HDFC SECURITIES LTD. & ORS.versusSTATE OF MAHARASHTRA & ANR.

                             [2016] 8 S.C.R. 968


A                    HDFC SECURITIES LTD. & ORS.
                                       v.
                   STATE OF MAHARASHTRA & ANR.
                      (Criminal Appeal No. 1213 of2016)
B                           DECEMBER 09, 2016
       [PINAKI CHANDRA GHOSE AND AMITAVA ROY, JJ.]
           Constitution of India: Art.227 - Criminal complaint filed by
    respondent no.2 u/s.156(3) alleging execution of unauthorised
    trades in her account without her consent by the appellants -
c   Magistrate directed registration of FIR against the appellants and
    ordered for a report after investigation - Registration of FIR u/
    ss.409, 420, 465, 467 rlw s.34 and 120-B, !PC - Writ petitions for
    quashing the FIR - High Court dismissed the writ petitions on the
    ground that same was premature and there was no need for
D   exercising the powers either under Art.227 or uls.482 Cr.P.C. - On
    appeal, held: In the instant case, a fact finding investigation was
    directed - Appellants approached the High Court even before the
    stage of issuance of process - Jn particular, the appellants
    challenged the order passed by the Magistrate uls.156(3), Cr.P. C.
E   - This order u/s.156(3), Cr.P. C. requiring investigation by the police,
    cannot be said to have caused an injury of irreparable nature which,
    at this stage, requires quashing of the investigation - The stage of
    cognizance would arise only after the investigation report is filed
    before the Magistrate - Therefore, at this stage, the High Court
    correctly held that filing ofthe petitions u/Art.227 or u/s.482, Cr.P.C.,
F   at this stage are nothing but premature - Further, the High Court
    correctly concluded that the inherent powers of the Court uls.482,
    Cr.P.C. should be sparingly used - High Court's order affirmed -
    Code of Criminal Procedure, 1973 - ss.482, 156(3).
          Dismissing the appeal, the Court
G         HELD: 1. In the present case, a fact finding investigation
    was directed and consequently, FIR was registered against
    appellants No.2 to 4 and also against Relationship Manager of
    the appellant-company. The accused under Indian Criminal Legal
    System, unless proved guilty shall always be given a reasonable
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                                       968
         HDFC SECURITIES LTD. & ORS. v. STATE OF                        969
                MAHARASHTRA & ANR.

space and liberty to defend himself in accordance with the law.         A
Further, it is always expected from a person accused of an offence
pleading not guilty that he shall co-operate and participate in
criminal proceedings or proceedings of that nature before a court
of law, or other Tribunal before whom he may be accused of an
'offence' as defined in Section 3(38) of the General Clauses Act,       B
i.e., an act punishable under the Penal Code or any special or
local law. At the. same time, courts, taking cognizance of the
offence or conducting a trial while issuing any order, are expected
to apply their mind and the order must be a well reasoned one. If
on a reading of the complaint, the Magistrate finds that the
allegations therein disclose a cognizable offence and that the           C
forwarding of the complaint to the police for investigation
under Section 156(3) will be conducive to justice and save the
valuable time of the Magistrate from being wasted in enquiring
into a matter, which was primarily the duty of the police to
investigate, he will be justified in adopting that course as an          D
alternative to taking cognizance of the offence, himself. [Paras
15, 21][978-D-F; 982-D-E]
      Lalitha Kumari v. Govt. of Uttar Pradesh 2013 (14)
      SCR 713 : (2014) 2 SCC 1; S.K. Alagh v. State of Uttar
      Pradesh & Ors. 2008 (2) SCR 1088 : (2008) 5 SCC
      662; Maksud Saiyed v. State of Gujrat & Ors. 2007 (9)              E
      SCR 1113 : (2008) 5 SCC 668; Thermax Limited &
      Ors. v. K. M Johny & Ors. 2011 (14) SCR 154 : (2011)
      13 SCC 412; Sunil Bharti Mittal v. Central Bureau of
      Investigation 2015 (1) SCR 377 : (2015) 4 SCC 609 -
      relied on.                                                         F
      2. The appellants approached the High Court even before
the stage of issuance of process. In particular, the appellants
challenged the order passed by the Magistrate under Section
156(3) of Cr.P.C. This order under Section 156(3) of Cr.P.C.
requiring investigation by the police, cannot be said to have caused     G
an injury of irreparable nature which, at this stage, requires
quashing of the investigation. The stage of cognizance would
arise only after the investigation report is filed before the
Magistrate. Therefore, at this stage the High Court has correctly
assessed the facts and the law in this situation and held that filing
                                                                         H
970           SUPREME COURT REPORTS                       [2016] 8 S.C.R.


A     of the petitions under Article 227 of the Constitution of India or
      under Section 482 of Cr.P.C., at this stage are nothing but
      premature. [Para 24][983-C-F]
           Anil Kumar v. M K. Aiyappa 2013 (9) SCR 869 : (2013)
           10 SCC 705; Devarapall Lakshminarayana v. V.
B          Narayana Reddy & Ors. 1976 (0) Suppl. SCR 524 :
           (1976) 3 SCC 252; Ram Dev Food Products Pvt. Ltd. v.
           State of Gujarat 2015 (5) SCR 283 : (2015) 6 SCC
           439; Iqbal Singh Marwah & Am: v. Meenakshi Marwah
           & Anr. 2005 (2) SCR 708 : (2005) 4 SCC 370; Rukhmni
           Narvekar v. Vljya Statardekar and Ors. 2008 (14) SCR
c          271 : (2008) 14 SCC 1; All Cargo Movers (India) (P.)
           Limited v. Dhanesh Badarwal Jain, 2007 (11) SCR 271
           : (2007) 14 SCC 776; Madhavrao Jiwanrao Scindia &
           Ors. v. Sambhajirao Chandrajirao Angle & Ors. (1998)
           1 SCC 692; State of Haryana v. Bhajanlal 1990 (3)
D          Suppl. SCR 259 : 1992 Supp (1) SCC 335; Rajiv
           Thapar & Ors v. Madan Lal Kapoor 2013 (3) SCR 52
           : (2013) 3 SCC 330; Rishi Pal Singh v. State of Uttar
           Pradesh & Am: 2014 (6) SCR 1012 : (2014) 7 SCC
           215; R. Kalyani v. Janak C. Mehta & Ors. 2008 (14)
           SCR 1249 : (2009) 1 SCC 516; Sharad Kumar Sanghi
E          v. Sangta Rane 2015 (2) SCR 145 : (2015) 12 SCC
            781 - referred to.
                            Case Law Reference
           2913 (9) SCR 869                 referred to     Para 10
F           1976 (0) Suppl. SCR 524         referred to     Para 12
           2915 (5) SCR 283                 referred to     Para 12
           2013 (14) SCR 713                relied on       Para 14
           2905 (2) SCR 708                 referred to     Para 16
G          2008 (14) SCR 271                referred to     Para 16
           2007 (11) SCR 271                referred to     Para 16
           (1998) 1 sec 692                 referred to     Para 17
            1990 (3) Suppl. SCR 259         referred to     Para 17
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         HDFC SECURITIES LTD. & ORS. v. STATE OF                             97!
                MAHARASHTRA & ANR.

      2013 (3) SCR 52                     referred to      Para 17           A
      2014 (6) SCR 1012                   referred to      Para 17
      2008 (2) SCR 1088                   relied on        Para 18
      2007 (9) SCR 1113                   relied on        Para 18
      2011 (14) SCR 154                   relied on        Para 18            B

      2015 (1) SCR 377                    relied on        Para 18
      2008 (14) SCR 1249                  referred to      Para 19
      2015 (2) SCR 145                    referred to      Para 20
      CRlMINALAPPELLATE JURISDrCTION: Criminal Appeal No.                     C
1213 of2016.
      From the Judgment and Order dated 16.11.2011 of the High Court
of Judicature at Bombay in Criminal W. P. No. 672 of201 I.
      Dr. A. M. Singhvi, Sidharth Luthra, Sr. Advs., Kuna! Vajani, Aman       D
Gandhi, Gautam Khazanchi, Ms. Tara Narula, Ms. Bindi Girish Dave,
Advs. for the Appellants.
      Basava Prabhu S. Patil, Sr. Adv, Anirudh Sanganeria, Chinmay
Deshpandey, Amjid Maqbook, Mohinder Jit Singh, Kuna! A. Cheema,
Yogesh K. Ahirrao, Nishant Ramakantrao Katneshwarkar, Advs. for               E
the Respondents.
      The Judgment of the Court was delivered by
      PINAKI CHANDRA GHOSE, J. I. Leave granted.
       2. This appeal has been filed assailing the judgment and order         F
dated 16th November, 2011, passed by the High Court of Judicature at
Bombay in Criminal Writ Petition No.672 of 2011, whereby the writ
petitions filed by the appellants were dismissed by the High Court on the
ground that the filing of the writ petition was premature and there was
no need for exercising the powers either under Article 227 of the
Constitution oflndia or under Section 482 Cr.P.C.                             G
      3. Brief facts of the case are as follows: appellant No. I - HDFC
Securities Ltd., is a public liability company (hereinafter referred to as
"the Company" for short), appellant No.2 is the Managing Director of
the Company, appellant No.3 is Business Head of the Company, and
                                                                              H
972             SUPREME COURT REPORTS                            [2016] 8 S.C.R.


A     appellant No.4 is the Regional head ofMumbai Region of the Company,
      respectively. Respondent No. I is State of Maharashtra and respondent
      No.2 is an individual, who held an account with the Company. The
      Company is engaged in the business of dealing in shares and securities
      on behalf of its constituents and clients on Brokerage Charge and it is
      also a member ofNational Stock Exchange oflndia Limited (NSE) and
B
      Bombay Stock Exchange oflndia Limited (BSE).
             4. Respondent No.2, had registered herself with the Company as
      a constituent/client by opening Securities Trading Account vide No.342889
      and was an imperial customer of the Company for about eight years.
      She executed a Member-Client Agreement dated 28th June, 2005. On
c     3rd August, 2009, respondent No.2, through a legal Notice dated
      03.08.2009, requested the appellants to make good the losses caused to
      her by indulging in unauthorized and fraudulent trading in her account by
      one Vi nod Koper (Relationship Manager of the company-"RM" in short)
      during the period July, 2008 to June, 2009. This Notice was also sent to
D     RM and one Rohan Raut, Assistant Vice President of the Company, on
      20'h October, 2009. Thereafter, she filed arbitration proceedings before
      NSE Panel of Arbitrators against the Company for a sum of Rs.48.99
      Lacs and costs of Rs.2.5 Lacs, and chose the Arbitrators of her choice,
      being two retired High Court Judges and sought to call RM as a witness.
      The Arbitrators passi.:d an award in favour of the Company on 18'h
 E    August, 20 l 0, recording a shift in the stand of respondent No.2, authorizing
      her husband to trade on her behalf. In the meantime, as the Police did
      not take cognizance of the matter, albeit she filed a complaint on 31"
      march, 20 I 0, against the appellants, RM and AVP, on l 01h June, 20 l 0,
      she also filed a criminal complaint under Section 156(3) of the Code of
 F    Criminal Procedure, 1973 (hereinafter referred to as Cr.P.C.) before
      l O'h Metropolitan Magistrate, Andheri, bearing Case No.143/20 l 0,
      alleging execution of unauthorized trades in her account without her
      consent by the appellants and claimed that she had thereby suffered
      losses amounting to Rs. 70 Lacs. Specific allegations were levelled against
      RM and appellant No.3 as she was introduced to RM by appellant No.3
 G    and was told that RM would handle her investment portfolio honestly
      and efficiently with her prior instructions. General allegations of
      involvement of other appellants were made. On 25'h September, 20 I 0,
      she preferred an appeal before NSE Appellate Panel of Arbitrators,
      being Arbitration REF No.CM/M-213/2009, wherein she disputed the
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      HDFC SECURITIES LTD. & ORS. v. STATE OF                                   973
  MAHARASHTRA & ANR. [PINAKI CHANDRA GHOSE, J.]

trades which had taken place during the period December 2008 to April A
2009. Being completely oblivious ofthe Arbitration proceedings, the award
passed therein and the appeal preferred by respondent No.2, on
04.01.2011, the learned Metropolitan Magistrate directed registration of
FIR against the appellants and ordered for a report after investigation.
       5. Pursuant to the order of the learned Metropolitan Magistrate B
dated 4.01.2011, Juhu Police Station registered the FIR, being MECR
No. 7of2011 dated 30th January, 2011, under Sections 409, 420, 465, 467
read with Sections 34 and 120-B of the IPC. Meanwhile, the Appellate
Tribunal had decided the appeal against respondent No.2, vide its Award
dated 241h January, 2011. The Appellate tribunal found that respondent C
No.2 had not denied the fact of having received all the necessary
documents, including Contract notes, etc. with regard to the transactions
undertaken by the appellants on her behalf, which were required to be
issued by the trading member to the investor immediately after the trade
is undertaken. Thereafter, the appellants filed a writ petition before the
Bombay High Court, being Criminal Writ Petition No.672 of 2011, inter D
alia praying for quashing of the said FIR and the same prayer was also
made in Criminal Writ Petition No.767 of201 I, filed by RM before the
High Court. The High Court by itsjudgmentdated 16.11.2011, dismissed
both the writ petitions as according to it, the filing of the writ petitions
was premature and there was no need for exercising the powers either
under Article 227 of the Constitution oflndia orunder Section 482 Cr.P.C. E
Aggdeved by the aforesaid judgment of the High Court, the appellants
have approached this Court by filing this appeal by special leave.
      6. The only question that arises for decision in this appeal is whether
the order dated 04.01.2011 passed by the Court of I O'h Metropolitan
Magistrate, Andheri, in Private Complaint, C.C. No.143/Misc/20 I 0, filed        F
by respondent No.2 for the offences punishable under Sections 409,
420, 465, 467 read with Sections 34, 120(B) !PC, as well as FIR bearing
MECR No. 7of2011 dated 30th January, 2011, registered at Police Station,
Juhu, District Mumbai, are liable to be quashed.
       7. In order to answer this question, it is necessary to first set out     G
the relevant provisions i.e. Sections 156 and 482 of the Code of Criminal
Procedure, 1973:
       "156. Police officer's power to investigate cognizable
       case.
                                                                                 H
974            SUPREME COURT REPORTS                           [2016] 8 S.C.R.


A           (1) Any officer in charge of a police station may, without
            the order of a Magistrate, investigate any cognizable
            case which a Court having jurisdiction over the local
            area within the limits of such station would have power
            to inquire into or try under the provisions of Chapter
            XIII.
B
            (2) No proceeding of a police officer in any such case
            shall at any stage be called in question 011 the ground
            that the case was one which such officer was not
            empowered under this section to investigate.
c           (3) Any Magistrate empowered under Section 190 may
            order such an investigation as above- mentioned. "
             "482. Saving of inherent power of High Court.-
            Nothing in this code shall be deemed to limit or effect
            the inherent powers of the High Court to make such
D           orders as may be necessary to give effect to any order
            under this Code, or to prevent abuse of process of any
            Court or otherwise to secure the ends of justice. "
             8. The High Court dismissed the application filed by the appellants
      for quashing and setting aside the order of the Metropolitan Magistrate
 E    dated 4•h January, 2011, on the ground that the appellants had applied
      before the stage ofissuance of process so to be issued by the Metropolitan
      Magistrate under Section 156(3) of the Criminal Procedure Code.
      According to the appellants, the fundamental rights of the appellants
      would be compromised ifthe order so passed by the Magistrate is allowed
 F    to be given effect to. The contention before the High Court on this
      question is that the order so passed by the Metropolitan Magistrate is
      illegal and amounts to abuse of the process of law. On the contrary,
      before the High Court it was submitted on behalf of respondent No.2
      that an order under Section 156(3) of Criminal Procedure Code requiring
      investigation by the police does not cause any injury of irreparable nature
 G    which requires quashing of the investigation. It is further stated that the
      stage of cognizance would arise after the investigation report is filed.
      Therefore, the application filed by the appellants before the High Court
      is nothing but prematured and thus there is no need for exercising the
      powers of the High Court either under Article 227 of the Constitution of
 H    India or under Section 482 of the Code. Further contention of the
      HDFC SECURITIES LTD. & ORS. v. STATE OF                                  975
  MAHARASHTRA & ANR. [PINAKI CHANDRA GHOSE, J.]

respondent before the High Court was that the inherent powers under            A
Section 482 of the Code should be sparingly used.
       9. The High Court held that the direction given to the police by the
Magistrate under Section 156(3) of the Code for carrying out the
investigation into the complaint and to submit a report, cannot give a
right to the appellants for quashing the same since such an order would         B
be based absolutely on speculations upon the report not filed. Further, it
would result in prejudging the complaint. In these circumstances, the
High Court dismissed the said application.
       10. Dr. Abhishek Singhvi, learned senior counsel appearing on
behalf of the appellants submitted that the initiation of proceedings in the   c
instant case is an abuse of process of law and isl iable to be quashed. He
argued that it is a settled principle that summoning of an accused in a
criminal case is a serious matter and the criminal law cannot be set in
motion as a matter of course. Therefore, the order of the magistrate
must reflect application of mind to the facts of the case and the law
applicable thereto. In support of this submission, the learned counsel          D
has reli~d upon Anil Kumar Vs. M. K. Aiyappa, (2013) I 0 SCC 705,
paragraph I I, of which is quoted below:
      "11. The scope of Section 156(3) CrPC came up for
      consideration before this Court in several cases. This
      Court in Maksud Saiyed case examined the requirement                      E
      of the application of mind by the Magistrate before
      exercising jurisdiction under Section 156(3) and held
      that where jurisdiction is exercised on a complaint filed
      in terms of Section 156(3) or Section 200 CrPC, the
      Magistrate is required to apply his mind, in such a case,                 F
      the Special Judge/Magistrate cannot refer the matter
      under Section 156(3) against a public servant without
      a valid sanction order. The application of mind by the
      Magistrate should be reflected in the order. The mere
      statement that he has gone through the complaint,
      documents and heard the complainant, as such, as                          G
      reflected in the order, will not be sufficient. After going
      through the complaint, documents and hearing the
      complainant, what weighed with the Magistrate to order
      investigation under Section 156(3) CrPC, should be
      reflected in the orde1; though a detailed expression of                   H
976             SUPREME COURT REPORTS                         [2016] 8 S.C.R.


A             his views is neither required nor warranted. We have
              already extracted the order passed by the learned
              Special Judge which, in our view, has stated no reasons
              for ordering investigation. "
              11. Learned Magistrate had passed an order on 04.01.2011 holding
B     that:
              "The bare reading of the complaint and the
              accompanying documents disclose the cognizable
              offence. Therefore in view of the judgement of Hon 'hie
              Supreme Court in case of Srinivas Gunduri & Ors. vs.
c             M. S. SEPCO Electric Power Construction & Anr. In
              the matter of criminal appeal No.137712010 and 13781
              2010 decided on 30.07.2010 when the complaint
              discloses a cognizable offence, then the Magistrate
              instead of applying his mind to the complaint for
              deciding whether or not there is sufficient ground for
D             proceedings may direct the police for investigation.
              Therefore, considering all these aspects, the complaint
              discloses the commission of cognizable offence.
              Therefore, considering the nature of offence it needs to
              be sent to police for investigation under section 156(3)
 E            of CrPC."
             12. Dr. Abhishek Singhvi, learned senior counsel appearing on
      behalf of the appellants has relied upon the following decisions of this
      Court to assail the aforesaid order passed by the Magistrate: Devara pall
      Lakshminarayana Vs. V. Narayana Reddy & Ors., (1976) 3 SCC
 F    252, and Ram Dev Food Products Pvt. Ltd. Vs. State of Gujrat,
      reported in (2015) 6 sec 439.
              13. Further, it was submitted by the learned counsel for the
      appellants that there is no merit in the complainant's (respondent No.2)
      contention that the transactions from her trading account were
 G    unauthorized. Trading from the complainant's-trading account were being
      carried out by her husband as admitted by the complainant in the complaint
      made before the learned Magistrate, and at the time of opening the
      trading account with appellant No. I, she was made aware of all the
      risks involved and the complainant had agreed to the same and understood
 H    that she would be responsible for all the risks and consequences of
      HDFC SECURITIES LTD. & ORS. v. STATE OF                             977
  MAHARASHTRA & ANR. [PINAKI CHANDRA GHOSE, J.]

entering into trades. The relevant clause of the Agreement entered into   A
by complainant is reprocfoced hereinbelow:
      "2. 11 The Client agrees and declares as follows: (i) The
      Client shall be wholly responsible for all the investment
      decisions and trades of the Client; (ii) The Client will
      pay receive applicable daily margins; (iii) Payment of              B
      margins by the Client does not necessarily imply
      complete satisfaction of all dues; (iv) In spite of
      consistent having paid margins, the Client may, on the
      closing of his trade, be obliged to pay (or entitled to
      receive) such further sums as the market price or an
      instrument of contract may dictate; and (v) The failure              c
      of a Client to understand the risk involved or the failure
      of the member to explain the risk to the Client shall not
      render a contract as void or voidable and the Client
      shall be and shall continue to be responsible for all the
      risks and consequences for entering into trades in                  D
      Derivatives. "
       14. In the light of the Agreement entered into between complainant-
respondent No.2 and the appellants, the learned counsel for the appellants
further averred that criminal prosecution of the appellants could not be
allowed to continue because the criminal prosecution requires a much E
higher standard of proof beyond reasonable doubt, whereas civil matters
require lower standard of proof - preponderance of probabilities. He
drew our attention towards a very recent pronouncement in the case of
Lalitha Kumari Vs. Govt. of Uttar Pradesh, reported in (2014) 2
SCC 1, wherein this Court held:
                                                                           F
       "Therefore, in view of various counter claims regarding
       registration or non-registration, what is necessary is
       only that the information given to the police must disclose
      the commission of a cognizable offence. In such a
      situation, registration of an FIR is mandatory. However,
       if 110 cognizable offence is made out in the information            G
      given, then the FIR need not be registered immediately
       and perhaps the police can conduct a sort ofpreliminary
       verification or inquiry for the limited purpose of
       ascertaining as to whether a cognizable offence has
       been committed. But, if the information given clearly               H
978            SUPREME COURT REPORTS                          [2016) 8 S.C.R.


A           mentions the commission of a cognizable offence, there
            is no other option but to register an FIR forthwith. Other
            considerations are not relevant at the stage of
            registration of FIR, such as, whether the information is
            falsely given, whether the information is genuine,
            whether the information is credible etc. These are the
 B
            issues that have to be verified during the investigation
            of the FIR. At the stage of registration of FIR, what is to
            be seen is merely whether the information given ex facie
            discloses the commission of a cognizable offence. If,
            after investigation, the information given is found to
 c          be false, there is always an option to prosecute the
            complainant for filing a false FIR. "
             15. We are of the considered opinion that in the present case a
      fact finding investigation was directed by the impugned order.
      Consequently, FIR was registered against appellants No.2 to 4 and against
D     RM (Vinod Kopar). The accused under Indian Criminal Legal System,
      unless proved guilty shall always be given a reasonable space and liberty
      to defend himself in accordance with the Jaw. Further, it is always
      expected from a person accused of an offence pleading not guilty that
      he shall co-operate and pai1icipate in criminal proceedings or proceedings
      of that nature before a court of law, or other Tribunal before whom he
 E
      may be accused ofan 'offence' as defined in Section 3(38) of the General
      Clauses Act, i.e., an act punishable under the Penal Code or any special
      or local law. At the same time, courts, taking cognizance of the offence
      or conducting a trial while issuing any order, are expected to apply their
      mind and the order must be a well reasoned one.
 F           16. Learned counsel for the appellants has further invited our
      attention to the order of the High Court dismissing the writ petitions.
      According to the learned counsel for the appellants, the High Court,
      relying upon the decision of this Court in Iqbal Singh Marwah & Anr.
      Vs. Meenakshi Marwah & Anr., (2005) 4 SCC 370 and Rukhmni
G     Narvekar Vs. Vijya Statardekar and Ors., (2008) 14 SCC 1, found
      that there was no substance in the argument that respondent No.2 ought
      to have disclosed the arbitration proceedings and the outcome thereof in
      her complaint and that non-disclosure of the same amounts to suppression
      of material facts. Learned counsel for the appellants further submitted
      that the High Court failed to appreciate that it was within its inherent
H
      HDFC SECURITIES LTD. & ORS. v. STATE OF.                               979
  MAHARASHTRA & ANR. [PINAKI CHANDRA GHOSE, J.]

jurisdiction under Section 482 Cr.P.C. to consider the correspondence        A
exchanged as well as the admitted documents under the arbitration
proceedings. In the case of All Cargo Movers (India) (P.) Limited
Vs. Dhanesh Badarwal Jain, (2007) 14 SCC 776, relied upon ill
paragraph 17 thereof, it was held by this Court:
       "We are of the opinion that the allegations made in the               B
      complaint petition, even if given face value and taken
      to be correct in its entirety, do not disclose an offence.
      For the said purpose, This Court may not only take into
      consideration the admittedfacts but it is also permissible
      to look into the pleadings of the plaintiff respondent
      No. I in the suit. No allegation whatsoever was made                   c
      against the appellants herein in the notice. What was
      contended was negligence and/or breach of contract
      on the part of the carriers and their agent. Breach of
      contract simplicitor does not constitute an offence. For
      the said purpose, allegations in the complaint petition                D
      must disclose the necessary ingredients therefor. Where
      a civil suit is pending ·and the complaint petition has
      been filed one year after filing of the civil suit, we may
      for the purpose of finding out as to whether the said
      allegations are prima facie cannot notice the
      correspondences exchanged by the parties and other                     E
      admitted documents. It is one thing to say that the Court
      at this juncture would not consider the defence of the
      accused but it is another thing to say that for exercising
      the inherent jurisdiction of this Court, it is impermissible
      also to look to the admitted documents. Criminal                        F
      proceedings should not be encouraged, when it is found
      to be ma/a fide or otherwise an abuse of the process of
      the Court. Superior Courts while exercising this power
      should also strive to serve the ends of justice.
       17. Learned counsel for the appellants further relied upon few         G
more judgments wherein it was well settled that the test to be applied for
quashing is, whether uncontroverted allegations made, prima facie
establish the offence. This is because the Court cannot be utilized for
any oblique purpose and where, in the opinion of the Court, the chances
of an ultimate conviction are bleak, no useful purpose will be served by
                                                                             H
980             SUPREME COURT REPORTS                          [2016) 8 S.C.R.


A     allowing the criminal prosecution to continue. He relied upon the decisions
      of this Court in Madhavrao Jiwanrao Scindia & Ors. Vs. Sambhajirao
      Chandrajirao Angre & Ors., ( 1998) I SCC 692 (para 7-8); State of
      Haryana Vs. Bhajanlal, 1992 Supp (1) SCC 335 (para 102); Rajiv
      Thapar& Ors Vs. Madan Lal Kapoor, (2013) 3 SCC 330 at para 30;
B     Rishi Pal Singh Vs. State of Uttar Pradesh & Anr. (2014) 7 SCC
      215, at para 12-13.
             18. Learned counsel for the respondents have not rebutted this
      issue in any ofhis arguments. With the meticulous understanding of the
      orders of the Courts below in the instant case, we can see that general
      and bald allegations are made in the context of appellant No. I who is a
 C    juristic person and not a natural person. The Indian Penal Code, 1860,
      does not provide for vicarious liability for any offence alleged to be
      committed by a company. If and when a statue contemplates creation of
      such a legal fiction, it provides specifically therefor, e.g. Negotiable
      Instruments Act, 1881. Further, reliance was made on S.K. Alagh Vs.
D     State of Uttar Pradesh & Ors., reported in (2008) 5 SCC 662, where
      at paragraph 16, this Court observed that "Indian Penal Code, save
      and except some provisions specifically providing therefor, does
      not contemplate any vicarious liability on the part of a party who is
      not charged directly for commission of an offence. " Further in
      Maksud Saiyed Vs. State of Gu,jrat & Ors., reported in (2008) 5
 E    SCC 668, at paragraph 13, this Court observed that where a jurisdiction
      is exercised on a complaint petition filed in terms of Section 156(3) or
      Section 200 of the Code of Criminal Procedure, the Magistrate is required
      to apply his mind. Indian Penal Code does not contain any provision for
      attaching vicarious liability on the part of the Managing Director or the
 F    Directors of the Company when the accused is the Company. The
      Learned Magistrate failed to pose unto himself the correct question viz.
      as to whether the complaint petition, even if given face value and taken
      to be correct in its entirety, would lead to the conclusion that the
      respondents herein were personally liable for any offence. The Bank is
      a body corporate. Vicarious liability of the Managing Director and
 G    Director would arise provided any provision exists in that behalf in the
      statute. Statutes indisputably must contain provision fixing such vicarious
      liability. Even for the said purpose, it is obligatory on the part of the
      complainant to make requisite allegations which would attract the
      provisions constituting vicarious liability. In Thermax Limited & Ors.
H
      HDFC SECURITIES LTD. & ORS. v. STATE OF                                981
  MAHARASHTRA & ANR. [PINAKI CHANDRA GHOSE, J.]

Vs. K. M. Johny & Ors., (2011) 13 SCC 412, and in Sunil Bharti A
Mittal Vs. Central Bureau of Investigation, (20 I 5) 4 SCC 609, at
para39, this Court held:
       "Apart from the fact that the complaint lacks necessary
      ingredients of Sections 405, 406, 420 read with Section
      34 !PC, it is to be noted that the concept of 'vicarious                B
      liability' is unknown to criminal law. As observed earlier,
      there is no specific al/ega_tion made against any person
      but the members of the Board and senior executives are
      ioined as the persons looking after the management
      and business of the appellant-Company".
                                                                              c
       19. Learned counsel for the appellants has lastly argued in favour
of the partial quashment of the FIR against the appellants on the
contention that there was no criminality on their behalf. It has been
further submitted that the allegations made against them do not amount
to disclosure of an offence and were made with the purpose of harassing
the appellants. Additionally, learned counsel contends that vicarious liability D
cannot be attributed to appellant Nos.2 to 4, while relying upon R. Kalyani
Vs. Janak C. Mehta & Ors., (2009) 1 SCC 516, wherein it was held:
      "Whereas, thus, no a/legation whatsoever has been
      made against the respondent No.I, the only a/legation
      against the respondent No.2 was that he had forwarded                    E
      the said letter dated JO.I.2002 to National Stock
      Exchange. The act of forgery on/or fabrication of the
      said letter had been attributed to Respondent No.3.
       Respondent Nos. I and 2 herein were sought to be
       proceeded against on the premise that they are                          F
       vicariously liable for the affairs of the company.
       As Mr. Mani had time and again referred to the
       allegations relating to forgery of the said document
       dated 10.I.2002, we may also notice a disturbing fact.
       Before lodging the said First Information, a notice was                 G
       issued by the appellant against the respondents herein
       on 15.I0.2002, whereas the address of respondent
       Nos.I and 2 were shown as 404, Embassy Centre,
       Nariman Point, Mumbai - 400 021 and 302, Veena
       Chambers, 21, Dalal Street, Fort, Mumbai - 400 001
                                                                               H
982           SUPREME COURT REPORTS                        [2016) 8 S.C.R.


A          respectively. However, in the. complaint petition, they
           were shown to be residents of Chennai ".
            20. In Sharad Kumar Sanghi Vs. Sangta Rane, reported in
      (2015) 12 SCC 781 (para 9-11) it is noted by this Court:
           "The allegations which find place against the Managing
 B         Director in his personal capacity seem to be absolutely
           vague. When a complainant intends to rope in a
           Managing Director or any officer of a company, it is
           essential to make requisite allegation to constitute the
           vicarious liab ii ity. "
c         21. Per contra, learned counsel for respondent No.2 submitted
   that the complaint has disclosed the commission of an offence which is
   cognizable in nature and in the light ofLalitha Kumari's Case, (supra),·
   registration of FIR becomes mandatory. We observe that it is clear from
   the use of the words ''may take cognizance" in the context in which
 D they occur, that the same cannot be equated with "must take cognizance".
   The word "may" gives discretion to the Magistrate in the matter. If on a
   reading of the complaint he finds that the allegations therein disclose a
   cognizable offence and that the forwarding of the complaint to the police
   for investigation under Section 156(3) will be conducive to justice and
   save the valuable time of the Magistrate from being wasted in enquiring
 E into a matter, which was primarily the duty of the police to investigate,
   he will be justified in adopting that course as an alternative to taking
   cognizance of the offence, himself. It is settled that when a Magistrate
   receives a complaint, he is not bound to take cognizance if the facts
   alleged in the complaint, do not disclose the commission of an offence.
 F        22. Learned counsel for the respondents further submitted that
   there is a marked difference between the civil nature of the arbitration
   proceedings and the Criminal nature of the current proceedings and
   relieving the RM on the same day when he had tendered his resignation
   reflects the conduct whereby conspiracy could be proved. It was further
 G argued that respondent No.2 has also sent the legal notice requesting for
   making good the losses caused to her by the appellants of which Criminal
   Court and the Arbitration Tribunal took notice of. Thus, allegations were
   already made against all the appellants. We find no substance in the said
   submission being completely opposed to the settled legal principles.
   Nevertheless, we find patent illegalities which would result in vitiating
 H
      HDFC SECURITIES LTD. & ORS. v. STATE OF                                  983
  MAHARASHTRA & ANR. [PINAKI CHANDRA GHOSE, J.]

the entire investigation which would·result in miscarriage ofjustice.          A
       23. Mr. Basava Prabhu Patil, learned senior counsel appearing on
behalf of respondent No.2 submitted that respondent No.2 in her
complaint had set out the conduct of the appellants and alleged that their
conduct had caused wrongful loss to her and wrongful gain to the
appellants and other accused. It is a fact that at the time of summoning       B
of the accused, the Courts must be careful to scrutinize the evidence
brought on record and in elicitation of answers to find out the truthfulness
of the allegations.
        24. It appears to us that the appellants approached the High Court
even before the stage of issuance of process. In particular, the appellants c
challenged the order dated 04.01.20 II passed by the learned Magistrate
under Section 156(3) ofCr.P.C. The learned counsel appearing on behalf
of the appellants after summarizing their arguments in the matter have
emphasized also in the context of the fundamental rights of the appellants
under the Constitution, that the order impugned has caused grave inequities
to the appellants. In the circumstances, it was submitted that the order is D
illegal and is an abuse of the process oflaw. However, it appears to us
that this order under Section 156(3) of Cr.P.C. requiring investigation by
the police, cannot be said to have caused an injury of irreparable nature
which, at this stage, requires quashing of the investigation. We must
keep in our mind that the stage of cognizance would arise only after the .E
investigation report is filed before the Magistrate. Therefore, in our
opinion, at this stage the High Court has correctly assessed the facts
and the Jaw in this situation and held that filing of the petitions under
Article 227 of the Constitution ofindia or under Section 482 ofCr.P.C.,
at this stage are nothing but premature. Further, in our opinion, the High
Court correctly came to the conclusion that the inherent powers of the F
Court under Section 482 of Cr.P.C. should be sparingly used. In these
circumstances, we do not find that there is any flaw in the impugned
order or any illegality has been committed by the High Court in dismissing
the petitions filed by the appellants before the High Court. Accordingly,
we affirm the order so passed by the High Court dismissing the writ G
petitions. The appeal is dismissed.


Devika Gujral                                              Appeal dismissed.