Holding

The High Court was not justified in quashing the charges against the directors; the charge must stand as there was sufficient material to proceed, and interference under Section 482 CrPC is limited.

Summary

The State of Punjab appealed against a High Court order that quashed charges framed under Section 7(1)(a)(ii) of the Essential Commodities Act, 1955 against the directors of Mis. Sangrur Vanaspati Mills Ltd., leaving only the production manager to stand trial for adulterating vegetable oil. The Supreme Court examined whether, at the charge‑framing stage, there was sufficient material to proceed against the directors under Section 10 of the Act, which makes any person in charge of, or a director who consents, connives or neglects, liable. It held that the High Court erred in assuming facts and finding that the directors were not responsible, as such factual determinations must await trial. The Court reiterated that the inherent jurisdiction under Section 482 of the CrPC to interfere with a charge‑framing order is extremely limited and may be exercised only to prevent abuse of process or to secure justice. Consequently, the appeal was allowed and the charges against the directors were reinstated, with the trial court to consider the evidence.

Issues considered

Whether the High Court was justified in quashing the charge framed against the directors under Section 10 of the Essential Commodities Act, 1955.
Whether, at the charge‑framing stage, there existed material sufficient to proceed against the directors and other officers of the company.
What is the scope of inherent jurisdiction under Section 482 of the Code of Criminal Procedure, 1973 to interfere with an order framing charge.

Legislation cited

Code of Criminal Procedure, 1973s. 482
Essential Commodities Act, 1955s. 10, s. 7(1)(a)(ii)
Negotiable Instruments Act, 1881s. 141

Subjects

Essential Commodities ActSection 10 liabilitycharge framingInherent jurisdictionSection 482 CrPCDirectors liabilityVegetable oil adulterationCriminal procedure

Judgment

A STATE OF PUNJAB
....
v.
KASTURI LAL AND ORS.

JULY 28, 2004

B (S.N. VARIAVA AND ARIJIT PASAYAT, JJ.]

Essential Commodities Act, 1955-Sections 3 and JO-Vegetable Oil
Products Control Order, 194 7-Charges framed against the Directors and
the Production Manager of the Company for infringement of 194 7 Order-
High Court held that the Production Manager would face trial and charge,
c and quashed charges against the Directors-Correctness of-Held: High
Court not justified in quashing charges framed against the Directors since
evidence was yet to led by the parties whether or not the Directors were
responsible for the conduct of the company-Also scope of interference
with an order framing charge is limited-Code of Criminal Procedure,
D 1973-Section 482.
Respondents are the Directors and P is the Production Manager
of Company producing vegetable oil product. The Special Judge
framed charges against the respondents and P for the alleged violation
of the provisions contained in section 7(1)(a)(ii) of the Essential
E Commodities Act, 1955. Respondents opposed the framing of charges
since P was nominated by the Company to be in charge and responsible
to the Company for conduct of the business, no one else could be
arrayed as accused. Accused person filed petition questioning the
correctness of the order of Special Judge. High Court held that only
F P was to face the trial and charge and quashed the charges with regard
to the respondents as there was no definite material to show that they
were in charge of running of business and/or responsible therefor.

Appellant-State contended that at the stage of framing charge it
was required to be found out whether there was any material to
G proceed against the accused persons and the High Court ought not to
have threadbare examined whether the complainant established that
the respondents were connected with and responsible for running of
the business.
"' H Respondents contended that there was no material to show that
158
STATE OF PUNJAB v. KASTURI LAL 159
~
any of them was in charge of and responsible to the company or its A
conduct.

Allowing the appeal, the Court

HELD : I. When the evidence was yet to be led by the parties,
the High Court could not on an assumption of facts come to a finding B
of fact that the respondents-directors of the company are not respon-
sible for the conduct of the business. Therefore, the High Court was
not justified in quashing the charge framed with regard to the
respondents. Trial Court would consider the evidence and materials to
be placed by the parties in the proper perspective and in accordance
with law. (166-E-G; 166-D-EJ
c
2.1. Under section 10 of the Essential Commodities Act, 1947 if
the contravention of the order made under Section 3 is by a Company,
the persons who may be held guilty and punished are (1) the Company
itself, (2) every person who, at the time the contravention was commit- D
ted, was in charge of, and was responsible to the Company for the
conduct of the business of the company and could be described as
person-in-charge of the Company, and (3) any Director, Manager,
Secretary or other Officer of the Company with whose consent or
connivance or because of neglect attributable to whom, the offence has
been committed. Anyone or someone or all them may be prosecuted
E
_.... and punished. Section IO does not lay down any condition that the
person-in-charge or an officer of the Company may not be separately
prosecuted if the Company itself is not prosecuted. Each or any of them
may be separately prosecuted, or along with the Company. Before the
person-in-charge or an Officer of the Company is held guilty in that F
capacity it must be established that there has been a contravention of
the order by the Company. (162-F-H; 163-A-C)

Sheoratan Agarwal and Anr. v. State of Madhya Pradesh, [1984] 4
sec 353, referred to.
G
L2. Inherent jurisdiction under the Section 482 of Cr. P.C., 1973
though wide has to be exercised sparingly, carefully and with caution
and only when such exercise is justified by the tests specifically laid
down in the section itself. It is to be exercised ex debito justitiae to do
• real and substantial justice for the administration of which alone H
160 SUPREME COURT REPORTS [2004) SUPP. 3 S.C.R.

A courts exist and if any attempt is made to abuse that authority so as
..
to produce injustice, the Court has power to prevent such abuse. In
exercise of the powers Court would be justified to quash any proceed-
ing if it finds that initiation/continuance of it amounts to abuse of the
process of Court or quashing of these proceedings would otherwise
B serve the ends of justice. When no offence is disclosed by the complain-
ant, the Court may examine the question of fact. When a complaint
is sought to be quashed, it is permissible to look into the materials to
assess what the complainant has alleged and whether any offence is
made out even if the allegations are accepted in toto. Furthermore, the
scope for interference with an order framing charge in terms of section
c 482 of the Code is extremely limited. (163-H; 164-A-C; 163-D)

R.P. Kapur v. State ofPunjab, AIR (1960) SC 866; State ofHaryana
v. Bhajan Lal, (1992) Supp. 1 SCC 335 and Rajlakshmi Mills v. Shakti
Bhakoo, (2002) 8 SCC 236, referred to.

D CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.
743 of 2003.

From the Judgment and Order dated 4.1.2002 of the Punjab and
Haryana High Court in Criminal Revision No. 326 of 1998.

E Naresh Bakshi and Bimal Roy Jad for the Appellant.

P.N. Puri for the Respondent.

The Judgment of the Court was delivered by

F
ARIJIT PASAYAT, J.: Leave granted.

The State of Punjab questions legality of the judgment rendered by
. '

a learned Single Judge of the Punjab and Haryana High Court in Criminal
Revision No. 326 of 1998. A petition was filed under Section 401/482 of
the Code of Criminal Procedure, 1973 (in short the 'Code') questioning
correctness of the order passed by learned Special Judge, Sangrur framing
G
charges against the present respondents and one Prem Mohan Tiwari for
alleged violation of the provisions contained in Section 7(l)(a)(ii) of the
Essential Commodities Act, 1955 (in short the 'Act').

Charge was framed by learned Special Judge by order dated 16.9.1997
H holding that there was infringement of the provisions of Vegetable Oil
STATE OF PUNJAB v. KASTURI LAL (PASA YAT, J.] 161

Products Control Order, 1947 (in short the 'Control Order') as amended A
under Section 3( 1) of the Act, Samples of the vegetable oil product were
drawn from the premises of Mis. Sangrur Vanaspati Mills Ltd. on
29.4.1992 and on analysis the sample was found to contain 78% of solvent
mustard oil as against the permitted limit of 20%. A challan under Section
173 of the Code was filed in the Court of Special Judge, Sangrur and the B
present respondents and aforesaid Prem Mohan Tiwari were arrayed as
accused persons. While the accused Prem Mohan Tiwari was the Produc-
tion Manager of the company, others were Directors of the company.
Before the Special Judge, the accused persons opposed framing of charge
on various grounds. Their main plank of the argument was that since Prem
Mohan Tiwari was nominated by the company to be in charge and C
responsible to the company for conduct of the business, no one else could
be arrayed as accused. The plea did not find acceptance and the learned
Special Judge framed the charge against the accused persons in terms of
Section 7(I)(a)(ii) of the Act. The accused persons filed the Criminal
Revision and Criminal Misc. No. 16907-M of 1998 was also filed to quash D
the challan under Section 173 of the Code which was taken up along with
the Criminal Revision. As noted above, by the judgment which is
impugned in the present appeal the High Court came to hold that it was
only Prerr. Mohan Tiwari who was to face trial and charge so far as the
others are concerned to be quashed. It was held that there was no definite
material to show that they were in charge of running of business and/or E
responsible therefor.

According to the learned counsel for the State of Punjab the view
taken by the High Court is erroneous. At the stage of framing charge all
that was required to. be found out was whether there was any material to
proceed against the accused persons. That being the position, the High F
Court ought not to have threadbare examined as to whether the complainant
established about the present respondents being connected with and
responsible for running of business for contravention of the statutory
provisions.

In response, learned counsel for the respondents submitted that there G
was no material to show that any of them was in charge of and/or
responsible to the company for the conduct of the business. That being so,
the High Court was justified in its view.

To appreciate rival submission it would be necessary to take note of
Section I 0 of the Act. The said provision reads as follows : H
162 SUPREME COURT REPORTS (2004] SUPP. 3 S.C.R.

A "(l) If the person contravening an order made under Section
..
3 is a company, every person who, at the time the contravention
was committed, was in charge of, and was responsible to the
company, shall be deemed to be guilty of the contravention and
shall be liable to be proceeded against and punished accordingly:

B Provided that nothing contained in this sub-section shall
render any such person liable to any punishment if he proves that
the contravention took place without his knowledge or that he
exercised all due diligence to prevent such contravention.

c (2) Notwithstanding anything contained in sub-section (l ), where
an offence under this Act has been committed by a company 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 company
such director, manager, secretary or other officer shall also be
D 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) "company'' means any body corporate, and includes a firm
E or other association of individuals; and

(b) "director" in relation to a firm means a partner in the firm."

The section appears to our mind to be plain enough. If the contra-
(
vention of the order made under Section 3 is by a company, the persons
F who may be held guilty and punished are (I) the company itself, (2) every
person who, at the time the contravention was committed, was in charge
of, and was responsible to, the company for the conduct of the business
of the company whom for short we shall describe as the person-in-charge
of the company, and (3) any director, manager, secretary or other officer
G of the company with whose consent or connivance or because of neglect
attributable to whom the offehce has been committed, whom for short we
shall describe as an officer of the company. Any one or more or all of them ;.
may be prosecuted and punished. The company akme may be prosecuted.
The person-in-charge only may be prosecuted. Tht: conniving officer may
H individually be prosecuted. One, some or all may be prosecuted. There is
STATE OF PUNJAB v. KASTURI LAL [PASAYAT, J.] 163

no statutory compulsion that the person-in:charge or an officer of the A
company may not be prosecuted unless he be ranged alongside the
company itself. Section I 0 indicates the persons who may be prosecuted
where the contravention is made by the company. It does not lay down any
condition that the person-in-charge or an officer of the company may not
be separately prosecuted if the company itself is not prosecuted. Each or B
any of them may be separately prosecuted or along with the company.
Section I 0 lists the person who may be held guilty and punished when it
is a company that contravenes an order made under Section 3 of the
Essential Commodities Act. Naturally, before the person-in-charge or an
officer of the company is held guilty in the capacity it must be established
that there has been a contravention of the order by the company. C
The above position was highlighted in Sheoratan Agarwal and Anr.
v. State of Madhya Pradesh, [1984] 4 SCC 352.

The scope for interference with an order framing charge in terms of D
Section 482 of the Code is extremely limited.

Exercise of power under Section 482 of the Code in a case of this
nature is the exception and not the rule. The section does not confer any
new powers on the High Court. It only saves the inherent p~wer which the
Court possessed before the enactment of the Code. It envisages three E
circumstances under which the inherent jurisdiction may be exercised,
namely, (i) give effec' to an order under the Code, (ii) to prevent abuse
of the process of court, and (iii) to otherwise secure the ends of justice.
It is neither possible nor desirable to lay down any inflexible rule which
would govern the exercise of-inherent jurisdiction. No legislative enact- F
ment dealing with procedure can prove for all cases that may possibly arise.
Courts, therefore, have inherent powers apart from express provisions of
law which are necessary for proper discharge of functions and duties

-
imposed upon them by law. That is the doctrine which finds expression
in the Section which merely recognizes and preserves inherent powers of
the High Courts. All courts, whether civil or criminal possess, in the G
absence of any express provision, as inherent in their constitution, all such
powers as are necessary to do the right and to undo a wrong in course of
administration of justice. While exercising powers under the Section, the
Court does not function as a court of appeal or revision. Inherent
jurisdiction under the Section though wide as to be exercised sparingly, H
164 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.

A carefully and with caution and only when such exercise is justified by the
.. .

tests specifically laid down in the Section itself. It is to be exercised ex
debito justitiae to do real and substantial justice for the administration of
which alone courts exist. Authority of the court exists for advancement of
justice and if any attempt is made to abuse that authority so as to produce
B injustice, the court has power to prevent such abuse. It would be an abuse
of process of the court to allow any action which would result in injustice
and prevent promotion of justice. In exercise of the powers court would
be justified to quash any proceeding if it finds that initiation/continuance
of it amounts to abuse of the process of court or quashing of these
proceedings would otherwise serve the ends of justice. When no offence
C is disclosed by the complainant, the court may examine the question of fact.
When a complaint is sought to be quashed, it is permissible to look into
the materials to assess what the complainant has alleged and whether any
offence is made out even if the allegations are accepted in toto.

D In RP. Kapur v. State of Punjab, AIR (1960) SC 866, this Court
summarized some categories of cases where inherent power can and should
be exercised to quash the proceedings.

(i) where it manifestly appears that there is a legal bar against
the institution or continuance e.g. want of sanction;
E
(ii) where the allegations in the first information report or
complaint taken at its face value and accepted in their
entirety do not constitute the offence alleged;

(iii) where the allegations constitute an offence, but there is no
F legal evidence adduced or the evidence adduced clearly or
manifestly fails to prove the charge.

In State of Haryana v. Bhajan Lal, [1992] Supp(!) SCC 335 the

--
categories were enumerated as fo Hows :
G "(!) 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.

H (2) Where the allegations in the first information report and
STATE OF PUNJAB v. KASTURI LAL [PASAYAT, J.] 165

other materials, if any, accompanying the FIR do not A
disclose a cognizable offence, justifying an investigation by
police officers under Section 156( I) of the Code except
under an order ofa Magistrate within the purview of Section
I 55(2) of the Code.

(3) Where the uncontroverted allegations made in the F.l.R. or B
complaint and the evidence collected in support of the same
do not disclose the commission of any offence and make out
a case against the accused.

(4) Where the allegations in the F .l.R. do not constitute a C
cognizable offence but constitute only a non-cognizable
offence, no investigation is permitted by a Police Officer
without an order of a Magistrate as contemplated under S.
155(2) of the Code.

(5) Where the allegations made in the FIR or complaint are so D
absurd and inherently improbable on the basis of which no
prudent person can ever reach a just conclusion that there
is sufficient ground for proceeding against the accused.

(6) Where there is an express legal bar en grafted in any of the E
provisions of the Code or the concerned Act (under which
a criminal proceeding is instituted) to the institution and
continuance of the proceedings and/or where there is a
specific provision in the Code or the concerned Act, provid-
ing efficacio~s redress for the grievance of the aggrieved F
party.

(7) Where a criminal proceeding is manifestly attended with
mala fide and/or where the proceeding is maliciously insti-
tuted with an ulterior motive for wreaking vengeance on the
accused and with a view to spite him due to private and G
personal grudge."

Somewhat similar provision is contained in Section 14 I of Negotiable
Instruments Act, 1881 (in short 'N.l. Act'). The scope and ambit of the
said provision has been examined by this Court in several cases. A three H
166 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
..
A Judge Bench in Rajlakshmi Mills v. Shakti Bhakoo, [2002] 8 sec 236 held
as follows:

"The appellant had filed a criminal complaint against the
respondent as well as her brother-in-law Anoop Bhakoo under
Section 138 of the Negotiable Instruments Act because of dishonour
B of a cheque which had been issued by Mis Sutlez Knitwears of
which Anoop Bhakoo and the respondent were partners. Against
the summoning order passed by the Magistrate, the respondent
filed a petition under Section 482 Cr.P.C. after the respondent's
application for discharge was unsuccessful.
c
The High Court invoked the provisions of Section 141 of the
Negotiation Instruments Act and came to the conclusion that as
the respondent was not in charge or responsible for the conduct
of the business, therefore the order summoning her was bad in
D law.

We are of the opinion that at the stage of summoning when
evidence was yet to be led by the parties, the High Court could
not on an assumption of facts come to a finding of fact that the
respondent was not responsible for the conduct of the business.
E , On this ground alone, these appeals are allowed and the impugned
decision of the High Court is set aside."

Above being the position, we are of the view that the High Court was
not justified in quashing the charge framed so' far as the present
F respondents are concerned. We make it clear that we are not expressing
any opinion on the merits of the case. It goes without saying that the trial
Court shall consider the evidence and materials to be placed by the parties
in the proper perspective and in accordance with law. The appeal is allowed
to the extent indicated above.

G N.J. Appeal allowed.