Section 482 BNSS | Criminal Prosecution Against Company Directors Cannot Be Quashed When Investigation Reveals Active Role Beyond Mere Designation: Delhi High Court

"The law does not recognise automatic criminal liability merely on account of a person's designation as a Director. However, the above principle cannot be read to mean that every Director must necessarily be discharged or have the proceedings quashed merely by asserting that he or she had no role in the day-to-day affairs of the company." Delhi High Court, in a significant ruling dated September 8, 2026, held that criminal proceedings against directors of a company cannot be quashed at the threshold when the investigation discloses material prima facie linking them to the management and financial affairs of the entity.

Dismissing a batch of petitions filed under Section 528 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023, a bench of Justice Madhu Jain observed that the "vicarious liability" doctrine cannot be used as a shield by directors to secure discharge when specific allegations of active participation in the impugned transactions exist.

The proceedings originated from an FIR registered by the Economic Offences Wing against M/s Supertech Limited and its directors, including the petitioners, regarding an alleged real estate scam involving a project in Sohna, Haryana. Complainants alleged that the company induced them to book flats under a subvention scheme but failed to deliver possession or service pre-EMIs, leading to significant financial loss. Following the filing of a charge sheet, the Trial Court took cognizance and issued summons, a decision subsequently upheld by the Revisional Court.

The primary question before the court was whether criminal proceedings against directors could be quashed in the absence of explicit statutory vicarious liability, and whether the dispute was purely civil in nature due to its roots in a contractual agreement. The court was further called upon to determine if the summoning order was vitiated by a lack of judicial application of mind.

Scope of Judicial Review under Section 528 BNSS

The court clarified that its jurisdiction is limited to verifying if the material collected during the investigation discloses a prima facie case. It emphasized that it is not the stage for a "mini-trial" or a detailed appreciation of evidence to determine guilt or innocence. The court must only satisfy itself that the orders challenged do not suffer from patent illegality or jurisdictional error.

No Blanket Immunity for Directors

Addressing the reliance placed on Sunil Bharti Mittal v. CBI and Maksud Saiyed v. State of Gujarat, the court held that while these judgments prevent the mechanical fastening of liability on directors, they do not provide a blanket protection. The court noted that in the present case, the investigation revealed that the petitioner was not merely a nominal director; she held significant shareholding, filed balance sheets, and was an authorized signatory to the company's bank accounts.

Prima Facie Evidence of Involvement "The prosecution has further specifically asserted that the petitioner was involved in the management and day-to-day affairs of the company. Whether these allegations will ultimately establish her criminal liability is a matter to be determined during the course of trial."

Contractual Disputes and Criminality

The petitioners contended that the failure to deliver flats was a civil breach of contract. The court rejected this, noting that the allegations involve a systematic scheme of inducement through the subvention arrangement and subsequent diversion of funds. The court reaffirmed that a transaction possessing a contractual element does not inherently preclude criminal prosecution for cheating or breach of trust if dishonest intention at the inception is prima facie evident.

Validity of Simultaneous Charges

The bench also addressed the argument regarding the simultaneous invocation of Sections 406 (Criminal Breach of Trust) and 420 (Cheating) of the IPC. It observed that while these offences have distinct ingredients, the prosecution is not barred from invoking both at the charge sheet stage. The court held that the applicability of these sections should be tested during the trial after evidence is recorded, rather than quashed at the threshold.

Requirement for Summoning Orders

The court held that a summoning order does not require an exhaustive examination of every defense document. The requirement is satisfied if the Magistrate, upon perusing the charge sheet and accompanying material, forms a prima facie opinion that sufficient grounds exist to proceed against the accused.

Finding no merit in the petitions, the High Court dismissed the challenges to the Trial Court’s summoning order and the Revisional Court’s affirmation. The court explicitly clarified that its observations are restricted to the current stage of proceedings and shall not influence the merits of the case during the trial.

Date of Decision: 08 September 2026