Bombay High Court
Liladevi Satoshkumar Bhoot vs The State Of Maharashtra Thr. Pso … on 25 February, 2026
2026:BHC-NAG:3139
Judgment
apl451.24
1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
NAGPUR BENCH, NAGPUR
CRIMINAL APPLICATION APL NO.451 OF 2024
Liladevi Santoshkumar Bhoot,
aged: 60 years, occupation: business,
r/o Devrankar Nagar, Badnera Road,
Amravati. ..... Applicant.
:: V E R S U S ::
State of Maharashtra,
through PSO Hinganghat,
district Wardha. ..... Non-applicant.
================================
Shri Anil Mardikar, Senior Counsel assisted by Shri
V.R.Deshpande and Shri D.P.Singh, Advocates for the
Applicant.
Shri N.B.Jawade, APP for the NA No.1/State.
================================
CORAM : URMILA JOSHI-PHALKE, J.
CLOSED ON : 11/02/2026
PRONOUNCED ON : 25/02/2026
JUDGMENT
1. Heard learned Senior Counsel Shri Anil Mardikar for
the applicant and learned APP Shri N.B.Jawade for non-
applicant No.1/State. Admit. Heard finally by consent.
…..2/-
Judgment
apl451.24
2
2. By this application, the applicant is challenging order
of rejection of discharge application below Exh.61 in RCC
No.193/2013 dated 28.4.2023 passed by learned JMFC, Court
No.1, Hinganghat and confirmed by learned Additional
Sessions Judge, Hinganghat in Criminal Revision Application
No.8/2013 dated 24.11.2023.
3. Brief facts, necessary for disposal of the application,
are as under:
The applicant along with three other persons namely
Yog Navalkumar Bhoot, Anupkumar Prakashchand Bhoot, and
Pushpadevi Navakumar Bhoot are Directors of “M/s.Deegee
Orchards Pvt.Ltd.” (the company), situated at Bela,
Hinganghat, district Wardha. From the years 2005-2012, as
per the allegations, the applicant and other Directors of the
company by joining hands with each other had supplied false
and fabricated information by giving false declaration in
Form-F and submitted the same with the Sales Tax
…..3/-
Judgment
apl451.24
3
Department and thereby defrauded the Government with
amount of Rs.10.12 Crores. It is further alleged that with the
help of the said false and fabricated documents, the co-
accused including the applicant obtained refund of
Rs.2,18,67,678/- from the Government. The informant
conducted an enquiry in the office of the company and it
revealed to him that fraud is committed by giving false and
fabricated documents.
On the basis of the said report, the police have
registered the crime against the applicant and the other co-
accused.
During investigation, the Investigating Officer has
collected documents and recorded relevant statements of
witnesses and after completion of the investigation, submitted
chargesheet against the applicant.
Being aggrieved and dissatisfied with the same, the
applicant preferred an application for discharge before
…..4/-
Judgment
apl451.24
4
learned JMFC at Hinganghat and learned JMFC at
Hinganghat, after considering the record, rejected the
application.
Being aggrieved and dissatisfied with the same, the
applicant has filed Revision Application No.8/2013 and the
same is also dismissed.
Hence, the present application.
4. Learned Senior Counsel for the applicant submitted
that the alleged incident is of Financial Years 2005-2006 to
2011-2012. The Financial Year 2005-2006 commences from
1.4.2005 and ends on 31.3.2006. The applicant has already
resigned in December 2005 itself. Thus, when the alleged
false information and the false documents were provided to
the Government, the applicant was not in the business with
the company. The fact of resignation of the applicant from
the Director of the company was also communicated to the
Registrar of the Companies who maintains record of the
…..5/-
Judgment
apl451.24
5
Directors of Company. Section 75 of the Maharashtra Value
Added Tax, 2002 (the said Act) categorically states about the
liability of the Directors for offences committed by the
company. In view of Section 75 of the said Act, when an
offence is committed by a business entity, every person, who
at the time, the offence is committed, was incharge of and
was responsible to the business entity for conduct of the
business as well as the business entity shall be deemed to be
guilty of the offence and shall be liable to be proceeded
against and punished accordingly. Proviso to Section 75(1) of
the said Act, states that nothing contained in this sub-section
shall render any such person liable to any punishment
provided in this Act if he proves that the offence was
committed without his knowledge or that he exercised all due
diligence to prevent the commission of such offence. Thus, he
submitted that the FIR or the entire investigation papers
nowhere shows that the applicant at the time when the
…..6/-
Judgment
apl451.24
6
offence was committed was responsible to the conduct of the
business entity.
He submitted that in various decisions, regarding pari
materia provisions under the various enactments, it is held
that a director may be vicariously liable only if the company
itself is liable in the first place and if such director personally
acted in a manner that directly connects their conduct to the
company’s liability. Mere authorization of an act at the behest
of the company or the exercise of a supervisory role over
certain actions or activities of the company is not enough to
render a director vicariously liable. There must exist
something to show that such actions of the Director stemmed
from their personal involvement and arose from actions or
conduct falling outside.
Thus, he submitted that vicarious liability of the
Directors cannot be imputed automatically in the absence of
any statutory provision to this effect. There has to be a
…..7/-
Judgment
apl451.24
7
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. On the basis of
the above submissions, he submitted that there is no prima
facie case against the applicant to show that she was incharge
of and looking after the day-to-day business of the company
and, therefore, she is vicariously liable for committal of the
said offence.
5. In support of his contentions, learned Senior Counsel
for the applicant has placed reliance on following decisions:
(1) Criminal Appeal No.11/2025 (Sanjay Dutt
and ors vs. The State of Haryana and anr) decided
by the Supreme Court on 2.1.2025;
(2) Sunil Bharti Mittal vs. Central Bureau of
Investigation, reported in (2015)4 SCC 609;(3) Karnataka Emta Coal Mines Limited vs. CBI,
2024 SCC OnLine SC 2250; and…..8/-
Judgment
apl451.24
8
(4) Keki Hormusji Gharda and ors vs. Mehervan
Rustom Irani and anr, reported in (2009)6 SCC
475.
6. Per contra, learned APP for the State strongly opposed
the said contentions and submitted that during the
investigation, it was revealed that there was evasion of taxes
for Rs.29,62,363/- for the Financial Year 2005-2006 when the
applicant was one of Directors of the company. Thus, this
material is sufficient in order to frame the charge against the
applicant. Moreover, framing of charge is the stage where the
court has to look at prima facie material against the accused
persons. He submitted that Section 75 of the said Act is very
specific and clear attributing the role of the offender, which
speaks that every person who at the time of commencement
of offence, was incharge of and was responsible to the
business entity for the conduct of the business, shall be
deemed to be guilty of the offence and shall be liable to be
prosecuted against and punished accordingly. He submitted
…..9/-
Judgment
apl451.24
9
that, admittedly, the applicant was the Director at the relevant
time and she was looking after the business during the period
of her Directorship. The alleged offence of evasion of tax was
committed and, therefore, she is responsible for the act
committed by the company. He submitted that the provisions
of the said Act are to be considered in the light of the object
of the Act. In view of that, the application deserves to be
rejected.
7. In support of his contentions, learned APP for the State
has placed reliance on following decisions:
(1) Commissioner of Central Excise, Nagpur vs.
Universal Ferro and Allied Chemicals Limited and
anr, reported in (2020)5 SCC 332;
(2) Hotel and Restaurant Assn. And anr vs. Star
India (P) Ltd. and ors, reported in (2006)13 SCC
753;
(3) Iridium India Telecom Limited vs. Motorola
Incorporated and ors, reported in (2011)1 SCC
74;
…..10/-
Judgment
apl451.24
10
(4) Madhumilan Syntex Ltd. and ors vs. Union of
India and anr, reported in (2007)11 SCC 297, and
(5) Standard Chartered Bank and ors vs.
Directorate of Enforcement and ors, reported in
(2005)4 SCC 530.
8. Before entering into the merits of the case, it is
necessary to see the settled law as far as considerations for
discharge applications are concerned.
9. The Hon’ble Apex Court, in the case of Union of India
vs. Prafulla Kumar Samal and anr, reported in
MANU/SC/0141/1978, has held as under:
“(1) That the Judge while considering the
question of framing the charges under section 227
of the Code has the undoubted power to sift and
weigh the evidence for the limited purpose of
finding out whether or not a prima facie case
against the accused has been made out,(2) Where the materials placed before the Court
disclose grave suspicion against the accused
which has not been properly explained the Court…..11/-
Judgment
apl451.24
11
will be, fully justified in framing a charge and
proceeding with the trial, and
(3) The test to determine a prima facie case
would naturally depend upon the facts of each
case and it is difficult to lay down a rule of
universal application. By and large however if two
views are equally possible and the Judge is
satisfied that the evidence produced before him
while giving rise to some suspicion but not grave
suspicion against the accused, he will be fully
within his right to discharge the accused.”
10. Thus, it is a settled principle of law that at the stage of
considering an application for discharge, the court must
proceed on the assumption that the material which has been
brought on record by the prosecution is true and evaluate the
material in order to determine whether the facts emerging
from the material, taken on its face value, disclose the
existence of the ingredients necessary of the offence alleged.
…..12/-
Judgment
apl451.24
12
11. The Hon’ble Apex Court in the case of State of Gujarat
vs. Dilipsinh Kishorsinh Rao, reported in MANU/SC/1113
2023, adverting to the earlier propositions of law in its earlier
decisions in the cases of State of Tamil Nadu vs. N.Suresh
Rajan and ors, reported in (2014) 11 SCC 709 and The State
of Maharashtra vs. Som Nath Thapa, reported in (1996) 4
SCC 659 and The State of MP Vs. Mohan Lal Soni, reported in
(2000) 6 SCC 338, has held as under:
“10. It is settled principle of law that at the stage of
considering an application for discharge the court
must proceed on an assumption that the material
which has been brought on record by the prosecution
is true and evaluate said material in order to
determine whether the facts emerging from the
material taken on its face value, disclose the existence
of the ingredients necessary of the offence alleged.
This Court in State of Tamil Nadu vs. N.Suresh Rajan
and ors, (2014) 11 SCC 709 adverting to the earlier
propositions of law laid down on this subject has held:
…..13/-
Judgment
apl451.24
13
“29. We have bestowed our consideration to the rival
submissions and the submissions made by Mr. Ranjit
Kumar commend us. True it is that at the time of
consideration of the applications for discharge, the
court cannot act as a mouthpiece of the prosecution or
act as a post office and may sift evidence in order to
find out whether or not the allegations made are
groundless so as to pass an order of discharge. It is
trite that at the stage of consideration of an
application for discharge, the court has to proceed
with an assumption that the materials brought on
record by the prosecution are true and evaluate the
said materials and documents with a view to find out
whether the facts emerging therefrom taken at their
face value disclose the existence of all the ingredients
constituting the alleged offence. At this stage,
probative value of the materials has to be gone into
and the court is not expected to go deep into the
matter and hold that the materials would not warrant
a conviction. In our opinion, what needs to be
considered is whether there is a ground for presuming
that the offence has been committed and not whether
a ground for convicting the accused has been made
out. To put it differently, if the court thinks that the…..14/-
Judgment
apl451.24
14
accused might have committed the offence on the
basis of the materials on record on its probative value,
it can frame the charge; though for conviction, the
court has to come to the conclusion that the accused
has committed the offence. The law does not permit a
mini trial at this stage.”
12. Thus, the defence of the accused is not to be looked
into at this stage when the application is filed for discharge.
The expression “the record of the case” used in Section 227 of
the Code of Criminal Procedure is to be understood as the
documents and materials, if any, produced by the prosecution.
The provisions of the Code of Criminal Procedure do not give
any right to the accused to produce any document at the stage
of framing of the charge. The submission of the accused is to
be confined to the material produced by the investigating
agency. The primary consideration at the stage of framing of
charge is the test of existence of a prima facie case, and at this
stage, the probative value of materials on record need not be
gone into. At the stage of entertaining the application for
…..15/-
Judgment
apl451.24
15
discharge under Section 227 of the Code of Criminal
Procedure, the court cannot analyze or direct the evidence of
the prosecution and defence or the points or possible cross
examination of the defence. The case of the prosecution is to
be accepted as it is.
13. In the light of the above settled principles of law, the
case of the prosecution is to be looked into to ascertain that,
whether there is any prima facie case against the applicant to
frame the charge against her.
14. The applicant is charged for offences under Sections
406, 409, 420, 467, 468, and 471 read with 34 of the IPC and
under Section 74(1)(b)(c)(e) of the said Act and under
Section 10(a) of the CGST.
15. As per allegations in the FIR and the entire
chargesheet, the applicant along with other co-accused had
supplied false and fabricated information by giving false
declaration form and submitted the same with the Sales Tax
…..16/-
Judgment
apl451.24
16
Department for the years 2005-2012 and thereby defrauded
the Government with amount Rs.10.12 Crores. It is further
the case of the prosecution that with the help of the said false
and fabricated documents, the applicant along with other co-
accused persons obtained refund of Rs.2,18,67,678/- from the
Government and thereby cheated the Government.
16. Thus, the allegation of cheating at the instance of the
applicant including other co-accused persons was from the
Financial Year 2005-2012. However, as per the applicant, she
has resigned from the company as Director of the company on
10.12.2005. Thus, it is very clear that from 1.4.2005 to
10.12.2005 she was holding the post of Director of the
company. There is no dispute as to the fact that she worked
as Director of the company, till 10.12.2005 i.e. till she resigns
from the post of Director of the company.
17. Before entering into the merits of the case, it is
necessary to see the relevant provisions.
…..17/-
Judgment
apl451.24
17
18. Section 75 of the said Act deals with, “offences by
business entity, which is reproduced as under for the purposes
of reference:
“75. Offences by Business entity.
(1) Where an offence under this Act or the rules made
thereunder has been committed by a business entity,
every person who at the time the offence was
committed, was in charge of, and was responsible to,
the business entity for the conduct of the business of
the business entity as well as the business entity shall
be deemed to be guilty of the offence and shall be
liable to be proceeded against and punished
accordingly:
Provided that, nothing contained in this sub-section
shall render any such person liable to any punishment
provided in this Act if he proves that the offence was
committed without his knowledge or that he exercised
all due diligence to prevent the commission of such
offence.
(2) Notwithstanding anything contained in sub-section
(1), where an offence under this Act or rules made
thereunder has been committed by a business entity…..18/-
Judgment
apl451.24
18
and it is proved that the offence has been committed
with the consent or connivance of, or is attributable to
any neglect on the part of any director, manager,
secretary or other officer of the business entity, such
director, manager, secretary or other officer shall also
be deemed to be guilty of that offence and shall be
liable to be proceeded against and punished
accordingly. Explanation.- For the purpose of this
section, –
(a) “business entity” means a body corporate,
and includes a firm or other association of
individuals; and
(b) “director”, in relation to a firm, means a
partner in the firm.
(3) Where an offence under this Act has been
committed by a Hindu Undivided Family, the Karta
thereof shall be deemed to be guilty of the offence
and shall be liable to be proceeded against and on
conviction, punished accordingly:Provided that,
nothing contained in this sub-section shall render
the Karta liable to any punishment if he proves
that the offence was committed without his
knowledge or that he had exercised all due
…..19/-
Judgment
apl451.24
19
diligence to prevent the commission of such
offence:Provided further that, where an offence
under this Act has been committed by a Hindu
Undivided Family and it is proved that the offence
has been committed with the consent or
connivance of, or is attributable to any neglect on
the part of, any adult member of the Hindu
Undivided Family, such member shall also be
deemed to be guilty of that offence and shall be
liable to be proceeded against and on conviction,
punished accordingly.”
19. Now, a question is, whether the applicant is
responsible for affairs of the company in absence of any
averments in the FIR or the entire chargesheet that she was
looking after the day-by-day affairs of the company.
20. Learned APP for the State vehemently submitted that
the provisions are to be looked into in view of the object of
the said Act.
…..20/-
Judgment
apl451.24
20
In support of his contentions, he placed reliance on
the decision in the case of Commissioner of Central Excise,
Nagpur vs. Universal Ferro and Allied Chemicals Limited and
anr supra wherein it is observed that, “it is a settled principle
in excise classification that the definition of one statute
having a different object, purpose and scheme cannot be
applied mechanically to another statute.”
It has further been held that, “the conditions or
restrictions contemplated by one statute having a different
object and purpose should not be lightly and mechanically
imported and applied to a fiscal statute.”
It is further held that, “the first principle of
interpretation of plain and literal interpretation has to be
adhered to. We are therefore of the considered view, that the
narrower scope of the term ‘sale’ as found in the Sale of
Goods Act, 1930 cannot be applied in the present case. The
term ‘sale’ and ‘purchase’ under the Central Excise Act, 1944,
…..21/-
Judgment
apl451.24
21
if construed literally, it would give a wider scope and also
include transfer of possession for valuable consideration
under the definition of the term ‘sale’.”
Learned APP for the State submitted that the similar
observations are made by the Hon’ble Apex Court in the case
of Hotel and Restaurant Assn. And anr vs. Star India (P) Ltd.
and ors supra, wherein it is held that, “it is furthermore well
known that the definition of a term in one statute cannot be
used as a guide for construction of a same term in another
statute particularly in a case where statutes have been
enacted for different purposes.”
21. There is no dispute as far as legal position regarding
application and interpretation of the statute is concerned. At
the same time, after considering provisions of Section 75(1)
of the said Act, it specifically states that where an offence
under this Act or the rules made thereunder has been
committed by a business entity, every person who at the time
…..22/-
Judgment
apl451.24
22
the offence was committed, was in charge of, and was
responsible to, the business entity for the conduct of the
business of the business entity as well as the business entity
shall be deemed to be guilty of the offence and shall be liable
to be proceeded against and punished accordingly.
22. Thus, Section 75(1) of the said Act states that every
person who at the time the offence is committed, was
incharge of and was responsible to the business entity for
conduct of the business as well as the business entity shall be
deemed to be guilty of the offence. It means that while the
company has been held liable for the wrongful acts, the
liability of its Directors is not automatic. It depends on
specific circumstances, particularly the interplay between the
director’s personal actions and the company’s responsibilities.
23. In catena of decisions, it is held that a director may be
vicariously liable only if the company itself is liable in the first
…..23/-
Judgment
apl451.24
23
place and if such director personally acted in a manner that
directly connects their conduct to the company’s liability.
24. In the case of Sanjay Dutt and ors vs. The State of
Haryana and anr supra, the Hon’ble Apex Court has observed
that, “mere authorization of an act at the behest of the
company or the exercise of a supervisory role over certain
actions or activities of the company is not enough to render a
director vicariously liable. There must exist something to
show that such actions of the director stemmed from their
personal involvement and arose from actions or conduct
falling outside the scope of its routine corporate duties. Thus,
where the company is the offender, vicarious liability of the
Directors cannot be imputed automatically, in the absence of
any statutory provision to this effect. 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.”
…..24/-
Judgment
apl451.24
24
25. Similarly, in Special Leave Petition (Criminal)
No.12390/12391/2022 (Susela Padmavathy Amma vs.
M/s.Bharti Airtel Limited) decided on 15.3.2024, the Hon’ble
Apex Court by referring catena of decisions in the cases of
State of Haryana vs. Brij Lal Mittal and others (1998)5 SCC
343; SMS Pharmaceuticals Ltd. vs Neeta Bhalla and another
(2007)9 SCC 481; Pooja Ravinder Devidasani vs. State of
Maharashtra and another (2014) 16 SCC 1; and State of NCT
of Delhi, through Prosecuting Officer, Insecticides,
Government of NCT, Delhi vs. Rajiv Khurana, reported in
(2010)11 SCC 469 has held that, “every person connected
with the Company will not fall into the ambit of the provision.
Time and again, it has been asserted by this Court that only
those persons who were in charge of and responsible for the
conduct of the business of the Company at the time of
commission of an offence will be liable for criminal action. A
Director, who was not in charge of and was not responsible
for the conduct of the business of the Company at the relevant
…..25/-
Judgment
apl451.24
25
time, will not be liable for an offence under Section 141 of
the N.I. Act.”
26. In the case of Sunil Bharti Mittal vs. Central Bureau of
Investigation supra, also the Hon’ble Apex Court has held
that, “when the company is offender, vicarious liability of the
Directors cannot be imputed automatically in the absence of
any statutory provisions to this effect. When the company is
the offender, 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 vs.
M/s.Godfather Travels & Tours Pvt.Ltd., reported in 2008 AIR
SCW 3608 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,
…..26/-
Judgment
apl451.24
26
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.”
27. Thus, question requires to be answered is that, when a
company is liable for criminal offences committed by its
Directors/Managers/Officers and other employees, while
conducting business, whether vicarious liability is attributable
to all.
28. It has been consistently held by the Hon’ble Apex
Court that in absence of any specific allegation of vicarious
liability against any Director or Managing Director or such
other Official of company and in absence of company being
…..27/-
Judgment
apl451.24
27
arrayed as party, proceeding initiated against such Director of
Managing Director or any Officer of the company is liable to
be quashed.
29. Thus, it is a trite law that commission of offence by the
company is sine qua non to attract the vicarious liability of
others involved in the company. Thus, so-called vicarious
liability of the Directors cannot be imputed automatically.
Whether such liability is statutorily prescribed in a particular
statute or not and or in absence of any statutory provision to
this effect, if it is to be included under the IPC either way, the
prosecution would have to weigh averments with regard to
the specific role played by the accused director or partner and
demonstrate that such director or partner was incharge of the
affairs of the company and directly impredecible connected to
the crime alleged.
30. Thus, in the case of Sanjay Dutt and ors vs. The State
of Haryana and anr supra, the Hon’ble Apex Court held that,
…..28/-
Judgment
apl451.24
28
“at the same time, wherever by a legal fiction the principle of
vicarious liability is attracted and a person who is otherwise
not personally involved in the commission of an offence is
made liable for the same, it has to be specifically provided in
the statute concerned. When it comes to penal provisions,
vicarious liability of the managing director and director would
arise provided any provision exists in that behalf in the
statute. Even where such provision for fastening vicarious
liability exists, it does not mean that any and all directors of
the company would be automatically liable for any
contravention of such statute. Vicarious Liability would arise
only if there are specific and substantiated allegations
attributing a particular role or conduct to such director,
sufficient enough to attract the provisions constituting
vicarious liability and by extension the offence itself.”
It has further been held that, “it is the cardinal
principle of criminal jurisprudence that there is no vicarious
liability unless the statute specifically provides so. Thus, an
…..29/-
Judgment
apl451.24
29
individual who has perpetrated the commission of an offence
on behalf of a company can be made an accused, if the statute
provides for such liability and if there is sufficient evidence of
his active role coupled with criminal intent. The primary
responsibility is on the complainant to make specific
averments as are required under the law in the complaint so
as to make the accused vicariously liable. For fastening
criminal liability on an officer of a company, there is no
presumption that every officer of a company knows about the
transaction in question.”
31. In the light of the above settled principles of law, the
facts of the present case are to be considered.
32. As per the allegations in the FIR, the applicant along
with other co-accused submitted declaration form by giving
false and fabricated information and submitted the same with
the Sales Tax Department for the years 2005-2012 and
thereby defrauded the Government with amount of Rs.10.12
…..30/-
Judgment
apl451.24
30
Crores. It is further alleged that during period of 1.4.2005 to
10.12.2005 there was evasion of taxes for Rs.29,62,363/-.
The prosecution has placed reliance on various documents.
After going through the entire chargesheet, it nowhere reveals
that the applicant was not only Director but also she was
looking after business and day-to-day activities of the
company and she was Director and incharge of the business
entity at the relevant time. The general allegation is levelled
against her that she is one of Directors.
33. A plain reading of the FIR reveals that the allegations
are made against all Directors of the company. The case of
the applicant is that she is Non-Executive Director of the
company and she has not actively participated in the day-to-
day affairs of the company. Perusal of statements recorded
during the investigation also nowhere reveals that the
applicant was actively participating in day-to-day affairs of
the business entity. It is indeed a prima facie to be established
that the applicant is incharge of the company and was looking
…..31/-
Judgment
apl451.24
31
after day-to-day business of the company. In absence of
averments that she was active Director and looking after day-
to-day business of the company, no vicarious liability can be
attracted against her. The vicarious criminal liability of
Directors/Partners of the company would arise provided any
provision exists in that behalf in the statute. The statute must
contain provision fixing such vicarious liability. Even for the
said purpose, it would be obligatory on the part of the
prosecution and the investigating agency to make requisite
allegation and collect evidence in support thereof, which
would attract provision constituting vicarious liability. The
question of making a company liable for criminal offences
committed by its Directors and other employees while
conducting business is of utmost importance in criminal law
jurisprudence.
34. The Hon’ble Apex Court in various decisions has
developed “doctrine of attribution.” As per this doctrine, in
the event of an act or omission leading to the violation of
…..32/-
Judgment
apl451.24
32
criminal law, the mens rea (guilty mind) is attributed to those
who are the “directing mind and will’ of the corporation.
Although this doctrine was developed in the United Kingdom
and has been in use in India since many years, the Hon’ble
Apex Court in Iridium Indian Telecom Limited v. Motorola
Inc, reported in (2011)1 SCC 74] has resolved the debate
and it is held that 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 and where the degree of control is such that a body
or body of persons can be said to be its “directing mind and
will” thereby the Apex Court resolved the position regarding
criminal liability of corporation. The immediate result of this
position of law was that Directors, Partners, Officers,
employees started getting arrayed as party to criminal
proceeding on the basis that they were the “mind and will” of
the company/firm/corporation.
…..33/-
Judgment
apl451.24
33
35. The issue arose for consideration was that, in a
number of cases of this nature, proceedings were initiated
against such persons without even adding the company as
accused in the complaint.
36. It was observed by the Hon’ble Apex Court that in
absence of any specific allegation of vicarious liability against
the Managing Director or such other officials of the company,
and in the absence of the company being arrayed as party, the
proceedings initiated against such Managing Director or any
officer of the company were liable to be quashed.
It has also been settled that when a complainant
intends to rope in a Managing Director or any officer of a
company, it is essential to make a specific averment or
requisite allegations to demonstrate how the persons, so
accused, is vicariously liable for the offences.
…..34/-
Judgment
apl451.24
34
37. Thus, now, it is settled law that the commission of
offence by the company is sine quo non to attract the
vicarious liability of others involved in the company.
38. Thus, the so-called vicarious liability of the Directors
cannot be imputed automatically.
39. Whether such liability is statutorily prescribed in a
particular statute as is in the present case and or in absence of
any statutory provisions to this effect, if it is deemed to be
included under the IPC either way the prosecution would
have to make averments with regard to the specific role
played by the accused or Directors or Partners and
demonstrate that such Directors or Partners were ‘incharge of
the affairs of the company’ and directly connected with the
crime alleged.
40. In the present case, there is no single averment either
in the FIR or in the entire chargesheet that in what manner
the applicant was responsible for day-to-day activities of the
…..35/-
Judgment
apl451.24
35
company. Even, if it is accepted that being a Director, the
present applicant is responsible for the offence under Section
420 of the IPC, to prove the offence of “cheating”, dishonest
intention requires to be proved. The offence of “cheating”
comprises of two ingredients: deception of any person and
fraudulently or dishonestly inducing that person to deliver
any property to any person or to consent that any person shall
retain any property. To put it differently, the ingredients of
the offence are that the person deceived delivers to someone a
valuable security or property, that the person so deceived was
induced to do so, that such person acted on such inducement
in consequence of his having been deceived by the accused
and that the accused acted fraudulently or dishonestly when
so inducing the person.
41. Thus, basic ingredients of the offence is deceiving any
persons and there has to be intention since inception.
…..36/-
Judgment
apl451.24
36
42. Now, question is whether, the allegations in the FIR are
sufficient to constitute the alleged offence against the
applicant.
43. The applicant is charged for offences under Sections
406, 409, 420, 467, 468, and 471 read with 34 of the IPC and
under Section 74(1)(b)(c)(e) of the said Act and under
Section 10(a) of the CGST.
44. Thus, in order to constitute a criminal breach of trust
under Section 406 of IPC:
(1) There must be entrustment with person for
property or dominion over the property, and(2) The person entrusted:
(a) Dishonestly misappropriated or converted
property to his own use, or
(b) Dishonestly used or disposed of the property
or willfully suffers any other person so to do in
violation of:
(i) Any direction of law prescribing the method
in which the trust is discharged; or…..37/-
Judgment
apl451.24
37
(ii) Legal contract touching the discharge of
trust.
45. Similarly to constitute an offence under Section 420 of
IPC there has to be (1) Deception of any person, either by
making a false or misleading representation or by other action
or by omission; (2) Fraudulently or dishonestly inducing any
person to deliver any property, or (3) The consent that any
person shall retain any property and finally intentionally
inducing that person to do or omit to do anything which he
would not do or omit.
46. In both the aforesaid Sections, mens rea i.e. intention
to defraud or the dishonest intention must be present, and in
the case of cheating it must be there from the very beginning
or inception.
47. On the plain reading of the complaint fails to spell out
any of the aforesaid ingredients noted above. If it is a case of
the Complainant that offence of criminal breach of trust as
…..38/-
Judgment
apl451.24
38
defined under Section 405 of IPC, punishable under Section
406 of IPC, is committed by the accused, then in the same
breath it cannot be said that the accused has also committed
the offence of cheating as defined and explained in Section
415 of IPC, punishable under Section 420 of IPC.
48. The learned Counsel for the Applicants relied upon the
judgment of Delhi Race Club (1940) Limited & Ors., Vs. State
of Uttar Pradesh & Anr., (2024) 10 SCC 690, wherein the
Hon’ble Apex Court has held in para 39 which read as under:
“39. Every act of breach of trust may not result in a
penal offence of criminal breach of trust unless
there is evidence of manipulating act of fraudulent
misappropriation. An act of breach of trust
involves a civil wrong in respect of which the
person may seek his remedy for damages in civil
courts but, any breach of trust with a mens rea,
gives rise to a criminal prosecution as well. It has
been held in Hari Prasad Chamaria v. Bishun
Kumar Surekha & Ors., reported in (1973) 2 SCC
823 as under:
…..39/-
Judgment
apl451.24
39
“4. We have heard Mr. Maheshwari on behalf of
the appellant and are of the opinion that no case
has been made out against the respondents under
Section 420 Penal Code, 1860. For the purpose of
the present appeal, we would assume that the
various allegations of fact which have been made
in the complaint by the appellant are correct. Even
after making that allowance, we find that the
complaint does not disclose the commission of any
offence on the part of the respondents under
Section 420 of the Penal Code, 1860. There is
nothing in the complaint to show that the
respondents had dishonest or fraudulent intention
at the time the appellant parted with Rs. 35,000.
There is also nothing to indicate that the
respondents induced the appellant to pay them Rs.
35,000 by deceiving him. It is further not the case
of the appellant that a representation was made by
the respondents to him at or before the time he
paid the money to them and that at the time the
representation was made, the respondents knew
the same to be false. The fact that the respondents
subsequently did not abide by their commitment
that they would show the appellant to be the
…..40/-
Judgment
apl451.24
40
proprietor of Drang Transport Corporation and
would also render accounts to him in the month of
December might create civil liability for them, but
this fact would not be sufficient to fasten criminal
liability on the respondents for the offence of
cheating.”
49. Thus, there is a distinction between criminal breach of
trust and cheating. For cheating, criminal intention is
necessary at the time of making a false or misleading
representation i.e. since inception. In criminal breach of trust,
mere proof of entrustment is sufficient. Thus, in case of
criminal breach of trust, the offender is lawfully entrusted
with the property and he dishonestly misappropriated the
same. Whereas, in case of cheating, the offender fraudulently
or dishonestly induces a person by deceiving him to deliver
any property. In such a situation, both the offences cannot co-
exist simultaneously.
…..41/-
Judgment
apl451.24
41
50. In the light of the above facts and circumstances of the
case, as already observed, there is no specific allegations
against the applicant as to evasion of tax or submission of the
false document. There is no averment that she was incharge
and looking after day-to-day affairs of the business entity.
Therefore, she is not vicariously liable to the offence
committed by the business entity.
51. As far as the offences under Sections 406 and 420 of
the IPC are concerned, there is no specific averments that the
property was entrusted with her and she has committed
criminal breach of trust. There is nothing on record to show
that there was intention since inception on her part and,
therefore, the offence of cheating is also not made out against
her.
52. It is now well settled that the extra-ordinary powers
under Article 226 of the Constitution of India or inherent
power under Section 482 of the Code can be exercised by the
…..42/-
Judgment
apl451.24
42
High Court either to prevent abuse of the process Court
otherwise to secure the ends of justice. Where the
allegations made in the First Information Report or the
complaint, even if they are taken at their face value and
accepted in their entirety, do not prima facie constitute any
offence or make out a case against the accused. Where the
allegations do not disclose ingredients of the offence alleged
and where the uncontroverted allegations made in the FIR or
complaint and the material collected in support of the same
do not disclose the commission of offence alleged and make
out a case against the accused; where the criminal
proceeding is manifestly attended with mala fide and where
the proceeding is maliciously instituted with an ulterior
motive for wreaking vengeance on the accused and with a
view to spite him due to private and personal grudge, the
power under Article 226 of the Constitution or under Section
482 of the Code may be exercised.
…..43/-
Judgment
apl451.24
43
53. Admittedly, while exercising powers under Article 226
of the Constitution of India or under Section 482 of the Code,
the Court does not function as a court of appeal or revision;
inherent jurisdiction under Section 482 of the Code, though
wide, has to be exercised sparingly, carefully and with caution
and only when such exercise is justified by the test specifically
laid under Section 482 of the Code itself. It is to be exercised
to do real and substantial justice, for the administration of
which alone it exists. The court must be careful to see that its
decision in exercise of this power is based on sound
principles. The inherent power should not be exercised to
stifle a legitimate prosecution.
54. By applying the above test, admittedly, the allegations
made in the FIR, nowhere disclose that the applicant was
incharge of the business entity and looking after day-to-day
business and she has actively participated in the business
activities. In absence of any material against her, vicarious
liability would not be attracted against her merely because
…..44/-
Judgment
apl451.24
44
she is Director as the vicarious liability of the Director cannot
be impugned automatically.
55. In view that, this is a fit case wherein the powers
under Section 482 of the Code can be exercised.
56. In this view of the matter, I proceed to pass following
order:
ORDER
(1) The criminal application is allowed.
(2) The applicant is discharged of offences under Sections
406, 409, 420, 467, 468, and 471 read with 34 of the IPC and
under Section 74(1)(b)(c)(e) of the Maharashtra Value Added
Tax, 2002 and under Section 10(a) of the CGST in connection
with Crime No.224/2012 in RCC No.193/2013.
(3) The order rejecting discharge application below Exh.61 in
RCC No.193/2013 dated 28.4.2023 passed by learned JMFC,
Court No.1, Hinganghat and order confirming the same by
…..45/-
Judgment
apl451.24
45
learned Additional Sessions Judge, Hinganghat in Criminal
Revision Application No.8/2013 dated 24.11.2023 are hereby
quashed and set aside to the extent of the applicant
Application stands disposed of.
(URMILA JOSHI-PHALKE, J.)
!! BrWankhede !!
Signed by: Mr. B. R. Wankhede
Designation: PS To Honourable Judge …../-
Date: 25/02/2026 18:46:39
