in the gauhati high courtghconline.gov.in/judgment/crlpet1892016.pdfcriminal petition no. 189 &...

Criminal Petition No. 189 & 192 OF 2016 of 26

IN THE GAUHATI HIGH COURT

(THE HIGH COURT OF ASSAM: NAGALAND: MIZORAM & ARUNACHAL PRADESH)

CRIMINAL PETITION NO. 189 of 2016 Sri Kailash Chandra Lohia, Son of Late Rameshwarlal Lohia, Residing at “Matrikunj”, M.S. Road, Fatasil, Guwahati, Assam.

----- Petitioner – VERSUS –

1. State of Assam, Represented by the Chief Secretary, To the Government of Assam,, Dispur-6, Assam. 2. Central Bureau of Investigation, Represented by its Head of Branch CBI, ACB, Betkuchi, P.O.-Gorchuk, Guwahati, Assam, Pin-781035.

----- Opposite Parties

CRIMINAL PETITION NO. 192 of 2016 1. Sri Bijay Kumar Garodia, Son of Late Ram Gopal Garodia, Residing at Block CF361, Sector-I, Salt Lake City, Kolkata-700064. 2. Mahendra Kumar Agarwal, Son of late Nirmal Kumar Agarwal, Block BE 77, Salt Lake City, Sector-I, Kolkata 700064, W.B. 3. Ramawatar Agarwala, Son of Late Prasad Chand Agarwala, Residing at 19 Arunoday Path, RK Choudhury Road, Narayan Nagar, Kumarpara, Guwahati-9. 4. Girdharilal Bathwal, Son of Biswanath Bathwal, Residing at H 131/132 Ankit Wood Wool Industries, Old Ricco Area Bagru,


Jaipur 303 007.

----- Petitioners – VERSUS –

1. State of Assam, Represented by the Chief Secretary, To the Government of Assam,, Dispur-6, Assam. 2. Central Bureau of Investigation, Represented by its Head of Branch CBI, ACB, Betkuchi, P.O.-Gorchuk, Guwahati, Assam, Pin-781035.

----- Opposite Parties

B E F O R E

Hon’ble Mr. Justice Hitesh Kumar Sarma

Advocates for the Petitioners : Mr. D Das, learned Senior Counsel, Mr. S Banerjee, Mr. B Ghosh, Mr. SSS Rahman,

Mr. SB Rahman, Mr. MR Sodial, Mr. AP Roy and Mr. N Chakrabaorty.

Advocate for Respondent No.1: Mrs. S Jahan, Additional Public Prosecutor. Advocate for Respondent No. 2:Mr. SC Keyal, Standing Counsel, CBI Date of hearing :27th of July, 2017.

Date of Judgment : 5th of September, 2017.

JUDGMENT & ORDER (CAV)

By way of this common judgment and order, I propose to

dispose of the Criminal Petition No. 189/2016 and Criminal Petition No.

192/2016 preferred under Section 482 of the Code of Criminal Procedure.

[2] It may be mentioned at the outset that both these cases were

heard and reserved for verdict. However, certain discrepancy was noticed in the

nomenclature of the case, sought to be quashed, hence the discrepancy was

brought to the notice of learned Senior Counsel for the petitioners. The learned


Senior Counsel for the petitioners, having realized the error, sought to file a

correction/modification application and accordingly vide I.A (Crl) No. 603/2017

in Criminal Petition No. 189/2016 and I.A (Crl) No. 608/2017 in Criminal

Petition No. 192/2016 amendments were sought to be introduced.

[3] The amendments, sought to be introduced in Criminal Petition

No. 189/2016 and Criminal Petition No. 192/2016, were heard on 24.08.2017

and after considering that the proposed amendments are only clarificatory in

nature, prayers in both the Interlocutory Applications were allowed. The

amendments in Criminal Petition No. 189/2016 and Criminal Petition No.

192/2016 shall now be read as part of original petitions.

[4] The amendments, sought for, can be precisely stated as follows:

i. The Case No. in the original application was mentioned as CR

854/2016 which has been amended as GR 854/2016

ii. In the cause title as well as in the body of the petition it was

stated that the case is presently pending in the Court of learned

Chief Judicial Magistrate, Kamrup (Metro), Guwahati which

has, now, been corrected as learned Special Judicial Magistrate,

Assam, Guwahati

[5] Having dealt with the clarificatory aspects of the case I now

proceed to decide the case as follows;

[6] The petitioners 1, 2 and 3 in Criminal Petition No. 192/2016 are

the Directors of Meghalaya Cements Ltd, a company registered under the

Companies Act, 1956 and the petitioner No. 4 is an employee of the said

Company. On the other hand, the petitioner in Criminal Petition No. 189/2016


is the Chairman of said Meghalaya Cements Ltd. On a reading of the chargesheet

dated 27.3.2014, appended as Annexure 4 to this petition, the allegation against

the petitioners is that during the period of 2008-2011 some officials of North

Eastern Coal Fields, CIL, (hereinafter referred to NEC, CIL) entered into criminal

conspiracy with Sri Kailash Chand Lohia, Director of Meghalaya Cements Ltd. to

facilitate misuse of coal supplied from NEC, CIL under subsidized rates as per

National Coal Distribution Policy of Govt. of India. As per the Fuel Supply

Agreement done between NEC/CIL and Sri Kailash Chand Lohia for Meghalaya

Cements Ltd, coal to the tune of 38,000 metric tonnes per annum was allotted

to the Unit. Accordingly, the firm had lifted 70,413 metric tonnes of coal from

NEC, CIL but instead of transporting the said coal to Meghalaya Cements Ltd the

Director diverted the said coal for use in M/s K.D. Coke, Jorabat. The coal was

allotted and lifted at the rate of Rs 3680/- per tonne and rate fixed under E-

auction is Rs 3851. The quantity of coal lifted by Meghalaya Cements Ltd would

have fetched an amount of Rs 15,50,25,136/- to the CIL if sold through e-auction

open market. Hence, wrongful loss was caused to CIL. Apart from the

allegations of cheating there are some other allegations that the petitioners

having entered into conspiracy created forged documents and used those

documents for the purpose of cheating. A chargesheet, thus, for the offences

under Section 420/468 read with Section 120B IPC has been laid against the

petitioners in both the cases.

[7] An FIR was lodged in this regard by Mr. H.C. Nath, IPS, Head of

Branch, CBI/ACB/Guwahati on 12.4.2011. The FIR was investigated, and after

investigation, a closure report, under Section 173 CrPC, was laid on 27.6.2012.


[8] As against the Closure Report, under Section 173 CrPC, the

impugned order, dated 4.8.12, was passed by learned Special Judge, Assam,

Guwahati, holding that since many aspects were left out during investigation the

Closure report cannot be accepted, and thereafter, the learned Special Judge

ordered re-investigation to be conducted by S.P, CBI/ACB and to entrust a

competent officer other than Mr. R.C. Basumatary, to investigate the case and

submit report in final form.

[9] In the investigation that ensued thereafter, the impugned

chargesheet, Annexure 4, was laid against the petitioners in both the cases. Since

no materials against any public servants were found, the charges under the

Prevention of Corruption Act, 1988, were dropped and hence, the chargesheet

was submitted in the Court of Special Judicial Magistrate, Assam, Guwahati, for

offences under Section 120B/420/409 IPC against the petitioners in both the

cases.

[10] Heard Mr. Diganta Das, learned Senior Counsel, appearing for

the petitioners in both the cases and also Mr. S.C. Keyal, learned Standing

Counsel, CBI.

[11] In the course of arguments, Mr. Das, learned Senior Counsel for

the petitioners laid emphasis on three aspects of law:

Firstly, the learned Special Judge could not have ordered re-investigation

of the case as re-investigation means fresh investigation, and hence, could

not have been so ordered


Secondly, for the offence committed by Company, if any, no vicarious

liability can be attached to the petitioners being Chairman, Directors and

employee of the Company

Thirdly, that, even if the allegations are taken on its face value yet no

offence is made out, and therefore, the chargesheet needs to be quashed.

[12] On the other hand, the learned Standing Counsel, CBI argued

that it is within the ambit of a Court sitting on a report under Section 173 CrPC

to reject the report an order further investigation.

[13] The learned Senior Counsel for the petitioners has placed reliance

on the cases of Vinay Tyagi v. Irshad Ali, reported in (2013) 5 SCC 762, Anju

Chaudhary v. State of U.P., reported in (2013) 6 SCC 384, Rama Chaudhary v.

State of Bihar, reported in (2009) 6 SCC 346, Chandra Babu v. State, reported in

(2015) 8 SCC 774, and State of Orissa v. Mahima, reported in (2007) 15 SCC

580.

[14] In Mahima (supra), the Orissa High Court had quashed a further

investigation done by the Crime Branch on the ground of abuse of process. As

against the order of the Orissa High Court, the State preferred an appeal. In the

context of the factual scenario, the Hon’ble Supreme Court re-iterated the law

laid down in Hemant Dhasmana vs CBI, reported in (2001) 7 SCC 536 holding

that power of police to conduct further investigation in terms of Section 173 (8)

Cr.PC is unfettered.

[15] In Rama Chaudhary (supra), the police after investigation had laid

a charge sheet against the accused persons. In the course of trial, a

supplementary charge sheet was laid against the accused person, wherein the


Investigating Agency had mentioned the name of 8 new witnesses. The prayer of

the prosecution to examine those witnesses was allowed by the Sessions Judge.

Aggrieved by the order of Sessions Judge, the accused preferred a Criminal

Revision before the Hon’ble High Court of Patna.The order of Sessions Judge

was upheld by the Hon’ble High Court. As against the order of High Court, the

accused approached the Supreme Court. The Supreme Court, while upholding

the order of High Court as well as the Court of Session, held that it is settled law

that carrying out further investigation, even after filing of the charge-sheet, is a

statutory right of the police. The material collected in further investigation

cannot be rejected only because it has been filed at the stage of the trial.

[16] The other relevant observation of the Hon’ble Supreme Court in

Rama Chaudhary (supra), was that the police has a right to “further”

investigation under sub-section (8) of Section 173 but not “fresh investigation” or

“reinvestigation”. The meaning of “further” is additional, more, or

supplemental. “Further” investigation, therefore, is the continuation of the

earlier investigation and not a fresh investigation or reinvestigation to be started

ab initio wiping out the earlier investigation altogether. It further held that Sub-

section (8) of Section 173 clearly envisages that on completion of further

investigation, the investigating agency has to forward to the Magistrate a

“further” report and not a fresh report regarding the “further” evidence

obtained during such investigation.

[17] In Vinay Tyagi v. Irshad Ali, reported in (2013) 5 SCC 762, as

relied upon by the learned Senior Counsel for the petitioners, the following

questions came up for consideration before the Supreme Court:


(i) Whether in exercise of its powers under Section 173 of the Code

of Criminal Procedure, 1973 (for short “the Code”), the trial court

has the jurisdiction to ignore any one of the reports, where there are

two reports by the same or different investigating agencies in

furtherance of the orders of a court? If so, to what effect?

(ii) Whether the Central Bureau of Investigation (for short “CBI”) is

empowered to conduct “fresh”/ “reinvestigation” when the

cognizance has already been taken by the court of competent

jurisdiction on the basis of a police report under Section 173 of the

Code?

[18] In the course of deliberations, the Hon’ble Supreme Court in

Vinay Tyagi v. Irshad Ali, reported in (2013) 5 SCC 762, held that investigation

can be of the following kinds:

(i) Initial investigation,

(ii) Further investigation,

(iii) Fresh or de novo or reinvestigation.

[19] The “initial investigation” is the one which the empowered police

officer shall conduct in furtherance of registration of an FIR. Such investigation

itself can lead to filing of a final report under Section 173(2) of the Code and

shall take within its ambit the investigation which the empowered officer shall

conduct in furtherance of an order for investigation passed by the court of

competent jurisdiction in terms of Section 156(3) of the Code.


[20] “Further investigation” is where the investigating officer obtains

further oral or documentary evidence after the final report has been filed before

the court in terms of Section 173(8). This power is vested with the executive. It is

the continuation of previous investigation, and therefore, is understood and

described as “further investigation”. The scope of such investigation is restricted

to the discovery of further oral and documentary evidence. Its purpose is to

bring the true facts before the court even if they are discovered at a subsequent

stage to the primary investigation. It is commonly described as “supplementary

report”. “Supplementary report” would be the correct expression as the

subsequent investigation is meant and intended to supplement the primary

investigation conducted by the empowered police officer. Another significant

feature of further investigation is that it does not have the effect of wiping out,

directly or impliedly, the initial investigation conducted by the investigating

agency. This is a kind of continuation of the previous investigation. The basis is

discovery of fresh evidence and in continuation of the same offence and chain of

events relating to the same occurrence incidental thereto. In other words, it has

to be understood in complete contradistinction to a “reinvestigation”, “fresh” or

“de novo” investigation.

[21] However, in the case of a “fresh investigation”, “reinvestigation”

or “de novo investigation” there has to be a definite order of the court. The

order of the court unambiguously should state as to whether the previous

investigation, for reasons to be recorded, is incapable of being acted upon.

Neither the investigating agency nor the Magistrate has any power to order or

conduct “fresh investigation”. This is primarily for the reason that it would be

opposed to the scheme of the Code. It is essential that even an order of


“fresh”/“de novo” investigation passed by the higher judiciary should always be

coupled with a specific direction as to the fate of the investigation already

conducted. The cases where such direction can be issued are few and far

between. This is based upon a fundamental principle of our criminal

jurisprudence which is that it is the right of a suspect or an accused to have a just

and fair investigation and trial. This principle flows from the constitutional

mandate contained in Articles 21 and 22 of the Constitution of India. Where the

investigation ex facie is unfair, tainted, mala fide and smacks of foul play, the

courts would set aside such an investigation and direct fresh or de novo

investigation and, if necessary, even by another independent investigating

agency.

[22] In Chandra Babu v. State, reported in (2015) 8 SCC 774, also

relied upon by the learned Standing Counsel, CBI, again an occasion arose

before the Hon’ble Supreme Court regarding the powers of Magistrate to pass

orders on further investigation and re-investigation. The Supreme Court

eventually held that under the Code of Criminal Procedure a Magistrate has

power to order further investigation but not reinvestigation.

[23] In view of the cases relied upon by the learned Senior Counsel, I

believe, it is not in dispute that once the Magistrate receives a report under

Section 173 CrPC on completion of investigation, ordering further investigation

is one of the courses open to the Magistrate.

[24] I may recall here the case of Abhinandan Jha v. Dinesh Mishra,

reported in (AIR 1968 SC 117) wherein the Supreme Court had the occasion to

deal with the question as to what is the position, when the Magistrate is dealing


with a report submitted by the police, under Section 173, that no case is made

out for sending up an accused for trial, which report is called as a ‘final report’?

[25] It was held in Abhinandan Jha (supra), that even in those cases, if

the Magistrate agrees with the said report, he may accept the final report and

close the proceedings. But there may be instances when the Magistrate may take

the view, on a consideration of the final report, that the opinion formed by the

police is not based on a full and complete investigation in which case the

Magistrate will have ample jurisdiction to give directions to the police, under

Section 156(3), to make a further investigation. That is, if the Magistrate feels,

after considering the final report, that the investigation is unsatisfactory, or

incomplete, or that there is scope for further investigation, it will be open to the

Magistrate to decline to accept the final report and direct the police to make

further investigation, under Section 156(3). The police, after such further

investigation, may submit a charge-sheet, or, again submit a final report,

depending upon the further investigation made by them. If, ultimately, the

Magistrate forms the opinion that the facts, set out in the final report, constitute

an offence, he can take cognizance of the offence, under Section 190(1)(b),

notwithstanding the contrary opinion of the police, expressed in the final report.

[26] Now, when the report, forwarded, under Clause (i) of Sub-

Section (2) of Section 173, by the officer-in-charge of a police station to the

Magistrate, comes up for consideration by the Magistrate, one of two different

situations may, as pointed out in Bhagwant Singh v. Commr. of Police, reported

in (1985) 2 SCC 537 may arise. The report may conclude that an offence appears

to have been committed by a particular person or persons and, in such a case,

the Magistrate may do one of three things: (i) he may accept the report and take


'cognizance' of the offence or offences, as the case may be, and issue process or

(ii) he may disagree with the report and drop the proceeding or (iii) he may

direct 'further investigation' under sub-section (3) of Section 156 and require the

police to submit a further report.

[27] In the case of Mithabhai Pashabhai Patel v. State of Gujarat,

reported in (2009) 6 SCC 332, the Hon’ble Supreme Court held that it is,

however, beyond any cavil that “further investigation” and “reinvestigation”

stand on different footing. It may be that in a given situation a superior court in

exercise of its constitutional power, namely, under Articles 226 and 32 of the

Constitution of India could direct a “State” to get an offence investigated and/or

further investigated by a different agency. Direction of a reinvestigation,

however, being forbidden in law, no superior court would ordinarily issue such

a direction. A distinction, therefore, exists between a reinvestigation and further

investigation.

[28] The relevant observations of Hon’ble Supreme Court, in

Mithabhai Pashabhai Patel (supra), are reproduced as follows:

“13. It is, however, beyond any cavil that “further investigation”

and “reinvestigation” stand on different footing. It may be that in

a given situation a superior court in exercise of its constitutional

power, namely, under Articles 226 and 32 of the Constitution of

India could direct a “State” to get an offence investigated and/or

further investigated by a different agency. Direction of a

reinvestigation, however, being forbidden in law, no superior

court would ordinarily issue such a direction.”

[29] The discussions, made above, may be summarized in the

following manner:


(i) That, police has a right to “further” investigation under sub-section

(8) of Section 173 but not “fresh investigation” or “reinvestigation”.

The meaning of “further” is additional, more, or supplemental.

“Further” investigation, therefore, is the continuation of the earlier

investigation and not a fresh investigation or reinvestigation to be

started ab initio wiping out the earlier investigation altogether.

(ii) In the case of a “fresh investigation”, “reinvestigation” or “de

novo investigation” there has to be a definite order of the court. The

order of the court unambiguously should state as to whether the

previous investigation, for reasons to be recorded, is incapable of

being acted upon. Neither the investigating agency nor the

Magistrate has any power to order or conduct “fresh investigation”.

It is essential that even an order of “fresh”/“de novo” investigation

passed by the higher judiciary should always be coupled with a

specific direction as to the fate of the investigation already

conducted.

(iii) If the Magistrate feels, after considering the final report, that the

investigation is unsatisfactory, or incomplete, or that there is scope

for further investigation, it will be open to the Magistrate to decline

to accept the final report and direct the police to make further

investigation, under Section 156(3). The police, after such further

investigation, may submit a charge-sheet, or, again submit a final

report, depending upon the further investigation made by them.

(iv) If in a given situation a superior court in exercise of its

constitutional power, namely, under Articles 226 and 32 of the


Constitution of India directs a “State” to get an offence investigated

and/or further investigated by a different agency wiping out previous

investigation such investigation would be called re-investigation.

Direction of a reinvestigation, however, being forbidden in law, no

superior court would ordinarily issue such a direction. A distinction,

therefore, exists between a reinvestigation and further investigation

[30] Thus, in the light of the cases, discussed hereinbefore, what

emerges is that if the Investigating Agency, after conducting investigation, lays a

charge sheet against the accused persons upon which Magistrate takes cognizance

and trial proceeds, what is permissible for the Police is to submit only additional

and further reports u/s 173 (8) Cr.PC and not a new and fresh report. However,

the said scenario cannot be conceived of in a situation where the Magistrate is

ordering further investigation in exercise of powers u/s 156(3) CrPC by rejecting

the opinion of Investigating Officer. Once such further investigation is ordered a

fresh investigation can be conducted and a new report can be filed and there

appears no hindrance in law that new opinion cannot be given. If it is argued

that even after ordering further investigation the Investigating Agency must stick

to its previous opinion, then the very purpose of further investigation would be

rendered nugatory.

[31] In the present case so far as the order of the learned Special Judge

is concerned he had ordered a re-investigation by the CBI and by a different

Officer. Keeping aside the use of expression re-investigation in the context of the

order, I may point out that the practice of ordering that investigation shall be

carried out by a particular Officer also came up for discussion in Hemant

Dhasmana v. CBI, reported in (2001) 7 SCC 536, wherein the Supreme Court


held in clear terms that it is not within the province of the Magistrate while

exercising the power under Section 173(8) to specify any particular officer to

conduct such investigation, not even to suggest the rank of the officer who

should conduct such investigation. Hence, the order of the learned Special Judge,

that investigation should be conducted by an officer other that Mr. R.C.

Basumatary, was not proper though on this count the order would not stand

vitiated.

[32] Now, coming to the use of expression re-investigation indeed in

view of the law laid down it would not have been permissible for the Special

Judge, to order re-investigation. But, the question which needs to be determined

here is whether by the impugned order a re-investigation has been conducted?

[33] The first test of re-investigation is that a fresh investigation

should, ordinarily, be conducted by an agency other than the one which has

already conducted investigation. The second aspect of re-investigation is

observation regarding previous mala fide investigation.

[34] In the present case, the learned Special Judge has only ordered re-

investigation by CBI, the same agency that conducted the previous investigation.

Secondly, there is no observation regarding any mala fides on the part of the

investigating agency regarding previous investigation. Hence, even though the

expression used is re-investigation, infact, what the learned Special Judge meant

was further investigation. The use of expression re-investigation, in the context

of present case, has to be termed as misnomer or a legally inaccurate expression.

Thus, not much can be read and should be read into the expression re-

investigation when otherwise only further investigation has been conducted in


terms of the power conferred by Section 156(3) CrPC which the learned Special

Judge possessed.

[35] Thus, the order of the learned Special Judge, cannot be assailed

on this ground.

[36] Now, coming to the other leg of arguments, made by the learned

Senior Counsel for the petitioners, about corporate criminal liability how far a

juristic person can be made criminally liable for offences remained an unsettled

issue till the case of Iridium India Telecom Ltd. v. Motorola Inc., reported in

(2011) 1 SCC 74. In this case, Iridium India had filed a criminal complaint against

Motorola Inc. alleging commission of offence under Section 420/120B IPC. The

complaint was quashed by the Bombay High Court. When the matter was

challenged in Hon’ble Supreme Court, by Iridium India, one of the grounds

taken by them was that the respondent Company cannot hide behind the

defence that the Company is incapable of possessing the necessary mens rea for

commission of the offence of cheating. While answering the rival arguments

made on the point of criminal liability of a corporate body the Hon’ble Supreme

Court, in Iridium India Telecom Ltd. (supra), held in categorical terms that a

corporation is virtually in the same position as any individual and may be

convicted of common law as well as statutory offences including those requiring

mens rea. The criminal liability of a corporation would arise when an offence is

committed in relation to the business of the corporation by a person or body of

persons in control of its affairs. In such circumstances, it would be necessary to

ascertain that the degree and control of the person or body of persons is so

intense that a corporation may be said to think and act through the person or


the body of persons. Mens rea is attributed to corporations on the principle of

“alter ego” of the company.

[37] The relevant paragraph in Iridium India Telecom Ltd. (supra), is

reproduced as follows;

63… it becomes evident that a corporation is virtually in the

same position as any individual and may be convicted of

common law as well as statutory offences including those

requiring mens rea. The criminal liability of a corporation would

arise when an offence is committed in relation to the business of

the corporation by a person or body of persons in control of its

affairs. In such circumstances, it would be necessary to ascertain

that the degree and control of the person or body of persons is so

intense that a corporation may be said to think and act through

the person or the body of persons. The position of law on this

issue in Canada is almost the same. Mens rea is attributed to

corporations on the principle of “alter ego” of the company.

[38] It was further held that a company/corporation cannot escape

liability for a criminal offence merely because the punishment prescribed is that

of imprisonment and fine.

[39] The learned Senior Counsel for the petitioners has referred to the

cases of Sunil Bharti Mittal vs CBI, reported in (2015) 4 SCC 609, Thermax

Limited vs K.M. Johny, reported in (2011) 13 SCC 412, Asoke Basak v. State of

Maharashtra, reported in (2010) 10 SCC 660, Maksud Saiyed vs State of Gujrat,


reported in (2008) 5 SCC 668, and S.K. Alagh vs State of U.P, reported in

(2008) 5 SCC 662.

[40] In Sunil Bharti Mittal (supra), a charge sheet was laid against 4

persons. However, when the matter was taken up for the cognizance, the Special

Judge held that Mr Sunil Bharti Mittal was Chairman-cum-Managing Director of

Bharti Cellular Ltd., Mr. Asim Ghosh was Managing Director of Hutchison Max

Telecom (P) Ltd. and Mr Ravi Ruia was a Director in Sterling Cellular Ltd., who

used to chair the meetings of its Board. According to him, in that capacity, these

persons, prima facie, could be treated as controlling the affairs of the respective

companies and represent the directing mind and will of each company. They

were, thus, “alter ego” of their respective companies and the acts of the

companies could be attributed and imputed to them. On this premise, the

Special Judge felt that there was enough material on record to proceed against

these three persons as well. Thus, while taking cognizance of the case, he

decided to issue summons not only to the four accused named in the charge-

sheet but the aforesaid three persons as well.

[41] On the facts of the case in Sunil Bharti Mittal (supra) itself it can

be said that this case may not be of any assistance to decide the present subject

matter as it is not the case of the petitioners that without they being named in

the charge sheet, processes have been issued against them without recording a

prima facie observation regarding their liability. The admitted position is that

petitioners have been charge sheeted as accused in the case in hand.

[42] In any view of the matter, the Hon’ble Supreme Court in Sunil

Bharti Mittal (supra), elucidated the law laid down in Iridium India (supra), and

held that the legal proposition that is laid down in the aforesaid judgment in


Iridium India (supra) is that if the person or group of persons who control the

affairs of the company commit an offence with a criminal intent, their criminality

can be imputed to the company as well as they are “alter ego” of the company.

[43] The cases of Thermax Ltd. v. K.M. Johny, reported in (2011) 13

SCC 412, Asoke Basak v. State of Maharashtra, reported in (2010) 10 SCC 660,

Maksud Saiyed v. State of Gujarat, reported in (2008) 5 SCC 668 andAsoke

Basak v. State of Maharashtra, reported in (2010) 10 SCC 660 do not seem to

have deviated from the law laid down in Iridium India (supra), rather on factual

analysis the Hon’ble Supreme Court found that no case is made out. Whether in

the present case offence is made out against the petitioners is being discussed

hereinafter.

[44] In S.K. Alagh v. State of U.P., reported in (2008) 5 SCC 662, a

criminal complaint was filed against the Managing Director and the General

Manager of Britannia Industries Ltd for offence under Section 405 IPC. The

company itself was not made an accused. It was in these context the Hon’ble

Supreme Court had held that as, admittedly, drafts were drawn in the name of

the Company, the Managing Director, 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.

[45] The ratio of S.K. Alagh (supra) is not found to be applicable in

the present case because in S.K. Alagh (supra), it was the company which was

alleged to have committed the offence, but instead of making the company as


accused its Managing Director was impleaded as accused on the principles of

vicarious liability. However, in the present case company has been made accused

and the petitioners are alleged to be the directing mind and will of the company

as its Directors.

[46] What emerges from the discussion undertaken hereinbefore is as

follows:

(i) A corporation is virtually in the same position as any individual

and may be convicted of common law as well as statutory offences

including those requiring mens rea. The criminal liability of a

corporation would arise when an offence is committed in relation to

the business of the corporation by a person or body of persons in

control of its affairs. In such circumstances, it would be necessary to

ascertain that the degree and control of the person or body of

persons is so intense that a corporation may be said to think and act

through the person or the body of persons.

(ii) If the company is not impleaded as an accused its Managing

Director or any other Official cannot be made vicariously liable for

the acts committed by the company

(iii) If on a reading of uncontroverted facts no offence is made out a

complaint or proceeding can be quashed.

[47] It now needs to be seen as to what is the nature of allegations

against the petitioners.

[48] The petitioners 1, 2 and 3 in Criminal Petition No. 192/2016 are

the Directors of Meghalaya Cements Ltd, a company registered under the


Companies Act, 1956 and the petitioner No. 4 is an employee of the said

Company. On the other hand, the petitioner in Criminal Petition No. 189/2016

is the Chairman of said Meghalaya Cements Ltd. On a reading of the

chargesheet, dated 27.3.2014, appended as Annexure 4 to this petition, the

allegation against the petitioners is that during the period of 2008-2011 some

officials of North Eastern Coal Fields, CIL, entered into criminal conspiracy with

Sri Kailash Chand Lohia, Director of Meghalaya Cements Ltd. to facilitate misuse

of coal supplied from NEC, CIL under subsidized rates as per National Coal

Distribution Policy of Govt. of India. As per the Fuel Supply Agreement, done

between NEC/CIL and Sri Kailash Chand Lohia for Meghalaya Cements Ltd, coal

to the tune of 38,000 metric tonnes per annum was allotted to the Unit.

Accordingly, the firm had lifted 70,413 metric tonnes of coal from NEC, CIL.But,

instead of transporting the said coal to Meghalaya Cements Ltd, the Director

diverted the said coal for use in M/s K.D. Coke, Jorabat. The coal was allotted

and lifted at the rate of Rs 3680/- per tonne and rate fixed under E-auction

wasRs 3851/-. The quantity of coal lifted by Meghalaya Cements Ltd would have

fetched an amount of Rs 15,50,25,136/- to the CIL it sold through e-auction

open market. Hence, wrongful loss was caused to CIL.

[49] As against the heading “Charge” in Annexure 4, an elaborate

factual allegations have been portrayed. Though there are enough incriminating

circumstances as to how the coal obtained at subsidized rate was misused for

purpose other than the purpose meant for Meghalaya Cements Ltd. it would be

sufficient for the purpose of present adjudication if some sets of allegations are

brought on record.


[50] One of the allegation is that during investigation it was revealed

that consignment of coal lifted from NEC, CIL had to be transported through

Taxation Check Gate, Byrnihat, Megahalaya. It was revealed that a total of 2956

numbers of trucks was shown to have crossed Byrnihat Check gate carrying coal

from NEC, CIL in the name of Meghalaya Cements Ltd to its factory premises

Topcem Cements. These movements of trucks were verified with the

Commissioner of Taxes, Meghalaya, Shillong with a request to verify whether

the alleged movement of 2956 numbers of trucks infact took place. The

Commissioner of Taxes in his communications to CBI informed that a total of

295 numbers of truck had crossed the Taxation Check Gate. The Superintendent

of Taxes, however, informed that a total of 278 numbers of truck had crossed

the check Gate during the period of 1/7/2008 to 31/03/2011. Again, as per the

information received from the Superintendent of Taxes, of the total 278 trucks

not all the trucks had transported coal, rather; some of the trucks had

transported Fly Ash, Coke, LPG etc though the road permits show that coal was

transported. The Investigating Agency, thus, infers that if one truck can transport

23 MT coal, then 295 trucks could transport only 6785 MT of coal, thereby

showing, that 63,628 MT coal was diverted by Meghalaya Cements Ltd.

[51] The other allegation is that Office Stamp of Taxation Check Gate,

the Seal impression of Taxation Inspector appearing on the Road Challan,

Permits, Transport Documents of the Meghalaya Cements Ltd. transporting the

coal, were fake stamp and fake stamp signatures.

[52] These two sets of allegations, among a host of other allegations

are quite incriminating in nature. In State of Haryana v. Bhajan Lal, reported in

1992 Supp (1) SCC 335, certain circumstances were laid down by the Hon’ble


Supreme Court when a complaint/FIR can be quashed. Those circumstances are

as follows:

(i) Where the allegations made in the first information report or the

complaint, even if they are taken at their face value and accepted in

their entirety do not prima facie constitute any offence or make out a

case against the accused.

(ii) Where the allegations in the first information report and other

materials, if any, accompanying the FIR do not disclose a cognizable

offence, justifying an investigation by police officers under Section

156(1) of the Code except under an order of a Magistrate within the

purview of Section 155(2) of the Code.

(iii) Where the uncontroverted allegations made in the FIR or

complaint and the evidence collected in support of the same do not

disclose the commission of any offence and make out a case against

the accused.

(iv) Where, the allegations in the FIR do not constitute a cognizable

offence but constitute only a non-cognizable offence, no investigation

is permitted by a police officer without an order of a Magistrate as

contemplated under Section 155(2) of the Code.

(v) Where the allegations made in the FIR or complaint are so absurd

and inherently improbable on the basis of which no prudent person

can ever reach a just conclusion that there is sufficient ground for

proceeding against the accused.


(vi) Where there is an express legal bar engrafted in any of the

provisions of the Code or the concerned Act (under which a criminal

proceeding is instituted) to the institution and continuance of the

proceedings and/or where there is a specific provision in the Code or

the concerned Act, providing efficacious redress for the grievance of

the aggrieved party.

(vii) Where a criminal proceeding is manifestly attended with mala

fide and/or where the proceeding is maliciously instituted with an

ulterior motive for wreaking vengeance on the accused and with a

view to spite him due to private and personal grudge.

[53] Applying the test laid down in the case of Bhajan Lal (supra) it

cannot be said, in the context of present case, that even uncontroverted

allegations do not make out any case. As there are strong prima facie materials

of tax evasion, cheating, and forgery, on facts, no case is made out for quashing

the proceedings.

[54] There is yet another aspect on which arguments have been

advanced and which needs appreciation. It is the contention of petitioners,

particularly in Criminal Petition No. 192/2016, that petitioner No. 4 Sri

Girdharilal Bathwal is only a Manager (Stores) and that he has been wrongly

implicated in this case. However, on perusal of charge sheet, Annexure 4, it is

found that petitioner No. 4, as Senior Manager (Stores), created false records of

receipt of coal consignments. I believe, embarking into any kind of inquiry to

ascertain the truthfulness of such allegations, at this stage, would be highly

prejudicial to the prosecution case. Hence, the argument has no force.


[55] As to the culpability of the petitioners, in both the cases, I may

point out certain observation of Courts in England, which have quoted with

approval in Iridium India (supra).

[56] In Director of Public Prosecutions v. Kent and Sussex Contractors

Ltd. reported in (1944) 1 All ER 119 (DC) it was held that a body corporate is a

“person” to whom, amongst the various attributes it may have, there should be

imputed the attribute of a mind capable of knowing and forming an intention —

indeed it is much too late in the day to suggest the contrary. It can only know or

form an intention through its human agents, but circumstances may be such that

the knowledge of the agent must be imputed to the body corporate.

[57] Lord Denning in Bolton (H.L.) (Engg.) Co. Ltd. v. T.J. Graham &

Sons Ltd. reported in (1957) 1 QB 159 summarized his findings in the following

words:

A company may in many ways be likened to a human body. They have a

brain and a nerve centre which controls what they do. They also have

hands which hold the tools and act in accordance with directions from

the centre. Some of the people in the company are mere servants and

agents who are nothing more than hands to do the work and cannot be

said to represent the mind or will. Others are directors and managers

who represent the directing mind and will of the company, and control

what they do. The state of mind of these managers is the state of mind of

the company and is treated by the law as such. So you will find that in

cases where the law requires personal fault as a condition of liability in

tort, the fault of the manager will be the personal fault of the company.

That is made clear in Lord Haldane’s speech in Lennard’s Carrying Co.


Ltd. v. Asiatic Petroleum Co. Ltd. So also in the criminal law, in cases

where the law requires a guilty mind as a condition of a criminal offence,

the guilty mind of the directors or the managers will render the company

themselves guilty.

[58] The petitioners being directly involved in the affairs of Meghalaya

Cements Ltd, and admittedly holding positions like Chairman and Directors of

the Company cannot get any reprieve by way of an application under Section

482 Cr.PC because of the nature of materials unearthed during investigation. It

would, thus, not be proper to invoke the jurisdiction vested in this Court under

Section 482 Cr.PC and quash the proceedings of GR 854/2014 pending in the

Court of Special Judicial Magistrate, Assam, Guwahati.

[59] Lastly, an argument has been made with reference to the order in

WP (C) 243/12 of this Court in order to show that dispute is civil in nature.

However, in view of the incriminating materials, already discussed hereinbefore,

this Court is not inclined to go into deeper aspects of the merits of defence. The

petitioners will be able to take all such defences as would be available to them

under law when the trial proceeds.

[60] In the result, the petitions are dismissed. The interim order passed

earlier stands vacated.

JUDGE

Nilakhi