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Judgment
Maheswaran, J.—This is an application for quashing the proceedings in C.C. No. 399 of 1982, on the file of the Chief Judicial Magistrate, Pondicherry,
The facts which led to this petition may briefly be stated. The Petitioner is Sri Aurobindo Society which was registered under the West Bengal Societies Registration Act on the 24th of September, 1960 at Calcutta. The Mother of the Sri Aurobindo Ashramam was designated as the permanent President of the Society. The Mother conceived of the idea of an international township of ''Aurovillie'' to be located at the outskirts of Pondicherry. The international township was intended to be a self contained unit and to demonstrate a new way of life guided by higher consciousness by bringing together peoples of different countries. The Mother approved of establishment of an Indian Pavilion named ''Bharat Nivas'' in the meeting of Administrative Committee of the Society on the 14th of June, 1979. The said Bharat Nivas was to contain an auditorium, a restaurant, and State Government Pavilions. The Petitioner society received a sum of Rs. 75.05 lakhs from the Central Government and State Government towards the construction of the pavilions between the period 1st January, 1968 and 31st March, 1976. The Mother left her physical body on the 17th of November, 1973. On 26th June, 1974, Sri Navajata was designated as the Chairman of the Society and Shyam Sundar Jhunjhenwala as General Secretary and treasurer of the Petitioner Society. Oh a complaint given by Kireet Joshi, Educational Adviser, Government of India, Ministry of Education and Culture, Department of Education, New Delhi, a case was registered by the Respondent in Crime No. P/86II No.2/80 S.I.V. I on 15th October, 1980, against Navajata, Chairman and others for offences u/s 120-B read with Sections 406, 409, 420, 467, 468, 471 and 477-A, I.P.C. The Respondent after investigation filed the charge sheet on 30th October, 1983 against the Petitioner Society for an offence u/s 406, I.P.C., and against the second Petitioner for an offence u/s 406 read with Section 109, I.P.C., the Petitioners filed an application u/s 239, Code of Criminal Procedure, to discharge the accused, but that was dismissed by the Chief Judicial Magistrate, Pondicherry. The Petitioner seek to quash the proceedings in C.C. 395 of 1982 on the grounds (1) that the offence u/s 406, I.P.C., has not been made out against the Petitioner society, (2) that the allegation against the accused that a sum of Rs. 18,74,668-55 do not stand accounted for in the books of accounts will not amount to dishonest misappropriation and that S.S. Jhunjhunwala cannot be charged for abetment of the offence which is alleged to have been committed through him by the Petitioner-society; (3) that there is no mens rea on the part of the accused; and (4) that action can be taken only under the West Bengal Societies Act and resort to the provisions of the Indian Penal Code is not proper as contravention of the provisions of the gifts made by the Central and State Governments does not amount to commission of criminal offence.
A complaint was given by the Educational Adviser, Ministry of Education and Culture, Government of India, against Navajata, Chairman, Sri Aurobindo Society and others for various offences u/s 120B read with Sections 406, 409, 420, 467, 468 471 and 477A, I.P.C. A charge sheet was laid against Sri Aurobindo Society, Pondicherry and against Shyam Sundar Jhunjhunwala, who are the Petitioners. It is not necessary to set out in detail the entire charge sheet. It is seen, from, the charge sheet that notwithstanding the fact that the post of Chairman of the Society was created, Shyam Sundar Jhunjhunwale continued to hold office of the General Secretary and Treasurer of the Society and later the authority enjoyed by Shyam Sander Jhunjhunwala to operate accounts in Banks, post offices and sign cheques and documents pertaining thereto and also other documents vested with Nevajata, the Chairman, and Harikant Patel, a member of the Executive Committee of the Society jointly. It is also seen from the charge sheet that for all intents and purposes the accounts of the society including Auroville were looked into by S.S. Jhunjunwala, the second Petitioner and all payments made for construction of Bharat Nivas were authorised by the second Petitioner and therefore the dominion over the funds and affairs of the Society was with the second Petitioner. It is further seen that the Society received Rs. 74.05 lakhs towards construction of Bharat Nivas and construction of State Pavilion at Auroville and that the books of accounts of Auroville show that a sum of Rs. 18,74,688.55 was not accounted for. The contention of the learned Counsel for the Petitioner is that the offences u/s 406, I.P.C. against the first Petitioner and u/s 406 read with Section 103, I.P.C., against the second Petitioner are not made out. It is no doubt true that in order to sustain a conviction u/s 406, I.P.C., distinct proof of entrustment of property and misappropriation of that property is necessary. But, at the same time it should be noted that it does not lie on the prosecution to prove the actual, made of misappropriation. The charge sheet clearly states that the second Petitioner was entrusted with the dominion over the funds and affairs of the society including Auroville and that investigation has revealed that the Society has received a sum of Rs. 74.05 lakhs from the Central Government and State Government towards construction of Bharat Nivas and Shite Pavalion at Auroville, that the books of accounts of the society show that a sum of Rs. 18,74,680-55 ''is not accounted for.'' The prosecution should prove the. entrustment of money for a specific purpose and the failure of the accused to account for them which he is bound to do. The feel that the accused has failed to account for the amount of Rs. 18,74,688.55 coupled, with other circumstances may justify an inference that the accused misappropriated the amount (sic) it does not really mean that the burden of proof has shifted from the prosecution to the defence. But, in my view, it is the function of the trial Court to find out whether there has been misappropriation of the funds entrusted with the accused and the Petitioner cannot invoke the inherent jurisdiction of this Court u/s 462, Code of Criminal Procedure to quash the charges. It depends on the evidence. that may be let in by the prosecution. The charge sheet filed discloses an offence. In exercising the jurisdiction, u/s 482, Code of Criminal Procedure, this Court would not embark upon an enquiry as to whether the evidence that may be let in this case would not sustain a conviction u/s 406, I.P.C. On that view, the Petitioners cannot pray for quashing the charges by invoking the inherent jurisdiction of this Court.
The next contention of Mr. Natarajan, learned Counsel for the Petitioner, is that the first Petitioner Society cannot in any event be held to have committed an offence u/s 406, I.P.C., as the essential ingredients of that offence is mens rea. He pointed out that no one could attribute a blame worthy act to the Society and Section 406. I.P.C., is not an offence requiring no mens rea, Mr Natarajan, learned Counsel for the Petitioners invited my attention to Sections 2 and 11 of the Indian Penal Code. Section 2 states that every person shall be liable to punishment under the Code and not otherwise for every act or omission contrary to the provisions thereof which he shall be guilty within India and Section 11 states that the word ''person'' includes any company or Association or body of persons, whether incorporated or not. A reading of these two sections would very clearly show that a company or a corporate body shall be liable for indictment. My attention was invited to State of Maharashtra v. Syndicate Transport Co. AIR 1964 Bom 115. That was a case where a private limited company along with its officers was prosecuted for offences under Sections 420 and 406 or Section 403, I.P.C. Charges were framed u/s 420, I.P.C., against the company and others. When the company went up in revision to the Sessions Court with a request to quash the proceedings against it, the extra Additional Sessions Judge reported the case to the High Court with recommendation to quash the charges framed. That recommendation was made with a view that the corporate body acts only through its agents or servants and that mens rea of such agents or servants cannot be attributed to the Company and that it would not be possible to sentence a company to imprisonment and a charge u/s 420, I.P.C., could not be sustained against the company, as the offence u/s 420, I.P.C., is mandatorily punishable with imprisonment. Paranjipe, J., held that despite the generality of the definition of a ''person'' given in Section 11 of the Penal Code, a corporate body or a company shall not be indictable for offences which can be committed only by a human individual or for offences which must be punished with imprisonment, that the offence of Cheating u/s 420, I.P.C. shall be punished with imprisonment and that company cannot be prosecuted for that offence mandatorily involving punishment of imprisonment and that barring these exceptions a corporate body ought to be indictable for criminal acts or omissions of its directors or authorised agents or servants whether they involve mens rea or not, provided they have acted or have purported to act under authority of the corporate body or in pursuance of the aims or objects of the corporate body. The learned Author on Marris''s Criminal Law, 21st Edn., at page 109, referring to criminal responsibility, states thus:
Corporations may be held vicariously responsible in exactly the same circumstances as a natural person. However, the liability of corporation is not limited exclusively to vicarious responsibility. Corporations can now, at least in theory, be convicted of roost crimes.
Corporations, being legal fictions, can only act and think through their officers and servants. For the purposes of imposing criminal responsibility upon corporations (other than vicarious responsibility) only the conduct and accompanying menial state of senior officers, acting in the course of their employment, can be imputed to a corporation. If a senior officer, for example, makes a false statutory return (i.e. a tax return) on behalf of the corporation, knowing it to be false, the corporation can be convicted of the offence which is thereby committed. So also, it has been held, a corporation may be convicted of a common law conspiracy to defraud the conduct and the guilty mind of the senior official involved being imputed to the corporation.
The limitations upon the liability of corporations may be noted. First, only the conduct and accompanying mental state of persons in control of the corporation may be imputed to the corporation. This would include directors, managers with a controlling voice and probably branch managers. Secondly, these officers must be acting within the scope of their employment. Thirdly, a company and its director cannot be convicted of conspiracy, when the only human being who broke the law or intended to do so was the director. Fourthly, corporations cannot be convicted of the few crimes which cannot be punished by a fine, e.g. murder. Finally, it is difficult to see how corporations could commit certain offences e.g., sexual offences. But it is not impossible that a corporation could be convicted of crimes involving personal violence, e.g. the directors order an unlawful trip to be built on corporation property to cash trespassers.
In the case of Rex. v. I. C. N. Haulages Ltd. 1944 1 K.B. 551 a company was charged along with others with an offence of conspiracy to defraud. The company was convicted and was ordered to be fined. The Company appealed. The question arose whether a limited company can be indicted for the offence charged with. Counsel for the Company contended that the indictment against a limited company for any offence involving mens rea must be bad for the reason that a company not being a natural person cannot have mind, honest or otherwise, and that consequently though in certain circumstances it is civilly liable for the fraud of its officers; it is immune from the criminal process. Per contra, counsel for the Crown, stated that a limited company like any other entity recognised by the law, can as a general rule, be indicted for its criminal acts which from the very necessity of the case must be performed by human agency and which in given circumstance become the acts of the company. The appeal was dismissed and Stable, J. in his judgment observed as follows:
The offences for which a limited company cannot be indicted as, it was argued, exceptions to the general rule arising from the limitations which must inevitably attach to an artificial entity, such a company. Included in these exceptions are the cases in which, from its very nature, the offence cannot be committed by a Corporation, as, for example, perjury, an offence which cannot be vicariously committed or bigamy an offence which a limited company, not being a natural person, cannot commit vicariously or otherwise. A further exception, but for a different reason, comprises offences of which murder is an example, where the only punishment the court can impose is corporal, the basis on which this exception rests being that the court will not stultify itself by embarking on a trial in which, if a verdict of guilty is returned, no effective order by way of sentence can be made. In our judgment, these contentions of the Crown are substantially sound, and the existence of these exceptions, and it may be that there are others, is by no means inconsistent with the general rule.
The exception in favour of a company thus created was for an offence where the only punishment that the court can impose is corporal .It should be noted here that in the case referred to (Rex v. I.C.R. Haulage Ltd. (1944)1 K.B. 551 a fine has been imposed. It should further be noted that u/s 406, I.P.C. the punishment prescribed is imprisonment of either description for a term which may extend to three years or with fine or with both. In (sic) circumstances, it cannot be said that the Sot Petitioner cannot be proceeded against, for it is the case of the prosecution that the Society had the mens rea because it had acted through the second Petitioner and others.
The next contention of Mr. Natarajan learned Counsel for the Petitioners, is that there is no evidence of misappropriation. It should be noted that evidence is still to be let in. As I have already pointed out, when once the prosecution proves the entrustment of money and the accused fails to account for them, which he is bound to do and when the accused fails to show what had happened to the money, that circumstance and other circumstances may justify an inference that, the accused has misappropriated. Learned Counsel, Mr. Natarajan, for the Petitioners pointed out that the Government grant to the society is a bounty which is equivalent to a gift and therefore, no question of misappropriation arises, it is further pointed out by the learned Counsel that section can be taken only under the West Bengal Societies Registration Act and the prosecution cannot circumvent the procedure laid down under S. 30 of the West Bengal Societies Registration Act and invoke the provision of the Indian Penal Code. Section 30 of the Act extracted by the Petitioners in the affidavit filed in suppose of the petition runs thus:
(1) Where a Society accepts a gift of sum kind from any person for a specific purpose it shall not use the gift or any part thereof for any other purpose without the written consent of the Registrar. The (sic) shall not give such consent unless he is (sic) the purpose for which the gift was made is (sic) of execution by the society: (2) For any (sic) of the provisions of Sub-section (1) every officer is (sic) shall be punishable with fine which may (sic) two hundred and fifty rupees.
A reading of Section 30 shows that the, contention now raised by the learned Counsel is based on the assumption that. Government (sic) a gift. My attention was invited to Annexure I to the Terms and Conditions of the Grant. The first clause runs thus:
(i) The grantee shall execute a bond in the prescribed form with two sureties in favour of the President of India providing therein that he will abide by the conditions of grant. In the event of his failing to comply with the conditions of the grant committing a breach of the head, the grantee and the sureties shall individually and jointly be liable to refund to the President of India the entire amount of the grant together with interest thereon at the prevailing borrowing rate of the Government of India.
It is pertinently pointed out by Mr. B. Sriramulu, learned Prosecutor for the Central Government, that there is no question of refund if the grant is a gift. But, Mr. Natarajan invited my attention to AIR 1943 21 (Privy Council) That was a case where in the year 1920, the Government of Bombay made a grant of Rs. 4 lakhs to the Appellant therein, a municipality constituted under, the Bombay District Municipalities Act, 1901, in connection with a scheme for acquisition of building sites for primary schools. The grant was silent as regards the interest which might he earned by the money pending its application. The grant was not spent immediately and the interest amounting to Rs. 24,030 for the financial year 1921-22 and Rs. 18,000 for the year 1922-23 was in fact earned on the whole or the unspent balance, making a total of Rs. 42,000. In 1923 the Government passed a resolution that the Government grant to the Ahmedabad Municipality for primary education payable in 1922-23; should be reduced to Rs. 24,000, or by the interest which actually accrued during 1921-22 on the advance building grant of Rs. 4 lakhs, paid by the Government whichever is greater. Similarly in future years, "the interest which actually accrues in any year, or six per cent of the unpaid balance of that year, whichever is greater, should be deducted from the Government grant of the following year." In pursuance of the resolution, the Government deducted Rs. 42,0O0, from the education grant to the Appellant municipality for the year 1922-23. It should further be noted that there was an admission by the counsel Who Stated that "it cannot be contended that the primary education grant annually made by the Government was not a bounty." So also, it was conceded that the Government cannot claim the interest of Rs. 4 lakhs of the unspent amount. Their Lordships of the Judicial Committee pointed out that ''if the position is that the annual education grant made by the Government is only a bounty, then it must follow that the Government can make deductions from the amount of whatever sums they like'' and ''that is the basis of the resolution, dated, January 26,1923, and the fact that the amounts of interest which accrued during, any period or would accrued in future, on the Rs. 4 lakhs or the unspent balance formed measures of the deductions to be made from the annual payments for primary education does not by any means show that it was the interest on the grant that the Government were seeking to deduct.'' This ruling did not decide any other thing except that the Government could make deductions. This will not help the Petitioners.
It was lastly contended that Shyam Sundar Jhenjunwala, the second Petitioner, cannot be charged for abetment of the offence which is alleged to have been committed through him by the Petitioner society. When the Society can be proceeded u/s 406, I.P.C., there cannot be any impediment for framing a charge-sheet u/s 406 read with Section 109, I.P.C., against the second Petitioner. Again those are questions which have to be decided by the trial court. In R.P. Kapur Vs. The State of Punjab, , their Lordships of the Supreme Court pointed out certain categories, of cases where the inherent jurisdiction of this Court to quash the proceedings can be exercised and they are-
(1) Where it manifestly appears that there is a legal bar against the institution or continuance of the criminal proceedings in respect of the offence alleged;
(2) Where the allegations in the first information report or a complaint, even if they are taken at their face value and accepted in their entirety, do not constitute the offence alleged; and
(3) Where the allegations made against the accused persons do constitute an Offence alleged, but there is BO legal evidence adduced in support of the case, or the evidence adduced clearly or manifestly fails to prove the charge.
The first category does not apply to this case, for, there is no legal bar against the institution of the criminal proceeding. Evidence has not been let in, in this case. Immediately after the filing of the charge-sheet, the Petitioners have filed this petition. The other categories also do not apply to this case. This petition, therefore is dismissed.