rare cases’ are used after the words ‘sparingly and with circumspection’ while describing the scope of Section 482, those words merely emphasise and reiterate what is intended to be conveyed by the words ‘sparingly and with circumspection’. They mean that the power under Section 482 to quash proceedings should not be used mechanically or routinely, but with care and caution, only when a clear case for quashing is made out and failure to interfere would lead to a miscarriage of justice. The expression ‘rarest of rare cases’ is not used in the sense in which it is used with reference to punishment for offences under Section 302 IPC, but to emphasise that the power under Section 482 CrPC to quash the FIR or criminal proceedings should be used sparingly and with circumspection. Judgments are not to be construed as statutes. Nor words or phrases in judgments to be interpreted like provisions of a statute. Some words used in a judgment should be read and understood contextually and are not intended to be taken literally. Many a time a Judge uses a phrase or expression with the intention of emphasising a point or accentuating a principle or even by way of a flourish of writing style. Ratio decidendi of a judgment is not to be discerned from a stray word or phrase read in isolation.”

20. Thus, the question for consideration is whether or not in light of the allegations in the complaint against the appellants, the High Court was correct in law in declining to exercise its jurisdiction under Section 482 of the Code?

21. In order to appreciate the rival contentions of the parties, it would be expedient to refer to the relevant portions of the complaint:

“5. In the said arbitration proceedings it was falsely contended by the accused at Para 9(A)(a) of the written statement that Complainant 1 had submitted false and fabricated commissioning reports and the equipment particularised therein was installed without the presence of MSEB's Section Incharge and the accused relied upon a copy of the commissioning report inter alia pertaining to Shirpur Section in Dhule Circle. The said commissioning report as relied upon by the accused was tendered as Ext. ‘C-64’ by the witness examined on behalf of Accused 1. The said commissioning report contained an endorsement ‘not installed in presence’ to allege that the commissioning of the equipment particularised in the said commissioning report at Ext. ‘C-64’ was not done in the presence of MSEB's Section Officer. The said commissioning report contained the signature of the representative of Complainant 1 and the said endorsement was made above the said signature of Complainant 1's representative in a manner to depict as if Complainant 1's representative had accepted the fact alleged in the said endorsement.

6. On the other hand, Complainant 1 brought on record their copy of the commissioning report pertaining to Shirpur Section in Dhule Circle as Ext. ‘C-74’ which had no such endorsement as is found on the face of Ext. ‘C-74’. It is the case of Complainant 1 that the accused with common criminal intent caused the impugned endorsement ‘not installed in presence’ to be superscribed on Ext. ‘C-64’ after it was duly signed by the representative of Complainant 1 and the Section Incharge of MSEB so as to convey the impression that Complainant 1's representative had accepted the fact alleged in the said endorsement. The said falsification and fabrication of the record was brought to the notice of the learned arbitrators in the arbitration proceedings and the learned arbitrators observed in their award dated 18-6-2004 as under:…

The complainants say and submit that the learned arbitrators have thus held that the said endorsement was fabricated and was admittedly tendered in evidence by Accused 1 acting under the control and management of Accused 2, 3, 4 and 5. Accused 6 was particularly responsible for the conduct of MSEB's officers in Shirpur Section which falls under Dondaicha Division of Dhule District. The complainants say and submit that the accused acted with common criminal intent to falsify and fabricate the said endorsement with the intention to support the case of Accused 1 that the equipment was installed by Complainant 1 without the presence of the officers of MSEB. The complainants say and submit that the said action was therefore clearly intended to pervert the course of justice and misled (sic) the learned arbitrator into entertaining in erroneous opinion touching upon the point of material determination as to whether Complainant 1 had installed the equipment without the presence of MSEB's Section Incharge. The complainants say and submit that the accused fabricated false evidence which has been tendered by them in the course of judicial proceedings before the learned arbitrators and the accused are guilty of offence under Section 192, 199 read with Section 34 of the Penal Code. The complainants say and submit that the accused acted with common criminal intention to play fraud on the learned Arbitral Tribunal and deny justice to Complainant 1.”

(emphasis supplied by us)

22. It is manifest that the allegation against the appellants herein is that Appellant 1 had, acting under the control and management of all the accused, including Appellant 2 and in particular Accused 6, superscribed an endorsement on Ext. C-64 with an intention to support its case and tendered the same in the course of judicial proceedings before the Arbitral Tribunal, thereby committing the offence of fabricating false evidence in terms of Sections 192 and 199 read with Section 34 IPC.

23. At this juncture, it would be apposite to refer to the relevant statutory provisions and examine the legal position.

24. Sections 192 and 199 IPC read as follows:

“192. Fabricating false evidence.—Whoever causes any circumstance to exist or makes any false entry in any book or record, or electronic record or makes any document or electronic record containing a false statement, intending that such circumstance, false entry or false statement may appear in evidence in a judicial proceeding, or in a proceeding taken by law before a public servant as such, or before an arbitrator, and that such circumstance, false entry or false statement, so appearing in evidence, may cause any person who in such proceeding is to form an opinion upon the evidence, to entertain an erroneous opinion touching any point material to the result of such proceeding, is said ‘to fabricate false evidence’.

199. False statement made in declaration which is by law receivable as evidence.—Whoever, in any declaration made or subscribed by him, which declaration any court of justice, or any public servant or other person, is bound or authorised by law to receive as evidence of any fact, makes any statement which is false, and which he either knows or believes to be false or does not believe to be true, touching any point material to the object for which the declaration is made or used, shall be punished in the same manner as if he gave false evidence.”

25. It is plain that for constituting an offence under Section 192 IPC the following ingredients must be satisfied:

(i) Causing any circumstance to exist, or making any false entry in any book or record or making any document containing a false statement.

(ii) Doing one of the above acts with the intention that it may appear in evidence in a judicial proceeding, or in a proceeding taken by law before a public servant or an arbitrator.

(iii) Doing such act with the intention that it may cause any person, who in such proceeding, is to form an opinion upon the evidence to entertain an erroneous opinion touching any point material to the result of such proceeding. (See Babu Lal v. State of U.P AIR 1964 SC 725, (1964) 1 Cri LJ 555, AIR p. 727, para 8.)

26. Similarly, Section 199 IPC requires the following ingredients to be established:

“(i) Making of a declaration which a court or a public servant is bound or authorised by law to receive in evidence.

(ii) Making of a false statement in such declaration knowing or believing it to be false.

(iii) Such false statement must be touching any point material to the object for which the declaration is made or used.”

27. 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 6, who was in charge of Shirpur Section. It is evident from the aforeextracted paragraphs of the complaint that other accused have been named in the complaint because, according to the complainant, MSEB, Accused 1 was acting under their control and management. It bears repetition that the only averment made against Appellant 2 is that Appellant 1 i.e MSEB was acting under the control and management of Appellant 2 along with other three accused. There is no denying the fact that Appellant 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 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 that the subject interpolation was made in Ext. C-64.

28. At 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 2 was responsible for the conduct of business of Appellant 1. The said resolution merely authorises the Chief Engineer to file counter-claim before the Arbitral Tribunal in proceedings between Appellant 1 and Respondent 1. It rather demonstrates that it was the Chief Engineer who was made responsible for looking after the interest of Appellant 1 in those proceedings.

29. 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 Pharmaceuticals (2005) 8 SCC 89:

“8. … There is 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.”

30. 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 Alagh (2008) 5 SCC 662:

“19. As, admittedly, 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.”

31. Therefore, we are of the view that even the Board resolution, adduced by the complainant, does not establish that Appellant 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 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 2 under Sections 192 and 199 IPC.

32. However, insofar as the case of Appellant 1 Company is concerned, bearing in mind the fact that Ext. C-64 was 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 Respondent 1 while discharging their obligations under the contract between them and Appellant 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 8 (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.

33. 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 1.

34. We shall now examine whether Appellant 2 could be made liable for the aforementioned offences by operation of Section 34 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 a prearranged plan between that person and the persons who actually committed the offence. In order to attract Section 34 IPC the following ingredients must be established:

(i) there was common intention in the sense of a prearranged plan;

(ii) the person sought to be so held liable had participated in some manner in the act constituting the offence.

(See Chandrakant Murgyappa Umrani v. State of Maharashtra 1998 SCC (Cri) 698, Hamlet v. State of Kerala (2003) 10 SCC 108 and Surendra Chauhan v. State of M.P (2000) 4 SCC 110)

35. 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 on the spur of the moment, yet the meeting of minds must be prior to the commission of offence suggesting the existence of a prearranged plan. Therefore, in order to attract Section 34 IPC, the complaint must, prima facie, reflect a common prior concert or planning amongst all the accused.

36. In our opinion, in the present case, the complaint does not indicate the existence of any prearranged plan whereby Appellant 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 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.

37. In the final analysis, we are of the opinion that no prima facie case has been made out against Appellant 2 in respect of offences under Sections 192 and 199 IPC even with the aid of Section 34 IPC. Therefore, it was a fit case where the High Court should have exercised its powers under Section 482 of the Code by quashing the complaint against Appellant 2.

38. For the aforegoing reasons, the appeal is dismissed qua Appellant 1; it is allowed in relation to Appellant 2; and consequently the order of the Magistrate taking cognizance against Appellant 2 in Complaint No. 476 of 2004 is quashed.