Court holds prima facie material against company directors including Sangita Arora; criminal liability not automatic by designation, but investigation reveals involvement warranting trial
In a significant judgment delivered on September 8, 2026, the Delhi High Court dismissed petitions seeking quashing of criminal proceedings against directors of M/s Supertech Limited, including Sangita Arora, in connection with allegations of fraud and breach of trust related to the "Hill Town" real estate project in Sohna, Haryana. The petitions challenged orders by lower courts that took cognizance of the offences and issued summons to the accused, but the High Court found no merit to interfere at the stage of quashing.
The genesis of the case lies in a complaint filed by homebuyers who had booked flats under a subvention scheme, wherein the company promised to bear pre-EMI payments until possession was delivered. Allegations included non-delivery of flats within the stipulated period, discontinuation of pre-EMI payments by the company, and diversion of funds collected from homebuyers. The Economic Offences Wing registered FIR No. 105/2020 and after investigation, filed a chargesheet alleging offences under Sections 406 (criminal breach of trust), 420 (cheating), and 120B (criminal conspiracy) of the Indian Penal Code against the company and its directors.
Petitioners argued that criminal liability could not be fastened solely on their designation as directors, emphasizing that the disputes were essentially civil in nature arising from delays in possession and payments. They asserted the absence of any individual role or dishonest intention and relied on Supreme Court precedents clarifying that mere directorship is insufficient for criminal prosecution without material showing personal involvement.
The prosecution, however, presented material indicating the petitioner Sangita Arora’s active participation in company affairs, such as holding 34% shareholding, attending board meetings, signing balance sheets, and acting as an authorized signatory for company accounts. The investigation suggested that she was involved in the day-to-day management, thus connecting her with the alleged offences beyond her designation.
The High Court acknowledged the principle that directors cannot be held criminally liable solely based on their position but emphasized that where prima facie material indicates involvement, the question of guilt is for trial courts to decide. The Court held that the allegations concerning the subvention scheme, receipt and utilization of funds, and the company’s failure to fulfill contractual commitments warranted continuation of criminal proceedings.
The Court also clarified that the invocation of Sections 406 and 420 IPC simultaneously does not warrant quashing at the threshold since these offences have distinct ingredients and the precise facts require trial. Furthermore, it observed that criminal conspiracy under Section 120B IPC generally requires inference from conduct and circumstances, which cannot be conclusively ruled out at this stage.
On the point of the summoning order being cryptic, the Court reiterated that while the magistrate must apply mind to the material, the order need not be a detailed examination of every defence or document. The trial court’s cognizance and summoning, supported by the chargesheet and investigation material, met the threshold for proceeding.
Ultimately, the Court found no jurisdictional error, illegality, or perversity in the lower courts’ orders and dismissed the quashing petitions, allowing the trial to proceed. The judgment reiterates that criminal proceedings against company directors require material indicating individual involvement, but where such material exists, the matter is to be decided on merits at trial.
This ruling underscores the judiciary’s approach to balancing protections against frivolous prosecutions of company directors with the need to investigate and prosecute white-collar crimes involving corporate fraud and mismanagement.
Bottom Line:
Directors of a company cannot be held criminally liable solely based on their designation; however, criminal proceedings may continue if material exists indicating their role or involvement in the alleged offences.
Statutory provision(s):
Indian Penal Code Sections 406, 420, 120B; Bharatiya Nagarik Suraksha Sanhita, 2023 Section 528
Sangita Arora v. State of NCT Delhi, (Delhi) : Law Finder Doc Id # 2974587
