Punjab-Haryana High Court
Kailash Chand Jain vs M/S Bibby Financial Services India Pvt. ... on 16 August, 2013
Author: Jitendra Chauhan
Bench: Jitendra Chauhan
CRM-M-3975-3976-2013 & -1-
CRM-M-15903-15904-2013
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
(I) CRM-M-3975-2013 (O&M)
Date of decision : 16.08.2013
Kailash Chand Jain
...Petitioner
Versus
M/s Bibby Financial Services India Pvt. Ltd.
...Respondent
(II) CRM-M-3976-2013 (O&M)
Kailash Chand Jain
...Petitioner
Versus
M/s Bibby Financial Services India Pvt. Ltd.
...Respondent
(III) CRM-M-15903-2013 (O&M)
Paresh Jain
...Petitioner
Versus
State of Haryana and another
...Respondents
(IV) CRM-M-15904-2013 (O&M)
Paresh Jain and another
...Petitioners
Versus
State of Haryana and another
...Respondents
Sethi Atul
2013.09.19 17:34
I attest to the accuracy and
integrity of this document
Chandigarh
CRM-M-3975-3976-2013 & -2-
CRM-M-15903-15904-2013
CORAM: HON'BLE MR. JUSTICE JITENDRA CHAUHAN
Present: Mr. Amar Vivek, Advocate for the petitioners in
CRM-M-3975-3976-2013.
Mr. Vikas Mohan Gupta, Advocate for the petitioners in
CRM-M-15903-15904-2013.
Mr. Ajay Gulati, DAG, Haryana.
Mr. M.S. Vinayak, Mr. Gurpreet Singh and
Mr. Deepak Bastha, Advocates,
for the complainant.
JITENDRA CHAUHAN, J.
By way of this single judgment, four petitions under Section 482 of the Code of Criminal Procedure, are being disposed of as the dispute is between the same parties and identical questions of law are involved therein.
In CRM-M-3975-2013, petitioner Kailash Chand Jain, has sought quashing of the criminal complaint case No.2057 of 2012 dated 06.07.2012, and the impugned summoning order dated 29.08.2012, passed by the Judicial Magistrate 1st Class, Gurgaon, and all consequent proceedings arising therefrom.
In CRM-M-3976-2013, the petitioner has sought quashing of the criminal complaint case No.2237 of 2012, dated 06.08.2012, and the impugned summoning order dated 06.08.2012, passed by the Judicial Magistrate 1st Class, Gurgaon, and all consequent proceedings Sethi Atul 2013.09.19 17:34 I attest to the accuracy and integrity of this document Chandigarh CRM-M-3975-3976-2013 & -3- CRM-M-15903-15904-2013 arising therefrom.
In CRM-M-15903-2013, the quashing of the complainant case No.3846 RM/12 (Old No.2057/2012) dated 29.08.2012, and summoning order dated 29.08.2012, passed by Judicial Magistrate 1st Class, Gurgaon, and all consequent proceedings arising therefrom has been sought.
Whereas, in CRM-M-15904-2013, the petitioners, Paresh Jain and Rakesh Kumar Jain, have sought quashing of complainant case No.3844 RM/12 (Old No.2237/2012) dated 06.08.2012, and summoning order dated 06.08.2012, passed by Judicial Magistrate 1st Class, Gurgaon, and all consequent proceedings arising therefrom.
However, for brevity, the facts are being derived from CRM-M-3976-2013.
The brief facts emerging from the pleadings of the parties are as under:-
On 25.03.2009, the respondent had granted factoring facility to M/s Vikash Metal & Power Ltd., who is described as 'Borrower' in the factoring transaction; and M/s Action distributors Pvt. Ltd. & M/s Sahaj Distributors Private Ltd. are 'Approved Debtor' in the said transaction. This implied that M/s Vikash Metal & Power Ltd. was selling goods to M/s Action Distributors Pvt. Ltd. & M/s Sahaj Distributors Private Ltd., and the invoices payableSethito Atul M/s 2013.09.19 17:34 I attest to the accuracy and integrity of this document Chandigarh CRM-M-3975-3976-2013 & -4- CRM-M-15903-15904-2013 Vikash Metal & Power Ltd. were being assigned to the respondent. On 26.02.2010, one of the directors of M/s Vikash Metal & Power Ltd. namely, Mr. Akash Patni, undertook and confirmed that in case the company failed to make payment of the outstanding amount within a period of seven days under facility, the respondent shall have a right to present the cheque issued by them for realization. M/s Vikash Metal & Power Ltd. through its directors issued nine cheques in favour of the respondent towards discharge of its liability on 10.05.2012. On 29.02.2012, the petitioner is said to have resigned from the Board of M/s Vikash Metal & Power Ltd. and has also filed an alleged document showing his resignation. The respondent denied this document. On 07.07.2012, the cheques in question were returned unpaid with the remarks, 'Funds insufficient'. On 18.07.2012, a notice of demand under Section 138 of the Negotiable Instruments Act (for short, 'the Act'), was issued by the respondent to M/s Vikash Metal & Power Ltd. and its directors including the petitioner herein. On 06.08.2012, the impugned complaint (Annexure P-2) under Section 138 of the Act, was filed by the respondent against M/s Vikash Metal & Power Ltd. and its directors, including the petitioner herein.
Impugned summoning order dated 06.08.2012 (Annexure P-1) was passed by the trial Court. A letter was issued by M/s Vikash Metal & Power Ltd. addressed to the respondent admitting its liability and a Sethi Atul 2013.09.19 17:34 I attest to the accuracy and integrity of this document Chandigarh CRM-M-3975-3976-2013 & -5- CRM-M-15903-15904-2013 schedule for payment of the outstanding amount.
The learned counsel for the petitioners submit that the petitioners have already resigned from the respondent Company, and even during their tenure, none of the petitioners, was either incharge or in control of the day-to-day activities or responsible for the conduct of the business of the Company. They were summoned as their names were mentioned in the past records of the Company not pertaining to the relevant period.
On the other hand, the learned counsel for the respondent- complainant submits that the petitioners are not entitled to any relief as disputed questions of facts are involved in these cases.
This Court has heard the rival contentions of the counsel for the parties and gone through the record of the case.
The only point involved in these petitions is that "whether there are specific averments made in the impugned complaints that the petitioner are incharge of and responsible for the conduct of the business of the company? If not, its effects."
The specific averments in paragraph 3 of the complaint to the extent that accused No.2 to 7 are the Managing Director/Directors or authorized signatories and responsible persons for day to day act, conduct and affairs of the business as well as the liabilities of the accused No.1, would prima facie reveal that offence underSethiSection Atul 2013.09.19 17:34 I attest to the accuracy and integrity of this document Chandigarh CRM-M-3975-3976-2013 & -6- CRM-M-15903-15904-2013 138 of the Act is made out against each and every person including the petitioners herein. However, it is settled law that even a non- director can be liable under Section 141 of the Act, on the basis of the averments made by the complainant in the complaint.
The petitioners are relying upon a documents i.e. their resignations from the board of M/s Vikash Metal & Power Ltd., on 26/29.02.2012, which fact is to be decided by leading evidence in the trial Court. Even if it is presumed that the said alleged documents are true, even then proceedings against the petitioners herein are not liable to be quashed on the ground that the petitioners were also incharge of and responsible for financial day to day affairs of the company, i.e. M/s Vikash Metal & Power Ltd., at the relevant time when the cheques were issued as well as when the offence was committed. Therefore, by no stretch of imagination, the petitioners can take advantage of their alleged resignations. When the respondent issued a notice of demand to the accused-company and its directors including the petitioners herein, there was no reply to refute the demand, or to raise the plea of their resignations. Moreover, the stand of the respondent herein is that M/s Vikash Metal & Power Ltd. itself wrote to the respondent on 27.09.2012, that their independent directors had submitted their resignations after receiving a notice of demand under Section 138 of the Act. Sethi Atul 2013.09.19 17:34 I attest to the accuracy and integrity of this document Chandigarh CRM-M-3975-3976-2013 & -7- CRM-M-15903-15904-2013 In SMS Pharmaceuticals Vs. Neeta Bhalla, AIR (SC) (2005) 3512, it has been held as under:-
"12. The conclusion is inevitable that the liability arises on account of conduct, act or omission on the part of a person and not merely on account of holding an office or a position in a company. Therefore, in order to bring a case within Section 141 of the Act the complaint must disclose the necessary facts which make a person liable."
Referring to this Court's earlier decisions in K.P.G. Nair v. Jindal Menthol India Ltd. [(2001) 10 SCC 218] and Monaben Ketanbhai Shah and Another v. State of Gujarat and Others [(2004) 7 SCC 15], it was stated:
"18. To sum up, there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under Section 141 of the Act is sought to be fastened vicariously on a person connected with a company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to Sethi Atul 2013.09.19 17:34 I attest to the accuracy and integrity of this document Chandigarh CRM-M-3975-3976-2013 & -8- CRM-M-15903-15904-2013 be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of Section 141 has to be spelled out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within Section 141, he would issue the process. We have seen that merely being described as a director in a company is not sufficient to satisfy the requirement of Section 141. Even a non-director can be liable under Section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial."
In K.K. Ahuja Vs. V.K. Vora & another, (2009) 10 SCC 48, it has been held as under:
"20. 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 Sethi Atul 2013.09.19 17:34 I attest to the accuracy and integrity of this document Chandigarh CRM-M-3975-3976-2013 & -9- CRM-M-15903-15904-2013 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. (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 Sethi Atul 2013.09.19 17:34 I attest to the accuracy and integrity of this document Chandigarh CRM-M-3975-3976-2013 & -10-
CRM-M-15903-15904-2013 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.
21. 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 Sethi Atul 2013.09.19 17:34 I attest to the accuracy and integrity of this document Chandigarh CRM-M-3975-3976-2013 & -11- CRM-M-15903-15904-2013 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 and not intended under the Act. 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." In Harshendra Kumar D Vs. Rebatilata Koley etc., AIR 2011 SC 1090, it has been held as under:-
"18. On March 4, 2004, the Company informed the Registrar of Companies in the prescribed form (Form no. 32) about the resignation of the appellant from the post of Director of the Company and, thus, change among directors.
19. The above documents placed on record by the appellant have not been disputed nor controverted by the complainants. As a matter of fact, it was not even the case of the complainants before the High Court that the Sethi Atul 2013.09.19 17:34 I attest to the accuracy and integrity of this document Chandigarh CRM-M-3975-3976-2013 & -12- CRM-M-15903-15904-2013 change among Directors of the Company, on resignation of the appellant with effect from March 2, 2004, has not taken place. The argument on behalf of the complainants before the High Court was that it was not permissible for the High Court to look into the papers and documents relating to the appellant's resignation since these are the matters of defence of the accused person and defence is a matter for consideration at the trial on the basis of evidence which cannot be decided by the High Court. The complainants in this regard relied upon a decision of Single Judge of that Court in the case of Fateh Chand Bhansali1 . The counsel for the present appellant (revision petitioner therein) on the other hand referred to a later decision of a Single Judge of the Calcutta High Court in the case of Saroj Kumar Jhunjhunwala v. State of West Bengal and Anr. wherein it was held that if before the issuance of cheques, the accused had resigned from the directorship, then he cannot be held liable for the offence. Confronted with two Single Bench decisions of that Court in Fateh Chand Bhansali1 and Saroj Kumar Jhunjhunwala, the Single Judge held that the judicial discipline demanded that he should go by the earlier decision, namely, Fateh Sethi Atul 2013.09.19 17:34 I attest to the accuracy and integrity of this document Chandigarh CRM-M-3975-3976-2013 & -13- CRM-M-15903-15904-2013 Chand Bhansali1 and, accordingly, refused to take into consideration the documents relating to the appellant's resignation as Director from the Company with effect from March 2, 2004. While relying upon Fateh Chand Bhansali1, the Single Judge referred to a decision of this Court in State of Madhya Pradesh v. Awadh Kishore Gupta and Others which was referred in Fateh Chand Bhansali.
20. In Awadh Kishore Gupta, this Court while dealing with the scope of power under Section 482 of the Code observed : "It is to be noted that the investigation was not complete and at that stage it was impermissible for the High Court to look into materials, the acceptability of which is essentially a matter for trial. While exercising jurisdiction under Section 482 of the Code, it is not permissible for the Court to act as if it was a trial Judge..........".
21. In our judgment, the above observations cannot be read to mean that in a criminal case where trial is yet to take place and the matter is at the stage of issuance of summons or taking cognizance, materials relied upon by the accused which are in the nature of Sethi Atul 2013.09.19 17:34 I attest to the accuracy and integrity of this document Chandigarh CRM-M-3975-3976-2013 & -14- CRM-M-15903-15904-2013 public documents or the materials which are beyond suspicion or doubt, in no circumstance, can be looked into by the High Court in exercise of its jurisdiction under Section 482 or for that matter in exercise of revisional jurisdiction under Section 397 of the Code. It is fairly settled now that while exercising inherent jurisdiction under Section 482 or revisional jurisdiction under Section 397 of the Code in a case where complaint is sought to be quashed, it is not proper for the High Court to consider the defence of the accused or embark upon an enquiry in respect of merits of the accusations. However, in an appropriate case, if on the face of the documents - which are beyond suspicion or doubt - placed by accused, the accusations against him cannot stand, it would be travesty of justice if accused is relegated to trial and he is asked to prove his defence before the trial court. In such a matter, for promotion of justice or to prevent injustice or abuse of process, the High Court may look into the materials which have significant bearing on the matter at prima facie stage."
The genuineness, admissibility, validity, legality and bona fide, of the resignations of the petitioners-Kailash Chand Jain, Paresh Sethi Atul 2013.09.19 17:34 I attest to the accuracy and integrity of this document Chandigarh CRM-M-3975-3976-2013 & -15- CRM-M-15903-15904-2013 Jain and Rakesh Kumar Jain, or its effect, will be seen by the trial Court after the evidence is led by the parties. It requires full trial. The petitioner did not reply to the notice of demand. There are prima facie allegations against the petitioners in the impugned complaints and thus, there is no illegality or infirmity in the impugned summoning orders.
Because there are disputed questions of facts involved in the present matter, this Court does not deem it proper to exercise its jurisdiction under Section 482 of the Code, at this initial stage.
Therefore, under such circumstances, this Court finds no merit in these petitions, which are liable to be dismissed. Accordingly, CRM-M-3975-2013; CRM-M-3976-2013; CRM-M- 15903-2013; and CRM-M-15904-2013; are hereby, dismissed.
However, the petitioners are at liberty to take up all the pleas during trial, at an appropriate stage.
16.08.2013 (JITENDRA CHAUHAN) atulsethi JUDGE Sethi Atul 2013.09.19 17:34 I attest to the accuracy and integrity of this document Chandigarh