1. This Criminal Petition is filed under Section 482 of the Code of Criminal Procedure, 1973 (for short, “CrPC”), by Petitioner No.1/Accused No.7, seeking quashing of the proceedings in C.C. No. 11 of 2026 pending on the file of the III Additional Special Judge for CBI cases Hyderabad, for the offence punishable under Section 109 of the Indian Penal Code, 1860 (for short, “IPC”) and Sections 13(2) and 13(1)(e) of the Prevention of Corruption Act, 1988 (for short “PC Act”), arising out of R.C. No.9(A)/2003/CBI/Hyd.

2. Heard Mr. Vikram Pooserla, learned Senior Counsel for the petitioner and Mr. T. Srujan Kumar Reddy, learned Special Public Prosecutor for CBI appearing for respondent No.1.

Prosecution Case

3.1. The prosecution case, in brief, is that Accused No.1, an officer of the Income Tax Department, who served as Deputy Commissioner, Joint Commissioner and Additional Director of Income Tax, abused his official position and acquired assets and pecuniary resources disproportionate to his known sources of income during the check period from 01.04.1989 to 21.03.2003. As per the charge sheet, Accused No.1 acquired assets valued at approximately Rs.2.56 crores against income and other known sources of about Rs.70,61,000/-, with expenditure of approximately Rs.14,91,000/-, resulting in alleged disproportionate assets of about Rs.2.01 crores.

               3.2. It is further alleged that Accused No.1, with the assistance of Accused Nos.2 to 9, acquired or concealed properties, investments and financial assets in the names of his relatives and other persons. The allegation against the petitioner/Accused No.7 is that he is a Chartered Accountant/private financier and stated to be the owner of the Libord Group of Companies, and that he facilitated diversion and concealment of Accused No.1’s alleged ill-gotten wealth by routing funds to his relatives in the guise of loans.

               3.3. According to the prosecution, through the financial companies associated with him, Accused No.7 created dummy bank and loan transactions in favour of the relatives of Accused No.1 without actual disbursement of the corresponding loan amounts. The prosecution relies upon cash-flow charts and other annexures to the charge sheet to contend that transactions between Accused No.1 and Accused Nos.2 to 6 were routed through Accused No.7.

               3.4. The specific case against Accused No.7 is, therefore, one of abetment of the substantive offence allegedly committed by Accused No.1. The charge sheet does not allege that Accused No.7 was a public servant or that he independently committed the offence of possession of disproportionate assets. His alleged liability is founded upon Section 109 of the IPC read with Sections 13(2) and 13(1)(e) of the PC Act.

Submissions on Behalf of the Petitioner

4.1. Learned Senior Counsel for the petitioner submits that the material collected by the prosecution does not disclose the ingredients of abetment under Section 109 of the IPC. There is, according to the petitioner, no specific material showing instigation, intentional aid or participation on his part in the alleged offence of Accused No.1. It is contended that the transactions relied upon by the prosecution were genuine commercial transactions undertaken in the ordinary course of business, that the loans were granted through banking channels and were subsequently repaid. Mere financial transactions with the relatives of Accused No.1, it is submitted, cannot constitute abetment in the absence of knowledge or intention to facilitate acquisition or concealment of disproportionate assets.

               4.2. It is further submitted that the petitioner derived no unlawful or personal benefit from the transactions and that there is no material establishing any conspiracy, meeting of minds or direct nexus between him and Accused No.1. Learned counsel also submits that the company through which the transactions were allegedly undertaken has not been arraigned as an accused and that the petitioner cannot be subjected to criminal liability merely because he was a Director, particularly in the absence of any specific overt act attributable to him in his individual capacity.

               4.3. Reliance is placed on Sharad Kumar Sanghi v. Sangita Rane, (2015) 12 SCC 781; Sunil Bharti Mittal v. CBI, (2015) 4 SCC 609; C.K. Jaffer Sharief v. State, (2013) 1 SCC 205; CBI v. V.C. Shukla, (1998) 3 SCC 410; State through SPE, CBI v. Uttamchand Bohra, 2021 SCC OnLine SC 1208; Rekha Nambiar v. CBI, 2015 SCC OnLine Del 13255; N. Srinivasan v. State of Telangana, Crl.P. No.7854 of 2015, decided on 18.03.2016; and State of Tamil Nadu by Inspector of Police, Vigilance & Anti-Corruption v. N. Suresh Rajan, (2014) 11 SCC 709, in support of the submission that criminal liability of a company officer must be founded upon specific allegations and material indicating individual participation and the requisite criminal intent, and cannot be based merely upon his designation. It is also contended that the proceedings have remained pending for a considerable period without effective progress and that their continuation, in the absence of sufficient material disclosing the ingredients of the alleged offence, would amount to an abuse of the process of law.

Submissions on Behalf of the Prosecution

5.1. Per contra, learned Special Public Prosecutor for the CBI submits that the charge sheet, documentary material and cash-flow charts disclose prima facie material connecting the petitioner with the alleged abetment of the disproportionate-assets offence attributed to Accused No.1. According to the prosecution, Accused No.7, through the financial companies associated with him, facilitated diversion and concealment of Accused No.1’s alleged ill-gotten wealth by routing funds to his relatives under the guise of loans. The cash-flow charts are stated to disclose transactions between Accused No.1 and Accused Nos.2 to 6 routed through Accused No.7, including, in certain instances, movement of funds from Accused No.1 to his relatives and back to Accused No.1 through Accused No.7.

               5.2. It is further alleged that dummy bank and loan transactions were created in favour of the relatives of Accused No.1 without actual disbursement of the corresponding loan amounts, thereby facilitating diversion and concealment of the alleged funds. The learned Special Public Prosecutor submits that the genuineness of the transactions, their alleged repayment, the petitioner’s knowledge and intention, and the question of personal benefit are matters for appreciation of evidence and cannot be conclusively determined at the stage of considering a petition for quashing. It is further contended that the non-impleadment of the concerned company as an accused does not, by itself, absolve the petitioner, since the allegations concern his individual role and participation in the transactions allegedly employed for diversion and concealment of Accused No.1’s assets.

               5.3. Placing reliance upon State of Tamil Nadu by Inspector of Police, Vigilance & Anti-Corruption v. N. Suresh Rajan, (2014) 11 SCC 709, learned Special Public Prosecutor submits that, at the pre-trial stage, the Court is not required to conduct a mini-trial or undertake a detailed appreciation of the evidence. The Court is required to proceed on the basis that the material produced by the prosecution is true and examine whether, on its face, it discloses the commission of an offence. While the Court may sift the material to the limited extent necessary to ascertain whether the allegations are wholly groundless, it cannot evaluate the evidence as would be done at trial.

               5.4. It is therefore contended that the petitioner’s defence that the transactions were genuine, that the loans were actually disbursed and repaid, and that he had no knowledge or intention to facilitate the alleged offence are matters requiring appreciation of evidence at trial. The prosecution accordingly opposes quashing of the proceedings against Accused No.7.

6. I have carefully considered the submissions and perused the material available on record.

Consideration

7. The principal issue that arises for consideration is whether the allegations and material contained in the charge sheet disclose, prima facie, the commission of the offence of abetment under Section 109 of the IPC by the petitioner in his individual capacity, or whether the petitioner is sought to be prosecuted essentially by reason of his position as a Director of the company through which the transactions in question were undertaken. The prosecution case against Accused No.1 is that, during the check period from 01.04.1989 to 21.03.2003, he acquired assets disproportionate to his known sources of income and that the petitioner, along with the other accused, assisted him in acquiring, holding, diverting or concealing such assets. As against the petitioner/A-7, the specific allegation is that, through the financial company associated with him, he facilitated the concealment of Accused No.1’s alleged ill-gotten wealth by extending or arranging loans in favour of the relatives of Accused No.1.

8. The petitioner, on the other hand, contends that he is being prosecuted by attributing to him the acts of the company, although the company itself has not been arraigned as an accused. It is his specific case that the charge sheet primarily discloses transactions between the relatives of Accused No.1 and the company and does not identify transactions personally undertaken by the petitioner/A-7. According to the petitioner, the transactions reflected in the charge sheet, on their face, constitute ordinary financial or loan transactions undertaken in the course of the company’s business. It is contended that there is no clear material demonstrating what particular act was personally performed by the petitioner, in his capacity as Director, which would amount to instigation, conspiracy or intentional aid to Accused No.1. The petitioner therefore contends that his designation as Director cannot, in the absence of a statutory provision creating vicarious criminal liability, be treated as a substitute for proof of individual participation and the requisite criminal intent.

9. The contention requires consideration in the light of Sections 107 and 109 of the IPC. Section 107 defines abetment in terms of instigation, conspiracy and intentional aid, while Section 109 prescribes the punishment for abetment where the act abetted is committed in consequence of the abetment. Therefore, in order to sustain the allegation of abetment against Accused No.7, the prosecution must place material from which it can, at least prima facie, be inferred that the petitioner consciously and intentionally participated in, or facilitated, the commission of the principal offence. The mere existence of a transaction between a company and a third party does not, by itself, establish that every Director of the company instigated, conspired or intentionally aided the commission of an offence connected with such transaction. It is equally well settled that criminal liability cannot ordinarily be imposed upon a Director merely by virtue of his designation. In Maqsood Syed v. State of Gujarat, (2008) 5 SCC 668, the Hon’ble Supreme Court held that the Penal Code does not contain any general provision imposing vicarious liability upon Directors for offences committed by a company and that the liability of an individual must be founded upon allegations and material disclosing his own involvement. Similarly, in Sunil Bharti Mittal v. CBI, (2015) 4 SCC 609, the Hon’ble Supreme Court held that a Director cannot be held criminally liable merely by reason of his office and that, in the absence of a statutory provision creating vicarious liability, the prosecution must disclose the specific role and criminal intent attributable to the individual concerned. In Sharad Kumar Sanghi v. Sangita Rane, (2015) 12 SCC 781, the Hon’ble Supreme Court considered a case where the allegations were essentially directed against the company, which itself had not been arraigned as an accused, and no specific role was attributed to the Managing Director in his individual capacity. The proceedings against the Managing Director were consequently quashed.

10. The principle emerging from the aforesaid decisions is that where criminal liability is sought to be attributed to an individual officer in respect of acts essentially alleged to have been committed by the company, there must be material disclosing an independent role and involvement of the individual officer. In the present case, the charge sheet and the material relied upon by the prosecution disclose transactions involving the relatives of Accused No.1 and the financial company. The cash-flow charts may indicate the movement of monies between the parties and may form part of the prosecution case concerning the alleged disproportionate assets of Accused No.1. However, the existence of such transactions or the movement of money does not, by itself, disclose the precise role personally played by the petitioner/A-7. The material placed before this Court does not clearly identify which particular transaction was personally authorised, created, engineered or facilitated by Accused No.7 in furtherance of Accused No.1’s alleged disproportionate assets, as distinct from transactions undertaken by the company in the ordinary course of its business. This aspect assumes significance because the transactions reflected in the charge sheet, when viewed ex facie, appear to be financial or loan transactions between the company and the relatives of Accused No.1. The prosecution characterises these transactions as dummy or camouflage transactions intended to facilitate concealment of Accused No.1’s funds. However, the material relied upon to draw such conclusion must itself disclose a factual basis for attributing the requisite knowledge and intention to Accused No.7.

11. Merely describing a transaction as a “dummy transaction” or as a transaction undertaken “in the guise of a loan” cannot, by itself, establish the petitioner’s criminal intent or individual involvement. This Court is conscious that, while exercising jurisdiction under Section 482 of the CrPC, it is not permissible to conduct a detailed appreciation of evidence or a mini-trial. In State of Tamil Nadu by Inspector of Police, Vigilance & Anti-Corruption v. N. Suresh Rajan, (2014) 11 SCC 709, the Hon’ble Supreme Court held that the Court may sift the prosecution material to a limited extent for determining whether a prima facie case is made out, but cannot undertake a detailed evaluation of the evidence or conclusively adjudicate upon the defence of the accused. At the same time, this principle does not mean that criminal proceedings must necessarily be permitted to continue where the material, even if accepted in its entirety, does not disclose the basic ingredients of the alleged offence against the particular accused. The distinction between the acts of the company and the individual acts of its Directors is, therefore, material. If the prosecution material discloses that the petitioner/A-7 personally instructed the company to create loans, knowingly represented the funds of Accused No.1 as loans, fabricated documents, or otherwise consciously participated in the alleged concealment, such material may constitute a sufficient basis to proceed against him, irrespective of whether the company was separately prosecuted. In the absence of such material, however, the mere fact that the transactions were undertaken by a company of which Accused No.7 was a Director cannot, by itself, constitute intentional aid within the meaning of Section 107 of the IPC or abetment punishable under Section 109 of the IPC.

12. The non-arraignment of the company as an accused is not, by itself, an absolute bar to the prosecution of an individual. It is, however, a relevant circumstance while examining whether the material discloses an independent criminal act attributable to the individual concerned. In the present case, the transactions relied upon by the prosecution are transactions of the company, whereas the charge sheet does not clearly identify an independent criminal act committed personally by the petitioner/A-7. The petitioner is, therefore, justified to the extent of contending that he cannot be subjected to criminal liability merely because he happened to be a Director of the company. The decision in Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd., (2012) 5 SCC 661, was rendered in the context of Section 141 of the Negotiable Instruments Act, 1881, which expressly provides for vicarious liability. The principle concerning the necessity of arraigning the company in such circumstances cannot, therefore, be mechanically extended to every prosecution under the IPC. Nevertheless, the underlying principle that criminal liability of an individual cannot ordinarily be founded merely upon his relationship with a corporate entity remains relevant while examining whether the present charge sheet discloses an independent case against the petitioner.

13. Viewed from this perspective, this Court finds a material distinction between the existence of suspicious circumstances surrounding a transaction and the existence of prima facie material constituting abetment by a particular accused. The former may justify investigation and may be relevant to the prosecution case against the principal accused. The latter, however, requires some material indicating the conscious and intentional participation of the individual accused in the commission or facilitation of the offence. In the present case, the prosecution material placed before this Court establishes the existence of transactions between the company and the relatives of Accused No.1. However, the precise role played by the petitioner/A-7, in his capacity as Director, in converting what otherwise appear to be financial transactions into intentional aid to Accused No.1’s disproportionate-assets offence is not clearly discernable from the material placed before the Court. The petitioner’s contention that the loans were genuine business transactions sanctioned in the ordinary course of business and subsequently repaid need not, at this stage, be conclusively accepted by this Court. Equally, however, the prosecution cannot rest merely upon its characterisation of the transactions as camouflage or dummy transactions without pointing to material which prima facie connects the petitioner/A-7 personally with the alleged offence.

14. In the absence of a clearly identifiable individual act attributable to the petitioner, and having regard to the fact that the company itself has not been arraigned as an accused, the transactions relied upon by the prosecution remain, on the material presently available, essentially transactions of the company which ex-facie bear the character of regular commercial or loan transactions.

15. In these circumstances, permitting the prosecution against the petitioner/A-7 to continue merely because he was a Director of the company would, in substance, amount to imposing criminal liability by reason of his corporate position. Such liability cannot ordinarily be imposed in the absence of a statutory provision creating vicarious criminal liability. The prosecution must establish an independent basis for the petitioner’s criminal liability, and such basis cannot be supplied merely by inference from his position as a Director.

16. On an overall consideration of the charge sheet and the material placed before this Court, this Court is of the considered view that the prosecution has not disclosed sufficiently specific prima facie material demonstrating the petitioner’s individual and intentional participation in the alleged abetment of Accused No.1’s disproportionate-assets offence. The transactions relied upon by the prosecution are principally transactions between the company and the relatives of Accused No.1 and, on their face, appear to be financial or loan transactions. The charge sheet does not clearly disclose the precise act personally performed by the petitioner/A-7 as Director which transformed such transactions into intentional aid, instigation or conspiracy in furtherance of the alleged offence of Accused No.1. The mere fact that the petitioner was a Director of the company cannot, in the absence of specific material demonstrating his individual participation and the requisite criminal intent, be treated as sufficient to sustain the criminal prosecution against him. The fact that the company itself has not been arraigned as an accused further assumes significance in the peculiar facts of the present case, particularly when the prosecution attributes liability to the petitioner substantially on the basis of transactions apparently undertaken by the company.

17. Accordingly, this Court is of the considered view that the essential ingredients of abetment under Sections 107 and 109 of the IPC, namely, prima facie material disclosing instigation, conspiracy or intentional aid attributable personally to the petitioner/A-7, are not sufficiently disclosed from the material placed before this Court. Continuation of the proceedings against the petitioner/A-7 in these circumstances would, in effect, permit his prosecution substantially on the basis of his status as a Director and his association with the company, without demonstrable material disclosing an independent criminal act on his part. Such a course is impermissible in the absence of a statutory provision creating vicarious criminal liability.

18. Accordingly, the Criminal Petition is allowed. Consequently, the proceedings in C.C. No.11 of 2006 pending on the file of the III Additional Special Judge for CBI Cases, Hyderabad, insofar as they relate to the petitioner/Accused No.7, arising out of R.C. No.9(A)/2003/CBI/Hyd, are hereby quashed.

19. It is made clear that this conclusion is confined to Accused No.7 alone and is based on the absence of specific prima facie material disclosing his individual role and intentional participation in the alleged offence. Nothing contained in this order shall affect the proceedings against the other accused, nor shall the observations made herein be construed as an adjudication on the merits of the prosecution case against them.

Consequently, all pending miscellaneous applications, if any, shall stand closed.