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SCC
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True Print TruePrint™ source: Supreme Court Cases, © 2024 Eastern Book Company. The text of this version of
this judgment s protected by the law declared by the Supreme Court in Eastem Book Company v. D.B.
Modak, (2008) 1 SCC 1 paras 61, 62 & 63.

GHCL EMPLOYEES STOCK OPTION TRUST v. INDIA INFOLINE LTD. 505

(2013) 4 Supreme Court Cases 505

(BEFORE P. SATHASIVAM AND M.Y. EQBAL, JJ.)
a Criminal Appeal No. 488 of 20137
GHCL EMPLOYEES STOCK OPTION TRUST
Versus
INDIA INFOLINE LIMITED
b With
Criminal Appeal No. 489 of 2013+
GHCL EMPLOYEES STOCK OPTION TRUST
Versus i
NILESH SHIVJI VIKAMSEY ‘Respondent.
c With
Criminal Appeal No. 490 of 20
GHCL EMPLOYEES STOCK OPTION TRUST Appellant;
Versus
VENKATARAMAN RAJAMANI
d

NIMISH RAMESH MEHTA Respondent.

e ith
Criminal at No. 492 of 2
GHCL EMPLOYEES STO¢KQBFION TRUS: Appellant;

ARUN KUMAR PUR Respondent.

f

Appellant;

Respondent.
g

1 ArfSing out of SLP (Crl.) No.

. 3113 0f 2010
Agising out of SLP (Crl.) No. 3120 of 2010
£ *Arising out of SLP (C1l.) No. 3213 of 2010
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this judgment s protected by the law declared by the Supreme Court in Eastem Book Company v. D.B.
Modak, (2008) 1 SCC 1 paras 61, 62 & 63.

506 SUPREME COURT CASES (2013) 4 SCC

With
Criminal Appeal No. 494 of 20137ff
GHCL EMPLOYEES STOCK OPTION TRUST
Versus
KRANTI SINHA
Criminal Appeals No. 488 of 2013 with Nos. 489-94 of 2013
decided on March 22, 2013
A. Criminal Procedure Code, 1973 — Ss. 482 and 204 ;
case — Setting aside of summoning order — When warranté
for — Abuse of process of law — Alleged commission of offenc

of Respondent 1-accused Company i.e. Respondents,2 — No specific

role assigned to Respondents 2 to 7 in respect of thgzallefied offences — ¢
Entire complaint containing bald and vague alle ! against said
respondents — Magistrate who issued summeoyis:. bt recording his
satisfaction about prima facie case agains ée yesporidents and role
played by them in capacity of Managing Diré; lonipany Secretary or
Dlrectors — On such facts,iissuance of summo inst Respondelyts 2 to 7

Company allegedly claimed outsta i . against the

appellant in its demat account wnh
shares purchased by the appellant §
appellant about the aforesaid deb' Bunt outstanding
ue. Later on, it

'ompany dishonestly
false demand. It was
further alleged that or¥ of Rs10.48 crores the f
respondent-accused werg utider’ Hegal obliga
pbol account mat account. The appellant
namely, the Managing Director,
Respondent 1 Company and
nd tgansfer its shares to demat account
but nothing; was déine. The agellant* rgfore alleged that the respondents
i reach of - ‘heating, inasmuch as they sold off
appropriated the entire sale proceeds.
f summons against the respondents to face

isifig out of SLP (Crl.) No. 3217 of 2010

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‘GHCL EMPLOYEES STOCK OPTION TRUST v. INDIA INFOLINE LTD. 507

against them. The High Court held that issuance of summons against the
Managing Director, the Company Secretary and the Directors of the Compan!
(i.e. Respondents 2 to 7 herein) could not be sustained and the same were Tiible
to be set aside. So far as the Company (i.e. Respondent 1 herein) was concerhéyd,
the High Court held that issuance of summons against it under Sectioftid 1'% PC
could not be sustained, but directed the Magistrate to proceed wil
against the Company in respect of other offences. Dissatisfied with

Dismissing the appeals, the Supreme Court held as above gid bgl(o’
Madhavrao Jiwgjirao Scindia v. Sambhajirao Chandrojirao Avlv re.

SCC (Cri) 650; Punjab National Bank v. Surendra Prasad Sinha, )

499: 1993 SCC (Cri) 149; Maksud Saived v. State of Gujaratwy@508) 5 SCC
668 : (2008) 2 SCC (Cri) 692, relied on
Nirmal Bhanwarlal Jain v. GHCL Employees Stock Opi
affirmed
S.K. Alagh v. State of U.P, (2008) 5 SCC 662 :
Chartered Bank v. Directorate of Enforcement, (2005
cited

Summoning of accused — Obligation ®

d Held, summons order must reflect that:
facts of case and law applicable theketo
existence of a prima facie case agal
allegations made in complaint supportet

Ss. 34 & 120-B

e Held: :
Summoning of accusedsin i e s us’ matter. Hence, the
criminal law cannot be se‘ rse. The order of the
as applied his mind to
he M_agistrate has to record

specific allegations m‘ uppgned by sansfactory evidence

and other materighfign asc. in the summoning order the
ordéd his satisfaction apbut a prima facie case as against
7 and the role Pl yed ¢hem in the capacity of Managing

predommautly be a civil wrang, such an act does not constitute a criminal

offenee — Tort Law — Deceif — Cheating or breach of trust — Nature of
(Para 13)
W-D/51553/CR
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this judgment s protected by the law declared by the Supreme Court in Eastem Book Company v. D.B.
Modak, (2008) 1 SCC 1 paras 61, 62 & 63.

508 SUPREME COURT CASES (2013) 4 SCC

Advocates who appeared in this case : N
Rakesh Tiku, Senior Advocate (Ms Manjusha Wadhwa and M.A. Venkata ¥
Subramanian, Advocates) for the Appellant;
AM. Singhvi and Jayant Bhushan, Senior Advocates (Ajay Bhargava, Ms Vani
Bhargava, Ankur Khandelwal, Vinam Gupta and M/s Khaitan and Co., Advocales)
for the Respondent.
Chronological list of cases cited
1. (2011) 13 SCC 412: (2012) 2 SCC (Cri) 650, Thermax Ltd. v. K.M.
Johny
2. (2010) 114 DRI 451, Nirmal Bhanwarlal Jain v. GHCL Employees Stogk™
Option Trust L
3. (2008)5 SCC 668 : (2008) 2 SCC (Cri) 692, Maksud Saiyed v. State o
Gujarat
4. (2008) 5 SCC 662 : (2008) 2 SCC (Cri) 686, S.K. Alagh v. State of U.P.
5. (2005) 4 SCC 530 : 2005 SCC (Cri) 961, Standard Charlered Bzmk Y.
Directorate of Enforcement
6. 1993 Supp (1) SCC 499 : 1993 SCC (Cri) 149, Punjab NationdffBank %
Surendra Prasad Sinha 514f. 515a-b
7. (1988) 1 SCC 692 : 1988 SCC (Cri) 234, Madhavrao Jiv chiltia V.
Sambhajirao Chandrojirao Angre 510d-e. S511c, S14c-d
The Judgment of the Court was delivered by
MLY. EQBAL, J.— Leave granted. Sin
the common order passed! by the Delhi

disposed of by this common judgment.

2. The aforesaid seven criminal miscell ous cases mgre filed in the
High Court challenging the ordgr dated 27-9-2008 passed by the
Metropolltan Maglstrate New Dell‘n wheleby he héd summoned the

appe].{ant “These criminal

T t on behalf of the

fientioned sections of the

Penal Code. The t in the complaint are as
follows: the comp

time for
account

comptainant in that account. The respondem Company being Accused 1

informed the complainant about tf)fl aforesaid debit. The complainant cleared
the amoutfit outstanding against it By making payment of Rs 10.48 crores by a
7 er on, it transpired that the correct debit against the complainant

priial Bhanwarlal Jain v, GHCL Employees Stock Option Trust, (2010) 114 DRJ 451
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this judgment s protected by the law declared by the Supreme Court in Eastem Book Company v. D.B.
Modak, (2008) 1 SCC 1 paras 61, 62 & 63.

GHCL EMPLOYEES STOCK OPTION TRUST v. INDIA INFOLINE LTD. (Egbal, J.) 509
was Rs 10,22,77,522. It was alleged that the respondent Company
dishonestly received a sum of Rs25,22,477.53 from the complainant by
a making false demand. It was further alleged by the complainant thdf,
receipt of the amount of Rs 10.48 crores the respondent-accused werg uj
legal obligation to transfer the shares purchased by the complainang:fre

the complainant to the accused, it denied the averments made T their letter
¢ dated 14-5-2008.
4. The complainant further alleged that they migt R spondems 2to7,
namely, the Managing Director, the Company Searstary ahd the Directors of
Respondent 1 Company and requested to excess amount and
transfer its shares to demat account but not s done. The complainant,
therefore, alleged that the respondentsihave: c mmitted criming] “breach of
d trust and cheating, inasmuch as they B ald off 8 76, 668 shares:: of the
complainant on 23- 6 2008 and m.lsappro f X

witnesses, aud after being satisfied that

directed issuance of summons against the respondents;to face trial under the
e aforementioned sections of the:
6. Aggneved by the said

t the Company, the

the Directors of the

f
c Compauy cannot be sustamed
far as Respondent 1 Company is
ance of summons as against the

g Ettions of the Penal Code.

id order passed by the High Court, the

" 8. Mr Rakesh Tiku, learngd Senior Counsel appearing for the appellant
assailfid the impugned order! ‘passed by the High Court as being illegal and

mal Bhanwarlal Jain v. GHCL Employees Stock Option Trust, (2010) 114 DRJ 451
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this judgment s protected by the law declared by the Supreme Court in Eastem Book Company v. D.B.
Modak, (2008) 1 SCC 1 paras 61, 62 & 63.

510 SUPREME COURT CASES (2013) 4 SCC

High Court has gravely erred in law in taking into consideration probable
defence of the accused, which was tendered at the time of the hearing of the
petitions under Section 482 CrPC questioning the legality of the summoning
order passed by the learned Magistrate. The learned counsel submitted ha
the High Court has failed to appreciate that the allegations againgt thic
Managing Director, Company Secretary and other Directors of the Comipany
(Accused 2 to 7) in the original complaint were not based on any vigiricas
liability but on the specific allegalions of their having conspiredstogether
b

its JurlSdlCthn under Section 482 CrPC by entermg into theme‘

observing that there were no material against the accused so as
against them under Sections 406, 409, 420, 477-A, 34 and 120-
learned counsel submitted that the appellant is a registel
M/s GHCL, a company registered under the Companigg c
of eligible employees of the Company for transfer of tfié Col pzmy s equity
shares. It was contended that Accused 2 to 7, who
Company Secretary and Directors of the Company
day activities of the Company and responsiblc’
of the said Company. Lastly, it was submit
: 0% g

i cally allege thgrdo omfilamt of/against the

individual Director a t ralc such mdlvncfiualDfiflctor had played. The
learned counsel submiti it i f
Respondents 2 to 7

g
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Modak, (2008) 1 SCC 1 paras 61, 62 & 63.

GHCL EMPLOYEES STOCK OPTION TRUST v. INDIA INFOLINE LTD. (Egbal, J.) 511
Dr Singhvi then contended that at the outset the alleged letter dated 1-3-2008
has been treated by the High Court for all practical purposes in favour of the
a respondents which is grossly incorrect when the High Court by arriving &t
decision has proceeded on the assumption that the letter dated 1-3-2608
not written by Shri Bhuwneswar Mishra to the respondent @ompany;
Referring various decisions of this Court, Dr Singhvi submitted thig:a
bald statement that Respondents 2 to 7 were in charge of the Comyptifiy
responslble for day- to--day affalrs of the Company is not sufficler.;t bug the
b

already put their disputes before the arbitrator and the arbitration pi ceedmgs
are pending for hearing. Under these circumstances, accordin, Dr Smghv1,

c
Jiwajirao Scindia v. Sambhajirao Chandrojirao Ang¥¢?, S.&. Alagh v. State of
U.P3, Thermax Ltd. v. K.M. Johny* and Stqndard. Ghartered Bank v.
Directorate of Enforcement>.
10. We have carefully considered the sfl SO
on elther side. The Vanous deClSlOl’lS relled v 1, Ey lhe lem;
d
quote extensively various passages frog
which are relevant and touching thé?
appeals.
11. In order to appreciate the rival*gontentions g
counsel, we would like to refer h
¢ of the complaint in order to fingd"
offences under Sections 406/4(49/d201477-A/34/1
er the Companies
the reglstered stock

f
i ire/were responsible for conduct
sor the other time interacted with

givgn by Accused 2 to 7 from ‘rne to llme They iin connivance w1th each
g othr in ordj

(2011) 13 SCC 412 : (2012) 2 SCC (Cri) 650 : (2011) 11 Scale 128
2005) 4 SCC 530 : 2005 SCC (Cri) 961 : AIR 2005 SC 2622
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Modak, (2008) 1 SCC 1 paras 61, 62 & 63.

512 SUPREME COURT CASES (2013) 4 SCC

(3) That the trustees of the complainant at the request of GHCL
opened Demat Account No. (DP ID and client ID is IN302269-
120107581) with Accused 1 on 11-9-2007 and transferred the share:
acquired in the said account after entering into broker-client agreemerit.
(4) That after opening the demat account, the complainant képt
placing orders for purchase of share on the accused and made pay: nts
against the running account from time to time.
(5) That Accused 1 vide letter dated 30-4-2008 i form\
complainant that there is an outstanding debit of Rs 10.4:
the complainant and the 20,46,195 quantity of GHCL sh:
the complainant shall be free from lien after clearing the

the 20,46,195 quantity of GHCL shares bough y""u shall be free ©

from lien after clearing the debit in the accouyy

debit of the following companies:

(a) Carissa Investments (P) Ltd.
(b) Altar Investments (P) Lt
(¢) Oval Investments (P) Ltd.
(d) Dalmia Housing Finance Ltd.
(e) Dear Investment (P,
The aforesaid letter by th
received by the complaingat, ot

cused to withifraw ghe fictitious claim/adjustment as

‘their leter dzr(ed }4 5 2008 However, mstead the

* *

(F4) That all the accused not only received the excess amount but h
Tiisappropriated the same, which they invariably refused to refund and
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this judgment s protected by the law declared by the Supreme Court in Eastem Book Company v. D.B.
Modak, (2008) 1 SCC 1 paras 61, 62 & 63.

GHCL EMPLOYEES STOCK OPTION TRUST v. INDIA INFOLINE LTD. (Egbal, J.) 513
instead constantly started intimidating the complainant to discharge the
liabilities of the aforesaid Companies mentioned in their letters dategd
a 14-5-2008 and 9-6-2008 whereas the complainant was under no &ugl
legal obligation to clear the debits of these Companies for the reagon.
these five Companies are separate legal entities and there is né, r
whatsoever with the complainant. All the accused were fully aware
the complainant is under no obhgallon to pay any amount all
payable from the other companies.
Ed £ Ed

(16) That it has now been learnt that the accuse

legal right, has illegally, without any authorisation, an
the complainant sold off 8,76,668 shares on 2.
complainant Trust in the open market. The complainant rc
24-6-2008 about the said sale. The Trust has, suff red a huge monetary
c loss on account of this illegal disposal of sto¢kg of the complainant by
the accused. The shares were lying/kept with the
of DEMATINC, to account of the complainap
own letter dated 30-4-2008 they had nq li
and thus the accused in connivance w1th

induced the complainant to ds

which as per their own admissi 3
the tune of Rs25,22,477.53. The ) thereby rendered
themselves liable to be pr i e rt under Section
477-A of the Indian Penal ¢ i
€ (18) That the accused other have further
dishonestly transferredlmlsappr,flpnated, ¢d on the pretext of
some unaccounted deb and further the pite having no legal
8,76,668 shares on
market without any prior
intimation to thi
f for wrongful g

g he paragraphs that the complainant has

Respondents 2 to 7. In Para 2 of the
Respondents 2 to 6 are looking after the
day-to-day affairs of the Cgmpany. With whom the complainant or its
authofised representative interdcted has also not been specified. Although in
Para 11 of the complaint it is alleged that the complainant on numerous
ccasions met Accused 2 to 7 and requested to refund the amount, but again
_thés€omplainant has not made specific allegation about the date of meeting
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Modak, (2008) 1 SCC 1 paras 61, 62 & 63.

514 SUPREME COURT CASES (2013) 4 SCC

and whether it was an individual meeting or collective meeting. Similarly, in
Para 17 of the complaint, there is no allegation that a particular Director or *
Managing Director fabricated the debit note. In the entire complaint there arg,
bald and vague allegations against Respondents 2 to 7.
13. There is no dispute with regard to the legal proposition that thé. ca#
of breach of trust or cheatmg are both a civil wrong and a cnmmal ofid

14. Be that as it may, as held by this Court, summoning O;E ccuse

criminal case is a serious matter. Hence, criminal law canijot by

allegations made in the complaint supported by sa Kacto

other material on record.
15. In Madhavrao Jiwajirao Scindia v. Sarf
Angre? this Court held as under: (SCC p. 695, gara
“7. The legal position is well settled tHat v
initial stage is asked to be quashed, theiest
as to whether the uncontroverted allegh
establish the offence. It is also for the cotirt
special features which appear in a p:
expedient and in the interest of jus
continue. This is so on the basis that the court cannot }
oblique purpose and where in opinion of the
i herefore, no usefl Pulpose is likely
na’l prosecutiog: nue, the court
:a case also quash
ftage.”
nha®, a complaint was
ons 409, 109 and 114

officers alleging,i i ing oan granted to one Sriman

Naram Dubey, the plai i 4 as guaramors and executed

a ment of debt; the* Brauch Managel of the Bank on

maturity of the sail fixed deposit adfi.\sted:a part of the amount agamst the
said loan. ’Ifhe complainant al
. thetliability of the guarntors also stood extinguished. It was,
therefore alleged that the offioe f the Bank criminally embezzled the sald
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GHCL EMPLOYEES STOCK OPTION TRUST v. INDIA INFOLINE LTD. (Egbal, J.) 515
prima facie make out an offence charged for, in a mechanical manner, issyed
the process against all the accused persons. The High Court refused to quash
a the complaint and the matter finally came to this Court. Allowing the appeal
and quashing the complaint, this Court held as under: (Surendra“Prgsgd -
Sinha case®, SCC pp. 504-05, para 6)
“6. Tt is also salutary to note that judicial process should
inslrument of oppression or needless harassmem The Complain

Magistracy to find out whether the accused concerned showfd bé egally

responsible for the offence charged for. Only on satlsfy g th
casts liability or creates offence against the juristic perso
impleaded then only process would be issued. At that s
would be circumspect and _]lelClOLlS in exerc; mg

issuing process lest it would be an instrument iy the hznds of the private

complaint as vendetta to harass the personsisectl cssly Vindication of
ma_]esty ofJjustice and mamtcnance of law Bider in the society are the

appellants without any prima f:

17. In Maksud Saiyed v. State

terms of Section 156(3

Procedure, the Magistrate
does not contain any pro
th¢ Company when the
trate failed to pose unto
cr the complaint petition,
£ in its entirety, would lead
i were personally liable for

hat, behalf in the

4 such vicariods liaBilities. Even for the said purpose, it is
m the partfpf the immplamant to make requisite allegauons
ision¥ constituting vicarious liability.”
rder passed by the Magistrate, it reveals
hat two wflnesses includi one of the trustees were examined by the
omplainant but none of therg: specifically stated as to which of the accused
comntjtted breach of trust or chieated the complainant except general and bald

: 1b National Bank v. Surendra Prasad Sinha, 1993 Supp (1) SCC 499 : 1993 SCC (Cri) 149
7°(2008) 5 SCC 668 : (2008) 2 SCC (Cri) 692
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516 SUPREME COURT CASES (2013) 4 SCC

allegations made therein. While ordering issuance of summons, the learned ,,
Magistrate concluded as under: i
“The complainant has submitted that Accused 2 to 6 are the Director;
of the Company and Accused 7 is the Secretary of the Company “an
were looking after the day-to-day affairs of the Company and werg, al:
responsible for conduct and business of Accused 1 and sometime Og:thi
other have interacted with the complainant.
I have heard arguments on behalf of the complainant and gperused thi
record. From the allegations raised, documents placed on rgcord ai
evidence led by the witnesses, prima facie an offence undet?Sectin
409/34/120-B is made out. Let all the accused hence be“suzmongd to
face trial under the aforesaid sections on PF/RC/Speed Post/: i
12-2008.”
19. In the order issuing summons, the leame_,d Magistrate” has not
recorded his satisfaction about the prima facie case a g

Company Secretary or Directors which is sine qua ny

action against them. Recently, in Thermax Ltd,

case without their specific role or p:

with the sole purpose of settling hig dis
by initiating the criminal prosecuti
to 8 are the ex-Chairperson, ex-

the allegations and claims of

allegation with regard to their
39. Apart from the fact thai
of Sections 405, 406, 420 read

defagainst any person

ives are joined as the
persons looking af ke business of the appellant
Company.”

‘V$$ed as the law has been well

21.In the mstaiit case the Hl %h Con has correctly noted that issuance of
illegal and amounts to abuse of
‘ourt, therefore, needs no interference

: 22. For the aforesaid reason: : e find no merit in these appeals, which
e accordingly dismissed.

1) 13 SCC 412 ¢ (2012) 2 SCC (Cri) 650