Summary
The Supreme Court quashed cheating and conspiracy proceedings against a company’s Managing Director and Director arising from allegedly substandard turbines supplied for a power project. The FIR and chargesheet lacked allegations of dishonest intention at inception or specific conduct attracting the appellants’ criminal liability. The company was not accused, and their offices did not create automatic vicarious liability. Proceedings against the other accused were expressly preserved.
Issues
- Whether the allegations disclosed cheating from inception or a basis to prosecute the directors personally for the company’s contractual performance.
Held
- Breach of contract does not by itself establish cheating; fraudulent or dishonest intention must exist when the promise or representation is made. The FIR and chargesheet lacked such allegations, and the project’s operation, satisfactory execution certificate and replacement of defective turbines supported quashing on these facts. (¶¶ 6, 7.2, 7.3, 7.4, 8.1)
- The principal allegations concerned the company, which had not been arraigned. There were no specific allegations against either appellant, and the Penal Code did not impose vicarious liability merely because they were Managing Director and Director. Such liability requires a statutory basis and requisite allegations. (¶¶ 7.5, 8.2)
- Inherent powers must be exercised sparingly and carefully, but criminal proceedings should not continue where no prima facie offence is disclosed. The thirteen-year interval between chargesheet and service of summons was also noted in finding that refusal to quash was erroneous. (¶¶ 7.1, 7.6, 7.7, 8.3, 9)
Result
Appeal allowed; High Court judgment set aside and the impugned FIR and chargesheet quashed only against the two appellants. Proceedings against the other accused to continue according to law.