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Code of Criminal Procedure, 1973 – s.482 – Corporate liability for criminal offences – Criminal complaint against company alleging offence of cheating – Magistrate issued process – Petition under s.482 CrPC r/w Article 227 of the Constitution allowed by High Court – Justification of – Held: Not justified – A company/corporation cannot escape liability for a criminal offence, merely because the punishment prescribed is that of imprisonment and fine – The conclusion reached by the High Court that respondent no.1- company could not have the necessary mens rea is clearly erroneous – The complainants were entitled to an opportunity to prove the averments made in the complaint – It was not appropriate for the High Court to exercise its jurisdiction under s.482 CrPC to quash the proceedings at the stage when the Magistrate had merely issued process against the respondents – The High Court ought to have refrained from indulging in detailed analysis of very complicated commercial documents and reaching any definite conclusions – The High Court clearly exceeded its jurisdiction in quashing the criminal proceedings in the peculiar facts and circumstances of the case – Penal Code, 1860 – ss. 415, 420 r/w 120B – Constitution of India, 1950 – Article 227. Criminal Law – Mens rea – Prosecution of corporations – Held: A corporation will be liable for crimes of intent. Penal Code, 1860 – s.415, Explanation – Ingredients of cheating – Held: Misleading statements which withhold vital facts for intentionally inducing a person to do or to omit to do something would amount to deception – In case, such a misleading statement wrongfully causes damage to the person deceived, it would amount to cheating. Respondent no.1 conceived a wireless communication system through a constellation of satellites in low orbit to provide digital service to mobile phones and other subscriber equipment globally. In 1992 a private placement memorandum (PPM) was floated to obtain funds/investment to finance the Project. Relying on the representations of respondent no.1, the appellant as well as banks and institutions collectively invested huge sums of money to purchase equity shares in the said project and in setting up a gateway. The project turned out to be commercially unviable, resulting in significant loss to the investors. Aggrieved, the appellant filed complaint against respondent no.1 before the Judicial Magistrate, First Class inter alia on the allegations of cheating. The Magistrate issued process against respondent no.1 under Section 420 read with Section 120B IPC. Respondent no.1 challenged the same before the High Court by way of a petition under Article 227 of the Constitution and under Section 482 of CrPC. The High Court allowed the petition and quashed the order issuing process passed by the Judicial Magistrate on the ground that a company or corporation does not have the mens rea for committing an offence of cheating under Section 415 of IPC. =Allowing the appeal, the Court HELD:1.1. There is much substance in the submission that virtually in all jurisdictions across the world governed by the rule of law, the companies and corporate houses can no longer claim immunity from criminal prosecution on the ground that they are incapable of possessing the necessary mens rea for the commission of criminal offences. The legal position in England and the United States has now crystallized to leave no manner of doubt that a corporation would be liable for crimes of intent. [Para 35] [628-C-D] 1.2. A corporation is virtually in the same position as any individual and may be convicted of common law as well as statutory offences including those requiring mens rea. The criminal liability of a corporation would arise when an offence is committed in relation to the business of the corporation by a person or body of persons in control of its affairs. In such circumstances, it would be necessary to ascertain that the degree and control of the person or body of persons is so intense that a corporation may be said to think and act through the person or the body of persons. The position of law on this issue in Canada is almost the same. Mens rea is attributed to corporations on the principle of `alter ego’ of the company. [Para 38] [633-A-C] 1.3. A company / corporation cannot escape liability for a criminal offence, merely because the punishment prescribed is that of imprisonment and fine. The conclusion reached by the High Court that the respondent could not have the necessary mens rea is clearly erroneous. [Para 40] [635- H; 636-A] 1.4. A bare perusal of section 415 IPC would show that it can be conveniently divided into two parts. The first part makes it necessary that the deception by the accused of the person deceived, must be fraudulent or dishonest. Such deception must induce the person deceived to: either (a) deliver property to any person; or (b) consent that any person shall retain any property. The second part also requires that the accused must by deception intentionally induce the person deceived either to do or omit to do anything which he would not do or omit, if he was not so deceived. Furthermore, such act or omission must cause or must be likely to cause damage or harm to that person in body, mind, reputation or property. Thus, it is evident that deception is a necessary ingredient for the offences of cheating under both parts of this section. The complainant, therefore, necessarily needs to prove that the inducement had been caused by the deception exercised by the accused. Such deception must necessarily produce the inducement to part with or deliver property, which the complainant would not have parted with or delivered, but for the inducement resulting from deception. The Explanation to the section would clearly indicate that there must be no dishonest concealment of facts. In other words, non- disclosure of relevant information would also be treated as a mis- representation of facts leading to deception. [Para 42] [636-F-H; 637-A-B] 1.5. It was necessary for the High Court to examine the averments in the complaint in terms of s.415 IPC. The High Court upon detailed examination of the 1992 PPM, the Stock Purchase Agreements and the 1995 PPM concluded that even if the averments made in the complaint are accepted on their face value, it would only disclose a civil dispute between the parties. According to the High Court, respondent no. 1 did not keep the investors in dark about the Iridium System and gave them all necessary information in respect of various aspects of the system. In coming to the aforesaid conclusion, the High Court observed that “a bare perusal of the complaint shows that there is no reference to the Stock Purchase Agreements of 1993 and 1994. In fact, these two important documents contain acknowledgments of the investors about their capability of evaluating the merits and risks of the purchase of the shares and their relying upon their own advisors.” The High Court, therefore, negated the submission that there has not been a complete and candid disclosure of the entire material which has resulted in the deception / inducement of the appellant to make huge investment in the Iridium. This conclusion reached by the High Court did not take notice of the Explanation to Section 415, which gives a statutory recognition to the legal principles established through various judicial pronouncements that misleading statements which withhold the vital facts for intentionally inducing a person to do or to omit to do something would amount to deception. Further, in case it is found that misleading statement has wrongfully caused damage to the person deceived it would amount to cheating. [Paras 42, 44] [637-C-D; 638-E-H; 639-A-B] 1.6. The appellants were entitled to an opportunity to prove the averments made in the complaint. They were entitled to establish that they have been deliberately induced into making huge investments on the basis of representations made by respondent no. 1 and its representatives, which representations subsequently turned out to be completely false and fraudulent. The appellants were entitled to an opportunity to establish that respondent no. 1 and its representatives were aware of the falsity of the representations at the time when they were made. The appellants have given elaborate details of the positive assertions made by respondent no. 1 which were allegedly false to its knowledge. It is also claimed by the appellants that respondent no. 1 and its representatives willfully concealed facts which were material and ought to have been disclosed, but were intentionally withheld so as to deceive the appellant into advancing and expending a sum of Rs. 500 Crores. Both the appellants and the respondents have much to say in support of their respective view points. Which of the views is ultimately to be accepted, could only be decided when the parties have had the opportunities to place the entire materials before the Court. The power to quash the proceedings at the initial stage have to be exercised sparingly with circumspection and in the rarest of the rare cases. The power is to be exercised ex debito justitiae. Such power can be exercised where a criminal proceeding is manifestly attended with malafide and have been instituted maliciously with ulterior motive. This inherent power ought not to be exercised to stifle a legitimate prosecution. [Para 44] [640-H; 641-A-E] 1.7. In the circumstances of the instant case, the High Court ought to have refrained from indulging in detailed analysis of very complicated commercial documents and reaching any definite conclusions. The High Court clearly exceeded its jurisdiction in quashing the criminal proceeding in the peculiar facts and circumstances of the case. The High Court noticed that while exercising jurisdiction under Section 482 CrPC “the complaint in its entirety will have to be examined on the basis of the allegations made therein. But the High Court has no authority or jurisdiction to go into the matter or examine its correctness. The allegations in the complaint will have to be accepted on the face of it and the truth or falsity cannot be entered into by the Court at this stage.” Having said so, the High Court proceeded to do exactly the opposite. The judgment of the High Court is set aside. [Para 45 and 46] [641-G-H; 642-A-C] Smt. Nagawwa v. Veeranna (1976) 3 SCC 736; Municipal Corporation of Delhi v. Ram Kishan Rohtagi (1983) 1 SCC 1; Dhanalakshmi v. R.Prasanna Kumar 1990 (Supp) SCC 686; State of Haryana v.. Bhajan Lal (1992) Supp. (1) SCC 335; Kalpnath Rai v. State (1997) 8 SCC 732; Asstt. Commr. v. Velliappa Textiles Ltd. (2003) 11 SCC 405; Standard Chartered Bank v. Directorate of Enforcement (2005) 4 SCC 405; Trisuns Chemical Industry v. Rajesh Agarwal (1999) 8 SCC 686; Madhavrao Jiwajirao Scindia and Others v. Sambhajirao Chandrojirao Angre and Others (1988) 1 SCC 692; State of Orissa v. Debendra Nath Padhi (2005) 1 SCC 568; M.N. Ojha and Others v. Alok Kumar Srivastav and Another (2009) 9 SCC 682; Kurukshetra University v. State of Haryana (1977) 4 SCC 451; Raj Kapoor and Others v. State (1980) 1 SCC 43; Janata Dal v. H.S. Chowdhary (1992) 4 SCC 305; State of Orissa v. Debendra Nath Padhi (2005) 1 SCC 568; Inder Mohan Goswami and Anr. v. State of Uttaranchal and Ors. (2007) 12 SCC 1; Indian Oil Corporation v. NEPC India Ltd. and Ors. (2006) 6 SCC 736; Divine Retreat Centre v. State of Kerala (2008) 3 SCC 542; Kalpanath Rai v. State (1997) 8 SCC 732; M.V. Javali v. Mahajan Borewell & Co. (1997) 8 SCC 72 and A.K. Khosla v. T.S. Venkatesan 1992 Crl. L.J. 1448 – referred to. The Directors & C., of the Central Railway Company of Venezuela v. Joseph Kisch 1867 English and Irish Appeals (Vol. II), 99; New Brunswick and Canada Railway Company v. Muggeridge (1860)1 Dr. & Sm. 381; Redgrave v. Hurd (1881) 20 Ch. D at p.13; Aarons Reefs Limited v. Twiss 1896 Appeal Cases 273; (House of Lords); New York Central & Hudson River Railroad Co. Vs. United States 53 L Ed 613; Director of Public Prosecutions v. Kent and Sussex Contractors Ltd. 1944 1 All ER 119; H.L.Bolton (Engg.) Co. Ltd. v. T.J.Graham & Sons 1956 3 All ER 624 and Tesco Supermarkets Ltd. v. Nattrass 1971 All ER 127 – referred to. Case Law Reference: (1976) 3 SCC 736 referred to Para 23 (1983) 1 SCC 1 referred to Para 23 1990 (Supp) SCC 686 referred to Para 23 (1992) Supp. (1) SCC 335 referred to Para 23 1867 English and Irish referred to Para 24 Appeals (Vol. II), 99 (1860)1 Dr. & Sm. 381 referred to Para 24 (1881) 20 Ch. D at p.13 referred to Para 24 1896 Appeal Cases 273 referred to Para 24 (1997) 8 SCC 732 referred to Para 26 (2003) 11 SCC 405 referred to Para 26 (2005) 4 SCC 405 referred to Para 26 (1999) 8 SCC 686 referred to Para 27 (1988) 1 SCC 692 referred to Para 29 (2005) 1 SCC 568 referred to Para 29 (2009) 9 SCC 682 referred to Para 29 (1977) 4 SCC 451 referred to Para 32 (1980) 1 SCC 43 referred to Para 32 (1992) 4 SCC 305 referred to Para 32 (2005) 1 SCC 568 referred to Para 32 (2007) 12 SCC 1 referred to Para 32 (2006) 6 SCC 736 referred to Para 32 2008) 3 SCC 542 referred to Para 32 (1997) 8 SCC 732 referred to Para 33 (1997) 8 SCC 72 referred to Para 33 1992 Crl. L.J. 1448 referred to Para 34 53 L Ed 613 referred to Para 35 1944 1 All ER 119 referred to Para 36 1956 3 All ER 624 referred to Para 36 1971 All ER 127 referred to Para 37 CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 688 of 2005. From the Judgment & Order dated 08.08.2003 of the High Court of Bombay in Writ Petition No. 465 of 2002. Ram Jethmalani, Mahesh Jethmalani, Gaurav Shah, Venkatesh Dhoud, Pranav Badheka, Mahesh Agarwal, Radhika Gautam (for E.C. Agrawala) for the Appellant. Parag Tripathi, ASG, Ashok H. Desai, Amit Desai, Jai Munim, Banoo J. Kapadia, Mohit D. Ram, Poli Katarki, Meenaksi Arora, Kunal Bahri, Sadhana Sandhu, S.N. Terdal, Subhash Kaushik, Sushma Suri, Shankar Chillarge, Chinmoy A. Khaladkar, Sanjay Kharde, Asha Gopalan Nair for the Respondents.

REPORTABLE
An Iridium satellite

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 IN THE SUPREME COURT OF INDIA
 CRIMINAL APPELLATE JURISIDCITION

 CRIMINAL APPEAL NO.688 OF 2005

IRIDIUM INDIA TELECOM LTD. ... APPELLANT

VERSUS

MOTOROLA INCORPORATED & ORS. ... RESPONDENTS

 JUDGMENT

SURINDER SINGH NIJJAR, J.

1. The original complainant Iridium India Telecom Ltd.

(hereinafter referred to as the appellant) has preferred this appeal

against the judgment and order dated 8th August, 2003, passed by

a learned single judge of the Bombay High Court quashing the

criminal complaint dated 3rd October, 2001 filed by the appellant,

inter alia, against respondent no.1, namely, Motorola Incorporated.

2. The complaint pertained to allegations of cheating under

Section 420 read with Section 120B of the Indian Penal Code.

Although the complaint spread over thirty five pages elaborately

sets out the factual scenario, we may notice the foundational facts.

3. Motorola Inc (respondent no. 1), Iridium LLC and Iridium Inc.

are a part of one group of corporations created through mergers

and takeovers. Respondent no. 1 was the founder promoter of a

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corporation known as Iridium LLC incorporated in the State of

Delaware, U.S.A; Iridium LLC was incorporated on 19th July, 1996

as a wholly owned subsidiary of respondent no. 1. Iridium LLC was

the successor of another corporation known as Iridium Inc. which

was incorporated on 14th July, 1991 also a wholly owned subsidiary

of respondent no.1. On or about, 19th July, 1996 Iridium Inc was

merged into Iridium LLC.

4. Iridium System/Iridium Project (which expressions are used

inter-changeably) was represented as being the world's first

commercial system designed to provide global digital hand held

telephone data, facsimile, paging, geo-location services similar to

today's cellular phone. It was further averred that Iridium System

was conceived by respondent no. 1 in the year 1987 and it was

intended to be a wireless communication system through a

constellation of 66 satellites in low orbit to provide digital service to

mobile phones and other subscriber equipment globally.

5. It was emphasized that Iridium Inc. was an instrumentality of

respondent no. 1; the corporate veil from behind which respondent

no. 1 operated. Respondent no.1 conceived, orchestrated, directed

and controlled Iridium and was at all material times Iridium's

dominant shareholder, supplier, financier, controller of its board,

as well as the developer of Iridium's business model and the creator

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of the Iridium system, which was respondent no.1's proprietary

space based Satellite Communication system. Respondent no.1

also designed, developed, sold, maintained and operated the

hardware and software of the Iridium System/Project. It was

further alleged in the complaint that respondent no.1 initially held

the entire equity in Iridium. Although the equity of respondent no.1

was subsequently diluted by sale to various investors and

shareholders through a series of private/public offerings,

respondent no.1 continued to hold, own and control a substantial

part (about 19.6%) of the equity of Iridium. From the inception

respondent no.1 exercised effective control over the Board of

Directors of Iridium. It was further alleged that most of the persons

on the board of Iridium were either former employees or current

employees of respondent no.1 who were deputed or seconded to

Iridium.

6. It was further alleged that respondent no.1 was the primary

contractor for Iridium system/project. As already stated above, this

comprised of five segments. These five segments were supplied,

sold, maintained and operated by three contracts viz. (i) the space

system contract; (ii) the operation and maintenance contract and

(iii) the terrestrial Network Development Contract. Each of these

contracts was awarded by Iridium Inc. to respondent no.1. The said

 3
contracts were intentionally structured to ensure that although

Iridium paid all the development costs, respondent no.1 would still

own the most valuable assets of the Iridium system. It was also

alleged that respondent no.1 provided itself with excessive profits

while saddling Iridium with exorbitant costs. Substantially, all the

initial capital raised by Iridium (form persons which included

Iridium India Telecom Ltd) was used to make payments to

respondent no.1. In all a sum of Rs. 19500 crores (6.5 billion U.S $)

has been paid till date by Iridium to respondent no.1 for the

Iridium system.

7. It was further mentioned in the Complaint that in August

1992, a PPM was floated through merchant bankers, Goldman

Sachs (who acted as placement agents) with the intention of

attracting investments from large and successful companies' world

wide. Copies of PPM were distributed to and received by several

prominent Indian companies, both in the public and private sector.

Prominent amongst these were:

 [a] Infrastructure Leasing and Financial Services Ltd.

 (IL&FS)

 [b] Industrial Development Bank of India (IDBI)

 [c] Industrial Credit and Investments Corporation of India

 (ICICI)

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 [d] State Bank of India (SBI)

 [e] Export Import Bank of India (EXIMP Bank)

 [f] Housing Development Finance Corporation Ltd. (HDFC)

 [g] Unit Trust of India (UTI)

 [h] General Insurance Corporation of India (GIC)

 [i] Life Insurance Corporation of India (LIC)

8. The object of the said PPM was to obtain funds/ investments

to finance the "Iridium project". The PPM set out in detail the

salient features of the Iridium project, its technical suitability,

commercial feasibility, risk factors. Thus it was claimed that the

said document was in the nature of a prospectus. It contained a

positive invitation to offer. The next equity offering was made under

the Private Placement Memorandum in 1995 [1995 PPM] wherein

the original representations and/or warranties and/or assurances

were substantially watered down and for the first time references

were made to the fact that the system may not successfully

operate.

9. It was also mentioned in the Complaint that certain personal

representations were made by the representatives of respondent

no.1 to further induce the persons to invest in Iridium. In the

course of these presentations and meetings, promotional video

 5
cassettes which depicted the progress of the project, the successful

attainment of various project milestones well within schedule and

how the said project would actually function when fully

operational, were displayed. The representations made by

respondent no. 1 are as under:

 (a) The Iridium System would use technology which was
 tried and tested and had been successfully applied in a
 number of operational systems including systems used
 by NASA and the U.S Department of Defence. In other
 words the technology that would be employed in the
 Iridium System, was not untested or experimental, but
 was a proven and tested technology with a past record
 of successful operation.
 (b) The Iridium System would provide a subscriber link on
 a global basis, which would be accessible virtually
 anywhere on the earth surface, save and except cases
 where severe or unusual conditions prevented the
 reception of signals. In normal operating day-to day real
 life environment, the Iridium System would, therefore
 offer a high quality link. In particular Iridium phones
 would work in automobiles and buildings which were
 the most common place where the professional traveler
 who would represent the bulk of Iridium customers,
 would use the same. Global coverage and accessibility
 was therefore assured.
 (c) Subscribers would be able to access the Iridium System
 through compact, hand held small sized phones which
 were comparable in size and weight to cellular phones.
 (d) The Iridium System would provide a high quality signal
 and offer (i) voice (ii) data (iii) fax and (iv) geo-location
 services. The System would provide a strong signal with
 sufficient link margin (i.e. a margin/allowance) in
 excess of the minimum technical requirement for
 desired voice quality.)
 (e) The Iridium System would be eminently viable and the
 investors in the Iridium project would expect to receive
 handsome financial gains.

 6
 (f) The Iridium System was a creation of respondent no. 1
 who was the world leader in cellular technology.
 Backing of respondent no. 1 ensured its success.
 (g) In addition to the benefits of investing in the equity of
 Iridium Inc. large investors would have the option to
 purchase the gateway, which would be an inter-
 connection point between the space based segment of
 the Iridium System and land/terrestrial network.
 Investment in gateway would be an extremely
 remunerative and profitable venture.

10. According to the appellant the aforesaid representations were

made to individual institutions and entities handling public money

so as to induce them to believe that Iridium was a company worth

participating and investing in by purchasing shares and operating

a gateway. The officers of respondent no.1 impressed upon the

prospective investors that Iridium Project venture was bound to

succeed.

11. Relying upon the aforesaid representations the appellant as

well as the banks and institutions mentioned hereinabove, in good

faith, collectively invested a sum of US $70 million for purchasing

equity of Iridium Inc as well as spent a sum of about Rs.150 crores

in setting up a gateway at Deghi in Pune. The complaint then

proceeds to state that the representations made by respondent no.1

proved to be false, dishonest, fraudulent and deceitful. It was

discovered that Iridium System was a complete failure and all the

material representations made, as aforesaid, were totally false,

 7
dishonest, fraudulent and deceitful, to the knowledge of respondent

and in particular respondent no.1.

12. It is specifically pleaded that the System proved to be a

complete non starter and technological failure as is evident from

the followings:

 [1] The phones did not work inside buildings or cars and
 even under trees. In real world operating environments,
 therefore, they were useless.
 [2] The Iridium phones were extremely bulky.
 [3] The quality of the Iridium signals, even in open areas
 with no obstruction, was extremely poor with frequent
 disconnections.
 [4] The promised data and fax features were not provided.
 [5] The system was inferior to competing cellular systems.
 [6] The system could operate with a single gateway.

13. It was also alleged that respondent no.1 had full knowledge

about the un-viability of the Iridium system. This can be best

gauged from the fact that the board of directors of respondent no.1

had in the early 1990's rejected a proposal that respondent no.1

itself fund the billions of dollars needed to develop the Iridium

system. Obviously, therefore, respondent no.1 had no qualms

about inducing others to invest their money.

14. It was further averred in the complaint that the entire

exercise of the respondent no. 1 besides generating money for itself,

was to experiment with others' money and at others' risk (including

the appellant). The Iridium System and Iridium was therefore used

 8
as a research and development tool in order to facilitate and assist

the respondent no. 1 to develop its expertise in building satellite

systems so that the said expertise could be marketed by it to

others. It was further alleged that market researchers who had

been commissioned by respondent no.1 had reported that Iridium's

target market, the professional business traveler would have little

interest in using the system. The research group characterized the

product as suitable only for oil rigs or the desert. It had been

pointed out that Iridium as then conceived may not address the

needs of many US based executives who traveled globally and/or

have offices in divergent or even in remote area. It was pointed out

that the system limitations of Iridium were too severe to sustain

interest.

15. The appellant company was further induced to part with a

sum of Rs. 126 crores for the gateway. The necessity for installation

of a gateway was a complete fraud. The respondent no.1 knew that

no gateway was necessary. The entire need for a gateway was

dishonestly created to get a license to operate the system in it. The

Collusy Group is now operating the System on a limited scale

through one single gateway, which further establishes the fact that

there was no need for more than one gateway.

 9
16. The appellants subsequently learnt that within nine months

of the huge investment made in Iridium, it applied for bankruptcy

protection under Chapter 11 of the U.S. Bankruptcy Code. Despite

best efforts, Iridium could not be revived and ultimately the much

touted Iridium System, for which US $ 6.5 billion had been paid to

respondent No.1, was sold for a paltry sum of US $ 25 million. This

represented 0.4% of the amount which was paid for by the

appellant and other investors. Consequently, the investment of the

appellants and its constituent shareholders of approximately

Rs.500 crores was wiped out and/or completely lost.

17. The appellants, therefore, addressed a notice dated 12th April,

2001, respondent No.1 calling upon them to make payment of a

sum of US $ 250 million, being the loss suffered by the appellant as

also seeking punitive damages. In the aforesaid notice, it was

clearly mentioned that in the event respondent No.1 failing to make

the payment, criminal prosecution would be instituted. The

respondent No.1 by its reply dated 2nd June, 2001 repudiated his

liability and instead made a claim of US $ 6,977,989 upon the

appellant. Left with no other alternative, the appellants filed a

criminal complaint alleging that respondent no.1 has committed an

offence of cheating as defined under Section 415 of the Indian

Penal Code. On the basis of the aforesaid allegations, the

 10
appellants have filed a complaint before the Judicial Magistrate, Ist

Class, Khadki Court, Pune charging that respondent No.1 are guilty

of the offence of criminal conspiracy for cheating the appellant and

for the offence of cheating committed pursuant to the conspiracy.

18. The entire material was placed before the Judicial Magistrate.

Upon consideration of the complaint and upon hearing the counsel

for the appellant, by an order dated 6th November, 2001 the

Judicial Magistrate Ist Class, Khadki Court, Pune issued process

against the respondent No.1 to 7 for offences under section 420

read with Section 120 IPC. The order reads as under :-

 "Read Complaint and verification. Perused
 documents. Heard the advocate Nimbalkar for the
 complainant. It reveals that complainant is a
 company of which the shares are held by public
 financial institutions, nationalized banks and
 public insurance companies i.e. IDDI, ICICI, SBI,
 UTI, GIC, LIC etc. The investments made by
 complainant company was raised out of public
 savings and funds of above noted public
 institutions. Therefore, it reveals that this case
 involves issues regarding public money. It is
 settled principle that at the stage of issuance of
 process prima facie case is to be considered. After
 giving anxious though to the averments in the
 complaint and the documents produced on record,
 it reveals that prima facie case is made out to
 issue process. Hence, issue process against
 Accused No.1 to 7 for the offence under Section
 420 r/w 120B of IPC."

19. Aggrieved by the aforesaid order, the respondents filed a

petition under Article 227 of the Constitution of India and under
 11
Section 482 Cr.P.C. seeking quashing of the order issuing process,

dated 6th November, 2001, passed by the Judicial Magistrate Ist

Class, Khadki Court, Pune. The grounds as culled out from the

petition can be summed up as under:-

 (i) The complaint lacked the basic and essential
 ingredients of the offence of cheating and conspiracy.
 (ii) At best the complaint had set out a civil dispute, subject
 to mandatory arbitration which the appellant herein
 (Iridium Telecom Pvt. Ltd.) was seeking to settle by
 adopting a cheaper coercive method.
 (iii) The complaint suppressed material facts which would
 have nullified the claim of the appellant based on the
 alleged misrepresentations.
 (iv) The Complaint does not even prima facie show that any
 of the representations made by the respondent no. 1
 herein (Motorola Inc/ petitioner before the High Court)
 were false nor is there any material to even prima facie
 establish any dishonest intention ab intio on their part
 while making the open offer investment in Iridium Inc.
 (v) The Court of JMFC, Pune did not have any territorial
 jurisdiction to entertain the complaint.
 (vi) The close association of respondent no. 1 with the
 Iridium project was fully disclosed to all the potential
 investors in the 1992 PPM prior to their investment. The
 1992 PPM also made it clear that each prospective
 investor should consult its own counsel and advisers
 and undertake such investigation as it deemed
 appropriate before investing in the shares of Iridium
 Inc.
 (vii) The risk factors were very prominently highlighted in the
 1992 PPM. The 1992 PPM made it clear that there were
 many risks in the investment. The entire project was
 unique being the first of its kind. The representations
 were made to very select strategic investors, who were
 experts in their own fields. The appellant had the
 backing of some of the prominent financial institutions
 of the country with the best of expertise in assessing the
 arrears of risk capital as well as with admitted technical
 advice, support and expertise of Videsh Sanchar Nigam
 Limited (VSNL).
 12
 (viii) It was stated that the service of summons was illegal,
 invalid and improper. It was further averred that filing
 of the petition under Section 482 should not be
 construed to be an admission of valid service.

20. The High Court granted ad interim relief staying the

proceeding of C.C. No. 81/2001 pending on the file of the learned

Magistrate, to the respondent no. 1 after the petition under Article

227 and Section 482 Cr.P.C was filed. The appellant had then filed

a Special Leave Petition (Crl.) No. 2093/2003 wherein this Court

observed as follows:

 "The order under challenge is an interlocutory order,
 therefore we are not inclined to interfere with the same.
 However, in the facts and circumstances of the case, we
 think it appropriate that the petition pending before the
 High Court should be disposed of as early as possible.
 Therefore, we request the High Court to dispose of the
 pending petition of the respondent by the end of July,
 2003 and while so deciding the High Court the High
 Court should also decide whether such decision of the
 High Court will bind those who have not approached the
 High Court challenging the summons issued by the
 Trial Court to them.

 With these observations this Special Leave Petition is
 disposed off."

21. The High Court by order dated 8th August, 2003 allowed the

petition and quashed the order issuing process passed by the

JMFC, Pune. Aggrieved by the said judgment, the appellant have

filed the present appeal before this Court.

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 22. We have heard Mr. Ram Jethmalani, learned senior counsel,

 for the appellant, Mr. Ashok Desai, learned senior counsel for the

 respondent no. 1 and Mr. Parag Tripathy for the Union of India at

 considerable length.

 23. The submissions made by Mr. Jethmalani although very

 elaborate, may be summed up as follows:-

 (i) The power to quash a criminal complaint that too at the
 stage of cognizance, is an extreme power, which must
 be exercised very sparingly and with abundant caution;
 that too in the rarest or rare cases.
 (ii) In exercise of its power under Section 482, the High
 Court has to consider the complaint as a whole, without
 examining merits of the allegations i.e. genuineness of
 the allegations is not to be examined at this stage.
 (iii) The complaint is not required to verbatim reproduce the
 legal ingredients of the offence. If the necessary factual
 foundation is laid in the complaint, proceedings should
 not be quashed.
 (iv) Quashing of a complaint is warranted only where the
 complaint is so bereft of even basic facts which are
 absolutely necessary for making out an offence; that it
 would be a miscarriage of justice to permit the
 proceedings to continue.
 (v) In support of the aforesaid submissions, Mr Jethmalani
 has relied on the following judgments of this Court:-
 Smt. Nagawwa Vs. Veeranna1, Municipal Corporation
 of Delhi Vs. Ram Kishan Rohtagi2, Dhanalakshmi Vs.
 R.Prasanna Kumar3, State of Haryana Vs. Bhajan
 Lal4

1
 [(1976) 3 SCC 736]
2
 [(1983) 1 SCC 1]
3
 [1990 (Supp) SCC 686]
4
 [(1992) Supp. (1) SCC 335]

 14
24. Mr. Jethmalani further submitted that the judgment of the

High Court is contrary to all known principles on the basis of which

an order issuing process can be quashed. He invited our attention

to the detailed pleadings in the complaint; the Stock Purchase

Agreements, Gateway Equipment Purchase Agreement and From

S-1 etc. According to Mr. Jethmalani, the documents were

subjected to meticulous analysis by the High Court at the instance

of the respondent. On a wholly erroneous interpretation of the

aforesaid documents, the High Court concluded that the allegations

made in the complaint even if they are taken on the face value,

disclosed only civil liability. The High Court was unnecessarily

influenced by the submission that the "Risk Factors" had been duly

pointed out to the prospective investors including the appellants.

These matters were to be examined by Court of competent

jurisdiction at the appropriate time. The allegations could be

proved or disproved on the basis of the evidence led by the parties.

The High Court, according to Mr. Jethmalani, failed to appreciate

that the 1992 PPM was in the nature of a deemed prospectus.

Therefore whilst issuing the aforesaid PPM, the promoter was

required to make a true and full disclosure of all the relevant facts.

This duty is imposed on the promoter under Section 3 and 64 of

the Companies Act, 1956. The statements made in the PPM as also

 15
 in the representations made to the high ranking officials of the

 prospective investors including the appellants, have been proved to

 be incorrect and misleading. According to Mr. Jethmalani, the legal

 position on this issue is quite clear and placed reliance on:- The

 Directors &c., of the Central Railway Company of Venezuela

 Vs. Joseph Kisch5, New Brunswick and Canada Railway

 Company Vs. Muggeridge6, Redgrave Vs. Hurd7, Aarons Reefs

 Limited Vs. Twiss8.

 25. According to Mr. Jethmalani dishonest intention of the

 respondent is evident from the fact that the proposal to invest in

 the Iridium system which was taken to the Board of Directors of

 the respondent Motorola, was not accepted. The market

 researchers commissioned by Motorola had in fact clearly stated

 that the professional business traveler would have little interest in

 the system. It had been characterized as suitable only for oil rigs

 or deserts. Mr. Jethmalani reiterated that the respondents

 deliberated painted a very rosy picture. They had promised a

 global link from any place on earth. The falsity of such tall claims

 is evident from the fact that the phone would not operate under a

 tree or in a building. It proved to be utterly useless. Mr.

5
 [1867 English and Irish Appeals (Vol. II), 99],
6
 [(1860)1 Dr. & Sm. 381]
7
 [(1881) 20 Ch. D at p.13]
8
 [1896 Appeal Cases 273 (House of Lords)]
 16
 Jethmalani then submitted that the value, which may be placed on

 the disclaimers relied upon by the respondent, could only be

 judged after a full fledged trial. At best, the disclaimers would be a

 defence. They would not be sufficient to absolve the respondents

 from criminal liability.

 26. It was then submitted by Mr. Jethmalani that the High Court

 committed a serious error of law in concluding that the respondent

 being a corporation was incapable of committing the offence of

 cheating. He emphasised that by now, it is settled in almost all

 jurisdictions of the world governed by the rule of law that

 companies can be prosecuted for certain criminal offences. The

 offences for which companies can be criminally prosecuted are not

 limited only to the specific provisions made in the Income Tax Act,

 The Essential Commodities Act, The Prevention of Food

 Adulteration Act.

 Mr. Jethmalani relied on Kalpnath Rai Vs. State9, Asstt. Commr.

 Vs. Velliappa Textiles Ltd10., and Standard Chartered Bank Vs.

 Directorate of Enforcement11. It was finally submitted by Mr.

 Jethmalani that the High Court has converted itself into the Court

 of a Judicial Magistrate and conducted an inquiry under Section

 202, 244 and 245.
9
 [(1997) 8 SCC 732]
10
 [(2003) 11 SCC 405]
11
 [(2005) 4 SCC 405]
 17
 27. Mr. Parag Tripathi, the learned Addl. Solicitor General

 submitted that the High Court was unnecessarily influenced by the

 fact that the service has not been duly affected on the respondent.

 This did not lead to the only conclusion that the defective service

 was a deliberate attempt to enable the appellants to adopt coercive

 process against the respondent. It is further submitted by Learned

 ASG that the High Court wrongly concluded that the highlighting of

 the risk factors would absolve the respondents of the criminal

 liability. According to the ASG, the mere existence of an arbitration

 clause, does not lead to the conclusion that there can be no

 criminal liability in such cases. In support of the submissions, the

 ASG relied on Trisuns Chemical Industry Vs. Rajesh Agarwal12, It

 is further submitted that the respondent company cannot hide

 behind the defence that the company is incapable of possessing the

 necessary mens rea for commission of the offence of cheating. In

 support of the submissions, he relied upon the following

 judgments:- Asstt. Commr. Vs. Velliappa Textiles Ltd13.,,

 Standard Chartered Bank Vs. Directorate of Enforcement14.

 28. We may now note the submission of Mr. Ashok Desai. The

 learned senior counsel at the very out set, submitted that even the

 basic facts have not been placed before this Court. According to
12
 [(1999) 8 SCC 686]
13
 Supra
14
 Supra
 18
him there were three things which have to be noted. Firstly, no

representation was made by Motorola as such. Secondly, Iridium

Inc was a company controlled by strategic investors. Thirdly,

representations were not of existing facts but future projections

wherein every possible warning was given. According to the

learned senior counsel, the most important aspect of the case are

that:-

 (i) We are dealing with a prospectus.

 (ii) We are dealing with technological development.

 Therefore, it can succeed or it can fail.

 (iii) Then again we are dealing with feasibility.

29. Mr. Desai submitted that the Iridium system was and is a

technological success. It is being used in global aerospace

programmes and defence departments of different countries. One

of its major customers is the Indian Defence Forces. Merely

because the satellite mobile system is not a commercial success is

not sufficient to establish that the respondent company had any

dishonest intention. Mobile phones seem to have overtaken the

entire market. Even the satellite phones and used when the mobile

phone service is not available. That is particularly so in remote and

inaccessible terrain. He then submitted that while seeking

 19
investments from strategic investors, the 1992 PPM contained all

the necessary information. The statements in the PPM related to

future projections. They were based on certain assumptions.

Merely because the expectations of the appellant were not realized,

it would not be sufficient to establish dishonest intention of the

respondents. The representations were made to strategic investors.

These were individuals, firms and entities, who were experts in

their field. They had been duly forewarned of the risk factors.

Therefore, the High Court rightly concluded that the complaint

even if it is accepted in toto, would not disclose the necessary

ingredients to establish criminal liability. Mr. Desai reiterated that

the risk factors had been prominently displayed at the

commencement of the PPM. In order to ensure that the investors

were well aware of the risks involved, they were invited to be guided

by the counsel or their own experts. Each investor had therefore

accepted and acknowledged that in making the investments, they

had relied only on the advice of their own experts. Mr. Desai then

submitted that the High Court correctly relied upon the documents

placed on record by the respondent. These were documents which

were required to be placed before the Magistrate by the appellants.

They were deliberately withheld to mislead the Magistrate into

issuing process. This according to him would amount to playing a

 20
fraud on court. He then submitted that in spite of the fact that the

respondent had not been duly served in order to avoid incalculable

damage to its image, reputation and business prospects. The

respondent was compelled to move to the High Court for nipping in

the bud a wholly frivolous and unjustified criminal prosecution.

The High Court was also justified in relying on the documents as

the appellants had relied on the reply to the notice before the

Magistrate. They had, however not placed on the record the notice,

and the accompanying documents. The High Court also correctly

stated the legal position with regard to the inability of a company to

possess the necessary mens rea for the commission of a criminal

offence. According to Mr. Desai, the facts pleaded would disclose

only civil liability at best. It is submitted by him that it was not

necessary for the High Court to permit the matter to proceed any

further. The High Court on a correct interpretation of the various

clauses of the 1992 PPM and the Stock Purchase Agreements of

1993 and 1994, concluded that it was a case of pure and simple

civil liability. It was further submitted that the High Court was

within its jurisdiction to look at all the documents including the

documents which were not on record. The power of the High Court

under Section 482 Cr.P.C is much wider than the revisional

jurisdiction of the High Court Cr.P.C under Section 401 Cr.P.C. In

 21
 support of the submissions, the learned counsel has relied on

 Madhavrao Jiwajirao Scindia and Others Vs. Sambhajirao

 Chandrojirao Angre and Others15 State of Orissa Vs. Debendra

 Nath Padhi16 and M.N. Ojha and Others Vs. Alok Kumar

 Srivastav and Another17.

 30. Mr. Desai also pointed out that the representations were not

 made in the year 1992 as the appellant was not incorporated till

 1994, therefore, it was impossible to have made any representation

 to the complainant. Even otherwise, the representations were

 accompanied by prominent risk factors. The representations

 related to future projections and expectations. This is patent from

 the fact that although the representations were made in the year

 1992-93, the system itself was not commissioned till 1998. The

 High Court, according to Mr. Desai, correctly relied on the risk

 factors. This is especially important since one Mr. S.H. Khan had

 been nominated by the appellant on the Board of Directors of the

 respondent. Apart from being a Director, he was a member of the

 Finance Committee and Related Party Contracts Committee of

 Iridium Inc. Therefore, the appellants were well aware of the risk

 factors.

15
 [(1988) 1 SCC 692]
16
 [(2005) 1 SCC 568]
17
 [(2009) 9 SCC 682]
 22
 31. We have considered the submissions made by the learned

 senior counsel. A bare perusal of the submissions would be

 sufficient to amply demonstrate that this cannot be said to be an

 `open and shut' case for either of the parties. There is much to be

 said on both sides. The entire scenario painted by both the sides is

 circumscribed by `ifs' and `buts'. A mere reading of the 1992 PPM

 would not be sufficient to conclude that the entire information has

 been given to the prospective investors. Similarly, merely because

 there may have been some gaps in the information provided in the

 PPM would not be sufficient to conclude that the respondents have

 made deliberate misrepresentations. In such circumstances, we

 have to examine whether it was appropriate for the High Court to

 exercise its jurisdiction under Section 482 Cr.P.C. to quash the

 proceedings at the stage when the Magistrate had merely issued

 process against the respondents.

 32. The contours within which the High Court would exercise its

 jurisdiction to quash the criminal proceeding has been dilated

 upon, and well defined by this Court in a catena of judgments. We

 may make a reference here only to a few representative cases.

 In the case of Smt. Nagawwa Vs. Veeranna18 considering the limits

 within which the Magistrate is required to conduct an inquiry

18
 Supra
 23
under Section 202 of the Cr.P.C., this Court observed that the

scope of such inquiry is (Para 4) "extremely limited - limited only to

the ascertainment of the truth or falsehood of the allegations made

in the complaint- (i) on the materials placed by the complainant

before the Court; (ii) for the limited purpose of finding out whether

a prima facie case for issue of process has been made out; and (iii)

for deciding the question purely from the point of view of the

complainant without at all adverting to any defence that the case

may have. In fact it is well settled that in proceedings under

Section 202, the accused has got absolutely no locus standi and is

not entitled to be heard on the question whether the process

should be issued against him or not". It has been further held

(Para 5) as follows:-

 "..........Once the Magistrate has exercised his discretion
 it is not for the High Court, or even this Court, to
 substitute its own discretion for that of the Magistrate
 or to examine the case on merits with a view to find out
 whether or not the allegations in the complaint, if
 proved, would ultimately end in conviction of the
 accused. These considerations, in our opinion, are
 totally foreign to the scope and ambit of an inquiry
 under Section 202 of the Code of Criminal Procedure
 which culminates into an order under Section 204 of
 the Code. Thus it may be safely held that in the
 following cases an order of the Magistrate issuing
 process against the accused can be quashed or set
 aside:
 (1) where the allegations made in the complaint or the
 statements of the witnesses recorded in support of the
 same taken at their face value make out absolutely no
 case against the accused or the complaint does not
 24
 disclose the essential ingredients of an offence which is
 alleged against the accused;
 (2) where the allegations made in the complaint are
 patently absurd and inherently improbable so that no
 prudent person can ever reach a conclusion that there
 is sufficient ground for proceeding against the accused;
 (3) where the discretion exercised by the Magistrate in
 issuing process is capricious and arbitrary having been
 based either on no evidence or on materials which are
 wholly irrelevant or inadmissible; and
 (4) where the complaint suffers from fundamental legal
 defects, such as, want of sanction, or absence of a
 complaint by legally competent authority and the like."

 The aforesaid examples are of course purely illustrative and provide

 sufficient guidelines to indicate the contingencies where the High

 Court can quash proceedings.

 This Court in the case of Kurukshetra University Vs. State of

 Haryana19, again stated the principle regarding the exercise of the

 inherent powers conferred by Section 482 Cr.P.C. Chandrachud J.

 speaking for the Bench observed as follows:

 "It ought to be realised that inherent powers do
 not confer an arbitrary jurisdiction on the High
 Court to act according to whim or caprice. That
 statutory power has to be exercised sparingly, with
 circumspection and in the rarest of rare cases."

 In Municipal Corporation of Delhi Vs. Ram Kishan Rohtagi20

 this Court reiterated the legal position with regard to the limits of

 the power under Section 482, as stated in the case of Raj Kapoor
19
 [(1977) 4 SCC 451]
20
 supra
 25
 and Others Vs. State21 wherein Krishna Iyer, J., observed as

 follows:-

 "Even so, a general principle pervades this branch of
 law when a specific provision is made : easy resort to
 inherent power is not right except under compelling
 circumstances. Not that there is absence of jurisdiction
 but that inherent power should not invade areas set
 apart for specific power under the same Code."

 This Court also reiterated the four propositions of law which were

 said to be illustrative in the case of Smt. Nagawwa Vs. Veeranna22.

 It was further held as follows:-

 "10. It is, therefore, manifestly clear that proceedings
 against an accused in the initial stages can be quashed
 only if on the face of the complaint or the papers
 accompanying the same, no offence is constituted. In
 other words, the test is that taking the allegations and
 the complaint as they are, without adding or
 subtracting anything, if no offence is made out then the
 High Court will be justified in quashing the proceedings
 in exercise of its powers under Section 482 of the
 present Code.

 The aforesaid proposition of law was again reiterated by this Court

 in the case of Madhavrao Jiwajirao Scindia and Others Vs.

 Sambhajirao Chandrojirao Angre and Others23in the following

 words:-

 "The legal position is well settled that when a
 prosecution at the initial stage is asked to be quashed,
 the test to be applied by the court is as to whether the
21
 [(1980) 1 SCC 43]
22
 supra
23
 supra
 26
 uncontroverted allegations as made prima facie
 establish the offence. It is also for the court to take into
 consideration any special features which appear in a
 particular case to consider whether it is expedient and
 in the interest of justice to permit a prosecution to
 continue. This is so on the basis that the court cannot
 be utilised for any oblique purpose and where in the
 opinion of the court chances of an ultimate conviction
 are bleak and, therefore, no useful purpose is likely to
 be served by allowing a criminal prosecution to
 continue, the court may while taking into consideration
 the special facts of a case also quash the proceeding
 even though it may be at a preliminary stage."

 The aforesaid ratio of law was further elaborately discussed in the

 case of State of Haryana Vs. Bhajan Lal24, wherein this court

 had formulated certain principles pertaining to the exercise of such

 power in the following words:-

 "102. In the backdrop of the interpretation of the
 various relevant provisions of the Code under Chapter
 XIV and of the principles of law enunciated by this
 Court in a series of decisions relating to the exercise of
 the extraordinary power under Article 226 or the
 inherent powers under Section 482 of the Code which
 we have extracted and reproduced above, we give the
 following categories of cases by way of illustration
 wherein such power could be exercised either to prevent
 abuse of the process of any court or otherwise to secure
 the ends of justice, though it may not be possible to lay
 down any precise, clearly defined and sufficiently
 channelised and inflexible guidelines or rigid formulae
 and to give an exhaustive list of myriad kinds of cases
 wherein such power should be exercised.
 (1) 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.
 (2) Where the allegations in the first information
 report and other materials, if any, accompanying
 the FIR do not disclose a cognizable offence,
 justifying an investigation by police officers under
24
 Supra
 27
 Section 156(1) of the Code except under an order
 of a Magistrate within the purview of Section
 155(2) of the Code.
(3) Where the uncontroverted allegations made in the
 FIR or 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 FIR do not constitute
 a 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 Section 155(2) of the Code.
(5) Where the allegations made in the FIR or
 complaint are so 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 engrafted in
 any of the 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,
 providing efficacious redress for the grievance of
 the aggrieved party.
(7) Where a criminal proceeding is manifestly
 attended with mala fide and/or where the
 proceeding is maliciously instituted with an
 ulterior motive for wreaking vengeance on the
 accused and with a view to spite him due to
 private and personal grudge.

103. We also give a note of caution to the effect that the
power of quashing a criminal proceeding should be
exercised very sparingly and with circumspection and
that too in the rarest of rare cases; that the court will
not be justified in embarking upon an enquiry as to the
reliability or genuineness or otherwise of the allegations
made in the FIR or the complaint and that the
extraordinary or inherent powers do not confer an
arbitrary jurisdiction on the court to act according to its
whim or caprice."

 28
 The aforesaid ratio of law was further reiterated in the case of

 Janata Dal Vs. H.S. Chowdhary25 in the following words:

 "132. The criminal courts are clothed with inherent power to
 make such orders as may be necessary for the ends of
 justice. Such power though unrestricted and undefined
 should not be capriciously or arbitrarily exercised, but
 should be exercised in appropriate cases, ex debito justitiae
 to do real and substantial justice for the administration of
 which alone the courts exist. The powers possessed by the
 High Court under Section 482 of the Code are very wide and
 the very plenitude of the power requires great caution in its
 exercise. Courts must be careful to see that its decision in
 exercise of this power is based on sound principles.

 134. This Court in Dr Raghubir Sharan Vs. State of Bihar
 had an occasion to examine the extent of inherent power of
 the High Court and its jurisdiction when to be exercised.
 Mudholkar, J. speaking for himself and Raghubar Dayal, J.
 after referring to a series of decisions of the Privy Council
 and of the various High Courts held thus:
 "... [E]very High Court as the highest court exercising
 criminal jurisdiction in a State has inherent power to make
 any order for the purpose of securing the ends of justice ....
 Being an extraordinary power it will, however, not be pressed
 in aid except for remedying a flagrant abuse by a
 subordinate court of its powers ...."

 137. This inherent power conferred by Section 482 of the
 Code should not be exercised to stifle a legitimate
 prosecution. The High Court being the highest court of a
 State should normally refrain from giving a premature
 decision in a case wherein the entire facts are extremely
 incomplete and hazy, more so when the evidence has not
 been collected and produced before the Court and the issues
 involved whether factual or legal are of great magnitude and
 cannot be seen in their true perspective without sufficient
 material. Of course, no hard and fast rule can be laid down
 in regard to the cases in which the High Court will exercise
 its extraordinary jurisdiction of quashing the proceedings at
 any stage......"

25
 [(1992) 4 SCC 305]
 29
 Adverting to the scope of the jurisdiction of the High Court under

 Section 482, this Court in the case of State of Orissa Vs.

 Debendra Nath Padhi26 again reiterated as follows:-

 "It is evident from the above that this Court was
 considering the rare and exceptional cases where the
 High Court may consider unimpeachable evidence while
 exercising jurisdiction for quashing under Section 482
 of the Code. In the present case, however, the question
 involved is not about the exercise of jurisdiction under
 Section 482 of the Code where along with the petition
 the accused may file unimpeachable evidence of sterling
 quality and on that basis seek quashing, but is about
 the right claimed by the accused to produce material at
 the stage of framing of charge."

 Again upon a very elaborate examination of the powers possessed

 by the High Court under Section 482 Cr.P.C., this Court in the case

 of Inder Mohan Goswami and Anr. Vs. State of Uttaranchal and

 Ors.27 very clearly observed that the aforesaid powers are very wide

 and the very plentitude of the power requires great caution in its

 exercise. The Court must be careful to see that its decision in

 exercise of this power is based on sound principles. It is clearly

 observed that the High Courts have been invested with inherent

 powers, both in civil and criminal matters, to achieve a salutary

 public purpose. A Court proceeding ought not to be permitted to

 degenerate into a weapon of harassment or persecution. At the

26
 [(2005) 1 SCC 568]
27
 [(2007) 12 SCC 1]
 30
 same time, it is also observed that the inherent power should not

 be exercised to stifle a legitimate prosecution. The High Court

 should normally refrain from giving a prima facie decision in a case

 where all the facts are incomplete and hazy, more so, when the

 evidence has not been collected and produced before the Court and

 the issues involved, whether factual or legal are of such magnitude

 that they cannot be seen in their true perspective without sufficient

 material. Reiterating the observations made by this Court in the

 case of Indian Oil Corporation Vs. NEPC India Ltd. and Ors28,

 the Court again cautioned about a growing tendency in business

 circles to convert purely civil disputes into criminal cases. The

 Court reiterated that any effort to settle civil disputes and claims,

 which do not involve any criminal offence, by applying pressure

 through criminal prosecution should be deprecated and

 discouraged.

 The limits within which the jurisdiction under Section 482 can be

 exercised was again precisely stated in the case of Divine Retreat

 Centre Vs. State of Kerala29, as follows:

 "In our view, there is nothing like unlimited arbitrary
 jurisdiction conferred on the High Court under Section
 482 of the Code. The power has to be exercised
 sparingly, carefully and with caution only where such
 exercise is justified by the tests laid down in the section

28
 [(2006) 6 SCC 736]
29
 [(2008) 3 SCC 542]
 31
 itself. It is well settled that Section 482 does not confer
 any new power on the High Court but only saves the
 inherent power which the Court possessed before the
 enactment of the Code. There are three circumstances
 under which the inherent jurisdiction may be exercised,
 namely, (i) to give effect to an order under the Code, ( ii)
 to prevent abuse of the process of court, and (iii) to
 otherwise secure the ends of justice."

 In the case of M.N. Ojha and Others Vs. Alok Kumar Srivastav

 and Another30, this Court was dealing with a situation where the

 SDJM had issued process mechanically and without any

 application of mind. Furthermore, the High Court had dismissed a

 petition for quashing the order of SDJM by a cryptic and non-

 speaking order. In such circumstances, this Court observed :-

 "25. Had the learned SDJM applied his mind to the
 facts and circumstances and sequence of events and as
 well as the documents filed by the complainant himself
 along with the complaint, surely he would have
 dismissed the complaint. He would have realised that
 the complaint was only a counterblast to the FIR lodged
 by the Bank against the complainant and others with
 regard to the same transaction.

 27. The case on hand is a classic illustration of non-
 application of mind by the learned Magistrate. The
 learned Magistrate did not scrutinise even the contents
 of the complaint, leave aside the material documents
 available on record. The learned Magistrate truly was a
 silent spectator at the time of recording of preliminary
 evidence before summoning the appellants.

 28. The High Court committed a manifest error in
 disposing of the petition filed by the appellants under
 Section 482 of the Code without even adverting to the

30
 supra
 32
 basic facts which were placed before it for its
 consideration.

 29. It is true that the Court in exercise of its jurisdiction
 under Section 482 of the Code of Criminal Procedure
 cannot go into the truth or otherwise of the allegations
 and appreciate the evidence if any available on record.
 Normally, the High Court would not intervene in the
 criminal proceedings at the preliminary stage/when the
 investigation/enquiry is pending.

 30. Interference by the High Court in exercise of its
 jurisdiction under Section 482 of the Code of Criminal
 Procedure can only be where a clear case for such
 interference is made out. Frequent and uncalled for
 interference even at the preliminary stage by the High
 Court may result in causing obstruction in progress of
 the inquiry in a criminal case which may not be in the
 public interest. But at the same time the High Court
 cannot refuse to exercise its jurisdiction if the interest of
 justice so required where the allegations made in the
 FIR or complaint are so absurd and inherently
 improbable on the basis of which no fair minded and
 informed observer can ever reach a just and proper
 conclusion as to the existence of sufficient grounds for
 proceeding. In such cases refusal to exercise the
 jurisdiction may equally result in injustice more
 particularly in cases where the complainant sets the
 criminal law in motion with a view to exert pressure and
 harass the persons arrayed as accused in the
 complaint."

33. Keeping in view the aforesaid principles, we may now examine

as to whether the High Court has adopted the correct approach

while exercising its inherent power under Section 482 Cr.P.C. The

High Court notices in extenso the facts as narrated above.

Thereafter the High Court notices the submissions made on behalf

of the parties. It was observed by the High Court that a

company/corporation will not have the mens rea for commission of
 33
 the offence under Section 415 IPC. The High Court relied on the

 observations made by this Court in the case of Kalpanath Rai Vs.

 State31 and distinguished the judgment in the case of M.V. Javali

 Vs. Mahajan Borewell & Co.32,. It is held that a company being a

 juridical person cannot have the intention to deceive, which is the

 necessary mens rea for the offence of cheating. According to the

 High court, although a company can be a victim of deception, it can

 not be the perpetrator of deception. It can only be a natural person

 who is capable of having mens rea to commit the offence.

 According to the High Court, the same reasoning would also apply

 in respect of the offence of conspiracy which involves a guilty mind

 to do an illegal thing.

 34. The judgments relied upon by the complainant are

 distinguished by the High Court, as they pertain to special

 provisions contained in different statutes such as, Income Tax Act,

 Essential Commodities Act, Food Adulteration Act and TADA Act.

 It is noticed that in Kalpanath Rai Vs. State33 this Court was

 concerned with the provisions of TADA Act. The High Court was

 further of the opinion that Indian Penal Code does not contain any

 provision similar to the aforesaid acts. Since the offence of

 cheating under Section 415 and the offence of conspiracy under
31
 [(1997) 8 SCC 732]
32
 [(1997) 8 SCC 72]
33
 Supra
 34
 Section 120B can only be committed by a natural person, the word

 "whoever" cannot include in its sweep, a juridical person like a

 company. The High Court notices the judgment of the Calcutta

 High Court in the case of A.K. Khosla Vs. T.S. Venkatesan34

 wherein it was held that there are two tests in respect of

 prosecution of a corporate body i.e. first being the test of mens era

 and the other being the mandatory sentence of imprisonment.

 However, no opinion has been expressed there upon by the High

 Court. In view of the aforesaid conclusions, the High Court has

 held that the complaint would not be maintainable against the

 respondent.

 35. We are of the considered opinion that there is much

 substance in the submission of Mr. Jethmalani that virtually in all

 jurisdictions across the world governed by the rule of law, the

 companies and corporate houses can no longer claim immunity

 from criminal prosecution on the ground that they are incapable of

 possessing the necessary mens rea for the commission of criminal

 offences. The legal position in England and the United States has

 now crystallized to leave no manner of doubt that a corporation

 would be liable for crimes of intent. In the year 1909, the United

34
 [1992 Crl. L.J. 1448]
 35
 States Supreme Court in New York Central & Hudson River Railroad

 Co. Vs. United States35, stated the principle thus:-

 "It is true that there are some crimes which, in their
 nature, cannot be committed by corporations. But there
 is a large class of offences, of which rebating under the
 federal statutes is one, wherein the crime consists in
 purposely doing the things prohibited by statute. In that
 class of crimes we see no good reason why corporations
 may not be held responsible for and charged with the
 knowledge and purposes of their agents, acting within
 the authority conferred upon them. If it were not so,
 many offences might go unpunished and acts be
 committed in violation of law where, as in the present
 case, the statute requires all persons, corporate or
 private, to refrain from certain practices, forbidden in
 the interest of public policy.
 * * *
 We see no valid objection in law, and every reason in
 public policy, why the corporation, which profits by the
 transaction, and can only act through its agents and
 officers, shall be held punishable by fine because of the
 knowledge and intent of its agents to whom it has
 entrusted authority to act in the subject-matter of
 making and fixing rates of transportation, and whose
 knowledge and purposes may well be attributed to the
 corporation for which the agents act. While the law
 should have regard to the rights of all, and to those of
 corporations no less than to those of individuals, it
 cannot shut its eyes to the fact that the great majority of
 business transactions in modern times are conducted
 through these bodies, and particularly that inter-State
 commerce is almost entirely in their hands, and to give
 them immunity from all punishment because of the old
 and exploded doctrine that a corporation cannot commit
 a crime would virtually take away the only means of
 effectually controlling the subject-matter and correcting
 the abuses aimed at."

 The aforesaid sentiment is reiterated in the 19 American

 Jurisprudence 2d para 1434 in the following words:-

35
 [53 L Ed 613]
 36
 "Lord Holt is reported to have said (Anonymous, 12 Mod
 559, 88 Eng Reprint 1164) that `a corporation is not
 indictable, but the particular members of it are'. On the
 strength of this statement it was said by the early
 writers that a corporation is not indictable at common
 law, and this view was taken by the courts in some of
 the earlier cases. The broad general rule is now well
 established, however, that a corporation may be
 criminally liable. This rule applies as well to acts of
 misfeasance as to those of nonfeasance, and it is
 immaterial that the Act constituting the offence was
 ultra vires. It has been held that a de facto corporation
 may be held criminally liable.
 As in case of torts the general rule prevails that a
 corporation may be criminally liable for the acts of an
 officer or agent, assumed to be done by him when
 exercising authorized powers, and without proof that his
 act was expressly authorized or approved by the
 corporation. A specific prohibition made by the
 corporation to its agents against violation of the law is
 no defence. The rule has been laid down, however, that
 corporations are liable, civilly or criminally, only for the
 acts of their agents who are authorized to act for them
 in the particular matter out of which the unlawful
 conduct with which they are charged grows or in the
 business to which it relates."

Again in 19 Corpus Juris Secundum, para 1363 it has been observed

as under:-

 "A corporation may be criminally liable for crimes which
 involve a specific element of intent as well for those
 which do not, and, although some crimes require such a
 personal, malicious intent, that a corporation is
 considered incapable of committing them, nevertheless,
 under the proper circumstances the criminal intent of
 its agent may be imputed to it so as to render it liable,
 the requisites of such imputation being essentially the
 same as those required to impute malice to corporations
 in civil actions."

 37
 36. The Courts in England have emphatically rejected the notion

 that a body corporate could not commit a criminal offence which

 was an outcome of an act of will needing a particular state of mind.

 The aforesaid notion has been rejected by adopting the doctrine of

 attribution and imputation. In other words, the criminal intent of

 the "alter ego" of the company / body corporate, i.e., the person or

 group of person that guide the business of the company, would be

 imputed to the corporation. It may be appropriate at this stage to

 notice the observations made by the MacNaghten, J. in the case of

 Director of Public Prosecutions Vs. Kent and Sussex

 Contractors Ltd.36:

 "A body corporate is a `person' to whom, amongst the
 various attributes it may have, there should be imputed
 the attribute of a mind capable of knowing and forming
 an intention -- indeed it is much too late in the day to
 suggest the contrary. It can only know or form an
 intention through its human agents, but circumstances
 may be such that the knowledge of the agent must be
 imputed to the body corporate. Counsel for the
 respondents says that, although a body corporate may
 be capable of having an intention, it is not capable of
 having a criminal intention. In this particular case the
 intention was the intention to deceive. If, as in this case,
 the responsible agent of a body corporate puts forward a
 document knowing it to be false and intending that it
 should deceive, I apprehend, according to the
 authorities that Viscount Caldecote, L.C.J., has cited,
 his knowledge and intention must be imputed to the
 body corporate."

36
 [1944 1 All ER 119]
 38
 The principle has been reiterated by Lord Denning in the case of

 H.L.Bolton (Engg.) Co. Ltd. Vs. T.J.Graham & Sons37 in the

 following words:-

 "A company may in many ways be likened to a human
 body. They have a brain and a nerve centre which
 controls what they do. They also have hands which hold
 the tools and act in accordance with directions from the
 centre. Some of the people in the company are mere
 servants and agents who are nothing more than hands
 to do the work and cannot be said to represent the mind
 or will. Others are directors and managers who
 represent the directing mind and will of the company,
 and control what they do. The state of mind of these
 managers is the state of mind of the company and is
 treated by the law as such. So you will find that in cases
 where the law requires personal fault as a condition of
 liability in tort, the fault of the manager will be the
 personal fault of the company. That is made clear in
 Lord Haldane's speech in Lennard's Carrying Co. Ltd.
 Vs. Asiatic Petroleum Co. Ltd. (AC at pp. 713, 714). So
 also in the criminal law, in cases where the law requires
 a guilty mind as a condition of a criminal offence, the
 guilty mind of the directors or the managers will render
 the company themselves guilty."

 37. The aforesaid principle has been firmly established in

 England since the decision of House of Lords in Tesco

 Supermarkets Ltd. Vs. Nattrass38. In stating the principle of

 corporate liability for criminal offences, Lord Reid made the

 following statement of law:-

 "I must start by considering the nature of the
 personality which by a fiction the law attributes to a
 corporation. A living person has a mind which can have
 knowledge or intention or be negligent and he has
 hands to carry out his intentions. A corporation has
37
 [1956 3 All ER 624]
38
 [1971 All ER 127].
 39
 none of these; it must act through living persons,
 though not always one or the same person. Then the
 person who acts is not speaking or acting for the
 company. He is acting as the company and his mind
 which directs his acts is the mind of the company.
 There is no question of the company being vicariously
 liable. He is not acting as a servant, representative,
 agent or delegate. He is an embodiment of the company
 or, one could say, he hears and speaks through the
 persona of the company, within his appropriate sphere,
 and his mind is the mind of the company. If it is guilty
 mind then that guilt is the guilt of the company. It must
 be a question of law whether, once the facts have been
 ascertained, a person in doing particular things is to be
 regarded as the company or merely as the company's
 servant or agent. In that case any liability of the
 company can only be a statutory or vicarious liability."

38. From the above it becomes evident that a corporation is

virtually in the same position as any individual and may be

convicted of common law as well as statutory offences including

those requiring mens rea. The criminal liability of a corporation

would arise when an offence is committed in relation to the

business of the corporation by a person or body of persons in

control of its affairs. In such circumstances, it would be necessary

to ascertain that the degree and control of the person or body of

persons is so intense that a corporation may be said to think and

act through the person or the body of persons. The position of law

on this issue in Canada is almost the same. Mens rea is attributed

to corporations on the principle of `alter ego' of the company.

39. So far as India is concerned, the legal position has been

clearly stated by the Constitution Bench judgment of this Court in
 40
 the case of Standard Chartered Bank Vs. Directorate of

 Enforcement39 On a detailed consideration of the entire body of

 case laws in this country as well as other jurisdictions, it has been

 observed as follows:

 "There is no dispute that a company is liable to be
 prosecuted and punished for criminal offences.
 Although there are earlier authorities to the effect that
 corporations cannot commit a crime, the generally
 accepted modern rule is that except for such crimes as
 a corporation is held incapable of committing by reason
 of the fact that they involve personal malicious intent, a
 corporation may be subject to indictment or other
 criminal process, although the criminal act is
 committed through its agents."

 This Court also rejected the submission that a company could

 avoid criminal prosecution in cases where custodial sentence is

 mandatory. Upon examination of the entire issue, it is observed as

 follows:-

 "27. In the case of Penal Code offences, for example
 under Section 420 of the Indian Penal Code, for
 cheating and dishonestly inducing delivery of property,
 the punishment prescribed is imprisonment of either
 description for a term which may extend to seven years
 and shall also be liable to fine; and for the offence under
 Section 417, that is, simple cheating, the punishment
 prescribed is imprisonment of either description for a
 term which may extend to one year or with fine or with
 both. If the appellants' plea is accepted then for the
 offence under Section 417 IPC, which is an offence of
 minor nature, a company could be prosecuted and
 punished with fine whereas for the offence under
 Section 420, which is an aggravated form of cheating by
 which the victim is dishonestly induced to deliver

39
 Supra
 41
property, the company cannot be prosecuted as there is
a mandatory sentence of imprisonment.

28. So also there are several other offences in the Indian
Penal Code which describe offences of serious nature
whereunder a corporate body also may be found guilty,
and the punishment prescribed is mandatory custodial
sentence. There are a series of other offences under
various statutes where the accused are also liable to be
punished with custodial sentence and fine.
30. As the company cannot be sentenced to
imprisonment, the court has to resort to punishment of
imposition of fine which is also a prescribed
punishment. As per the scheme of various enactments
and also the Indian Penal Code, mandatory custodial
sentence is prescribed for graver offences. If the
appellants' plea is accepted, no company or corporate
bodies could be prosecuted for the graver offences
whereas they could be prosecuted for minor offences as
the sentence prescribed therein is custodial sentence or
fine.
31. As the company cannot be sentenced to
imprisonment, the court cannot impose that
punishment, but when imprisonment and fine is the
prescribed punishment the court can impose the
punishment of fine which could be enforced against the
company. Such a discretion is to be read into the
section so far as the juristic person is concerned. Of
course, the court cannot exercise the same discretion as
regards a natural person. Then the court would not be
passing the sentence in accordance with law. As regards
company, the court can always impose a sentence of
fine and the sentence of imprisonment can be ignored
as it is impossible to be carried out in respect of a
company. This appears to be the intention of the
legislature and we find no difficulty in construing the
statute in such a way. We do not think that there is a
blanket immunity for any company from any
prosecution for serious offences merely because the
prosecution would ultimately entail a sentence of
mandatory imprisonment. The corporate bodies, such
as a firm or company undertake a series of activities
that affect the life, liberty and property of the citizens.
Large-scale financial irregularities are done by various
corporations. The corporate vehicle now occupies such a
large portion of the industrial, commercial and
sociological sectors that amenability of the corporation
to a criminal law is essential to have a peaceful society
with stable economy.
32. We hold that there is no immunity to the companies
from prosecution merely because the prosecution is in
 42
 respect of offences for which the punishment prescribed
 is mandatory imprisonment (sic and fine). We overrule
 the views expressed by the majority in Velliappa
 Textiles1 on this point and answer the reference
 accordingly. Various other contentions have been urged
 in all appeals, including this appeal, they be posted for
 hearing before an appropriate Bench."

40. These observations leave no manner of doubt that a

company / corporation cannot escape liability for a criminal

offence, merely because the punishment prescribed is that of

imprisonment and fine. We are of the considered opinion that in

view of the aforesaid Judgment of this Court, the conclusion

reached by the High Court that the respondent could not have the

necessary mens rea is clearly erroneous.

41. The next important question which needs to be examined is

 as to whether the averments made in the complaint if taken

 on their face value would not prima facie disclose the

 ingredients for the offence of cheating as defined under

 Section 415 IPC. The aforesaid section is as under:-

 "Cheating.- 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 deceive, 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".

 Explanation- A dishonest concealment of facts is a
 deception within the meaning of the section."
 43
42. A bare perusal of the aforesaid section would show that it can

be conveniently divided into two parts. The first part makes it

necessary that the deception by the accused of the person deceived,

must be fraudulent or dishonest. Such deception must induce the

person deceived to: either (a) deliver property to any person; or (b)

consent that any person shall retain any property. The second part

also requires that the accused must by deception intentionally

induce the person deceived either to do or omit to do anything

which he would not do or omit, if he was not so deceived.

Furthermore, such act or omission must cause or must be likely to

cause damage or harm to that person in body, mind, reputation or

property. Thus, it is evident that deception is a necessary

ingredient for the offences of cheating under both parts of this

section. The complainant, therefore, necessarily needs to prove

that the inducement had been caused by the deception exercised

by the accused. Such deception must necessarily produce the

inducement to part with or deliver property, which the complainant

would not have parted with or delivered, but for the inducement

resulting from deception. The explanation to the section would

clearly indicate that there must be no dishonest concealment of

facts. In other words, non-disclosure of relevant information would

 44
also be treated as a mis-representation of facts leading to

deception.

It was, therefore, necessary for the High Court to examine the

averments in the complaint in terms of the aforesaid section. The

High Court upon detailed examination of the 1992 PPM, the Stock

Purchase Agreements and the 1995 PPM concluded that even if the

averments made in the complaint are accepted on their face value,

it would only disclose a civil dispute between the parties.

43. Surprisingly, the High Court notices the representations that

were made and contrasted the same with the actual realities and

yet concluded that the averments made in the complaint even if

taken at their face value would not lead to the conclusion that the

respondent has committed the offence of cheating. In coming to

the aforesaid conclusions, the High Court has given elaborate

reasons. The High Court negated the submissions of the appellant

that 1992 PPM is in the nature of a prospectus or a brochure,

which requires that all technical information touching upon the

commercial feasibility of the project had to be faithfully and fully

disclosed. The submission is rejected with the observation that the

1992 PPM contained the following caution:-

 "An investment in Iridium involves certain risks, many
 of which relate to the factors and developments listed
 above, prospective investors should carefully consider
 the disclosures set forth elsewhere in this
 45
 memorandum, including those under the caption `risk
 factors'(1992 PPM Pg. 5)"

The High Court also accepted the submissions of the respondent

that the 1992 PPM contained a separate chapter titled "Risk

Factors". This portion related to the most important risk factors

which were as follows:-

 "New regulated Business Venture. The Company is a
 new business venture of global scope that will require
 substantial licensing and authorizations from numerous
 sovereign nations before its business can be conducted
 in the manner contemplated by its current business
 plan. Therefore in deciding whether to invest in Shares,
 prospective investors must evaluate among other things,
 the potential feasibility and future performance of the
 Company based on its business plan without benefit of
 any operating history, and prior to application for an
 receipt of such licensing and authorizations. No
 assurance can be given that any of the necessary
 licenses and authorizations will be obtained in a timely
 or at all. (1992 PPM Pg. 72)"

44. According to the High Court, the respondent no. 1 did not

keep the investors in dark about the Iridium System and gave them

all necessary information in respect of various aspects of the

system. In coming to the aforesaid conclusion, the High Court

observed that "a bare perusal of the complaint shows that there is

no reference to the Stock Purchase Agreements of 1993 and 1994.

In fact, these two important documents contain acknowledgments

of the investors about their capability of evaluating the merits and

 46
 risks of the purchase of the shares and their relying upon their own

 advisors." The High Court, therefore, negated the submission that

 there has not been a complete and candid disclosure of the entire

 material which has resulted in the deception / inducement of the

 appellant to make huge investment in the Iridium. This conclusion

 reached by the High Court did not take notice of the explanation to

 Section 415. The aforesaid explanation gives a statutory recognition

 to the legal principles established through various judicial

 pronouncements that misleading statements which withhold the

 vital facts for intentionally inducing a person to do or to omit to do

 something would amount to deception. Further, in case it is found

 that misleading statement has wrongfully caused damage to the

 person deceived it would amount to cheating. It would at this stage

 be appropriate to notice the observations made by the House of

 Lords in the case of The Director &c. of the Central Railway

 Company of Venezuela Vs. Joseph Kisch40 which would be of

 some relevance to the issue under consideration. In this case, the

 House of Lords examined the duty of those who issued a

 prospectus inviting investments from the general public and held

 that they were required to make a true and full disclosure of all the

 relevant facts. The House of Lords quoted with approval the

 observations made in the case of New Brunswick and Canada
40
 supra
 47
 Railway Company Vs. Muggeridge41 wherein it has been observed

 as follows :-

 ".........those who issue a prospectus holding out to the
 public the great advantages which will accrue to
 persons who will take shares in a proposed
 undertaking, and inviting them to take shares on the
 faith of the representations therein contained, are
 bound to state everything with strict and scrupulous
 accuracy, and not only to abstain from stating as fact
 that which is not so, but to omit no one fact within their
 knowledge the existence of which might in any degree
 affect the nature, or extent, or quality of the privileges
 and advantages which the prospectus holds out as
 inducements to take shares."

 The House of Lords went on to observe that it is no answer to a

 person who has been deceived that he would have known the

 truth by proper inquiry. It would be apposite to reproduce here

 the observations made by the House of Lords on this aspect of

 the matter:

 "But it appears to me that when once it is established
 that there has been any fraudulent misrepresentation or
 willful concealment by which a person has been induced
 to enter into a contract, it is no answer to his claim to
 be relieved from it to tell him that he might have known
 the truth by proper inquiry. He has a right to retort
 upon his objector, "You, at least, who have stated what
 is untrue or have concealed the truth, for the purpose of
 drawing me into a contract, cannot accuse me of want
 of caution because I relied implicitly upon your fairness
 and honesty". I quite agree with the opinion of Lord
 Lyndhurst, in the case of Small Vs. Attwood (1), that
 "where representations are made with respect to the
 nature and character of property which is to become the
 subject of purchase, affecting the value of that property,
 and those representations afterwards turn out to be
41
 Supra
 48
 incorrect and false, to the knowledge of the party
 making them, a foundation is laid for maintaining an
 action in a Court of common law to recover damages for
 the deceit so practiced; and in a Court of equity a
 foundation is laid for setting aside the contract which
 was founded upon that basis." And in the case of Dobell
 Vs. Stevens (2), to which he refers as an authority in
 support of the proposition, which was an action for
 deceit in falsely representing the amount of the
 business done in a public house, the purchaser was
 held to be entitled to recover damages, although the
 books were in the house, and he might have had access
 to them if he thought proper.
 Upon the whole case I think the decree of Lords Justices
 ought to be affirmed, and the appeal dismissed with
 costs."

The aforesaid observations leave no manner of doubt that the

appellants were entitled to an opportunity to prove the averments

made in the complaint. They were entitled to establish that they

have been deliberately induced into making huge investments on

the basis of representations made by respondent no. 1 and its

representatives, which representations subsequently turned out to

be completely false and fraudulent. The appellants were entitled to

an opportunity to establish that respondent no. 1 and its

representatives were aware of the falsity of the representations at

the time when they were made. The appellants have given

elaborate details of the positive assertions made by respondent no.

1 which were allegedly false to its knowledge. It is also claimed by

the appellants that the respondent no. 1 and its representatives

 49
willfully concealed facts which were material and ought to have

been disclosed, but were intentionally withheld so as to deceive the

appellant into advancing and expending a sum of Rs.500 Crores.

As noticed earlier, both the appellants and the respondents have

much to say in support of their respective view points. Which of

the views is ultimately to be accepted, could only be decided when

the parties have had the opportunities to place the entire materials

before the Court. This Court has repeatedly held that power to

quash proceedings at the initial stage have to be exercised

sparingly with circumspection and in the rarest of the rare cases.

The power is to be exercised ex debito justitiae. Such power can be

exercised where a criminal proceeding is manifestly attended with

malafide and have been instituted maliciously with ulterior motive.

This inherent power ought not to be exercised to stifle a legitimate

prosecution. In the present case, the parties are yet to place on the

record the entire material in support of their claims. The issues

involved are of considerable importance to the parties in particular,

and the world of trade and commerce in general.

45. In such circumstances, in our opinion, the High Court ought

to have refrained from indulging in detailed analysis of very

complicated commercial documents and reaching any definite

conclusions. In our opinion, the High Court clearly exceeded its

 50
jurisdiction in quashing the criminal proceeding in the peculiar

facts and circumstances of this case. The High Court noticed that

while exercising jurisdiction under Section 482 Cr.P.C. "the

complaint in its entirety will have to be examined on the

basis of the allegations made therein. But the High Court has

no authority or jurisdiction to go into the matter or examine

its correctness. The allegations in the complaint will have to

be accepted on the face of it and the truth or falsity cannot

be entered into by the Court at this stage." Having said so, the

High Court proceeded to do exactly the opposite.

46. We, therefore, allow the appeal and set aside the impugned

judgment of the Bombay High Court. There shall be no order as to

costs.

 ...........................................J.
 [B. Sudershan Reddy]

 ............................................J.
 [Surinder Singh Nijjar]
New Delhi;
October 20, 2010. 51

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