A Magistrate rejected a 'B' report without saying why. The Karnataka High Court has written down the procedure and sent it to every Magistrate in the State
Justice H.P. Sandesh quashes the summons in a software-copying complaint because the company was never arraigned, and lays down six propositions on what a Magistrate must do when a 'B' report is filed.
A complaint that a software product had been copied after being handed over for a trial produced a police report finding no case, a protest petition, a Magistrate's order rejecting that report, and a summons issued five months later against an individual whose employer was never made an accused. The Karnataka High Court has quashed the summons, holding that proceedings cannot run against him in the company's absence. Justice H.P. Sandesh went further: finding that the Magistrate had given no reasons for rejecting the police report, he set out six propositions on the procedure to be followed when a 'B' report is filed, and directed that they be circulated to every Magistrate and Judge in the State dealing with private complaints, and to the Karnataka Judicial Academy for use in training.
Kaleido, a trial, and a complaint
The complainant owns a company that had developed a software product called Kaleido and obtained a patent in respect of it. His case was that during 2014 and 2015 another company, situated at Ashwini Layout, asked for the software on trial so that it could be adapted and shown to schools. The software was given over in 2014. The complaint alleges that the software was then copied, marketed and offered for sale, and sought legal action for taking the software and for cheating.
On the written complaint, the police registered a crime in 2015 for the offence punishable under Section 420 of the Indian Penal Code. A requisition was placed before the Magistrate in July 2015 invoking Sections 380, 406, 468, 471 and 120B of the IPC and Section 65 of the Information Technology Act, 2000.
The police investigated and filed a 'B' report — the report filed when the material does not support the allegation. Notice went to the complainant, who filed a protest petition reiterating the contents of his complaint and asking the Court to reject the police report and take cognizance.
By an order of 8 July 2019 the IV Additional Chief Metropolitan Magistrate rejected the 'B' report. By a further order of 21 December 2019 the Magistrate took cognizance against the accused for offences under Sections 380, 406, 468, 471, 420 and 120B of the IPC. The petitioner, arrayed as accused No. 4, came to the High Court to have both orders and the resulting case quashed.
The company that was never an accused
The first and decisive ground was that the petitioner had been proceeded against in his individual capacity while the company through which the alleged acts were done was not arraigned at all.
Counsel relied on Sushil Sethi v. State of Arunachal Pradesh, where the Supreme Court was concerned with allegations that a company had supplied sub-standard turbine components not conforming to specification. There was no first information report, complaint or charge-sheet against the company, and no specific allegation that the individual was in charge of its administration and management; in the absence of both, the Court held, there could be no vicarious liability. Orders of the Karnataka High Court applying Aneeta Hada and Pepsi Foods in the context of Section 49 of the Legal Metrology Act, 2009 were cited to the same effect — that where nothing is said about the individual's role and he is not shown to have been in charge of and responsible for the day-to-day affairs of the company, there can be no prosecution.
Senior counsel for the complainant resisted this, contending that it was not necessary to arraign the company and that specific allegations had been made against the petitioner in the complaint itself.
The Court examined the material on that question and found against the complainant. The complaint, the protest petition and the sworn statement, taken at face value, did not point out this petitioner's role or identify what he was said to have done. On that footing the summons ought not to have been issued. Since the company was not before the Court and the petitioner had been made a party in his individual capacity, there could be no proceedings against him in the company's absence, and the issuance of summons required to be quashed.
An order with no reasons in it
The second ground concerned the rejection of the 'B' report itself, and it is where the judgment turns from this case to all of them.
Counsel relied on an earlier decision of the same Court which had laid down the procedure a Magistrate is to adopt before rejecting a 'B' report, and submitted that the procedure had simply not been followed. The Magistrate ought to have expressed a judicious opinion after applying his mind to the contents of the police report, and only then rejected it.
The Court found that neither the order rejecting the report nor anything else disclosed such an exercise. The order did not engage with the contents of the protest memo, formed no opinion as to why the report was being rejected, and identified no error on the part of the investigating officer in filing it. No reasoning having been given, the rejection was not sustainable in law.
There was a further procedural tangle. The Magistrate had recorded the complainant's sworn statement while considering the 'B' report, and had then issued process for recording the sworn statement over again. The Court held that this sequence was a procedural error, while making clear that such an error would not by itself vitiate the proceedings.
Why a 'B' report needs reasons at all
The requirement the Magistrate was found to have skipped is not a formality, and the judgment's treatment of it explains why.
A 'B' report is the investigating officer's conclusion, reached after investigation, that the material does not support the allegation. When a Magistrate rejects it he is displacing that conclusion and setting a prosecution in motion, and he does so on material — the protest petition, the sworn statement and the documents — which he must actually weigh against the reasons the officer gave. An order that does neither tells nobody anything: not the accused, who cannot know what case he must answer; not the complainant, whose protest may have been accepted for reasons that would not survive examination; and not a court asked later to review it.
That is what the Court found here. The order neither engaged with the protest memo nor identified any error in the investigation, and so disclosed no basis on which the officer's conclusion had been displaced. Having been passed without reasons, it could not stand.
The two defects in this case also sit together. A Magistrate who has not applied his mind to the 'B' report is, by the same token, unlikely to have asked the question that mattered most — whether the material disclosed anything at all against this particular accused, as distinct from the company through which he acted.
Six propositions for the Magistrates
Observing that the statute does not specifically prescribe what a Magistrate is to do when a 'B' report is filed after a reference for investigation under Section 156(3) of the Code of Criminal Procedure, the Court summarised the position emerging from the authorities as guidelines to assist Magistrates in proceeding according to law.
An order referring a complaint for investigation under Section 156(3), made on considering the contents of the complaint, is a pre-cognizance order. If the Magistrate goes on to record the complainant's sworn statement, that act amounts to taking cognizance of the offence, whether or not the order says so in terms. Having recorded the sworn statement and considered it with the documents produced, an order holding that there is prima facie material to proceed amounts to issuance of process under Section 204; and where no sufficient ground to proceed is found, Section 203 is to be invoked to dismiss the complaint.
On the report itself: when a 'B' report is filed and notice of it is given to the complainant, whether by the investigating officer or by the Court, and the complainant chooses to file a protest memo, the Magistrate is to give an opportunity to file a detailed protest petition even if the memo as filed is not proper or sufficiently detailed. The protest memo should contain full details to proceed against the accused, because it will be treated as the complaint.
Once the protest petition is filed it is to be treated as a complaint; the Magistrate takes cognizance, gives the complainant an opportunity to give his sworn statement, and considers the documents. At that stage, the Court held, there is no need to reject the 'B' report. The reasons the investigating officer gave for filing it have to be considered along with the sworn statement and the documents produced, and whether the report is rejected or accepted the Court does not become functus officio. The two can be considered simultaneously, and the Magistrate then passes an order under Section 203 or Section 204. The Magistrate need not necessarily pass any explicit order rejecting or accepting the report at all — the issuance of process is itself the act of proceeding against the accused, provided the reasons given in the 'B' report have been considered.
The sixth proposition is the one that disposed of the defect in this case: recording the sworn statement while considering the 'B' report and thereafter issuing process for recording the sworn statement again is a procedural error, but it does not vitiate the proceedings.
Two features of this summary are worth drawing out, because they cut against how these matters are often handled.
The first is that the guidelines reduce the significance of the order on the 'B' report itself. The common practice is to treat rejection of the report as a discrete, contested step — which is how this case generated a separate order in July 2019 and another in December. On the Court's formulation that step is largely unnecessary: the protest petition becomes the complaint, cognizance is taken on it, the sworn statement is recorded, the investigating officer's reasons are weighed alongside it, and the Magistrate then either issues process under Section 204 or dismisses under Section 203. Whether the report is formally rejected or accepted does not determine anything, and the Court is not functus officio either way.
The second is the latitude extended to complainants at the protest stage. A protest memo that is not proper or sufficiently detailed is not to be thrown out; the complainant is to be given an opportunity to file a detailed protest petition. The reason is structural rather than indulgent — because that document will be treated as the complaint, it has to carry the particulars a complaint needs, including the particulars this complaint lacked about who did what. Had that opportunity been used here, the question of the petitioner's role might have been answered one way or the other at the outset instead of seven years later.
Order
The petition was allowed. The order passed by the trial court in respect of this petitioner, accused No. 4, was quashed. Because the first point had been answered in the petitioner's favour, the Court held there was no need to remand the matter for reconsideration — a remand would have sent back a case that could not be mended, since the company's absence from the array was not a defect the Magistrate could cure by reasoning better.
Two directions followed. The Registrar General was directed to communicate the order to all Magistrates and Judges dealing with private complaints, particularly to apprise them of the procedure to be followed when a 'B' report is received in a private complaint, the Court observing that it would serve as a useful reference for their academic and judicial guidance. The Registrar General was also directed to communicate the order to the Director of the Karnataka Judicial Academy, to be used in enlightening judicial officers during their training programmes.
Those directions put the judgment in a different class from an ordinary quashing order. The guidelines are expressed as guidance rather than as a binding rule — the Court says they "may assist" Magistrates, and acknowledges that the statute does not prescribe the procedure. But by routing them to every Magistrate dealing with private complaints and into the Judicial Academy's training, the Court has given them the practical reach of a circular.
The underlying complaint, meanwhile, is not at an end. What has been quashed is the order against this petitioner alone; the Court expressly declined to remand for reconsideration in his case because the absence of the company from the array disposed of it. The question whether the software was taken and copied as alleged has never been decided — the police said the material did not support it, the Magistrate disagreed without saying why, and the High Court has now set that disagreement aside.