Punjab-Haryana High Court
Ajay Mittal And Others vs Bibby Financial Services (India) Pvt. ... on 16 August, 2013
Author: Sabina
Bench: Sabina
Crl.Misc.No.M- 8376 of 2011 (O&M) 1
Crl.Misc.No.M-5835 of 2011 (O&M)
In the High Court of Punjab and Haryana at Chandigarh
Date of decision: 16.8.2013
Crl.Misc.No.M- 8376 of 2011 (O&M)
Ajay Mittal and others ......Petitioners
Versus
Bibby Financial Services (India) Pvt. Ltd. and others
.......Respondents
Crl.Misc.No.M-5835 of 2011 (O&M)
Ajay Mittal and others ......Petitioners
Versus
Bibby Financial Services (India) Pvt. Ltd. and others
.......Respondents
CORAM: HON'BLE MRS. JUSTICE SABINA
Present: Mr.R.S.Cheema, Sr. Advocate with
Mr.Sidhant Goel, Advocate,
for the petitioners.
Mr.M.S.Vinaik, Advocate for
for the respondents
****
SABINA, J.
Vide this judgment, above mentioned two petitions would be disposed of as petitioners have sought quashing of the complaints filed against them by respondent No.1 qua dishonour of cheques in question.
Devi Anita
Learned senior counsel for the petitioners has submitted 2013.08.22 17:04 I attest to the accuracy and integrity of this document Chandigarh Crl.Misc.No.M- 8376 of 2011 (O&M) 2 Crl.Misc.No.M-5835 of 2011 (O&M) that the petitioners were admittedly, non executive directors of the company. Thus, petitioners were not responsible for the day to day affairs of the company. In this regard, learned senior counsel for the petitioners has submitted that in para 13.9 of the petition, it had been specifically averred that the petitioners were independent non executive directors of the company. No reply had been submitted to the said paragraph by respondent No.1- complainant. Hence, petitioners could not be criminally prosecuted qua disnour of the cheques in question. Further, it has been submitted that petitioner No.1 had resigned from the company on 21.9.2010, whereas, petitioners No.2 and 3 had resigned from the company w.e.f. 3.8.2010.
In support of his arguments, learned senior counsel has placed reliance on the decision of the Apex Court in Anita Malhotra vs. Apparel Export Promotion Council and another (2012) 1 SCC 520, wherein, it was held as under:-
"This Court has repeatedly held that in case of a Director, complaint should specifically spell out how and in what manner the Director was in charge of or was responsible to the accused Company for conduct of its business and mere bald statement that he or she was in charge of and was responsible to the company for conduct of its business is not sufficient. (Vide National Small Industries Corporation Ltd. v. Harmeet Singh Paintal) In the case on hand, particularly, in para 4 of the complaint, except Devi Anita 2013.08.22 17:04 I attest to the accuracy and integrity of this document Chandigarh Crl.Misc.No.M- 8376 of 2011 (O&M) 3 Crl.Misc.No.M-5835 of 2011 (O&M) the mere bald and cursory statement with regard to the appellant, the complainant has not specified her role in the day to day affairs of the Company. We have verified the averments as regard to the same and we agree with the contention of Mr. Akhil Sibal that except reproduction of the statutory requirements the complainant has not specified or elaborated the role of the appellant in the day to day affairs of the Company. On this ground also, the appellant is entitled to succeed."
Learned senior counsel has further placed reliance on National Small Industries Corporation Ltd. vs. Harmeet Singh Paintal (2010) 3 SCC 330, wherein, it was held as under:-
" 13. Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent No.1 was in-charge of or was responsible to the accused company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability.Devi Anita
2013.08.22 17:04 I attest to the accuracy and integrity of this document Chandigarh Crl.Misc.No.M- 8376 of 2011 (O&M) 4 Crl.Misc.No.M-5835 of 2011 (O&M)
14. A company may have a number of Directors and to make any or all the Directors as accused in a complaint merely on the basis of a statement that they are in-charge of and responsible for the conduct of the business of the company without anything more is not a sufficient or adequate fulfillment of the requirements under Section 141.
15. In a catena of decisions, this Court has held that for making Directors liable for the offences committed by the company under Section 141 of the Act, there must be specific averments against the Directors, showing as to how and in what manner the Directors were responsible for the conduct of the business of the company.
22. Therefore, this Court has distinguished the case of persons who are in-charge of and responsible for the conduct of the business of the company at the time of the offence and the persons who are merely holding the post in a company and are not in-charge of and responsible for the conduct of the business of the company. Further, in order to fasten the vicarious liability in accordance withSection 141, the averment as to the role of the concerned Directors should be specific. The description should be clear and there should be some unambiguous allegations as to how the concerned Directors were alleged to be in- charge of and was responsible for the Devi Anita 2013.08.22 17:04 I attest to the accuracy and integrity of this document Chandigarh Crl.Misc.No.M- 8376 of 2011 (O&M) 5 Crl.Misc.No.M-5835 of 2011 (O&M) conduct and affairs of the company."
Learned senior counsel has next placed reliance on Central Bank of India vs. Asian Global Ltd. and another (2010) 11 SCC 203, wherein, it was held as under:-
"15. We have carefully considered the submissions made on behalf of the respective parties and we are unable to persuade ourselves to differ with the judgment and order of the High Court. The judgment in S.M.S. Pharmaceuticals Ltd.'s case (supra), which was relied upon by the High Court, while interpreting the provisions of sub-section (1) of Section 141 of the 1881 Act, made it very clear that unless a specific averment was made in the complaint that at the time when the offence was committed, the person accused was in charge of and responsible for the conduct of the business of the Company, the requirements of Section 141 would not be satisfied.
16. It was further held that while a Managing Director or a Joint Director of the Company would be admittedly in charge of the Company and responsible to the Company for the conduct of its business, the same yardstick would not apply to a Director. The position of a signatory to a cheque would be different in terms of Sub-section (2) of Section 141 of the 1881 Act. That, of course, is not the Devi Anita 2013.08.22 17:04 I attest to the accuracy and integrity of this document Chandigarh Crl.Misc.No.M- 8376 of 2011 (O&M) 6 Crl.Misc.No.M-5835 of 2011 (O&M) fact in this case.
17. The law as laid down in S.M.S. Pharmaceuticals Ltd. 's case (supra) has been consistently followed and as late as in 2007, this Court in the case of N.K. Wahi's case (supra), while considering the question of vicarious liability of a Director of a Company, reiterated the sentiments expressed in S.M.S. Pharmaceuticals Ltd.'s case (supra) that merely being a Director would not make a person liable for an offence that may have been committed by the Company. For launching a prosecution against the Directors of a Company under Section 138 read with Section 141 of the 1881 Act, there had to be a specific allegation in the complaint in regard to the part played by them in the transaction in question. It was also laid down that the allegations had to be clear and unambiguous showing that the Directors were in charge of and responsible for the business of the Company.
This was done to discourage frivolous litigation and toprevent abuse of the process of Court and from embarking on a fishing expedition to try and unearth material against the Director concerned.
18. In this case, save and except for the statement that the Respondents, Mr. Rajiv Jain and Sarla Jain Devi Anita 2013.08.22 17:04 I attest to the accuracy and integrity of this document Chandigarh Crl.Misc.No.M- 8376 of 2011 (O&M) 7 Crl.Misc.No.M-5835 of 2011 (O&M) and some of the other accused, were Directors of the accused Companies and were responsible and liable for the acts of the said Companies, no specific allegation has been made against any of them. The question of proving a fact which had not been mentioned in the complaint did not, therefore, arise in the facts of this case. This has prompted the High Court to observe that the Bank had relied on the mistaken presumption that as Directors, Rajiv Jain, Sarla Jain and the other Directors were vicariously liable for the acts of the Company.
19. Admittedly, except for the aforesaid statement, no other material has been disclosed in the complaint to make out a case against the respondents that they had been in charge of the affairs of the Company and were responsible for its action. The High Court, therefore, rightly held that in the absence of any specific charge against the Respondents, the complaint was liable to be quashed and the respondents were liable to be discharged." Learned counsel for the respondents, on the other hand, has opposed the petition and has submitted that petitioners being directors of the company were liable to be criminally prosecuted with regard to dishonour of cheques in question. The cheques in question had been issued before the alleged resignation of the petitioners. Devi Anita 2013.08.22 17:04 I attest to the accuracy and integrity of this document Chandigarh Crl.Misc.No.M- 8376 of 2011 (O&M) 8 Crl.Misc.No.M-5835 of 2011 (O&M) Learned counsel has further submitted that all the submissions put forth by the petitioners could be only seen by the trial Court and the petitions seeking quashing of the complaints qua the petitioners were liable to be dismissed. In support of his arguments, learned counsel has placed reliance on Aneeta Hada vs. M/s Godfather Travels and Tours Pvt. Ltd. AIR 2012 Supreme Court 2795, wherein, it was held as under:-
"16. On a reading of the said provision, it is plain as day that if a person who commits offence under Section 138 of the Act is a company, the company as well as every person in charge of and responsible to the company for the conduct of business of the company at the time of commission of offence is deemed to be guilty of the offence. The first proviso carves out under what circumstances the criminal liability would not be fastened. Sub-section (2) enlarges the criminal liability by incorporating the concepts of connivance, negligence and consent that engulfs many categories of officers. It is worth noting that in both the provisions, there is a'deemed' concept of criminal liability."
In the present case, complainant-respondent No.1 has filed the complaint against the petitioners as well as other accused with regard to dishonour of cheques in question which were issued by the company.
Devi Anita 2013.08.22 17:04 I attest to the accuracy and integrity of this document Chandigarh Crl.Misc.No.M- 8376 of 2011 (O&M) 9 Crl.Misc.No.M-5835 of 2011 (O&M) Para 13.9 of the petition (CrM-M No.8376 of ) reads as under:-
"On 16.8.2007, the petitioners were all "independent non executive directors" on the board of directors of Koutons. A copy of the Form No.32 filed by Koutons with the Registrar of Companies, Delhi evidencing change in designation of the petitioners, to "independent non executive directors" on the board of directors of Koutons is annexed herewith and marked Annexure P-7."
A perusal of the reply submitted by respondent No.1 reveals that no reply has been given to the said paragraph. A perusal of Annexure P-7 (in CrM-M No.8376 of ) reveals that as per Form No.32, submitted by the company, petitioners have been described as 'independent non executive directors'. Although, in the complaint, it was mentioned that all the accused were responsible for day to day act, conduct and affairs of the business as well as acts and liabilities of the company but the fact remains that the petitioners were non-executive directors of the company. Now the petitioners have resigned from the company. In this regard, relevant form No.32 submitted by the company has been placed on record but the fact remains that even during the period when the petitioners remained directors of the company they were not looking after the day to day affairs of the company as they were non-executive directors of the company. As per the decisions of the Apex Court relied upon by the learned senior counsel as well as counsel for the complainant, the Devi Anita 2013.08.22 17:04 I attest to the accuracy and integrity of this document Chandigarh Crl.Misc.No.M- 8376 of 2011 (O&M) 10 Crl.Misc.No.M-5835 of 2011 (O&M) company as well as every person in charge of and responsible to the company for the conduct of the business of the company at the time of commission of offence, is deemed to be guilty of the offence. So far as petitioners are concerned, they were not responsible for day to day affairs of the company. In the complaint it has not been specifically spelt out as to in what manner the petitioners were responsible for conduct of the company at the time of commission of offence. The case of the petitioners is squarely covered by the decisions relied upon by learned senior counsel for the petitioners. The judgment relied upon by learned counsel for the respondents, on the other hand, fails to advance the case of the respondents.
Accordingly, both the petitions are allowed. Criminal complaint No. 12306 of 2010 dated 21.12.2010 as well as summoning order dated 21.12.2010 and criminal complaint No. 12228 of 2010 dated 16.12.2010 as well as summoning order dated 12.1.2011 and all the subsequent proceedings arising therefrom, qua the petitioners, are quashed.
(SABINA) JUDGE August 16, 2013 anita Devi Anita 2013.08.22 17:04 I attest to the accuracy and integrity of this document Chandigarh