Sanchayita Lahkar

In a recent judgment, Calcutta High Court Single Bench of  Justice Rai Chattopadhyay, quashed criminal proceedings against the petitioners, who are executives of Audi India, in a case alleging cheating and dishonest inducement in the sale of a luxury vehicle. The petitioners had sought the quashing of proceedings in Case No. C/00062851/2016, pending before the Metropolitan Magistrate, 12th Court at Kolkata, arguing that the allegations failed to disclose a cognizable offence and that the company itself had not been named as an accused in the case.

The dispute arose from the purchase of an Audi Q5 PI 2.0 TDI Navigation model by the complainant company, Patton International Limited. According to the complaint, on June 16, 2014, the accused persons issued a proforma invoice indicating the on-road price of the vehicle as Rs. 53,66,522/-. A sales contract followed on June 18, 2014. Subsequently, the complainant company issued a cheque of Rs. 3,00,000/- as an advance payment on June 17, 2014, and made a balance payment of Rs. 50,66,520/- on August 11, 2014. The vehicle was delivered to the complainant on August 18, 2014, and registered in its name with a manufacturer’s warranty of two years.

Within the warranty period, the vehicle was serviced at an authorized Audi workshop on June 29, 2015, with a servicing charge of Rs. 25,041.71/- being paid. However, on November 29, 2015, while being driven at a permissible speed en route to Balasore, Odisha, the vehicle allegedly suffered a brake failure while carrying the complainant’s chairman, Mr. H.P. Budhia, and two other industrialists. The complainant claimed that the incident could have resulted in a serious accident but was averted as the driver managed to bring the vehicle to a gradual stop after one kilometre.

Following the incident, the complainant reported the issue to Audi’s Roadside Assistance Service on November 30, 2015. A service report from the authorized workshop indicated: "Vehicle Brakes were not working at the speed of 100 km" and recommended checking the brake system. The complainant subsequently requested a return of the vehicle and a refund of the purchase price, citing safety concerns, but no resolution was provided by the accused parties.

The complainant alleged that the vehicle was falsely advertised as having superior safety features, which were not present, thereby inducing them to purchase a defective car under false pretences. The complaint was filed under Sections 34, 120B, 418, and 420 of the Indian Penal Code, 1860, accusing the petitioners of dishonest inducement and fraud.

The petitioners contended that they were corporate officers of Audi India and had no direct involvement in the sale or transaction. They argued that criminal liability could not be imposed on them in the absence of specific allegations and cited Supreme Court precedents, including Sunil Bharti Mittal v. CBI (2015) and S.K. Alagh v. State of Uttar Pradesh (2008), to assert that vicarious liability could not be attributed to corporate officers without direct involvement in the alleged offence.

The court examined the allegations, statutory provisions, and precedents cited. It analysed the applicability of Sections 418 and 420 IPC, which deal with cheating and dishonestly inducing delivery of property. The court referred to the definition of cheating under Section 415 IPC:

"Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation, or property, is said to 'cheat'."

The court stted the principle that criminal liability does not automatically extend to corporate officers unless there is a clear and specific averment of their personal involvement. It noted:

"An individual can be held to be an offender along with the company only when his active role, coupled with criminal intent, is on record and the statute provides for the application of vicarious liability."

Furthermore, it observed:

"The petitioners have been made accused as portfolio holders of their respective companies without impleading the company as an accused. This omission turns the allegations against the petitioners nugatory."

The court also examined the complainant’s claim that the vehicle's brake failure was evidence of fraud and deception. It noted that the complainant had used the vehicle for over a year without reporting any defects. At the time of the first servicing on June 29, 2015, there was no record of brake system issues. The sudden failure on November 29, 2015, did not, in itself, substantiate allegations of fraud or deception.

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Citing Sharad Kumar Sanghi v. Sangita Rane (2015), the court stated that a complaint must contain specific allegations establishing direct involvement of accused individuals in the commission of the offence. The absence of such allegations rendered the complaint legally unsustainable.

The court further noted that the complainant had sought criminal proceedings without impleading the company itself, contrary to the principles established in Sunil Bharti Mittal (2015). It recorded:

"The lineage of allegations does not constitute a cognizable offence under Sections 418 or 420 IPC. The absence of the company as an accused, coupled with the lack of direct allegations against the petitioners, renders the complaint unsustainable."

The High Court exercised its inherent jurisdiction under Section 482 of the Criminal Procedure Code, 1973, to quash the criminal proceedings, stating:

"Further proceedings against the petitioners, pursuant to the instant complaint, would amount to gross abuse of the process of the Court. The complaint and all orders passed therein are hereby quashed."

Advocates Representing the Parties

For the Petitioners: Mr. Sandipan Ganguly, Senior Advocate, Mr. Somopriyo Chowdhury, Mr. Pratik Shanu

For the Opposite Party: Mr. Satadru Lahiri, Mr. Vinay Joshi

Case Title: Joe King, Head, Audi India & Anr. v. Patton International Limited
Case Number: C.R.R. 2320 of 2016
Bench: Justice Rai Chattopadhyay

[Read/Download order]