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Criminal liability can be fastened only on those who, at the time of the commission of the offense, were in-charge of and were responsible for the conduct of the business of the company : Tripura High Court

The Tripura High Court in the case of Sri Tanay Das vs The State Of Tripura (CRL A (J) 53 OF 2018) upheld that criminal liability can be fastened only on those who, at the time of the commission of the offense, were in-charge of and were responsible for the conduct of the business of the company.

Facts of the case: Case was registered by the Officer-in-Charge of R.K.Pur PS under Sections 420 and 406 of the Indian Penal Code against the accused persons based on a written complaint lodged by one Goutam Dey. In the said complaint, the complainant stated that there was an office of Rubi Star Marketing Pvt. Ltd./Real Estate in Udaipur. In June, 2010 the State Government started an investigation against various chit fund organizations by way of bringing allegations of cheating and fraudulent collection of money from the public and launched a crackdown on the chit fund companies and sealed the head office of the companies at Agartala. However, the State Government permitted companies to reopen their offices from 10.08.2010, but Rubi Star Marketing Ltd. did not reopen its offices, nor did make payment of maturity of the customers, instead wound up all its offices. It was alleged that the local Branch-in-charge of Udaipur, namely, Sri Amar Dey of Chhanban, the Managing Director, namely, Sri Tanay Das, and the Chief Managing Director of the said Company, namely, Sri Dibakar Das allured the public and collected money from the public. They turned up a network to issue false certificates of investments and thereby cheated the investors. 

At the commencement of trial, the learned trial Court had framed charges against the accused person, namely,Tanoy Das under Sections 406 and 420 of IPC, read with Section 3 of TPID Act, 2000 to which the accused pleaded not guilty and claimed to be tried. 

Counsel for the appellant argued that there was no evidence at all to demonstrate that the appellant was the Managing Director of the said company. There was no evidence which would have suggested that there was any entrustment of money upon the convict-appellant and in the absence of proof of entrustment and misappropriation thereof, offence punishable under Section 406 of IPC should not be said to be proved,

Judgment: The court held that a careful reading of Section 405 shows that the ingredients of a criminal breach of trust are as follows: 

i) A person should have been entrusted with property, or entrusted with dominion over property; 

ii) That person should dishonestly misappropriated or convert to their own use that property, or dishonestly use or dispose of that property or willfully suffer any other person to do so; and 

iii) That such misappropriation, conversion, use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of such trust. 

The money which had been invested by the investors were always used to be deposited in the branch office at Udaipur and those deposits were used to be deposited to the Agartala Branch, the head of the company in the State. The appellant had not used the invested money of the complainant or other investors for his own benefits. There was no evidence that the money received from the investors was not deposited to the company. 

If the accused is not one of the persons who falls under the category of “persons who are responsible to the company for the conduct of the business of the company” then merely stating that “he was in charge of the business of the company is not enough. For fastening the criminal liability, there is no presumption that every Director knows about the transaction. Criminal liability can be fastened only on those who, at the time of the commission of the offense, were in-charge of and were responsible for the conduct of the business of the company. Vicarious liability on the part of a person must be pleaded and proved and not inferred. 

The Court held that every breach of contract would not attract criminal offense, but, it may be a case of civil dispute for which remedy lies before the Civil Court. The accused was acquitted.

JUDGMENT REVIEWED BY : SHUBHANGI CHAUDHARY

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