Courts may order further investigation when an unverified corporate bank account determines a director’s criminal liability.

The petitioners challenged the order dated 31 October 2023 by which the Special Judge, Anti-Corruption, Jammu, framed charges against them for offences under Sections 5(1)(d) read with 5(2) of the Prevention of Corruption Act, Svt. 2006, and Sections 409, 468, 471 and 120-B RPC

The prosecution alleged that Dr. Hemla Aggarwal, while serving as Principal of Government SPMR College of Commerce, Jammu, falsely processed the purchase of an iMac system and software, caused entries to be made in the College stock registers, and procured payment despite the equipment allegedly already being in her possession

It was further alleged that Sunil Malik, a Director of M/s Sun Broadcast Equipments Pvt. Ltd., in conspiracy with other accused, issued or facilitated false invoices and received Rs. 5,24,060/- in a bank account maintained in the name of the said entity

Sunil Malik contended that the company, and not he individually, had undertaken the transaction and received the payment, and that the company had not been arraigned as an accused

Both petitioners also relied on the CFSL report and alleged defects in the seizure and custody of the iMac computer

The High Court found that the investigation had failed to establish whether the relevant bank account belonged to the private limited company or to Sunil Malik in his individual capacity

Whether Sunil Malik could be proceeded against for the alleged transaction without first determining whether the relevant bank account and transaction belonged to M/s Sun Broadcast Equipments Pvt. Ltd. or to him individually, and whether the company was required to be arraigned as an accused if it was the account-holder and beneficiary?

Whether the material collected by the prosecution disclosed a prima facie case against Dr. Hemla Aggarwal and Sunil Malik so as to justify framing of charges?

Whether the High Court should order further investigation under its inherent jurisdiction to determine the true status of the bank account?

The Court applied Sections 5(1)(d) and 5(2) of the Prevention of Corruption Act, Svt. 2006, and Sections 409, 468, 471 and 120-B RPC, concerning criminal misconduct, criminal breach of trust, forgery, use of forged documents and criminal conspiracy

At the stage of framing charges, the Court applied the principle that it is not required to conduct a meticulous appreciation of evidence, but must determine whether the prosecution material raises a strong or prima facie suspicion, relying on State of Bihar v. Ramesh Singh, Union of India v. Prafulla Kumar Samal and Sajjan Kumar v. CBI

Under Sunil Bharti Mittal v. CBI, an individual may be prosecuted for an offence committed on behalf of a company where there is material showing his active role coupled with criminal intent; ordinarily, criminal liability is not imposed merely by virtue of office or directorship unless the statute provides for vicarious liability

The Court further applied the principles in H.N. Rishbud v. State (Delhi Administration), Vinubhai Haribhai Malaviya v. State of Gujarat and Devendra Nath Singh v. State of Bihar, recognising the power of the Court to direct further investigation under Section 173(8) CrPC and, in exceptional circumstances, under its inherent jurisdiction under Section 482 CrPC, corresponding to Section 528 CrPC in the applicable procedural framework, to secure a fair investigation and prevent innocent persons from being tried

The Court held that the allegations against Dr. Hemla Aggarwal were sufficient to disclose a prima facie case. The CFSL material allegedly showed that Windows XP and Adobe software were installed on the computer on 8 February 2009, bearing the user identification “GCW Gandhi Nagar”, although the relevant software invoices were dated July 2009. This circumstance, together with the alleged manipulation of stock entries, procurement of technical certification and processing of payment, supported the prosecution case at the charge stage

The Court rejected the petitioners’ reliance on alleged tampering and the asserted genuineness of the software, holding that those matters involved appreciation of evidence and could be examined at trial

However, the Court found a fundamental investigative defect concerning Sunil Malik. The prosecution alternately described M/s Sun Broadcast Equipments Pvt. Ltd. as a company and as Malik’s proprietary concern, despite the use of “Pvt. Ltd.” and the statement that Malik and his wife were the company’s directors

Since the prosecution had not verified the legal status of the bank account into which the payment was credited, it was premature to determine whether the transaction was attributable to Malik personally or to the separate corporate entity. If the account belonged to the company, the company’s own role and arraignment would require consideration in light of the rule against imposing criminal liability on a director merely because of his position

The Court therefore directed limited further investigation rather than quashing the charges.

It directed the Investigating Officer to conduct further investigation to ascertain whether Account No. 0206020100000074 with J&K Bank, Rajinder Palace Branch, Delhi, belonged to M/s Sun Broadcast Equipments Pvt. Ltd. or to Sunil Malik individually

If the account was found to belong to the company, the Investigating Officer was directed to proceed in accordance with law; if it belonged to Malik personally, the trial was to proceed against him in accordance with law

Proceedings before the trial court were stayed until completion of the further investigation, which was to be concluded preferably within three months from receipt of the judgment, subject to any extension being sought from the trial court.