Summary
Defamation complaint against the Chairman and officers of a bank, founded on a SARFAESI possession notice that, by clerical error, stated an inflated outstanding amount, quashed. Officers cannot be prosecuted vicariously under the IPC without the bank being arraigned and without specific allegations of their individual role; the notice was issued bona fide under Section 13(4) and attracted the protection of Section 32 of the SARFAESI Act.
Issues
- Whether officers of a bank can be prosecuted for defamation under Sections 500 and 501 IPC when the bank itself, on whose behalf the allegedly defamatory notice was issued, is not arraigned as an accused.
- Whether the IPC permits vicarious liability of directors or officers of a body corporate merely on the basis of their designation.
- Whether a possession notice issued under Section 13(4) of the SARFAESI Act containing a clerical error in the outstanding amount can found a defamation prosecution in view of Section 32 of that Act.
Provisions considered
- Sections 499, 500 and 501, Indian Penal Code, 1860Defamation and its punishment, and printing matter known to be defamatory. The Court held that the IPC contains no provision for vicarious liability of officers or directors for offences attributable to a company, unlike special penal statutes; the complainant must show the precise role of each officer, and process cannot issue on bald assertions tied to official designation. (¶¶ 3, 10, 20, 22, 24)
- Sections 200, 202 and 482, Code of Criminal Procedure, 1973The Magistrate issued process after following Sections 200 and 202; the appellants sought quashing under Section 482. Relying on Maksud Saiyed, the Court held that a Magistrate exercising jurisdiction on a complaint must apply his mind to whether the complaint, taken at face value, shows the named officers to be personally liable, and quashed the proceedings as an abuse of process. (¶¶ 2, 11, 12, 15, 21, 23)
- Sections 13(2), 13(4) and 32, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002Demand notice and possession notice were issued under Sections 13(2) and 13(4) after the borrower's accounts became non-performing. Section 32 bars any suit, prosecution or legal proceeding against a secured creditor or its officers for anything done in good faith under the Act; the possession notice with a clerical error in the amount, promptly corrected by a clarificatory letter, was held to be a bona fide act in discharge of statutory duty attracting that protection. (¶¶ 7, 8, 9, 25, 26, 27)
Held
- Prosecution of directors or officers of a company can be maintained only when the company itself is arraigned as an accused and the officer's conduct is directly connected to the company's liability (Aneeta Hada). The bank, on whose behalf the allegedly defamatory possession notice was issued, was not impleaded; the prosecution of its Chairman and officers alone was therefore ex facie impermissible. (¶¶ 16, 17, 18)
- There is no concept of vicarious liability of officers or directors for offences under the IPC, unlike special penal statutes such as the Negotiable Instruments Act, 1881, the Food Safety and Standards Act, 2006 or the Drugs and Cosmetics Act, 1940, which specifically create such liability. Before an officer of a bank or body corporate is prosecuted under the IPC for acts done on behalf of the institution, the complainant must produce unimpeachable material indicating the officer's precise role; bald assertions without foundational facts of active participation, authorisation or deliberate omission are insufficient, and the law does not permit automatic prosecution based on designation. (¶¶ 20, 21, 22, 24)
- The judicial process must not become an instrument of oppression or needless harassment; the Magistrate must be satisfied that the law casts liability on the persons impleaded before issuing process (Punjab National Bank v. Surendra Prasad Sinha). The Magistrate and the High Court wrongly assumed that the appellants were responsible for the bank's day-to-day affairs and hence for the notice. (¶¶ 19, 23)
- The possession notice dated 13 June 2007 was bona fide issued under Section 13(4) of the SARFAESI Act after default; the inflated figure in it was a clerical error promptly rectified by the bank's clarificatory letter of 7 August 2007, and the acts of the bank and its officials were in good-faith discharge of statutory duty, attracting the protection of Section 32. A prosecution founded on that clerical error is untenable in fact and law. (¶¶ 25, 26, 27)
Result
Appeals allowed. High Court order dated 3 December 2010 and the Magistrate's order dated 29 September 2008 issuing process quashed and set aside; proceedings of Complaint No. 6353 of 2007 quashed in entirety. In the connected appeal, the order dated 20 December 2007 issuing process in Criminal Complaint No. 804530/SS/2007 and all proceedings against the appellant Mukul Ranjan also quashed. Pending applications disposed of.