M.A.A. ANNAMALAI versus STATE OF KARNATAKA & ANOTHER

Citation: [2010] 9 S.C.R. 1124 · Decided: 12-08-2010 · Supreme Court of India · Bench: DALVEER BHANDARI, A.K. PATNAIK · Disposal: Appeal(s) allowed

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Judgment (excerpt)

A 
B 
[2010] 9 S.C.R. 1124 
M.A.A. ANNAMALAI 
v. 
STATE OF KARNATAKA & ANOTHER 
(Criminal Appeal No. 1504 of 2010) 
AUGUST 12, 2010 
[DALVEER BHANDARI AND A.K. PATNAIK, JJ.] 
Code of Criminal Procedure, 1973: s.482 - Quashing of 
criminal proceedings - FIR lodged against accused alleging 
C cheating - Grievance of complainant that he had deposited 
certain amount in a scheme floated by the company in which 
accused was one of the directors - Company closed down 
and amount remained due to the complainant - Petition u/ 
s. 482 for quashing of proceedings - High Court disposed of 
o the petition, with direction to the accused to approach trial court 
for discharge -
On appeal, held: A person cannot be 
compelled to face criminal prosecution if basic ingredients of 
the alleged offence against him are a/together absent - There 
were no a/legations in the FIR against the accused - The 
E scheme under which deposit was made was approved by RBI 
and, therefore, element of cheating cannot be made out -
Moreover, accused had resigned from the directorship prior 
to the relevant period and was not in-charge of or responsible 
for the conduct of the company's business - He, thus, could 
F not be made vicariously liable - Criminal proceedings against 
him quashed - Penal Code, 1860 - s.420 - Prize, Chits and 
Money Circulation Schemes (Banning) Act, 1978 - ss.3, 4, 
5 and 6. 
Respondent no.2 filed an FIR against the appellant 
G u/s.420 IPC read with ss.3, 4, 5 and 6 of Money Circulation 
and Banning Act, 1978. The allegation in the FIR was that 
respondent no.2 and his wife had invested money in the 
Benefit Fund Scheme in a company in which the 
H 
1124 
M.A.A. ANNAMALAI v. STATE OF KARNATAKA & 1125 
ANR. 
appellant was one of the directors. The company closed 
A 
down its business and an amount of about Rs.2.91 lacs 
remained due to respondent no.2. The Magistrate issued 
non-bailable warrants against the appellant on the basis 
of the FIR. 
B 
The appellant filed a petition u/s.482, Cr.P.C. for 
quashing of the criminal proceedings against him on the 
ground that he had resigned from the company and 
ceased to be its director w.e.f. 27.12.1997 and, therefore, 
was not liable in any manner for the acts done during the 
period between 24.5.1998 and 17.9.1999. The petition was 
C 
disposed of with a d!rection to the appellant to approach 
the trial court for seeking an order of discharge. 
In the instant appeal, it was contended for the 
appellant that respondent no.2 had filed an affidavit in the 
Supreme Court admitting that the appellant had resigned 
as a director but his name was inadvertently included as 
one of the accused by the Investigating Officer. The 
appellant also placed reliance on a letter· sent by 
respondent no.2 to the Inspector of Police stating that he 
was not interested in the prosecution of the appellant as 
he had received 55% of the deposit amount from the 
official liquidator. 
Allowing the appeal, the Court 
HELD: 1.1. The inherent power should not be 
exercised to stifle the legitimate prosecution but at the 
same time no person can be compelled to face criminal 
prosecution if basic ingredients of the alleged offence 
against him are altogether absent. [Para 42] [1143-D] 
1.2. The primary requirement to make out an offence 
of cheating under Section 415 punishable under Section 
420 IPC is dishonest/fraudulent intention at the time the 
inducement is made. The company had invited 
D 
E 
F 
G 
H 
1126 
SUPREME COURT REPORTS 
[2010] 9 S.C.R. 
A investment from the depositors to invest in the business/ 
benefit funds after receiving due approval of the scheme 
from the Reserve Bank of India. Therefore, in any event, 
the element of cheating as alleged cannot be made out. 
[Paras 21, 41] [1133-E-F; 1142-E-F] 
B 
1.3. Admittedly, there were no allegations against the 
appellant in the FIR. He ceased to be a Director of the 
company from 27.12.1997 whereas the alleged offences, 
if any, were committed during the period from 24.5.1998 
to 17.9.1999. The complainant/respondent no.2 submitted 
C • in writing to this Court that he did not want to proceed 
against the appellant because according to him the 
appellant was inadvertently included as an accused by 
the Investigating Officer. He further mentioned in the letter 
that he had already received 55% of the deposited 
D amount from the Official Liquidator. Assuming that there 
could have been a vicarious liability thrust on the 
appellant; even then th

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