Sunil Bharti Mittal v. Central Bureau of Investigation

2. It is submitted by the learned PP that accused Shyamal Ghosh was a public servant, who has since retired. It is further submitted that remaining three accused are companies, namely M/s Bharti Cellular Limited, M/s Hutchison Max Telecom (P) Limited and M/s Sterling Cellular Limited. It is further submitted that there is enough incriminating material on record against the accused persons and, as such, they may be proceeded against, as per law.

3. I have carefully gone through the copy of FIR, chargesheet, statement of witnesses and documents on record. On the perusal of the record, I am satisfied that there is enough incriminating material on record to proceed against the accused persons.

4. I also find at the relevant time, Sh. Sunil Bharti Mittal was Chairman-cum-Managing Director of Bharti Cellular Limited, Sh. Asim Ghosh was Managing Director of Hutchison Max Telecom (P) Limited and Sh. Ravi Ruia was a Director in Sterling Cellular Limited, who used to chair the meetings of its board. In that capacity, they were/are, prima facie, in control of affairs of the respective companies. As such, they represent the directing mind and will of each company and their state of mind is the state of mind of the companies. They are/were “alter ego” of their respective companies. In this fact situation, the acts of the companies are to Page 14 be attributed and imputed to them. Consequently, I find enough material on record to proceed against them also.

5. Accordingly, I take cognizance of the case. Issue summons to all seven accused for 11.04.2013.”

15. It will also be pertinent to mention that the appellants were not implicated as accused persons in the charge-sheet. As discussed in some details at the appropriate stage, Mr. Mittal was interrogated but in the opinion of CBI, no case was made out against him. Mr. Ravi Ruia was not even summoned during investigation. The Arguments: Appellants

16. M/s Harish Salve and Fali Nariman, learned senior counsel, argued the case on behalf of the appellant Sunil Bharti Mittal in an attempt to take him out of the clutches of the impugned order. Mr.K.V. Viswanathan, learned senior counsel, led the attack to the said order on behalf of the appellant Ravi Ruia. Their onslaught was tried to be blunted by Mr. K.K. Venugopal, learned senior counsel appearing for the CBI. Challenge of the appellants was also sought to be thwarted by Mr. Prashant Bhushan, learned counsel appearing for CPIL, and Mr. Sunil Malhotra, counsel who argued on behalf of Telecom Watchdog, which has filed the Page 15 appeal arising out of SLP (Crl.) Nos.3326-3327/2013 challenging another order of the even date namely 19th March, 2013 passed by the Special Judge whereby protest application filed by this appellant has been dismissed.

17. Leading the attack from the front, Mr. Harish Salve opened his submission by arguing that the impugned order was in two parts. Paras 1 to 3 pertain to the charge-sheet which was filed by the CBI naming four accused persons namely, Mr. Shyamal Ghosh and the three Cellular Companies. This fact is noted in para 2. He pointed out that in respect of these four accused persons named in the charge-sheet, after going through the copy of the FIR, charge-sheet, statement of witnesses and documents on record, the learned Judge was satisfied that there was enough incriminating material on record to proceed against them. However, in the second part of the order, which was contained in para 4, the Court also found that the three persons (including the two appellants) were, prima facie, controlling the affairs of the said three companies and, therefore, they represented the directing mind and will of each company. On that basis, these three persons are treated as “alter ego” of their respective companies and in the opinion of the learned Special Judge, the acts of the companies are “to be attributed and imputed to them”. Page 16 That was the reason given by the Special Judge finding enough material to proceed against them also which resulted in issuing of summons against these three persons including the appellant.

18. The neat submission of Mr. Salve was that the aforesaid reason given by the learned Special Judge was clearly erroneous in law. Expanding this argument, he submitted that principle of “alter ego” has always been applied in reverse, inasmuch as general principle is that the acts of individual, who is in control of the affairs of a company and is a directing mind, are attributed to the company, inasmuch as whenever such a person, who is controlling the affairs of the company, is made an accused, on the application of the principle of “alter ego”, the company can also be implicated as accused person. It is on the well recognised principle that company does not act of its own but through its Directors/Officers and when such Directors/Officers act on behalf of the company, the company is also held liable for those acts on the application of “principal – agent” principle. He submitted that it has never been a case where for the act of the company, an individual is made accused, unless there is a categorical provision in the statute making such a person vicariously liable or there is enough material to attribute the alleged acts of criminality to the said person. For his aforesaid submissions, he placed heavy Page 17 reliance upon the decision of this Court in Iridium India Telecom Ltd. v. Motorola Inc[2]. He further submitted that merely on the basis of the appellant's status in the company, it could not be presumed that it is the appellant who became a party to the alleged conspiracy, as was held in Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd.[3] in the following manner:

Mr. Salve also referred to the following observations in S.K. Alagh v. State of U.P.4:

12. The short question which arises for consideration is as to whether the complaint petition, even if given face value and taken to be correct in its entirety, disclosed an offence as against the appellant under Section 406 of the Penal Code. xx xx xx

19. As, admittedly, drafts were drawn in the name of the Company, even if the appellant was its Managing Director, he 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. (See Sabitha Ramamurthy v. R.B.S. Channabasavaradhya, (2006) 10 SCC 581.” Reliance was also placed on the decision in the case of Aneeta Hada v. Godfather Travels & Tours (P) Ltd.5, with

Page 19 particular emphasis on the following passage:

19. In addition to the above, another submission of Mr. Salve was that in the present case, role of the appellant was specifically looked into and investigated by the CBI and an opinion was formed that there was no material to implicate him. Since the appellant was consciously omitted from the array of the accused persons after thorough discussions and deliberations by the investigating agency at the appropriate level, and it was specifically so stated in the charge-sheet itself, in a situation like this even if the learned Judge wanted to differ from the investigating agency and decided to take cognizance against the appellant, he should have given valid reasons for proceeding against the appellant which could include his opinion that there was sufficient material against the appellant to be proceeded Page 20 against. However, reasons given in the impugned order, according to the learned senior counsel, are totally extraneous amounting to wrong approach in law.

20. His further submission was that even at a later stage if any evidence surfaces against the appellant, the Court is not powerless as any person can be summoned as accused under Section 319 of the Code at any stage of the trial.

21. Mr. Viswanathan who appeared for the appellant Mr. Ravi Ruia, while adopting the aforesaid arguments and reiterating them briefly, tried to canvass another feature peculiar to in the case of his client Mr. Ravi Ruia. The learned counsel pointed out that he was not even called for interrogation by the CBI which would show that there is no material against him at all. His name is not even mentioned in the charge-sheet. He painstakingly pleaded that in the absence of any material reflected even in the chargesheet, this appellant would be handicapped in making any submission for his discharge at the stage of framing charges. As the appellant was implicated involving the principle of vicarious liability, which is not applicable and erroneously referred to, he had no option but to file the present appeal for quashing of the notice of cognizance against him. Mr. Viswanathan in support of Page 21 his submission referred certain judgments, which we shall discuss at the appropriate stage. The Arguments: Respondents

22. Mr. K. K. Venugopal, learned senior counsel appearing for the CBI, refuted the aforesaid submissions in strongest possible manner. He referred to the various portions of the charge-sheet where allegations against the accused persons are stated and outcome of the investigation revealed. His endeavour was to demonstrate the manner in which the decision was taken, resulting into huge loss to the Government Exchequer and, prima facie, it was established that such a decision was taken to help the accused Telecom Companies. He argued that once the companies are charged with mens rea offences, they require guilty mind as these are not strict liability offences. However, the companies would act through their Directors/Officers only and the mens rea/guilty mind would be of those persons who are controlling the affairs of the companies. He referred to the counter affidavit filed by the CBI which, in summary form, mentions the role of different persons including the manner in which note was put up by Mr. J.R. Gupta; the changes that were made by Mr. Shyamal Ghosh to the said note allegedly to benefit the companies; and the manner in which it was approved by the Page 22 Minister. This affidavit also mentions that there is evidence on record to show that the appellant Mr. Sunil Mittal had met late Shri Pramod Mahajan during 2001-2002 for getting allocated additional spectrum beyond 6.[2] MHz for tele-service area of his company. There was also evidence of meetings between the appellant and Mr. Shyamal Ghosh for the same purpose during the same period which would constitute the circumstantial evidence to implicate these persons. The thrust of his submission, thus, is that it is the “human agency” in the accused companies who was responsible as it was a mens rea offence and such an agency/person has to be the top person, going by the circumstantial evidence. Therefore, even if in the chargesheet, names of these appellants were not included, the Special Judge was within his powers to look into the matter in its entirety as the charge-sheet along with documents spanning over 25000 pages was submitted to him.

23. Mr. Venugopal joined issue on the interpretation given by the appellants to the impugned order. According to him, the order could not be bifurcated into two parts. Para 3 of the order wherein the Special Judge has observed that he had perused the FIR, charge-sheet, statement of witnesses and documents on record was relatable to the three individuals, including the two Page 23 appellants as well. He even submitted that in the absence of individual accused persons, who were in charge of the affairs of the three accused companies, it may become difficult to proceed against the accused companies alone as it was a mens rea offence. He also relied upon the following judgments to support the impugned order, with the plea that the trial court was invested with requisite powers to summon the appellants:

1. M.C. Mehta (Taj Corridor scam) v. Union of India[6]

2. Kishun Singh v. State of Bihar[7]

24. He also referred to the decision in the case of Lee Kun Hee, President, Samsung Corpn., South Korea v. State of Uttar Pradesh[9] wherein this Court has set down the limits of High Court's power under Section 482 of the Code to interfere with summoning orders passed by the trial court, as follows:

59. While dealing with the various judgments rendered by this Court on the subject reference was also made to the decision in M.N. Ojha v. Alok Kumar Srivastav (2009) 9 SCC 682. In M.N. Ojha case similar views as in Bhajan Lal case 1992 Supp (1) SCC 335 came to be recorded in the following words: (M.N. Ojha case, SCC pp. 686-88, paras 25 & 27-30)

63. As of now we are satisfied, that the factual foundation/background of the acts of omission and commission presented by the complainant is specific and categorical. We are also satisfied that the allegations levelled by the complainant, fully incorporate all the basic facts which are necessary to make out the offences whereunder the impugned summoning order dated 12-1-2005 has been passed. The instant controversy does not suffer from any of the impairments referred in Iridium India Telecom Ltd. case. Accordingly, we leave it open to the appellants to canvass the legal issues, as were canvassed before us, before the trial court. After the rival parties have led their evidence the trial court will return its finding thereon in accordance with law without being influenced by any observations made on the merits of the controversy hereinabove, or hereafter. xx xx xx

71. It was also the contention of the learned counsel for the respondents, that the civil liability, in the instant case, was raised as against the eventual purchaser of the goods/product (Samsung, Dubai), in lieu of the goods/product supplied by the complainant JCE Consultancy, which had passed onto the purchasers under the agreement dated 1- 12-2001. Accordingly, the civil liability was only raised as against Samsung, Dubai. However, insofar as the criminal liability is concerned, Samsung, Dubai being one of the subsidiary companies of Samsung, South Korea, it was allegedly under the overall control exercised by Samsung, South Korea. Samsung, South Korea, according to the complainant, was instrumental in the eventual decision taken by Samsung, Dubai to deny the passing of the reciprocal monetary consideration for the goods supplied under the agreement dated 1-12-2001. This, according to the respondents, has been the categorical stance of Page 30 JCE Consultancy in the criminal complaint, as also, in the pre-summoning evidence recorded before the VIIth Additional Chief Judicial Magistrate, Ghaziabad under Section 200 of the Code of Criminal Procedure.

72. These allegations made by JCE Consultancy, are supported by documents furnished to the summoning court. The aforesaid factual position has also been endorsed by Sky Impex Ltd. before this Court. According to the learned counsel for the respondents, the culpability of the appellants before this Court, in a series of similar actions, clearly emerges even from documents placed on record of the instant case by Sky Impex Ltd. As such, it is submitted, that the respondents have per se repudiated all the submissions advanced on behalf of the appellant, obviously subject to the evidence which rival parties will be at liberty to adduce before the trial court. xx xx xx

74. It would not be appropriate for us to delve into the culpability of the appellants at the present juncture on the basis of the factual position projected by the rival parties before us. The culpability (if at all) would emerge only after evidence is adduced by the rival parties before the trial court. The only conclusion that needs to be drawn at the present juncture is that even on the basis of the last submission canvassed on behalf of the appellants it is not possible to quash the summoning order at this stage. In the aforesaid view of the matter, it is left open to the appellants to raise their objections, if they are so advised, before the trial court. The trial court shall, as it ought to, adjudicate upon the same in consonance with law after allowing the rival parties to lead evidence to substantiate their respective positions.”

25. He concluded his submission by reiterating that when it was a case of circumstantial evidence which appeared on record in Page 31 abundance, the trial court was right in summoning the appellants and in fact, judgment in Keshav Mahindra v. State of M.P.10 fully supported the impugned order. On the other hand, decision in Iridium India Telecom Ltd. (supra) had no application to the facts of this case.

26. Mr. Prashant Bhushan, appearing for intervenor, highlighted the role of the appellant Mr. Sunil Bharti Mittal from the records and particularly the extract of file noting which inter alia contained the views of the Superintendent of Police. He, thus, submitted that this constituted sufficient material to proceed against him and since it was only a summoning order, the appellants were free to seek discharge before the trial court. Submissions of Mr. Sunil Malhotra, Advocate, were also on the same lines. The Arguments: Appellants' Rejonder

27. Mr. Fali Nariman argued in rejoinder on the lines submissions were made by Mr. Salve, and in the process lucidly expanded those submissions. Emphasising that position in law with regard to vicarious liability was that there is no such vicarious liability in criminal law unless something is imputed or there is a specific statutory provision creating criminal vicarious liability. He pointed out that in para 4 of the impugned order, the learned Special

Page 32 Judge has not gone into the facts but did so taking shelter under a legal cover, but went wrong in applying an ex facie incorrect non- existing legal principle. Our Analysis of the Subject Matter

28. We have given our serious consideration to all the submissions made before us and fully conscious of the importance of the matter as well. At the outset, we would like to point out that detailed submissions were made on the nature of the charges, and in the process, learned counsel for the appellants tried to trivialize the matter by stating that what was decided was only a policy decision of the Government to allocate additional spectrum by charging 1% additional AGR i.e. from 4% to 5%; benefit thereof was extended to all Cellular Operating Companies including Pubic Sector Companies like MTNL and BSNL etc. and, therefore, there cannot be a criminal intent behind it. Mr. Salve as well as Mr. Nariman took pains in showing various portions of the counter affidavit filed by the CBI to show that the appellant was left out and not made accused after due deliberations and argued that it was not a case of erroneous omission by CBI. It was also argued at length that the allegations were in the domain of the policy decision taken by the Government to charge 4% of AGR whereas it was realised much later in the year 2010 when the Page 33 TRAI has passed orders that it should have been 5% AGR. According to them, it was merely a bona fide policy decision which could not be subject matter of criminal proceedings, in the absence of intent of criminality therein. More so, when benefit of the said decision was not confined to the appellant's company, namely M/s Bharti Cellular Limited, but was extended to all others as well including public sector telecom companies like MTNL and BSNL. Therefore, there cannot be a criminal intent behind such a decision. Mr. K.K. Venugopal and others, appearing for the other side, had tried to demonstrate that the aforesaid submission of the learned counsel for the appellant was totally erroneous and contrary to records. He tried to project that it was a conspiracy of major level with sole intention to benefit the accused companies at the cost of the public exchequer and for this purpose, criminal conspiracy was hatched up between them. However, we make it clear at this juncture itself that this part of the submission is beyond the scope of the present appeals inasmuch as even according to the learned counsel for the appellants that the aforesaid is not made the basis of the order while implicating the appellants herein. Insofar as four persons who were made accused in the charge-sheet by the CBI is concerned, they are concededly not before us as their summoning order has not been Page 34 challenged. Therefore, we deem it unnecessary to go into this question, which position was even conceded by all the counsel appearing before us.

29. The fulcrum of the issue before us is the validity of that part of impugned order vide which the two appellants who were not named in the charge sheet, have been summoned by the Special Judge, for the reasons given therein.

(i) Dissecting the Impugned Order:

30. In the first instance, we make it clear that there is no denying the legal position that even when a person is not named in the charge sheet as an accused person, the trial court has adequate powers to summon such a non-named person as well, if the trial court finds that the charge sheet and the documents/material placed along with the charge-sheet disclose sufficient prima facie material to proceed against such a person as well. Kishun Singh (supra) and Dharam Pal (supra) are the direct decisions on this aspect. However, in the present case, the question is not as to whether there is sufficient material against the appellants filed in the trial court to proceed against them. Whether such a material is there or not is not reflected from the impugned order as that aspect is not even gone into. The learned Special Judge Page 35 has not stated in the order that after examining the relevant documents, including statement of witnesses, he is satisfied that there is sufficient incriminating material on record to proceed against the appellants as well. On reading of the impugned order which is already extracted verbatim, it is very clear that in para 2 of the order, the learned Special Judge discusses the submissions of the Public Prosecutor in respect of the persons who are made accused in the charge-sheet. Insofar as chargesheet is concerned, it has named Mr. Shyamal Ghosh, who was the public servant and other three accused persons are the corporate entities. Submission of the learned Public Prosecutor is recorded in this para that there is enough incriminating material on record against them and they be proceeded against, as per law. Immediately thereafter in para 3, the learned Special Judge records his satisfaction on the perusal of the records namely FIR, charge-sheet, statement of witnesses and documents and states that he is satisfied that there is enough incriminating material on record to proceed against the “accused persons”. Para 3 is clearly relatable to para 2. Here, the “accused persons” referred to are those four persons whose names are mentioned in para 2. Obviously, till that stage, appellants were not the accused persons as they are not named as such in the charge-sheet. Page 36 After recording his satisfaction qua the four said accused persons, discussion about other three individuals (including the two appellants) starts from para 4 where the Special Judge “also” finds and refers to the positions which these three persons hold/held in the three companies respectively. In para 4, the learned Special Judge does not mention about any incriminating material against them in the statement of witnesses or documents etc. On the other hand, the reason for summoning these persons and proceeding against them are specifically ascribed in this para which, prima facie, are: i) These persons were/are in the control of affairs of the respective companies. ii) Because of their controlling position, they represent the directing mind and will of each company. iii) State of mind of these persons is the state of mind of the companies. Thus, they are described as “alter ego” of their respective companies.

31. It is on this basis alone that the Special Judge records that “in this fact situation, the acts of companies are to be attributed and imputed to them”.

(ii) Principle of “alter ego”, as applied

32. The moot question is whether the aforesaid proposition, to Page 37 proceed against the appellants is backed by law? In order to find the answer, let us scan through the case law that was cited during the arguments.

33. First case which needs to be discussed is Iridium India (supra). Before we discuss the facts of this case, it would be relevant to point out that the question as to whether a company could be prosecuted for an offence which requires mens rea had been earlier referred to in a Constitution Bench of five Judges in the case of Standard Chartered Bank v. Directorate of Enforcement11. The Constitution Bench had held that a company can be prosecuted and convicted for an offence which requires a minimum sentence of imprisonment. In para 8 of the judgment, the Constitution Bench clarified that the Bench is not expressing any opinion on the question whether a corporation could be attributed with requisite mens rea to prove the guilt. Para 8 reads as under:

34. In Iridium India (supra), the aforesaid question fell directly for

Page 38 consideration, namely, whether a company could be prosecuted for an offence which requires mens rea and discussed this aspect at length, taking note of the law that prevails in America and England on this issue. For our benefit, we will reproduce paras 59, 60, 61, 62, 63 and 64 herein:

61. The principle has been reiterated by Lord Denning in Bolton (H.L.) (Engg.) Co. Ltd. v. T.J. Graham & Sons Ltd. in the following words: (AC p. 172): “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. (AC at pp. 713, 714). 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.”

62. The aforesaid principle has been firmly established in England since the decision of the House of Lords in Tesco Supermarkets Ltd. v. Nattrass. In stating the principle of corporate liability for criminal offences, Lord Reid made the following statement of law: (AC p. 170 E-G) “I must start by considering the nature of the personality which by a fiction the law attributes to a corporation. A living person has a mind which can have knowledge or intention or be negligent and he has hands to carry out his Page 40 intentions. A corporation has none of these: it must act through living persons, though not always one or the same person. Then the person who acts is not speaking or acting for the company. He is acting as the company and his mind which directs his acts is the mind of the company. There is no question of the company being vicariously liable. He is not acting as a servant, representative, agent or delegate. He is an embodiment of the company or, one could say, he hears and speaks through the persona of the company, within his appropriate sphere, and his mind is the mind of the company. If it is a guilty mind then that guilt is the guilt of the company. It must be a question of law whether, once the facts have been ascertained, a person in doing particular things is to be regarded as the company or merely as the company’s servant or agent. In that case any liability of the company can only be a statutory or vicarious liability.”

63. From the above 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.

64. So far as India is concerned, the legal position has been clearly stated by the Constitution Bench judgment of this Court in Standard Chartered Bank v. Directorate of Enforcement (2005) 4 SCC 530. On a detailed consideration of the entire body of case laws in this country as well as other jurisdictions, it has been observed as follows: (SCC p. 541, para 6) Page 41

35. It is abundantly clear from the above that the principle which is laid down is to the effect that the criminal intent of the “alter ego” of the company, that is the personal group of persons that guide the business of the company, would be imputed to the company/corporation. The legal proposition that is laid down in the aforesaid judgment 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.

36. In the present case, however, this principle is applied in an exactly reverse scenario. Here, company is the accused person and the learned Special Magistrate has observed in the impugned order that since the appellants represent the directing mind and will of each company, their state of mind is the state of mind of the company and, therefore, on this premise, acts of the company is Page 42 attributed and imputed to the appellants. It is difficult to accept it as the correct principle of law. As demonstrated hereinafter, this proposition would run contrary to the principle of vicarious liability detailing the circumstances under which a direction of a company can be held liable.

(iii) Circumstances when Director/Person in charge of the affairs of the company can also be prosecuted, when the company is an accused person:

37. No doubt, a corporate entity is an artificial person which acts through its officers, directors, managing director, chairman etc. If such a company commits an offence involving mens rea, it would normally be the intent and action of that individual who would act on behalf of the company. It would be more so, when the criminal act is that of conspiracy. However, at the same time, it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute specifically provides so.

38. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated is in those cases where the statutory regime itself attracts the doctrine of vicarious liability, by specifically Page 43 incorporating such a provision.

39. When the company is the offendor, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect. One such example is Section 141 of the Negotiable Instruments Act, 1881. In Aneeta Hada (supra), the Court noted that if a group of persons that guide the business of the company have the criminal intent, that would be imputed to the body corporate and it is in this backdrop, Section 141 of the Negotiable Instruments Act has to be understood. Such a position is, therefore, because of statutory intendment making it a deeming fiction. Here also, the principle of “alter ego”, was applied only in one direction namely where a group of persons that guide the business had criminal intent, that is to be imputed to the body corporate and not the vice versa. Otherwise, there has to be a specific act attributed to the Director or any other person allegedly in control and management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company. This very principle is elaborated in various other judgments. We have already taken note of Maharashtra State Electricity Distribution Co. Ltd. (supra) and S.K. Alagh (supra). Few other judgments reiterating this principle are the following: Page 44

1. Jethsur Surangbhai v. State of Gujarat12 “9. With due respect what the High Court seems to have missed is that in a case like this where there was serious defalcation of the properties of the Sangh, unless the prosecution proved that there was a close cohesion and collusion between all the accused which formed the subject matter of a conspiracy, it would be difficult to prove the dual charges particularly against the appellant (A-1). The charge of conspiracy having failed, the most material and integral part of the prosecution story against the appellant disappears. The only ground on the basis of which the High Court has convicted him is that as he was the Chairman of the Managing Committee, he must be held to be vicariously liable for any order given or misappropriation committed by the other accused. The High Court, however, has not referred to the concept of vicarious liability but the findings of the High Court seem to indicate that this was the central idea in the mind of the High Court for convicting the appellant. In a criminal case of such a serious nature mens rea cannot be excluded and once the charge of conspiracy failed the onus lay on the prosecution to prove affirmatively that the appellant was directly and personally connected with acts or omissions pertaining to Items 2, 3 and 4. It is conceded by Mr Phadke that no such direct evidence is forthcoming and he tried to argue that as the appellant was Chairman of the Sangh and used to sign papers and approve various tenders, even as a matter of routine he should have acted with care and caution and his negligence would be a positive proof of his intention to commit the offence. We are however unable to agree with this somewhat broad statement of the law. In the absence of a charge of conspiracy the mere fact that the appellant happened to be the Chairman of the Committee would not make him criminally liable in a vicarious sense for items 2 to 4. There is no evidence either direct or circumstantial to show that apart from approving the purchase of fertilisers he knew that the firms from which the fertilisers were purchased did not exist. Similar is the case with the other two items. Indeed, if the Chairman was to be made liable 12 (1984) Supp. SCC 207 Page 45 then all members of the Committee viz. Tehsildar and other nominated members, would be equally liable because all of them participated in the deliberations of the meetings of the Committee, a conclusion which has not even been suggested by the prosecution. As Chairman of the Sangh the appellant had to deal with a large variety of matters and it would not be humanly possible for him to analyse and go into the details of every small matter in order to find out whether there has been any criminal breach of trust. In fact, the hero of the entire show seems to be A-3 who had so stage-managed the drama as to shield his guilt and bring the appellant in the forefront. But that by itself would not be conclusive evidence against the appellant. There is nothing to show that A-3 had either directly or indirectly informed the appellant regarding the illegal purchase of fertilisers or the missing of the five oil engines which came to light much later during the course of the audit. Far from proving the intention the prosecution has failed to prove that the appellant had any knowledge of defalcation of Items 2 to 4. In fact, so far as item 3 is concerned, even Mr Phadke conceded that there is no direct evidence to connect the appellant.”

2. Sham Sunder v. State of Haryana13

3. Hira Lal Hari Lal Bhagwati v. CBI 14

4. Maksud Saiyed v. State of Gujarat15

5. R. Kalyani v. Janak C. Mehta16

7. Keki Hormusji Gharda v. Mehervan Rustom Irani18

19. Even as regards the availability of the remedy of filing an application for discharge, the same would not mean that although the allegations made in the complaint petition even if given face value and taken to be correct in its entirety, do not disclose an offence or it is found to be otherwise an abuse of the process of the court, still the High Court would refuse to Page 49 exercise its discretionary jurisdiction under Section 482 of the Code of Criminal Procedure.”

40. It is stated at the cost of repetition that in the present case, while issuing summons against the appellants, the Special Magistrate has taken shelter under a so-called legal principle, which has turned out to be incorrect in law. He has not recorded his satisfaction by mentioning the role played by the appellants which would bring them within criminal net. In this behalf, it would be apt to note that the following observations of this Court in the case of GHCL Employees Stock Option Trust v. India Infoline Ltd.19:

41. We have already mentioned above that even if the CBI did not implicate the appellants, if there was/is sufficient material on

Page 50 record to proceed against these persons as well, the Special Judge is duly empowered to take cognizance against these persons as well. Under Section 190 of the Code, any Magistrate of first class (and in those cases where Magistrate of the second class is specially empowered to do so) may take cognizance of any offence under the following three eventualities: (a) upon receiving a complaint of facts which constitute such offence; (b) upon a police report of such facts; and

(c) upon information received from any person other than a police officer, or upon his own knowledge, that such offence has been committed.

42. This Section which is the starting section of Chapter XIV is subject to the provisions of the said Chapter. The expression “taking cognizance” has not been defined in the Code. However, when the Magistrate applies his mind for proceeding under Sections 200-203 of the Code, he is said to have taken cognizance of an offence. This legal position is explained by this Court in S.K. Sinha, Chief Enforcement Officer v. Videocon International Ltd & Ors.20 in the following words:

43. Cognizance of an offence and prosecution of an offender are two different things. Section 190 of the Code empowered taking cognizance of an offence and not to deal with offenders. Page 52 Therefore, cognizance can be taken even if offender is not known or named when the complaint is filed or FIR registered. Their names may transpire during investigation or afterwards.

44. Person who has not joined as accused in the charge-sheet can be summoned at the stage of taking cognizance under Section 190 of the Code. There is no question of applicability of Section 319 of the Code at this stage (See SWIL Ltd. v. State of Delhi21 ). It is also trite that even if a person is not named as an accused by the police in the final report submitted, the Court would be justified in taking cognizance of the offence and to summon the accused if it feels that the evidence and material collected during investigation justifies prosecution of the accused (See Union of India v. Prakash P. Hinduja and another22 ). Thus, the Magistrate is empowered to issue process against some other person, who has not been charge-sheeted, but there has to be sufficient material in the police report showing his involvement. In that case, the Magistrate is empowered to ignore the conclusion arrived at by the investigating officer and apply his mind independently on the facts emerging from the investigation and take cognizance of the case. At the same time, it is not permissible at this stage to consider any material other than that

45. On the other hand, Section 204 of the Code deals with the issue of process, if in the opinion of the Magistrate taking cognizance of an offence, there is sufficient ground for proceeding. This Section relates to commencement of a criminal proceeding. If the Magistrate taking cognizance of a case (it may be the Magistrate receiving the complaint or to whom it has been transferred under Section 192), upon a consideration of the materials before him (i.e., the complaint, examination of the complainant and his witnesses if present, or report of inquiry, if any), thinks that there is a prima facie case for proceeding in respect of an offence, he shall issue process against the accused.

46. A wide discretion has been given as to grant or refusal of process and it must be judicially exercised. A person ought not to be dragged into Court merely because a complaint has been filed. If a prima facie case has been made out, the Magistrate ought to issue process and it cannot be refused merely because he thinks that it is unlikely to result in a conviction.

47. However, the words “sufficient grounds for proceeding” appearing Page 54 in the Section are of immense importance. It is these words which amply suggest that an opinion is to be formed only after due application of mind that there is sufficient basis for proceeding against the said accused and formation of such an opinion is to be stated in the order itself. The order is liable to be set aside if no reason is given therein while coming to the conclusion that there is prima facie case against accused, though the order need not contain detailed reasons. A fortiori, the order would be bad in law if the reason given turns out to be ex facie incorrect.

48. However, there has to be a proper satisfaction in this behalf which should be duly recorded by the Special Judge on the basis of material on record. No such exercise is done. In this scenario, having regard to the aforesaid aspects coupled with the legal position explained above, it is difficult to sustain the impugned order dated 19.03.2013 in its present form insofar as it relates to implicating the appellants and summoning them as accused persons. The appeals arising out of SLP (Crl.) No. 2961 of 2013 and SLP (Crl.) No. 3161 of 2013 filed by Mr. Sunil Bharti Mittal and Ravi Ruia respectively are, accordingly, allowed and order summoning these appellants is set aside. The appeals arising Page 55 out of SLP (Crl.) Nos. 3326-3327 of 2013 filed by Telecom Watchdog are dismissed. Epilogue

49. While parting, we make it clear that since on an erroneous presumption in law, the Special Magistrate has issued the summons to the appellants, it will always be open to the Special Magistrate to undertake the exercise of going through the material on record and on that basis, if he is satisfied that there is enough incriminating material on record to proceed against the appellants as well, he may pass appropriate orders in this behalf. We also make it clear that even if at this stage, no such prima facie material is found, but during the trial, sufficient incriminating material against these appellants surfaces in the form of evidence, the Special Judge shall be at liberty to exercise his powers under Section 319 of the Code to rope in the appellants by passing appropriate orders in accordance with law at that stage..........................................CJI. (H.L. DATTU) ............................................. J. (MADAN B. LOKUR) ............................................. J. Page 56 (A.K. SIKRI) NEW DELHI; JANUARY 09, 2015. Page 57 ITEM NO. 1A COURT NO.1

SECTION II (For Judgment) S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS CRIMINAL APPEAL NO. 34 OF 2015 @ PETITION FOR SPECIAL LEAVE TO APPEAL (Crl.) NO. 2961 OF 2013 Sunil Mittal.. Appellant(s) vs. Central Bureau of Investigation..Respondent(s) WITH CRIMINAL APPEAL NO. 35 of 2015 (@ SLP(Crl.) No. 3161 of 2013 CRIMINAL APPEAL NOs.36-37 of 2015 (@ SLP(Crl.) Nos. 3326-3327 of 2013) DATE: 09.01.2015 These matters were called on for pronouncement of judgment today. For Appellant(s) Mr. Harish Salve, Sr. Adv. Mr. Fali S. Nariman, Sr. Adv. Mr. Amit Desai, Sr. Adv. Mr. Percival Billimonia, Adv. Mr. Sidharth Agarwal, Adv. Mr. Kamal Shankar, Adv. Mr. Atul N, Adv. Mr. Manpreet Lamba, Adv. Mr. Gautam, Adv. Mr. Utkarsh Saxena, Adv. Mr. Utkarsh Saxena, Adv. For Respondent(s) Ms. Pinky anand, ASG Mr. Gopal Sankaranarayanan, Adv. Mr. Rajesh Ranjan, Adv. Mr. Balendu Shekhar, Adv. Mr. B.V. Balram Das, Adv. Ms. Meenakshi Grover, Adv. Mr. Rohit Bhat, Adv. Mr.D.S. Mehara, Adv. --- Page 58 Hon'ble Mr. Justice A.K. Sikri pronounced the judgment of the Bench comprising Hon'ble the Chief Justice, Hon'ble Mr. Justice Madan B. Lokur and His Lordship. Leave granted. The appeals arising out of SLP(Crl.) No. 2961 of 2013 and 3161 of 2013 are allowed. The appeals arising out of SLP(Crl.) Nos. 3326-3327 of 2013 are dismissed. [ Charanjeet Kaur ] [ Vinod Kulvi ] [ Signed reportable judgment is placed on the file ]