Satinder Singh Bhasin And Another vs. State Of U.P. And Another

Held

The Court held that the applicants' argument that the dispute is purely civil in nature does not persuade it at this stage. Citing the Supreme Court in P. Swaroopa Rani vs. M. Hari Narayana Alias Hari Babu, the Court stated that civil and criminal proceedings can proceed simultaneously, and the presence of a civil dispute does not bar criminal prosecution if allegations of fraud, cheating, or dishonest intention are made out. The Court found that the allegations prima facie disclose inducement of a large number of persons and alleged misappropriation of funds, which cannot be brushed aside as a mere breach of contract. Regarding vicarious liability, the Court clarified that where material on record discloses prima facie involvement, the matter must proceed to trial, and whether the applicants had an active role or mens rea requires evidence and cannot be conclusively determined at this stage. The Court also noted significant circumstances against the applicants, including the cancellation of their bail by the Supreme Court due to non-compliance with bail conditions and the concealment of the charge-sheet submission while obtaining interim protection. Furthermore, the Court emphasized that the parent FIR, being central to all clubbed proceedings as directed by the Supreme Court, cannot be interfered with prematurely as it would have a cascading effect on all connected FIRs, potentially disrupting the course of trial and prejudicing the rights of numerous victims. Therefore, the Court found no good ground to exercise its inherent jurisdiction under Section 482 Cr.P.C. to quash the impugned proceedings.

Facts

The applicants, Satinder Singh Bhasin and another, sought to quash criminal proceedings initiated by FIR No. 353 of 2015, registered under Sections 406 and 420 IPC. This FIR, along with 41 others in Uttar Pradesh and 5 in New Delhi, alleged large-scale misappropriation of funds and cheating related to the 'Grand Venice' project. The Supreme Court, on May 12, 2022, directed clubbing of all 46 FIRs, with FIR No. 353 of 2015 designated as the parent FIR, and ordered a composite charge-sheet. A charge-sheet was filed on December 23, 2019, followed by a supplementary charge-sheet on April 10, 2025. The applicants argued the dispute was civil, lacked essential criminal ingredients, and that vicarious liability could not be fastened without the company being arraigned. They also contended the proceedings were vitiated as the Magistrate directed further investigation without formally accepting the final report or treating the protest petition as a complaint. Civil and insolvency proceedings were also pending.

Key Issues

1. Whether the criminal proceedings under Sections 406 and 420 IPC are maintainable given that the dispute arises from a commercial transaction and the applicants contend there was no entrustment or dishonest intention from inception? (Section 406, Section 420 IPC). The applicants argued that the dispute is essentially civil, lacking the necessary ingredients for criminal offences like entrustment and dishonest intention. They also contended that the project is ready and allotments have been made. The revenue argued that the allegations prima facie disclose inducement of numerous buyers and misappropriation of funds, which cannot be dismissed as a mere breach of contract. They also pointed to a fabricated allotment letter mentioning GST before its implementation as evidence of dishonest intent. 2. Whether vicarious criminal liability can be fastened upon directors or office bearers of a company in the absence of the company being arraigned as an accused and without specific allegations of their active role? (Sections 406, 420 IPC). The applicants argued that the company must be an accused for vicarious liability to attach to its directors and that mere holding a position is insufficient without clear averments of personal involvement. The revenue contended that the material collected during investigation clearly discloses a prima facie case against the applicants. 3. Whether the proceedings are vitiated due to the Magistrate's direction for further investigation without a formal order on the final report or protest petition? (Section 482 Cr.P.C.). The applicants argued that the direction for a supplementary charge-sheet was without jurisdiction. The revenue argued that the Supreme Court's order to club FIRs and file a composite charge-sheet validates the ongoing proceedings.