A director cannot be prosecuted for criminal breach of trust unless the company is arraigned as an accused.

Falcon Tyres Ltd. was covered by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

The complaint alleged that the petitioner, its whole-time Director and Chairman, was responsible for failing to remit employees’ provident-fund contributions deducted from wages.

The complaint referred to ₹84,43,161 for March–May 2014; the charge sheet alleged that ₹1,30,31,617 had been deducted but not remitted.

Police filed a charge sheet invoking, among other provisions, Section 406 IPC. The Magistrate took cognizance and issued summons in C.C. No. 202/2015.

The petitioner sought relief under Section 482 CrPC, including quashing of the FIR, charge sheet, cognizance order and proceedings.

Whether the criminal proceedings against the petitioner could continue for the alleged breach of trust when Falcon Tyres Ltd. had not been arraigned as an accused.

Whether the allegations and material in the complaint and charge sheet otherwise disclosed the ingredients of criminal breach of trust under Sections 405 and 409 IPC.

Sections 405 and 406 IPC concern criminal breach of trust and its punishment; Section 409 IPC addresses criminal breach of trust by specified persons, including persons entrusted with property in a qualifying capacity.

The Court applied the principle that criminal liability is not ordinarily vicarious: absent a statutory basis, a director cannot be prosecuted merely by virtue of office, and the company must be arraigned where the alleged prosecution of the individual depends on the company’s liability.

It relied on Aneeta Hada v. Godfather Travels and Tours (P) Ltd., (2012) 5 SCC 661, and referred to S.K. Alagh v. State of Uttar Pradesh, (2008) 5 SCC 662, and Sunil Bharti Mittal v. CBI, (2015) 4 SCC 609, in considering the limits on imposing criminal liability on company officers.

The Court considered the complaint’s allegation that provident-fund contributions had been deducted but not remitted and observed that the allegation could attract the ingredients of criminal breach of trust.

It nevertheless held that Falcon Tyres Ltd. had not been made a party to the prosecution. Relying on the principle it drew from Aneeta Hada, the Court treated that omission as a foundational defect: the petitioner could not be prosecuted as a director on a vicarious-liability basis without the company being arraigned.

It rejected the respondents’ contention that the specific allegations against the petitioner were sufficient to sustain the proceedings despite the company’s absence.

The High Court allowed the petition and quashed the criminal proceedings against the petitioner, including the impugned cognizance order, charge sheet, FIR and further proceedings in C.C. No. 202/2015.