SRI NARENDRA KUMAR A. BALDOTA versus THE STATE OF KARNATAKA on 14 March 2022

SRI NARENDRA KUMAR A. BALDOTA

v.

THE STATE OF KARNATAKA

(Criminal Appeal No. 429 of 2022)

MARCH 14, 2022

[INDIRA BANERJEE AND J. K. MAHESHWARI, JJ.]

Code of Criminal Procedure, 1973: s. 482 – Quashing ofproceedings – M Company of which appellant is the Chairman andManaging Director, imported a car for which customs duty androad tax was paid – Thereafter, differential motor vehicle tax wasdemanded in respect of the said vehicle and the same was paid, andno Dues Certificate was also issued – FIR filed against appellantthat he conspired with Regional Transport Officer to evade paymentof road tax– Petition seeking quashing of proceedings– Dismissedby the High Court – On appeal, held: Criminal law cannot be setinto motion as a matter of course – Summoning of an accused in acriminal case is a serious matter - Before summoning, the Magistratehas to record his satisfaction of a prima facie case against theChairman, Managing Director or officer of a company in his/herown capacity – On facts, there is no whisper of how and in whatmanner the appellant abetted the commission of any offence – Nodocument submitted in connection with the vehicle imported by MCompany being fake or fabricated – Allegations in the FIR readwith the chargesheet filed by the Lokayuktha Police only disclosesshort payment of road tax – There is only a vague, bald allegationof collusion and conspiracy to defraud the State of revenue, whichis devoid of any material particulars – Thus, proceedings againstthe appellant are misconceived, harassive, in abuse of process oflaw and have been initiated without proper application of mind –Prevention of Corruption Act, 1988:ss. 13(1)(c), 13(1)(d), 13(2) –Penal Code – ss. 120B and 420.

Allowing the appeal , the Court

HELD: 1.1 The appellant is Chairman and ManagingDirector of the corporate entity, which purchased the vehicle inquestion. There is not a whisper in the chargesheet of the specific

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Arole played by the appellant or how he committed the offence ofcheating. [Para 24][980-E-F]

1.2. Criminal law cannot be set into motion as a matter ofcourse. Summoning of an accused in a criminal case is a seriousmatter. To set Criminal law into motion, the order of theBMagistrate summoning the accused, must reflect that he hasapplied his mind to the facts of the case. Before the Magistrateissues summons to a Chairman, Managing Director, Director orany other official of the company, the Magistrate has to recordhis satisfaction of a prima facie case against him/her in his/herown capacity is sine qua non for initiation of criminal proceedingsCagainst a Chairman, Managing Director or officer of a company.It is well settled that no official of a company can be dragged intocriminal proceedings only in his/her capacity as official of thecompany, without any specific role attributed to him/her in relationto the offence alleged against the company. [Para 25][980-F-H;D981-A]

1.3. Short payment of tax per se is not a criminal offence.The High Court ordinarily would exercise its jurisdiction underSection 482 Cr.P.C., if the allegations made in the FIR taken tobe correct in entirety, do not make out any offence. When theEallegations made in the FIR or evidence collected duringinvestigation do not satisfy the ingredients of an offence, thesuperior Courts would not encourage harassment of a person ina Criminal Court. [Para 29][984-B-C]

Devendra v. State of U.P. (2009) 7 SCC 495 : [2009]F(7) SCR 872 – referred to.

1.4. In the instant case, the allegations in the FIR readwith the chargesheet filed by the Lokayuktha Police only disclosesshort payment of road tax. There is only a vague, bald allegationof collusion and conspiracy to defraud the State of revenue, whichGis devoid of any material particulars. [Para 32][985-D-E]

1.5. The Appellant has not questioned initiation of criminalproceedings against any of the other accused persons. He has nointention of stalling proceedings against any person involved insmuggling cars or forging or fabricating documents or committing H

any other illegal activities. He has questioned the legality ofinitiation of proceedings against him for alleged short payment ofroad tax in respect of a vehicle owned by the company of whichhe is Chairman and Managing Director even though, the allegeddeficit road tax had been paid by the company within one monthof issuance of demand notice. [Para 37][987-C-D]

1.6. There is no whisper of how and in what manner theappellant has abetted the commission of any offence. It is nobody’scase that any document submitted in connection with the vehiclein question imported by M/s MSPL Limited is fake or fabricated.That is not the charge, so far as the appellant is concerned. Ittranspires that in case of some of the cars, the owners had declaredthe selling rates at the factory as the value of the car, and not theon road value which would be about three times the factory value.[Para 38][987-E-F]

1.7 The mere fact that demand notice may have been issuedand the differential tax realized before institution of the privatecomplaint is inconsequential. Either the charges disclose anoffence of defrauding the State of revenue or the offence ofdefrauding the State of revenue not made out. The question iswhether the materials on record disclose any criminal act on thepart of these Appellants. The answer cannot but be in the negative.[Para 42][988-D-E]

1.8 It is submitted that the Company had paid full road taxas charged by the Motor Vehicles Authorities, on the basis of theactual invoice value of the car. No further amount was payable.However, when the RTO raised a notice of demand for Rs. 21lakh odd in 2012, the company did not raise any dispute since theamount claimed was a small amount for the Company, which hada turnover of crores of rupees. [Para 44][988-G-H]

1.9 The proceedings against the appellant are misconceived,harassive, in abuse of process of law and have been initiated withoutproper application of mind. Further proceedings against theappellants in the Court below, shall remain stayed. [Para 45][989-A]

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AS.V. Nandaraju and others Writ Petition No. 41103/2016 (GM-RES) dated 19th December, 2019; S.Rajendran v. State of Karnataka & Others CriminalPetition No. 3087 of 2018; K.J. Kruruvilla v. State ofKarnataka & Another Criminal Petition No. 344 of2017; Ravindranatha Bajpe v. Mangalore SpecialBEconomic Zone Limited and Others 2021 SCC OnlineSC 806; Maksud Saiyed v. State of Gujarat (2008) 5SCC 668 : [2007] (9) SCR 1113; State of Haryana v.Bhajan Lal (1992) Supp (1) SCC 335 : [1990] (3) Suppl.SCR 259; G. Sagar Suri & Another v. State of U.P. andCOthers (2000) 2 SCC 636 : [2000] (1) SCR 417; JosephSalvaraj A. v. State of Gujarat and Others (2011) 7SCC 59 : [2011] (8) SCR 815 - referred to.

From the Judgment and Order dated 22.10.2021 of the High Courtof Karnataka, Dharwad Bench in Criminal Petition No.100167 of 2017.

FMukul Rohatgi, Sr. Adv., Mahesh Agarwal, M. S. Ananth,Anshuman Srivastava, Rohan Talwar, E. C. Agrawala, Advs. for theAppellant.

Shubhranshu Padhi, Ashish Yadav, Rakshit Jain, Vishal Banshal,Advs. for the Respondent.GThe Judgment of the Court was delivered by INDIRA BANERJEE, J.

1. Leave granted.

2. This Appeal is against an order dated 22[nd] October 2021 passedHby the Dharwad Bench of the High Court of Karnataka dismissing the

Criminal Petition being CRL.P. No.100167 of 2017 filed by the Appellantunder Section 482 of the Code of Criminal Procedure (“Cr.P.C.”), seekingto quash the proceedings against the Appellant in Crime No.69/2012 onthe file of the III Additional District and Sessions Judge, Ballari laternumbered as Special Case No.04/2016 for offences punishable underSections 13(1)(c) and 13(1)(d) read with Section 13(2) of the Preventionof Corruption Act, 1988 (hereinafter referred to as “the P.C. Act”) andSections 120B and 420 of the Indian Penal Code (“IPC”).

3. The Appellant is the Chairman and Managing Director of M/sMSPL Limited. In 2010, MSPL Limited imported an Aston Martin Rapidecar for which the Company paid the applicable customs duty. TheCompany also paid road tax to the Regional Transport Office (RTO),Hosapete.

4. One Jagadish B.N., Advocate filed a private complaint in theCourt of XXIII Additional City Civil Sessions Judge, Bangalore City andSpecial Judge, Prevention of Corruption Act, Bangalore Urban District,Bangalore City alleging that there was collusion and conspiracy betweenRTOs in Karnataka as a result of which appropriate road tax was notbeing collected. It was alleged that cars were being imported in Karnatakafor which RTO was not charging road tax as per the actual cost.

5. By an order dated 7[th] August 2012, the Court of XXIII AdditionalCity Civil & Special Judge, Prevention of Corruption Act Bengalurupassed an order referring the complaint to the Superintendent of Police,Lokayuktha, Bengaluru Urban, under Section 156(3) of the Cr.P.C. with adirection to constitute a team of four Deputy Superintendents of Policeto investigate the matter and report. On 14[th] August 2012, FIR in respectof the complaint was registered at the Lokayuktha Police Station, Bengaluru,Urban and a criminal case being Crime No.69/2012 was started.

6. Some relevant observations and/or findings in the order dated7[th] August 2012 of the XXIII Additional City Civil Sessions Judge,Bangalore City and Special Judge, Prevention of Corruption Act,Bangalore Urban District, Bangalore City are as follows:

“This complaint is filed under section 200 of Cr.P.C. on06.08.2012 by the complainant Mr. Jagadeesh B.N, advocateand the complainant claims that a huge scam has taken placein connection with imported cars, more particularly Bentleyand Ferari cars.

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5. The complaint claims that huge scam has taken placeregarding registration of Foreign cars that are imported toIndia more particularly Bentley and Ferari. The complainantclaims that the vehicle dealers, middle man, smugglers acrossthe country and owners of the imported vehicle at Mangalorehave misquoted and collected the price of Bentley and Feraricar have come away with the registration, and in the processhave also managed suppress the brand names of the cars.The complainant claims that he is unable to procure that factswhich have been hidden and buried at high publicfunctionaries and it is only an authorised investigating agencythat can unearth the fraud taken place regarding the fraudin the registration.

6. The complainant claims that after a tax investing exposedthe alleged smuggling operation, nervous members of thesuper-rich have scrambled to avoid arrest by abandoningcars, including Bentleys and Astoria Martins on the streets ofNew Delhi and it is reported and a copy photograph is madeavailable. The complainant claims that the said document isdown loaded from the internet.

7. The Complainant claims that more than 500 cars enteredIndia and majority have been illegal or illegal means and togeneral car registered it requires the payment of tax of 18%of the amount. The complainant claims that to get a carregistered in the passport authorities, and approved procedureis laid down by the Motor Vehicles Act, more particularly acustom duty of 10% should have been paid.

8. Complaint further claims that not less than 500 cars enteredin Karnataka and for name sake 4 to 5 car were mentionedas Bentley and remaining cars have been registered bysuppressing the brand name and more than 98% have beenregistered on the basis of invoice and not on the basis ofcash bill.

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11. The complainant further claims that the manufacturingrate of Bentley car is 1.16 crores for basic model and carwhich have entered Bangalore range from basic model to top end. The selling rate at the factory ord is 86,000 pounds i.e.,Rs.1,16,00,000/- and on road the value of Bentley car wouldgo beyond Rs.3 crores for a car and if formalities are properlycomplied with. The complainant further claims that top endmodel would range up more the Rs.6 crores.

12. The complainant also claims that the racket is done withextraordinary brilliance and intelligence and it is abettingcome and also influencing the public servant in getting theircar registered and unless proper investigation agencyconducted fair, equal and comprehensive investigation, thefraud cannot be unearthed……

13. The complainant further claims that the majority of thedealers who have not disclosed their identity in Bangaloreafter receiving the assignment, have based on the documentsonly invoice which totally not explained and have cleverlyavoided the cash receipt being given, for the reason that themajority of the authorized dealer are not entitled to deal withthe vehicle.

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20. The complainant claims that the accused persons areprivate individual and no sanction is necessary to takecognizance against them the complainant orally submits thatthe accused persons have abetted and influenced the publicservants for committing the offences and the investigatingagency would get the definite picture orally after ascertainingwith the concerned transport authority at different levels andat different parts of Karnataka, but mainly in Bangalore asthe cars moved from Bangalore and fabrication and forgeryof documents took place in Bangalore, besides abetments (sic)to commit offence under prevention of corruption actcomplainant further claims that a full scale investigation isrequired by independent agency.

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24. The complainant further orally submitted that, few vehicleswere registered with take documents in the transport authorityin India and thereafter in Karnataka through Bangalore moreparticularly rural areas and thereafter they go away from the A

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state and will be applied in different parts it is further submittedthat for registration the documents are necessary and onethe registration is the certificate given by the R.T.O. in thatevent the different between the fake and genuine paperspertaining to the presence of the motors vehicles get vanished.

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28. The Complainant claims that the accused persons whoare the dealers, distributors in Bangalore, other places haveforged the documents and have successfully abated the publicservants (Transport Authorities) and have got the registrationof the said vehicles illegally and have resulted in the loss ofcrores and cores of rupees and in the process have cheatedthe Government Public at large. He further submits that mafiain the form of a ‘net work’ is behind the scam.

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31. In the cell all context and circumstances of the case andafter recording the complainant his grievance and contentsof the complaint at this stage I am of the sincere view that is itjust and proper that only a comprehensive investigation isnecessary by the superintendent of police, lokayuktaEBangalore urban by constitute a team of four Dy. SP andentrust the matter to them to investigation and to report. HenceI proceed to pass the following

ORDER

The complaint is referred to superintendent of Police,Lokayukta, Bangalore Urban under Section 156(3) of Cr.P.C.with a direction to constitute a team of four Dy. S.P. forinvestigating the matter and to report. “

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7. The Appellant is neither a vehicle dealer nor a middle man nora smuggler. He is not even the owner of the vehicle in question but onlyGthe Chairman/Managing Director of M/s MSPL Limited, the Companywhich has imported the vehicle, and got the same registered. Neitherthe Appellant nor the Company of which the Appellant is the ManagingDirector has abandoned any vehicle.

8. On 27[th] February 2013, the RTO, Hosapete issued a demandHnotice to M/s MSPL Limited demanding differential motor vehicle tax of Rs.20,44,468/- in respect of the vehicle in question. M/s MSPL Limitedimmediately complied with the demand and paid the demanded sum ofRs.20,44,468/- in full on 20[th] March 2013, after which the RTO, Hosapeteissued a “No Dues Certificate” to M/s MSPL Limited.

9. On 2[nd] November 2015, Lokayuktha Police issued a noticedated 13[th] October 2015 to the RTO, Ballari. By a letter dated 2[nd]November 2015, the RTO informed the Lokayuktha Police that M/sMSPL Limited had paid the entire deficit tax.

10. On 8[th] December 2015, Lokayuktha Police filed an inquiryreport-cum-chargesheet in the aforesaid case being Crime No. 69/2012under Sections 13(1)(c), 13(1)(d) and 13(2) of the P.C. Act, 1988 andSections 120B and 420 of IPC.

11. In the chargesheet, it is alleged that the Appellant had conspiredwith one Mr. K. Pampapati, Regional Transport Officer, Hosapete andMr. Shanmukh Naik Superintendent, Office of Regional TransportOfficer, Hosapete to evade payment of an amount of Rs.20,44,468/-towards road tax.

12. Pursuant to the chargesheet filed by the Lokayuktha Police,against the Appellant and others, Special Case No.4 of 2016 was startedin the Court of the III Additional District and Sessions Judge, Ballarisitting at Hosapete.

13. By an order dated 4[th] November 2016, in Special Case No.4/2016, the learned III Additional District and Sessions Judge, Ballari sittingat Hosapete took cognizance and issued summons to the Appellant.

14. Thereafter, the Appellant filed Criminal Petition No.100167 of2017 before the Dharwad Bench of the High Court of Karnataka underSection 482 of the Cr.P.C., praying that the proceedings in Special CaseNo.4/2016 on the file of the III Additional District and Sessions Judge,Ballari sitting at Hosapete be quashed as against the Appellant.

15. Section 8A of the Karnataka Motor Vehicles Taxation Act,1957 provides as follows:- “8A. Collection of tax escaping payment.- If at any time it isfound that the amount of tax paid for any period in respect ofany motor vehicle falls short of the tax payable under thisAct, then, notwithstanding any incorrect entry or the absenceof any entry in the certificate of registration relating to the A

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Amotor vehicle regarding the tax payable in respect of suchvehicle or the issue of a taxation card or an entry havingbeen made in such taxation card regarding the payment oftax for such period, the taxation authority may, after noticeto the registered owner or person having possession or controlof the motor vehicle and giving him an opportunity of beingBheard recover the difference between the tax so paid and thetax payable by such owner or person”.

16. In the said petition, the Appellant pointed out that short collectionin road tax, if any, could be collected from the owner of the vehicle,under Section 8A of the Karnataka Motor Vehicles Taxation Act, 1957.COn receipt of demand notice, M/s MSPL Limited, the owner of thevehicle in question, had paid the differential tax. M/s MSPL Limited haddeposited the entire road tax in full.

17. By an interim order dated 14[th] February 2017, the DharwadBench of the High Court of Karnataka was pleased to stay the criminalDproceedings against the Appellant. The interim order was extended fromtime to time.

18. By the judgment and order dated 22[nd] October 2021 impugnedin this Court, the High Court dismissed the Criminal Revisional Petitionbeing CRL.P. No.100167 of 2017.E

19. It is the case of the Appellant that on 19[th] December 2019, theBengaluru Bench of the High Court of Karnataka allowed a Writ Petition/Criminal Revisional Petition filed by one S.V. Nandaraju and others beingWrit Petition No.41103/2016 (GM-RES) and quashed proceedings initiatedagainst petitioners in the aforesaid case, S.V. Nandaraju, which aroseFfrom the same chargesheet as in the present case. The High Courtheld:- “23. In that view of the matter, as already noticed, theoccurrence of the events and accrual of cause of action inthe present set of matters were between the years 2003 and2006. The private complaint under Section 200 of Cr.P.C. wasregistered on 06.08.2012, while the FIR was registered on14.08.2012. It is an admitted fact that except petitioners No.6and 7, in Crl.P.No.5130/2016, who retired in the year 2013and 2015 respectively, the other petitioners had alreadyretired, way back in the year 2006-2007. Some of the G

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petitioners continue to serve. However, as noticed earlier theState Government had declined to sanction prosecutionagainst the serving employees. It was also observed in theGovernment Order that two of the employees had alreadyretired and therefore the State Government declined tosanction prosecution. Furthermore, the State Government,while pointing out to Section B(a) of the Taxation Act, hadobserved that if there was short collection of tax, the differencecould be collected from the owners of the vehicles. It is anadmitted fact that the owners of the vehicles were called uponto pay the difference amount and the same has been paid bythem. Consequently, the criminal proceedings against theowners of the vehicles were quashed by this Court.Further,as held by the State Government, since Section 21 of theTaxation Act protects the Officers who acted in good faith,and since sanction to prosecute was declined by the StateGovernment, the same benefit is required to be granted to thepetitioners who are similarly placed. Some of the petitionershave already got the benefit of the order passed by theGovernment.”

20. Mr. Rohatgi, learned Senior Counsel appearing for theAppellant drew attention of this Court to an order dated 26[th] September2019 passed by the Bengaluru Bench of the High Court of Karnatka inCriminal Petition No.3087 of 2018 titled S. Rajendran v. State ofKarnataka & Others and an order dated 11[th] December 2019 passedby another Bench of the High Court of Karnatka at Bengaluru in CriminalPetition No.344 of 2017 (K.J. Kruruvilla v. State of Karnataka &Another). In both the cases, the criminal revisional petitions wereallowed and the proceedings against the petitioners were quashed.

21. In the case of S. Rajendran (supra) he had purchased aToyota Prado vehicle, which was registered on 3[rd] November 2007.Pursuant to the private complaint filed by the Respondent No. 2, FIRwas registered and chargesheet was filed on 28[th] November 2016. Inthe meanwhile, on 28[th] July 2010, a notice was issued demanding a sumof Rs.2,83,480/-. At the time of hearing, the petitioner in Criminal PetitionNo.344 of 2017 produced a receipt acknowledging payment of theaforesaid amount. Taking note of the fact that there was no materialannexed to the chargesheet against the petitioner, S. Rajendran, in A

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ACriminal Petition No.3087 of 2018, and that payment of differential taxhad been made before filing of the private complaint, the petition wasallowed.

22. In the case of the K.J. Kuruvilla (supra), the petitioner hadpurchased a Range Rover which was registered on 30[th] March 2007. AtBthe time of Registration, the petitioner was called upon to pay Rs.9,99,628/- towards Life Time Tax. Later the vehicle was sold on 11[th] March2011. Thereafter, the petitioner was called upon to pay differential tax ofRs.19,045/- which was paid. Relying on S. Rajendran(supra), Criminalproceedings against K.J. Kuruvilla were also quashed. Under Section8A of the Karnataka Motor Vehicle Taxation Act, 1957 a notice isCrequired to be issued to the petitioner to explain how there was shortfallin collection of tax and thereafter the petitioner is required to pay thedifferential amount, if any.

23. The chargesheet filed by the police is totally vague and devoidof material particulars. The charges in the Chargesheet were identicalDstereotype charges. Only the dates of registration and the deficit feeamount varied from case to case. On such stereotype charge is as follows:- “On 10.01.2011 at the time of registering the vehicle shownin Column No.4, indulged with the officers shown in columnNo.2 and hatched a criminal conspiracy by paying deficitEfee of Rs.20,44,468/- causing loss of revenue to Governmentand thus committed offence of cheat.”

24. As observed above, the Appellant is Chairman and ManagingDirector of the corporate entity, which purchased the vehicle in question.There is not a whisper in the chargesheet of the specific role played byFthe Appellant or how he committed the offence of cheating.

25. Criminal law cannot be set into motion as a matter of course.Summoning of an accused in a criminal case is a serious matter. To setCriminal law into motion, the order of the Magistrate summoning theaccused, must reflect that he has applied his mind to the facts of theGcase. Before the Magistrate issues summons to a Chairman, ManagingDirector, Director or any other official of the company, the Magistratehas to record his satisfaction of a prima facie case against him/her inhis/her own capacity is sine qua non for initiation of criminal proceedingsagainst a Chairman, Managing Director or officer of a company. It iswell settled that no official of a company can be dragged into criminalH

proceedings only in his/her capacity as official of the company, withoutany specific role attributed to him/her in relation to the offence allegedagainst the company.

26. InRavindranatha Bajpe v. Mangalore Special EconomicZone Limited and Others[1], this Court held:-

Procedure

“……All of them are arrayed as an accused as Chairman,Managing Director, Deputy General Manager (Civil & Env.),Planner & Executor, Chairman and Executive Directorrespectively. Therefore, as such, in absence of any specificallegations and the specific role attributed to them, the learnedMagistrate was not justified in issuing process against accusednos. 1 to 8 for the offences punishable under Sections 427,447, 506 and 120B read with Section 34 IPC.

26. As observed by this Court in the case of Pepsi FoodsLtd. v. Special Judicial Magistrate, (1998) 5 SCC 749 andeven thereafter in catena of decisions, summoning of anaccused in a criminal case is a serious matter. Criminal Lawcannot be set into motion as a matter of course. In paragraph28 in Pepsi Foods Limited (supra), it is observed and held asunder:

“28. Summoning of an accused in a criminal case is aserious matter. Criminal law cannot be set into motionas a matter of course. It is not that the complainant hasto bring only two witnesses to support his allegations inthe complaint to have the criminal law set into motion.The order of the Magistrate summoning the accusedmust reflect that he has applied his mind to the facts ofthe case and the law applicable thereto. He has toexamine the nature of allegations made in the complaintand the evidence both oral and documentary in supportthereof and would that be sufficient for the complainantto succeed in bringing charge home to the accused. Itis not that the Magistrate is a silent spectator at thetime of recording of preliminary evidence beforesummoning of the accused. The Magistrate has tocarefully scrutinise the evidence brought on record and A

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may even himself put questions to the complainant andhis witnesses to elicit answers to find out the truthfulnessof the allegations or otherwise and then examine if anyoffence is prima facie committed by all or any of theaccused.”

27. As held by this Court in the case of India InfolineLimited (supra), in the order issuing summons, the learnedMagistrate has to record his satisfaction about a prima faciecase against the accused who are Managing Director, theCompany Secretary and the Directors of the Company andthe role played by them in their respective capacities whichis sine qua non for initiating criminal proceedings againstthem.Looking to the averments and the allegations in thecomplaint, there are no specific allegations and/or avermentswith respect to role played by them in their capacity asChairman, Managing Director, Executive Director, DeputyGeneral Manager and Planner & Executor. Merely because they are Chairman, Managing Director/Executive Directorand/or Deputy General Manager and/or Planner/Supervisorof A1 & A6, without any specific role attributed and the roleplayed by them in their capacity, they cannot be arrayed asan accused, more particularly they cannot be held vicariously liable for the offences committed by A1 & A6.”

27. In Maksud Saiyed v. State of Gujarat[2], this Court held:-

“13. Where a jurisdiction is exercised on a complaint petitionfiled in terms of Section 156(3) or Section 200 of the Code ofCriminal Procedure, the Magistrate is required to apply hismind. The Penal Code does not contain any provision forattaching vicarious liability on the part of the ManagingDirector or the Directors of the Company when the accusedis the Company.The learned Magistrate failed to pose untohimself the correct question viz. as to whether the complaintpetition, even if given face value and taken to be correct inits entirety, would lead to the conclusion that the respondentsherein were personally liable for any offence. The Bank is abody corporate. Vicarious liability of the Managing Director and Director would arise provided any provision exists in thatbehalf in the statute. Statutes indisputably must containprovision fixing such vicarious liabilities. Even for the saidpurpose, it is obligatory on the part of the complainant tomake requisite allegations which would attract the provisionsconstituting vicarious liability.”

28. In State of Haryana v. Bhajan Lal[3] this Court held:- “102. In the backdrop of the interpretation of the variousrelevant provisions of the Code under Chapter XIV and ofthe principles of law enunciated by this Court in a series ofdecisions relating to the exercise of the extraordinary powerunder Article 226 or the inherent powers under Section 482of the Code which we have extracted and reproduced above,we give the following categories of cases by way of illustrationwherein such power could be exercised either to preventabuse of the process of any court or otherwise to secure theends of justice, though it may not be possible to lay down anyprecise, clearly defined and sufficiently channelised andinflexible guidelines or rigid formulae and to give anexhaustive list of myriad kinds of cases wherein such powershould be exercised.

(1) Where the allegations made in the first information reportor the complaint, even if they are taken at their face valueand accepted in their entirety do not prima facie constituteany offence or make out a case against the accused.

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(3) Where the uncontroverted allegations made in the FIR orcomplaint and the evidence collected in support of the samedo not disclose the commission of any offence and make outa case against the accused.

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(5) Where the allegations made in the FIR or complaint areso absurd and inherently improbable on the basis of which noprudent person can ever reach a just conclusion that there issufficient ground for proceeding against the accused.

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3 (1992) Supp (1) SCC 335

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A(7) Where a criminal proceeding is manifestly attended withmala fide and/or where the proceeding is maliciouslyinstituted with an ulterior motive for wreaking vengeance onthe accused and with a view to spite him due to private andpersonal grudge.”

B29. Short payment of tax per se is not a criminal offence, as heldby this Court in Devendra v. State of U.P.[4]. The High Court ordinarilywould exercise its jurisdiction under Section 482 of Cr.P.C., if theallegations made in the FIR taken to be correct in entirety, do not makeout any offence. When the allegations made in the FIR or evidencecollected during investigation do not satisfy the ingredients of an offence,Cthe superior Courts would not encourage harassment of a person in aCriminal Court.

30. In G. Sagar Suri & Another v. State of U.P. and Others[5],this Court adjudicating the liability of a Director in a proceedings underSection 420 of the IPC held:-D

“8. Jurisdiction under Section 482 of the Code has to beexercised with great care. In exercise of its jurisdiction theHigh Court is not to examine the matter superficially. It is tobe seen if a matter, which is essentially of a civil nature, hasbeen given a cloak of criminal offence. Criminal proceedingsEare not a short cut of other remedies available in law. Beforeissuing process a criminal court has to exercise a great dealof caution. For the accused it is a serious matter. This Courthas laid certain principles on the basis of which the HighCourt is to exercise its jurisdiction under Section 482 of theCode. Jurisdiction under this section has to be exercised toFprevent abuse of the process of any court or otherwise to securethe ends of justice.

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14. We agree with the submission of the appellants that theGwhole attempt of the complainant is evidently to rope in allthe members of the family particularly those who are theparents of the Managing Director of Ganga Automobiles Ltd.in the instant criminal case without regard to their role or 4 (2009) 7 SCC 495H5 (2000) 2 SCC 636

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participation in the alleged offences with the sole purpose ofgetting the loan due to the Finance Company by browbeatingand tyrannising the appellants with criminal prosecution. Acriminal complaint under Section 138 of the NegotiableInstruments Act is already pending against the appellants andother accused. They would suffer the consequences if offenceunder Section 138 is proved against them. In any case thereis no occasion for the complainant to prosecute the appellantsunder Sections 406/420 IPC and in his doing so it is clearlyan abuse of the process of law and prosecution against theappellants for those offences is liable to be quashed, whichwe do.”

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31. In Joseph Salvaraj A. v. State of Gujarat and Others[6], thisCourt held that even if chargesheet had been filed, Magistrate could stillexamine whether the offences alleged to have been committed by theaccused were prima facie made out from the complainant’s FIR,chargesheet, documents, etc. or not.

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32. In the instant case, the allegations in the FIR read with thechargesheet filed by the Lokayuktha Police only discloses short paymentof road tax. There is only a vague, bald allegation of collusion andconspiracy to defraud the State of revenue, which is devoid of any materialparticulars.

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33. The Appellant filed the Criminal Revisional Petition underSection 482 of the Cr.P.C. praying that the proceedings in Special CaseNo.4 of 2016 on the file of the III[rd] Additional District and SessionsJudge, Ballari sitting at Hosapete be quashed in so far as the Appellant isconcerned.

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34. In the said petition the Appellant contended:-

(i) The Appellant is not in charge of the day to day affairs ofthe company, M/s MSPL limited;

(ii) The Appellant had not signed the application for registrationGof the vehicle in question;

(iii) Even though the vehicle is owned and registered in the nameof the Company, no complaint has been filed against theCompany but only against the Appellant; H

(iv) No notice was issued to the Appellant during theinvestigation and no opportunity was given to the Appellantor to the Company.

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(v) The Company M/s MSPL Limited had paid the entire taxamount, as was evident from “no dues certificate” issuedby the RTO, Hosapete dated 16[th] August, 2016.

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(vi) The Appellant has not gained any pecuniary benefit, norhas the company gained any pecuniary benefit;

(vii) The Appellant never met any official of the road transport,the question of conspiracy involving the Appellant did notarise.

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35. The Appellant claims that he has never been involved in anycriminal offence in his life time. The false implication of the Appellantwould damage the reputation of the Appellant. There being absolutelyDno materials against the Appellant anywhere in the chargesheet, theproceedings as against the Appellant are liable to be quashed. The filingof the chargesheet against the Appellant is arbitrary, harassive andunsupported by any materials on record.

36. None of the aforesaid contentions have been considered byEthe High Court. The High Court observed:- “14. On going through the charge sheet filed by theinvestigation officer, which is referred to above, discloses thataccused Nos.1 and 2 have involved in evasion of the tax andadmittedly, the difference tax of Rs.20,44,468/- was collectedfrom accused No.2 only on 20.03.2013, whereas, the R.C.was issued on 10.01.2011 by collecting nominal tax of Rs.21,98,801/- only. The allegation is of serious nature and these factsare not disputed. Under such circumstances, it cannot beconcluded that the criminal proceeding was initiated againstthe accused Nos.1 and 2 without any basis. The contention ofthe learned counsel for accused No.1 that he was not knowingthe value of the vehicle and he accepted the value as declaredby accused No.2 and therefore, he demanded lesser amountof tax, cannot be accepted at this stage. Similarly, thecontention of the learned counsel for accused No.2 that hewas not knowing either the value of the vehicle or the tax F

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and whatever tax demanded by accused No.1 was paid byhim and therefore, he was not committed any offence alsocannot be accepted at this stage. When there is specificallegation made against various accused including the presentpetitioners, regarding evasion of tax systematically showingthe value of the imported vehicles at a lesser value, the samecannot be ignored. Therefore, I am of the opinion that thepetitioners are not entitled for the relief they are claimed inthe present petitions and they are required to answer thecharges and face the trial.”

37. The Appellant has not questioned initiation of criminalproceedings against any of the other accused persons. He has no intentionof stalling proceedings against any person involved in smuggling cars orforging or fabricating documents or committing any other illegal activities.He has questioned the legality of initiation of proceedings against himfor alleged short payment of road tax in respect of a vehicle owned bythe company of which he is Chairman and Managing Director eventhough, the alleged deficit road tax had been paid by the company withinone month of issuance of demand notice.

38. There is no whisper of how and in what manner the Appellanthas abetted the commission of any offence. It is nobody’s case that anydocument submitted in connection with the vehicle in question importedby M/s MSPL Limited is fake or fabricated. That is not the charge, sofar as the Appellant is concerned. From Paragraph 11 of the order dated7[th] August 2012, it transpires that in case of some of the cars, the ownershad declared the selling rates at the factory as the value of the car, andnot the on road value which would be about three times the factoryvalue.

39. Mr. Rohatgi emphatically argued that the company of whichthe Appellant is the Chairman and Managing Director, M/s. MSPLLimited, had paid road tax as charged by the Motor Vehicle Authoritieson the basis of the value of the vehicle as given in the invoice. TheAppellant has annexed a copy of the invoice which shows that the vehiclein question was purchased by the Company from Aston Martin Brusselsby the Manager of M/s MSPL Limited at a total cost of 162,465,00Euros, the Appellant has also annexed the application form for registrationof the vehicle. It is pointed out that all the required information wasprovided in the application for registration.

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A40. Opposing the appeal, Mr. Subhranshu Padhi, learned counselappearing on behalf of the State of Karnataka emphasized the gravityof the allegations in the complaint. Mr. Padhi submitted that there wasa racket in operation to defraud the State of revenue of crores ofrupees. Mr. Padhi submitted that this Court ought not to quash theproceedings.B

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41. Mr. Padhi tried to distinguish the judgments of the High Courtcited by the Appellant, that is, the judgments/orders in the cases of S.V.Nandaraju (supra), S. Rajendran (supra) and K.J. Kuruvilla (supra).Mr. Padhi pointed out that in the cases of S. Rajendran (supra)andCK.J. Kuruvilla (supra),wherethe High Court had quashed the criminalproceedings, the demand notice for deficit tax had been issued and thedeficit tax had also been realized before the private complaint filed bythe Respondent No.2 was registered.

42. The mere fact that demand notice may have been issued andDthe differential tax realized before institution of the private complaint isin our view inconsequential. Either the charges disclose an offence ofdefrauding the State of revenue or the offence of defrauding the Stateof revenue not made out. The question is whether the materials on recorddisclose any criminal act on the part of these Appellants. The answerEcannot but be in the negative.

43. The judgment dated 19[th] December, 2019 in the case of S.V.Nandarajuand others (supra) is distinguishable and has no applicationto the facts of this case. The accused were officers and/or employeesof the Motor Vehicles Department, some of whom had retired long beforeFthe complaint was lodged. In some of the cases, proceedings had beenquashed on the ground that sanction under Section 17 of the P.C. Act toprosecute had been declined by the State Government.

44. Mr. Rohatgi argued with force that the Company had paid fullroad tax as charged by the Motor Vehicles Authorities, on the basis ofGthe actual invoice value of the car in question. No further amount waspayable. However, when the RTO raised a notice of demand for Rs. 21lakh odd in 2012, the company did not raise any dispute since the amountclaimed was a small amount for the Company, which had a turnover ofcrores of rupees.

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45. This Court is of the view that the proceedings against theAppellant are misconceived, harassive, in abuse of process of law andhave been initiated without proper application of mind. This appeal is,therefore, allowed. Further proceedings against these Appellants in theCourt below, shall remain stayed.

Nidhi Jain

Appeal allowed.

(Assisted by : Tamana, LCRA)

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