Bombay High Court
Balkrishna A. Bhandari And Ors vs Sandeep Mehta And Anr on 30 June, 2022
Author: Prakash D. Naik
Bench: Prakash D. Naik
2-WP-3208-2019.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL WRIT PETITION NO. 3208 OF 2019
1. Balkrishna A. Bhandari
14 Gavdevi Co-op Housing Society
Gavdevi Road, Bhandup (West)
Mumbai 400 078.
2. Raghav Somayya Shetty
A/16, Shiv Shraddha Kutir CHS Ltd.
Nadivali Road, Dombivali (East),
Dombivali (East) 421 201.
3. Avinash Moreshwar More
At Post Shirgaon, Taluka Palghar
Dist. Palghar 401 404. ...Petitioners
Versus
1. Sandeep Mehta
Proprietor of Osain (India)
Having his office at 16th Annanthwadi,
3rd Floor, Room No.42, Bhuleshwar,
Mumbai 400 002.
2. State of Maharashtra ...Respondents
....
Mr. Pradnyesh G. Sabnis with Ms. Kashimira Khedkar, Advocate for the
Petitioners.
Mr. Ajay Panicker i/by Ajay Law Associates, Advocate for Respondent
No.1.
Mr. A. D. Kamkhedkar, APP for the Respondent - State.
CORAM : PRAKASH D. NAIK, J.
DATE : 30th JUNE, 2022.
PER COURT:
1. The Petitioner has challenged the order issuing process dated
28th September, 2018 passed by the Court of learned Metropolitan
Digitally signed
by SAJAKALI
SAJAKALI LIYAKAT
JAMADAR
LIYAKAT
JAMADAR
Date:
2022.07.11 Sajakali Jamadar 1 of 17
19:09:41
+0530
2-WP-3208-2019.doc
Magistrate 48th Court, Andheri, Mumbai, for offence punishable
under Section 138 of Negotiable Instruments Act.
2. The complainant has alleged that the accused No.1 is a
Company registered under the Companies Act, carrying on the
business of manufacturing of Specialty Surfactants. The accused
No.2 is managing director and signatory of the two cheques. The
accused No.3 is alternative Director and accused No.4 is the whole
time Director. Accused No.5 is the Director. Accused Nos. 6, 7 & 8
are also the persons in charge of the day to day affairs of Accused
No.1 - Company and they were duty bound to arrange the funds in
the account of accused No.1 - company to ensure the passing of the
subject cheques issued to the complainant. The accused No.2 to 8
are the persons in charge of and responsible for the conduct of day
to day affairs of the business of accused No.-1 - company. All the
accused are in charge of all acts, deeds and responsible for day to
day affairs and in charge of the Company for the conduct of the
business and day to day affairs of accused No.1. The Company
placed orders for chemicals from the complainant by purchase
order dated 17th September, 2013 and the said chemicals were
delivered. In discharge of liability, the accused issued three
cheques for an amount of Rs.3,32,514/-, Rs.2,35,683/- &
Rs.3,00,000/- bearing different dates. The said cheques were
Sajakali Jamadar 2 of 17
2-WP-3208-2019.doc
presented by the complainant which were dishonoured on account
'Insufficient Funds'. The complainant issued Demand Notice dated
26th December, 2013 to accused No.1 and its directors calling upon
them to pay the amount of Rs.8,68,197/-. The demand notice was
served on the accused. The accused Nos. 2 to 8 are liable for
dishonor of cheques along with the directors and committed
offences under Section 138 r/w Section 141 of the Negotiable
Instruments Act, 1881.
3. Vide order dated 28th September, 2018, the learned
Metropolitan Magistrate 48th Court, Andheri, Mumbai noted that
the demand notice was not sent to accused Nos. 2, 3 & 5 by
complainant's Advocate. The complainant has not filed extract of
Registrar of Companies on record. Hence, it cannot be presumed
that cause of action arose against accused Nos. 2, 3 & 5. However,
there is sufficient material on record to proceed against accused
Nos.1 4, 6 to 8. The process was issued against accused Nos. 1, 4,
6, 7 & 8 under Section 138 r/w 141 of Negotiable Instruments Act,
1881.
4. The learned counsel for Petitioners urged as follows :-
i. The Petitioners are not signatories to the cheques.
ii. The Petitioners are not directors of the accused No.1-
Company.
Sajakali Jamadar 3 of 17
2-WP-3208-2019.doc
iii. The complaint does disclose the commission of offence
under Section 138 of Negotiable Instruments Act, 1881
against the Petitioners. The averments in the complaint do
not show that the Petitioners were directors of the company.
The complaint does not provide any details whatsoever in
respect to the role played by the Petitioners in the business
and the affairs of the Company. The complaint does not
disclose any role played by the Petitioners in issuance of the
cheques or transactions.
iv. The learned Magistrate failed to take into consideration
that for an accused to be brought within the purview of
Section 141 of the Negotiable Instruments Act, the person
should be in charge of and responsible for the overall business
of the company as a whole and not the part of the business.
The learned Magistrate failed to appreciate that the complaint
does not provide any material to show that any of the
Petitioners were in charge of overall business of the Company.
v. As per complaint, the Petitioners were acting as Chief
Accountant, Purchase Head and Purchase Executive. In order
to prosecute the persons other than the directors of the
company there has to be material before the Court. Section
141(2) provides for the act committed by other officers of the
Sajakali Jamadar 4 of 17
2-WP-3208-2019.doc
company for which there has to be material before the Court
to issue process.
vi. Reliance is placed on the decision of the Apex Court in the
case of K. K. Ahuja V/s. V. K. Vora and Another (2009) 10 SCC
48.
5. Learned counsel for Respondent submitted that the order
issuing process is not an interlocutory order and could be
challenged by invoking Revisional Jurisdiction. The Petitioners had
alternate remedy of preferring Revision Application under Section
397 of Cr.P.C. before the Sessions Court. There are requisite
averments in the complaint which provides the role of the
Petitioners. In the complaint it is stated that accused No.6, 7 & 8
(Petitioners) are the persons in charge of and responsible for the
conduct of day to day affairs of the accused No.1-company and
they were duty bound to arrange the funds in the account of the
accused No.1 - Company to ensure passing of the cheques issued
to the complainant. At all relevant time, the accused Nos. 2 to 8
were the persons in charge of and responsible for the conduct of
day to day affairs business of company. They were in charge of all
acts, deeds and responsible for day to day and in charge of the
company. The grounds urged by Petitioners cannot be accepted at
this stage. The averments in complaint are required to be tested
Sajakali Jamadar 5 of 17
2-WP-3208-2019.doc
during trial. On the basis of material on record, the Court has
issued process. The contents of complaint were sufficient to issue
process. The complaint lays down the foundation to issue process
and on the basis of grounds urged by the Petitioners at the
threshold of the complaint cannot be quashed. Learned counsel
relied upon the decision of the Hon'ble Supreme Court in the Case
of Rajendra Kumar Sitaram Pande and Others V.s Uttam and
Another (1999) 3 SCC 134.
6. In rejoinder learned counsel for Petitioners submitted that,
this Court in exercise of powers under Section 482 of the Code of
Criminal Procedure can quash the order of process. Merely on
account of alternate remedy of preferring Revision Application, the
Petitioners cannot be restrained from invoking powers of this Court
under Article 227 of the Constitution of India or inherent powers
under Section 482 of Cr.P.C. Reliance is placed on the decision in
the case of Dhariwal Tobacco Products Ltd. And Others V/s. State
of Maharashtra and Another (2009) 2 SCC 370 and Vishwanath
Ramkrishna Patil V/s. Ashok Murlidhar Sonar 2006(5) Mh.L.J. 671.
7. Undisputedly the Petitioners are not the signatories to the
cheques. In the title of the complaint it is stated that the Petitioner
No.1 is Chief Accountant, Petitioner No.2 is the Purchase Head and
the Petitioner Nos. 3 is the Purchase Executive. Thus, they are not
Sajakali Jamadar 6 of 17
2-WP-3208-2019.doc
the directors of the company and at the most the employees of
accused No.1 - Company.
8. The order issuing process refers to the fact that statutory
demand notice was not duly sent to accused Nos. 2, 3 & 5 by
complainant. The extract of Registrar of companies is not on
record for perusal. It cannot be presumed that, cause of action
arose against accused Nos. 2, 3 & 5. Process was issued against
accused Nos. 1, 4, 6, 7 & 8. The Petitioners are arrayed as accused
Nos. 6 to 8. Accused No.2 is described as managing Director and
signatory of two cheques. Accused No.2 and 5 are Directors. Thus,
the process was not issued against signatory of cheques and two
Directors.
9. The preliminary objection urged by the learned counsel for
Respondent No.1 that the Petitioners have to challenge impugned
order of process by preferring revision application in accordance
with Section 397 of the Code of Criminal Procedure.
10. In the case of Rajendra Kumar Sitaram Pande (supra) the
Apex Court had observed that the order issuing process is not an
interlocutory order and the bar under sub-section 2 of Section 397
would not apply. The revisional jurisdiction under Section 397
could be exercised against the same. It is further observed that the
discretion in the exercise of revisional jurisdiction should be
Sajakali Jamadar 7 of 17
2-WP-3208-2019.doc
exercised within the four corners of Section 397.
11. There is no debate that the order of process is not an
interlocutory order and revisional powers under Section 397 of
Cr.P.C. could be exercised challenging order of process. The
question which arises for consideration whether in the light of the
remedy under Section 397 this Court should relegate the
Petitioners to exercise the remedy of revision under Section 397 of
Cr.P.C. In the case of Dhariwal Tobacco Products Ltd. And Others
(supra), the Apex Court has dealt with the question, whether an
application under Section 482 of Cr.P.C. can be dismissed only on
the premise that an alternative remedy of filing revision application
under Section 397 of the Code is available. The High Court in the
said case had observed that the jurisdiction under Section 482 of
the Code will not be exercised if recourse can be taken to the
remedy of filing Revision Application under Section 397 of the
Code. The High Court relied on decision in the case of V.K. Jain
V/s. Pratap Padole (2005) 30 Mh.L.J. 778. The apex Court referred
to decision in R.P. Kapur Vs. State of Punjab AIR 1960 SCC 866,
Som Mittal V/s. Government of Karnataka (2008) 3 SCC 574 and
observed that in the said decisions Court has laid down the
Criterion for entertaining an application under Section 482. Only
because a Revision Petition is maintainable, the same by itself,
Sajakali Jamadar 8 of 17
2-WP-3208-2019.doc
would not constitute a bar for entertaning an application under
Section 482 of the Code. The inherent Power of the High Court is
not conferred by Statute but has merely been saved thereunder. It
is thus difficult to conceive that the jurisdiction of the High Court
would be held to be barred only because the revisional jurisdiction
could also be availed of. The Supreme Court referred to two
decision of this Court viz. Vishwanath Ramkrishna Patil (supra)
where a similar question was raised and it was opined that, it is
difficult to curtail this remedy merely because there is a revisional
remedy available. The alternate remedy is no bar to invoke power
under Article 227. What is required is to see the facts and
circumstances of the case while entertaining such petition under
Article 227 of the Constitution and/or under Section 482 of Cr.P.C.
In Keki Bomi Dadiseth V/s. State of Maharashtra (2002) 3 Mah.
L.J. 246 it was held that, in view of ratio laid down by the apex
Court, it is well settled that inherent powers under Section 482 can
be exercised by the accused in the appropriate case. The apex
Court held that, the decision in the case of V.K. Jain(supra) does
not lay down a good law and it is over ruled. In the case of Adalat
Prasad V/s. Rooplal Jindal (2004) 7 SCC 338 it was observed that,
order of process can be challenged under Section 482 of the Code
of Criminal Procedure Code.
Sajakali Jamadar 9 of 17
2-WP-3208-2019.doc
12. Thus, it is settled law that the powers under Section 482 of
Cr.P.C. could be exercised although the order of process could be
challenged by preferring revision application.
13. The primary contention of the Petitioners is that to invoke
the vicarious liability as embodied under Section 141 of the said
Act there has to be requisite material before the Court. The
Petitioners were Chief Accountant, Purchase Head and Purchase
Executive. Section 141 of Negotiable Instruments Act reads as
follows :
" 141. Offences by companies.-- (1) If the person committing an
offence under section 138 is a company, every person who, at the time
the offence was committed, was in charge of, and was responsible to,
the company for the conduct of the business of the company, as well
as the company, shall be deemed to be guilty of the offence and shall
be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any
person liable to punishment if he proves that the offence was
committed without his knowledge, or that he had exercised all due
diligence to prevent the commission of such offence:
1
[Provided further that where a person is nominated as a Director of a
company by virtue of his holding any office or employment in the
Central Government or State Government or a financial corporation
owned or controlled by the Central Government or the State
Government, as the case may be, he shall not be liable for prosecution
under this Chapter.]
(2) Notwithstanding anything contained in sub-section (1), where any
offence under this Act has been committed by a company and it is
Sajakali Jamadar 10 of 17
2-WP-3208-2019.doc
proved that the offence has been committed with the consent or
connivance of, or is attributable to, any neglect on the part of, any
director, manager, secretary or other officer of the company, such
director, manager, secretary or other officer shall also be deemed to be
guilty of that offence and shall be liable to be proceeded against and
punished accordingly. "
14. In the case of K. K. Ahuja V/s. V. K. Vora and Another (supra),
in Paragraphs 21, 22, 23, 24, 25, 26, 27 28, 29 & 30 are as
follows :
21. A combined reading of Sections 5 and 291 of
Companies Act, 1956 with the definitions in clauses
(24), (26), (30), (31), (45) of section 2 of that Act
would show that the following persons are considered to
be the persons who are responsible to the company for
the conduct of the business of the company : --
(a) the managing director/s;
(b) the whole-time director/s;
(c) the manager;
(d) the secretary;
(e) any person in accordance with whose directions or
instructions the Board of directors of the company is
accustomed to act;
(f) any person charged by the Board with the
responsibility of complying with that provision (and who
has given his consent in that behalf to the Board); and
(g) where any company does not have any of the officers
specified in clauses (a) to (c), any director or directors
who may be specified by the Board in this behalf or
where no director is so specified, all the directors. It
follows that other employees of the company, cannot be
said to be persons who are responsible to the company,
for the conduct of the business of the company.
Sajakali Jamadar 11 of 17
2-WP-3208-2019.doc
22. Section 141 uses the words "was in charge of, and
was responsible to the company for the conduct of the
business of the company". It is evident that a person who
can be made vicariously liable under sub-section (1) of
Section 141 is a person who is responsible to the
company for the conduct of the business of the company
and in addition is also in charge of the business of the
company. There may be many directors and secretaries
who are not in charge of the business of the company at
all. The meaning of the words "person in charge of the
business of the company" was considered by this Court in
Girdhari Lal Gupta v. D.N. Mehta [1971 (3) SCC 189]
followed in State of Karnataka v. Pratap Chand [1981 (2)
SCC 335] and Katta Sujatha vs. Fertiliser & Chemicals
Travancore Ltd. [2002 (7) SCC 655]. This Court held
that the words refer to a person who is in overall control
of the day to day business of the company. This Court
pointed out that a person may be a director and thus
belongs to the group of persons making the policy
followed by the company, but yet may not be in charge
of the business of the company; that a person may be a
Manager who is in charge of the business but may not be
in overall charge of the business; and that a person may
be an officer who may be in charge of only some part of
the business.
23. Therefore, if a person does not meet the first
requirement, that is being a person who is responsible to
the company for the conduct of the business of the
company, neither the question of his meeting the second
requirement (being a person in charge of the business of
the company), nor the question of such person being
liable under sub-section (1) of section 141 does not
arise. To put it differently, to be vicariously liable under
sub- section (1) of Section 141, a person should fulfill
the 'legal requirement' of being a person in law (under
Sajakali Jamadar 12 of 17
2-WP-3208-2019.doc
the statute governing companies) responsible to the
company for the conduct of the business of the company
and also fulfill the 'factual requirement' of being a person
in charge of the business of the company.
24. Therefore, the averment in a complaint that an
accused is a director and that he is in charge of and is
responsible to the company for the conduct of the
business of the company, duly affirmed in the sworn
statement, may be sufficient for the purpose of issuing
summons to him. But if the accused is not one of the
persons who falls under the category of 'persons who are
responsible to the company for the conduct of the
business of the company' (listed in para 14 above), then
merely by stating that 'he was in charge of the business
of the company' or by stating that 'he was in charge of
the day to day management of the company' or by
stating that he was in charge of, and was responsible to
the company for the conduct of the business of the
company', he cannot be made vicariously liable under
section 141(1) of the Act.
25. It should, however, be kept in view that even an
officer who was not in charge of and was responsible to
the company for the conduct of the business of the
company can be made liable under sub-section (2) of
Section 141. For making a person liable under Section
141(2), the mechanical repetition of the requirements
under Section 141(1) will be of no assistance, but there
should be necessary averments in the complaint as to
how and in what manner the accused was guilty of
consent and connivance or negligence and therefore,
responsible under sub-section (2) of section 141 of the
Act.
26. Another aspect that requires to be noticed is that
only a Director, Manager, Secretary or other officer can
Sajakali Jamadar 13 of 17
2-WP-3208-2019.doc
be made liable under sub-section (2) of section 141. But
under sub-section (1) of section 141, it is theoretically
possible to make even a person who is not a director or
officer, liable, as for example, a person falling under
category (e) and (f) of section 5 of Companies Act, 1956.
When in SMS Pharma (I), this Court observed that
" 10....Conversely, a person not holding any
office or designation in a company may be liable if he
satisfies the requirement of being in charge of and
responsible for conduct of the business of the
company...",
this Court obviously had in mind, persons described in
clauses (e) and (f) of section 5 of Companies Act. Be that
as it may.
27. The position under section 141 of the Act can be
summarized thus :
(i) If the accused is the Managing Director or a Joint
Managing Director, it is not necessary to make an
averment in the complaint that he is in charge of, and is
responsible to the company, for the conduct of the
business of the company. It is sufficient if an averment is
made that the accused was the Managing Director or
Joint Managing Director at the relevant time. This is
because the prefix `Managing' to the word `Director'
makes it clear that they were in charge of and are
responsible to the company, for the conduct of the
business of the company.
(ii)In the case of a director or an officer of the company
who signed the cheque on behalf of the company, there
is no need to make a specific averment that he was in
charge of and was responsible to the company, for the
conduct of the business of the company or make any
specific allegation about consent, connivance or
negligence. The very fact that the dishonoured cheque
was signed by him on behalf of the company, would give
rise to responsibility under sub-section (2) of Section
141.
Sajakali Jamadar 14 of 17
2-WP-3208-2019.doc
(iii) In the case of a Director, Secretary or Manager (as
defined in Sec. 2(24) of the Companies Act) or a person
referred to in clauses (e) and (f) of section 5 of
Companies Act, an averment in the complaint that he
was in charge of, and was responsible to the company,
for the conduct of the business of the company is
necessary to bring the case under section 141(1). No
further averment would be necessary in the complaint,
though some particulars will be desirable. They can also
be made liable under section 141(2) by making
necessary averments relating to consent and connivance
or negligence, in the complaint, to bring the matter
under that sub-section.
" (iv) Other Officers of a company can not be made liable
under sub-section (1) of section 141. Other officers of a
company can be made liable only under sub-section (2)
of Section 141, be averring in the complaint their
position and duties in the company and their role in
regard to the issue and dishonour of the cheque,
disclosing consent, connivance or negligence.
In the said judgment the Hon'ble Supreme Court further
held as under :-
28. If a mere reproduction of the wording of section
141(1) in the complaint is sufficient to make a person
liable to face prosecution, virtually every
officer/employee of a company without exception could
be impleaded as accused by merely making an averment
that at the time when the offence was committed they
were in charge of and were responsible to the company
for the conduct and business of the company. This would
mean that if a company had 100 branches and the
cheque issued from one branch was dishonoured, the
officers of all the 100 branches could be made accused
by simply making an allegation that they were in charge
of and were responsible to the company for the conduct
of the business of the company. That would be absurd
Sajakali Jamadar 15 of 17
2-WP-3208-2019.doc
and not intended under the Act.
29. As the trauma, harassment and hardship of a
criminal proceedings in such cases, may be more serious
than the ultimate punishment, it is not proper to subject
all and sundry to be impleaded as accused in a complaint
against a company, even when the requirements of
section 138 read and section 141 of the Act are not
fulfilled.
30. A Deputy General Manger is not a person who is
responsible to the company for the conduct of the
business of the company. He does not fall under any of
the categories (a) to (g) listed in section 5 of the
Companies Act (extracted in para 14 above). Therefore
the question whether he was in charge of the business of
the company or not, is irrelevant. He cannot be made
vicariously liable under Section 141(1) of the Act. If he
has to be made liable under Section 141(2), the
necessary averments relating to consent/connivance/
negligence should have been made. In this case, no such
averment is made. Hence the first respondent, who was
the Deputy General Manger, could not be prosecuted
either under sub-section (1) or under sub- section (2) of
Section 141 of the Act."
15. In the complaint itself it is mentioned that the Petitioners
are Chief Accountant, Purchase Head and Purchase Executive. Sub-
section 2 of Section 141 refers to the liability of the persons other
than the directors referred to clause (1) of Section 141. The
averments in the complaint are vague qua the Petitioners. The
averments in the complaint does not falsify the requirements of
Section 141 of Negotiable Instruments Act. The learned
Magistrate issued the process mechanically. This is a fit case to
Sajakali Jamadar 16 of 17
2-WP-3208-2019.doc
exercise power under Section 482 of Cr.P.C. and to set aside the
order of process.
16. Hence, I pass the following order :-
ORDER
i. Writ Petition No.3208 of 2019 is allowed and disposed of;
ii. Order dated 28th September, 2018 issuing process passed by learned Metropolitan Magistrate, 48 th Court, Andheri, Mumbai and proceedings in C.C. No.953/SS/2016 pending before the Court of learned Metropolitan Magistrate, 48th Court, Andheri, Mumbai are quashed and set aside.
(PRAKASH D. NAIK, J.)
Sajakali Jamadar 17 of 17