Ramakant Vijaywargiya vs The State Of Madhya Pradesh & Ors.

By way of the present petitions filed under Section 528 of the BNSS 2023, the applicant seeks quashing of proceedings pending against the petitioner in Sessions Trial Nos.237/2021, 693/2020, 692/2020, 247/2021, pending before VIII Addl. Sessions Judge, Bhopal, Sessions Trial Nos 675/2020, 795/2020, 98/2021, 99/2021, 238/2021 and 432/2021, pending before XVI Addl. Sessions Judge, Bhopal, Sessions Trial Nos.542/2021, 545/2021, 546/2021, 547/2021, 548/2021, 555/2021, 556/2021, 557/2021, 559/2021, 560/2021 and 876/2022 pending before XXI Addl. Sessions Judge, Bhopal and Sessions Trial No.340/2021, pending before XXV Addl. Sessions Judge, Bhopal.

As per the facts discernible from the FIR was the petitioner was one of the Directors of M/s Distinct Infrastructure Ltd. (DIL), a company engaged in the development of residential projects. The company had launched a project known as “Panchvati Enclave/Panchvati Phase-3”, pursuant to which various purchasers entered into agreements with the company for allotment of plots. It is not in dispute that the said agreements were executed between the purchasers/complainants and the company, and that the entire sale consideration was deposited in the account of the company itself. The broad allegation against the petitioner and others is that the sale deeds were not executed in favour of the purchasers, the land was not developed in terms of the agreement, and the amounts paid were neither refunded nor accounted for, but were allegedly misappropriated for personal use. On the basis of these allegations, multiple FIRs have been registered under Sections 420 and 409 of the Indian Penal Code. The petition further discloses that, pursuant to an order dated 01.08.2018 passed by the learned Sessions Court, directions were issued for registration of separate FIRs in respect of different complainants. In consequence thereof, as many as 21 criminal cases came to be registered, all founded on substantially similar allegations arising out of the same project and transactions.

It is argued on behalf of the petitioner that in all the aforesaid cases, the prosecution has chosen to proceed solely against the petitioner by describing him as the Managing Director, while the company itself, being the principal contracting entity and the recipient of the entire consideration, has not been impleaded as an accused. This omission assumes considerable importance, inasmuch as the transactions in question are admittedly between the complainants and the company, and any alleged liability, at least in the first instance, would arise in the context of the acts and affairs of the company. The petitioner specifically points out that in an identical matter arising out of FIR No. 496/2020, this Hon’ble Court had already granted stay of further proceedings on the very ground that the company had not been arrayed as an accused. This circumstance clearly demonstrates that the defect is not a mere procedural irregularity, but one which goes to the very root of the prosecution and its maintainability. In such a situation, the petitioner is being subjected to multiple criminal prosecutions in respect of transactions which, on the face of the record, are attributable to the company as a separate legal entity. The continuation of proceedings in this manner, without impleading the company, raises serious concerns regarding the legality and sustainability of the prosecution against the petitioner in his individual capacity.

It is contended that once it is an admitted position on record that the agreements in question were executed by the company and the entire consideration was received in the account of the company, the company itself constitutes the principal entity responsible for the transactions. In such circumstances, the company would be the primary offender, and in its absence, no vicarious liability can be fastened upon its Directors. It is further submitted that the petitioner has been arrayed as an accused solely on account of his designation as the Managing Director, without there being any specific allegation attributing to him any direct or active role in the alleged transactions. There is no material to indicate his personal involvement, criminal intent (mens rea), or any independent act on his part which could attract criminal liability. In criminal jurisprudence, liability is essentially personal in nature, and vicarious liability cannot be inferred or imposed unless expressly provided for by statute or supported by specific allegations demonstrating the role of the individual concerned. In the absence of the company being impleaded as an accused, and in the absence of any concrete allegations against the petitioner in his individual capacity, the continuation of criminal proceedings against him is legally unsustainable and amounts to a misuse of the criminal process.

In support of the aforesaid submission, reliance is placed upon a consistent and well-settled line of decisions of the Hon’ble Supreme Court, which unequivocally hold that where an offence is attributable to a company, the company must necessarily be arraigned as an accused, and in its absence, prosecution against its directors or officers cannot be sustained. In C.V. Parekh v. State of Maharashtra (1970) 3 SCC 491, it was held that where the company itself is not prosecuted, its directors cannot be held vicariously liable, as the principal offender is not before the Court. This principle was subsequently reaffirmed by a three-Judge Bench in Aneeta Hada v. Godfather Travels & Tours (P) Ltd. (2012) 5 SCC 661 , wherein it was authoritatively held that arraignment of the company as an accused is a sine qua non for maintaining prosecution against its directors where the alleged liability is essentially corporate in nature. The same principle has been reiterated in the context of offences under the Penal Code in Maksud Saiyed v. State of Gujarat (2008) 5 SCC 668, wherein it was held that the Indian Penal Code does not, as a general rule, contemplate vicarious liability of directors. It was further observed that, in the absence of specific allegations demonstrating their individual role, directors cannot be prosecuted merely by virtue of their position, particularly when the allegations pertain to acts of the company and the company itself is not before the Court. In Sunil Bharti Mittal v. CBI (2015) 4 SCC 609, the Hon’ble Supreme Court clarified that criminal intent cannot be attributed to directors solely on the basis of their designation, and that in cases involving corporate offences, the company must first be arraigned as an accused before examining the role of its officers. Similarly, in Shiv Kumar Jatia v. State (NCT of Delhi) (2019) 17 SCC 193, it was held that directors cannot be subjected to criminal prosecution in the absence of specific allegations indicating their direct involvement, and that mere designation is insufficient to attract criminal liability. The legal position was further crystallised in Sushil Sethi v. State of Arunachal Pradesh (2020) 3 SCC 240, wherein the Hon’ble Supreme Court quashed criminal proceedings against directors on the ground that the company had not been impleaded as an accused and there were no specific allegations against the individuals. It was held that where the allegations are essentially against the company, and the company is not before the Court, continuation of proceedings against the directors alone would amount to an abuse of the process of law. It has been urged that most recently, in S.C. Garg v. State of Uttar Pradesh (2025 SCC OnLine SC 791), the Hon’ble Supreme Court has directly addressed the issue and held that where the prosecution arises out of transactions of a company and the company has not been arrayed as an accused, the proceedings against the Managing Director alone are unsustainable, particularly in the absence of specific allegations of individual culpability. The Court treated such omission as a fundamental defect going to the root of the prosecution and, on that ground, quashed the proceedings.

Learned counsel for the petitioner submits that, when the aforesaid settled legal principles are applied to the facts of the present case, it becomes evident that the prosecution itself proceeds on the premise that the petitioner acted in his capacity as the Managing Director of M/s Distinct Infrastructure Ltd. (DIL), and that all the impugned transactions were undertaken by the company. The agreements in question were executed by the company, the entire consideration was received in the account of the company, and the alleged default pertains to non-fulfilment of contractual obligations of the company. In such circumstances, the company is the principal actor and a necessary party to the proceedings. The omission to implead the company as an accused, despite the nature of the allegations, renders the very foundation of the prosecution legally unsustainable. It is further submitted that the continuation of criminal proceedings against the petitioner alone, in the absence of the company and in the absence of any specific allegations attributing to him an independent role or criminal intent, is in clear contravention of the settled position of law as laid down by the Hon’ble Supreme Court. Such prosecution, it is urged, amounts to a gross abuse of the process of law. Consequently, the impugned criminal proceedings, being fundamentally defective, are liable to be quashed in exercise of the inherent as well as writ jurisdiction of this Hon’ble Court.

The respondent No.1/State contend that non-impleadment of the company is not fatal in the present case, as the allegations disclose direct criminal liability of the petitioner in his individual capacity. It may be submitted that the case is not one of mere vicarious liability, but involves specific acts of inducement, misrepresentation, and dishonest intention attributable to the petitioner, who was in control of the affairs of the company. It is further argued that the petitioner, being the Managing Director, was actively involved in the transactions and decision-making process, and cannot avoid prosecution by taking shelter behind the corporate entity. Where individual mens rea and active participation are alleged, prosecution against the individual is maintainable even in the absence of the company. It is further submitted that the issue of the petitioner’s role and intent is a matter of evidence and cannot be adjudicated at the stage of quashing. The allegations, taken at face value, disclose cognizable offences under Sections 420 and 409 IPC, and therefore warrant a full-fledged trial. It is also contended that separate FIRs are justified as they arise from distinct transactions with different complainants. Lastly, it is urged that the petition seeks to prematurely stifle legitimate prosecution, and in the absence of any patent illegality, no interference is warranted in exercise of writ or inherent jurisdiction.

This court has considered the arguments advanced by both the parties, and perused the record.

9 . The point for consideration before this court is whether the non-impleadment of M/s Distinct Infrastructure Ltd., being the principal contracting entity and recipient of the consideration, renders the prosecution against the petitioner alone, legally unsustainable?

It has been alleged in the FIR that the petitioner, solely on the basis of an agreement and without having acquired ownership or lawful title over the said land, proceeded to sell plots by falsely representing the agricultural land as his own. It is further alleged that the petitioner prepared a fictitious and unauthorized layout plan, on the basis of which approximately 479 plots were carved out, out of which about 247 plots were sold to various purchasers/complainants, thereby collecting an amount of approximately Rs.16,60,00,000/-. It is specifically alleged that the said layout plan had not been approved by the competent authority, namely the Town and Country Planning (TNCP) Department. It is further alleged that the petitioner utilized the amounts so collected from the sale of plots for the purchase of various immovable properties in Indore for his personal benefit.

The material collected during investigation, particularly the statement of Anil Nair, recorded under Section 161 of the Cr.P.C., prima facie discloses the active role and involvement of the petitioner in the affairs of M/s Distinct Infrastructure Limited. The said witness has stated that he was working as an Accountant in the company on the post of Senior Executive, and that the petitioner, Ramakant Vijayvargiya, was functioning as the Managing Director, along with other Directors including Archana Vijayvargiya, Rajat Vijayvargiya, Major Nanni and Arpit. Significantly, the witness has specifically stated that substantial amounts belonging to the company were utilized for personal purposes of the petitioner and other Directors. It has been stated that Archana Vijayvargiya was holding LIC policies at various branches, and the premium installments in respect thereof were paid by the petitioner. Further, it has been alleged that the petitioner purchased an apartment at Shyamala Hills, Bhopal, and the consideration for the same was paid from the accounts of the firm, namely Panchwati Phase-III, out of the proceeds received from the sale of plots. The witness has also referred to payments amounting to Rs. 44,33,245/- made to the M.P. Housing Board during the years 2005–2006, though he expressed lack of knowledge regarding the exact land transaction. The statement further indicates that funds generated from the sale of plots under the Panchwati Phase-III project were systematically diverted and misappropriated for personal use and for acquisition of personal assets. These allegations, at this stage, prima facie suggest not merely corporate liability, but active involvement and culpable conduct on the part of the petitioner in the alleged acts of misappropriation and breach of trust.

The statement of Maharaj Singh Meena, recorded during the course of investigation, reveals that in the year 2003 he, along with his family members, entered into an agreement with the petitioner for sale of land admeasuring 8.66 acres situated at Village Laukhedi, at the rate of Rs.20 lakhs per acre. It is stated that a part of the consideration was paid by the petitioner in cash, and it was agreed that the entire sale consideration would be paid within a period of six years. In furtherance, a written agreement was executed on 08.03.2003. The witness has further stated that after about one year, the petitioner issued a cheque of Rs.10,00,000/-, but no further payment was made thereafter. Despite repeated demands for payment of the remaining consideration and execution of the sale deed, the petitioner allegedly avoided compliance on one pretext or another, assuring that the balance amount would be paid shortly upon receipt of funds. It has also been stated that the land continues to remain in the possession of the witness and his family members. Significantly, the witness has alleged that the petitioner proceeded to sell plots to various persons on the basis of the said agreement to sell, despite not having acquired title over the land. According to him, he became aware of such transactions around the year 2010, when the petitioner was implicated in a case under Section 420 of the IPC.

The judgment in Sunil Bharti Mittal v. CBI (supra) lays down the settled principle that criminal liability of a Director or officer of a company cannot be fastened merely on the basis of his designation. The Hon’ble Supreme Court held that criminal law recognizes personal culpability, and therefore, before summoning or prosecuting an individual, there must be specific material indicating his active role coupled with the requisite mensrea. It was further observed that where the offence is primarily attributable to a company, the company should ordinarily be arraigned as an accused, and only thereafter the role of its officers can be examined. When the aforesaid principles are applied to the facts of the present case, it becomes evident that the petitioner cannot derive any benefit from the said judgment. The present case is not one where the petitioner has been implicated merely by virtue of holding the office of Managing Director. On the contrary, the material collected during investigation, including the statements of witnesses, prima facie attributes specific and direct acts to the petitioner. The statement of Anil Nair indicates that company funds, generated from sale of plots, were diverted and utilized for personal purposes, including payment of LIC premiums and purchase of immovable properties. Similarly, the statement of Maharaj Singh Meena discloses that the petitioner entered into an agreement for purchase of land, failed to pay the agreed consideration, and yet proceeded to deal with the property by selling plots to third parties without acquiring title.

These allegations, taken at face value, suggest active involvement, dishonest intention, and personal gain, which go beyond mere corporate liability. Thus, the prosecution case is not founded on the principle of vicarious liability alone, but on independent acts of cheating, misappropriation, and breach of trust allegedly committed by the petitioner in his personal capacity while managing the affairs of the company. In such circumstances, the requirement emphasized in Sunil Bharti Mittal (supra) namely, existence of material showing active role and mensrea, stands prima facie satisfied. Moreover, the said judgment does not lay down an inflexible rule that in every case non-impleadment of the company would render the prosecution unsustainable. Where specific allegations disclose direct involvement of an individual in the commission of the offence, proceedings against such person can validly continue.

The judgments relied upon by the petitioner, namely C.V. Parekh v. State of Maharashtra (1970) 3 SCC 491, , Maksud Saiyed v. State of Gujarat (2008) 5 SCC 668, Sunil Bharti Mittal v. CBI (2015) 4 SCC 609, Shiv Kumar Jatia v. State (NCT of Delhi) (2019) 17 SCC 193, Sushil Sethi v. State of Arunachal Pradesh (2020) 3 SCC 240, and S.C. Garg v. State of Uttar Pradesh (2025 SCC OnLine SC 791), are clearly distinguishable on facts as well as on the legal matrix applicable to the present case. In the aforesaid decisions, the Hon’ble Supreme Court was dealing with situations where the liability of directors or officers was sought to be fastened solely on account of their official designation, without there being any specific allegations attributing to them an active role or criminal intent. In such cases, the Court emphasized that where the offence is essentially corporate in nature, the company being the principal offender must necessarily be arraigned as an accused, and in its absence, prosecution against its directors based purely on vicarious liability cannot be sustained. However, the present case does not fall within the ambit of the aforesaid principles. Here, the prosecution is not founded merely on the petitioner’s status as Managing Director, nor is it a case of bald or omnibus allegations. On the contrary, the material collected during investigation, including the statements of witnesses, prima facie discloses specific acts attributable to the petitioner, indicating his direct involvement in the alleged transactions.

The allegations pertain to diversion of funds received from sale of plots for personal use, purchase of personal properties from company accounts, and dealing with land and third parties in a manner suggestive of dishonest intention. These circumstances, if taken at face value, point towards independent acts of cheating, misappropriation, and breach of trust, thereby establishing the necessary element of mens rea on the part of the petitioner. In such a factual background, the principle of vicarious liability, which formed the basis of the judgments relied upon by the petitioner, is not strictly attracted. The prosecution herein is predicated upon the petitioner’s own conduct and not merely on his position within the company. Consequently, the non-impleadment of the company, though a factor to be considered, cannot be said to be fatal at this stage when the allegations disclose direct and personal involvement of the petitioner in the commission of the alleged offences. Therefore, the reliance placed by the petitioner on the aforesaid judgments is misplaced, as the ratio laid down therein does not apply to the facts of the present case. Rather, the present matter is one where the allegations and material on record necessitate a full-fledged trial to ascertain the extent of the petitioner’s involvement, and do not warrant interference at the threshold.

The case of Aneeta Hada (supra) was rendered in the context of Section 138 read with Section 141 of the Negotiable Instruments Act, wherein the statute itself incorporates the principle of vicarious liability and mandates arraignment of the company as a sine qua non for prosecution of its officers. However, the present case arises out of offences under the Indian Penal Code, such as Sections 420 and 409 IPC, which do not, in general, envisage vicarious liability in the absence of specific statutory provision. In such cases, criminal liability is primarily personal and depends upon the existence of specific allegations disclosing active involvement and requisite mensrea. In the present matter, the prosecution is not founded merely on vicarious liability arising from the petitioner’s position in the company, but on prima facie material indicating his direct role in the alleged acts of misappropriation and cheating. Therefore, the ratio of Aneeta Hada does not strictly apply to the facts of the present case.

The allegations in the FIR, if taken at face value, clearly disclose that the petitioner, without acquiring title over the land, induced purchasers by misrepresenting ownership, developed an unauthorized layout, and collected substantial amounts, which were allegedly diverted for personal use. Such allegations prima facie establish the ingredients of cognizable offences involving deception and dishonest intention from inception. At this stage, this Court finds no ground to interfere, and the matter warrants a full-fledged trial.

Therefore, finding no merit to entertain the petition in exercise of jurisdiction under Section 482 of the Cr.P.C., the petition deserves to be rejected. It is clarified that the observations recorded herein are prima facie in nature and confined to the adjudication of the present petition. The learned trial Court shall decide the case strictly on the basis of the evidence adduced before it, uninfluenced by any observations made in this order.

With the aforesaid observations, the petition stands rejected. Interim order of any kind operating, shall stand dissolved. Registry is directed to send the copy of this order to the trial Court.