LexSUSHIL SETHI AND ANOTHER versus THE STATE OF ARUNACHAL PRADESH AND OTHERS
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A B C D E F G H 582 SUPREME COURT REPORTS [2020] 1 S.C.R. SUSHIL SETHI AND ANOTHER v. THE STATE OF ARUNACHAL PRADESH AND OTHERS CRIMINAL APPEAL NO. 125 OF 2020 JANUARY 31, 2020 [ASHOK BHUSHAN AND M.R. SHAH. JJ.] Code of Criminal Procedure, 1973: s. 482 – Petition under – By two accused (Director and Managing Director of a Company) – For quashing the criminal proceedings against them u/s. 420 r/w s. 120B IPC – High Court dismissed the petition – Appeal to Supreme Court – Held: There are no specific allegations and averments in the complaint that the accused had fraudulent and dishonest intention – No prima facie case for the offence u/s. 420 IPC has been made out – Main allegation in the complaint is against the company which has not been made a party – There is also no allegation to constitute vicarious liability against the accused – Moreover, the statute i.e. IPC does not contain any provision fixing such vicarious liability – Summons were issued to the accused 13 years after filing of the chargesheet – Therefore, the criminal proceedings are liable to be quashed – Penal Code, 1860 – s. 420 r/w s. 120B. Allowing the appeal, the Court HELD : 1. The chargesheet has been filed against the appellants for the offences under Section 420 read with Section 120B IPC. However, it is required to be noted that there are no specific allegations and averments in the FIR and/or even in the chargesheet that fraudulent and dishonest intention of the accused was from the very beginning of the transaction. It is also required to be noted that contract between the Company and the Government was for supply and commissioning of the Nurang Hydel Power Project including three power generating units. The appellants purchased the turbines for the project from another manufacturer. The company used the said turbines in the power project. The contract was in the year 1993. Thereafter in the [2020] 1 S.C.R. 582 582 A B C D E F G H 583 year 1996 the project was commissioned. In the year 1997, the Department of Power issued a certificate certifying satisfaction over the execution of the project. Even the defect liability period ended/expired in January, 1998. In the year 2000, there was some defect found with respect to three turbines. Immediately, the turbines were replaced. The power project started functioning right from the very beginning – 1996 onwards. If the intention of the company/appellants was to cheat the Government they would not have replaced the turbines which were found to be defective. In any case, there are no specific allegations and averments in the complaint that the accused had fraudulent or dishonest intention at the time of entering into the contract. Therefore, it cannot be said that even a prima facie case for the offence under Section 420 IPC has been made out. [Para 8.1] [599-B-G] State of Haryana v. Bhajan Lal (1992) Supp. 1 SCC 335 : [1990] 3 Suppl. SCR 259 ; Vesa Holdings Private Limited v. State of Kerala and others (2015) 8 SCC 293 : [2015] 4 SCR 27 ; Hira Lal Hari Lal Bhagwati v. CBI, New Delhi (2003) 5 SCC 257 : [2003] 3 SCR 1118 ; V.V. Jose and another v. State of Gujarat and another (2009) 3 SCC 78 : [2008] 17 SCR 588 ; Sharad Kumar Sanghi v. Sangita Rane (2015) 12 SCC 781 : [2015] 2 SCR 145 ; InderMohan Goswami v. State of Uttarnchal (2007) 12 SCC 1 : [2007] 10 SCR 847 – relied on. 2. The main allegations can be said to be against the company. The company has not been made a party. The allegations are restricted to the Managing Director and the Director of the company respectively. There are no specific allegations against the Managing Director or even the Director. There are no allegations to constitute the vicarious liability. 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 vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. The statute indisputably must contain provision fixing such vicarious SUSHIL SETHI v. THE STATE OF ARUNACHAL PRADESH A B C D E F G H 584 SUPREME COURT REPORTS [2020] 1 S.C.R. 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. In the present case, there are no such specific allegations against the appellants being Ma
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