Using Criminal Prosecution To Extract Dues For Which A Civil Remedy Is Available Is Unacceptable: Jharkhand High Court

A bench comprising Justice Gautam Kumar Choudhary of the Jharkhand High Court, while allowing a criminal miscellaneous petition, has recently ruled that criminal prosecution, in any case, cannot be permitted as an arm twisting measure to settle and extract dues for which efficacious civil remedy is available.In this case, the Criminal miscellaneous petition was preferred for quashing of the entire criminal proceeding and the order passed by the J. M. 1st Class, Jamshedpur whereby summons were issued against the petitioners after finding a prima facie case under Sections 420, 406 & 120B of the Indian Penal Code.The complainant is a partnership firm engaged in the business of trading and transporting limestone with its headquarters in Sonari, Jamshedpur, and the first petitioner is a company registered under the Companies Act, 1956 with its headquarters in New Delhi.The second petitioner is the company's C.M.D., and the third petitioner is the company's Director. It was alleged that on 22.05.2015, the first petitioner, through other petitioners, persuaded the opposite party to enter into a contract for the supply of limestone lumps and issued a purchase order in the office of the opposite party No.2, located at Sonari, Jamshedpur, for the supply of 4000 MT of the grade 10-40 MM lime stones worth Rs.67,00,000/-.The agreed-upon payment method was that the material cost would be paid 60 days after the issuance of the Railway receipt. The opposing party accepted the said purchase order and delivered 3690.87 MT of limestone ordered by the accused persons worth Rs.64,92,862.55/- by railway rake from Paradip Port to the petitioners' Kalinga Nagar site.In accordance with the said purchase order, the opposing party issued a bill for the supply of the material after 60 days from the date of R/R issuance, but the petitioners did not pay any amount against the said bill.After much persuasion, the petitioners paid the opposing party a paltry sum of Rs.6,00,000/- in June 2016. It was also claimed that the opposing party demanded the balance payment of Rs.58,92,862/- on several occasions through emails and phone calls with all of the petitioners, but no payment had been made to date, following which, the opposing party sent a request letter with bank details, but no payment was made by the petitioners, therefore the complaint case was filed.The counsel for the petitioners, Mr. S.R. Soren submitted that Court had overlooked the fact that petitioner No.1 being a registered company under the Companies Act, as such, cannot be made as an accused in a criminal proceeding for the acts of its agents or servants and the mens rea of such agents or servants cannot be attributed to the company. In support of this contention, he placed reliance on the State of Maharashtra vs. Messrs Syndicate Transport Co. (P) Ltd. [AIR 1964 BM. 195], and Ravindranath Bajpe vs. Mangalore Special Economic Zone Ltd. & Ors. [Criminal Appeal No.1047- 1058/2021, decided on September 27, 2021] wherein it was held that the criminal proceedings cannot be kick-started against the directors and other management personnel of a company in absence of specific allegations and their role in the crime. The Supreme Court in passing this order re-affirmed its earlier judgments in Sunil Bharti Mittal v. Central Bureau of Investigation [(2015) 4 SCC 609] and Maksud Saiyed vs. State of Gujarat & Others [(2008) 5 SCC 668] which provided that :-a. Unless the statute specifically provides, vicarious liability of the directors cannot be automatically imputed where company is the offender; b. If a company commits an offense involving mens rea (guilty intent), it would normally be the intent and action of that individual who acted on behalf of the companyHe further submitted that a corporate body is included in the definition of “person” under Section 11 of IPC, however, there are certain offenses which could be committed by an individual human being and a corporate body could not, therefore, be capable of committing such offenses. Mr. Soren said that the certain offenses are to be punished only with imprisonment and it would not be possible to impose a punishment of imprisonment on corporate bodies.The sum and substance of the argument made by Mr. Soren was that order of cognizance is bad in law on the ground that the order taking cognizance has no territorial jurisdiction as the entire financial transaction took place at Paradip Port, Orissa. It was also submitted by the counsel that the Director of Company cannot be impleaded unless a specific role is attributed to him in view of the settled law.Cognizance has been taken against the Company which is impermissible and the role of Director over the petitioner in the present case has not been stated. Part payment of the amount goes to show that there was no dishonest intention and criminality involved in the caseAgreeing with the argument made by the learned APP, Justice Choudhary said, “I find force in the argument made by the...

Using Criminal Prosecution To Extract Dues For Which A Civil Remedy Is Available Is Unacceptable: Jharkhand High Court

Bhavya Singh

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