Karnataka High Court
Trishul Developers vs M/S Smart Asset Services India Pvt Ltd on 5 January, 2023
Author: Hemant Chandangoudar
Bench: Hemant Chandangoudar
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 5TH DAY OF JANUARY, 2023
BEFORE
THE HON'BLE Mr. JUSTICE HEMANT CHANDANGOUDAR
CRIMINAL PETITION No.1621 OF 2017
BETWEEN:
1. TRISHUL DEVELOPERS,
A PARTNERSHIP FIRM,
HAVING ITS OFFICE AT MITTAL TOWERS,
NO.109, B WING, FIRST FLOOR,
NO.6, MG ROAD,
BANGALORE - 560 001.
REPRESENTED BY ITS
MANAGING PARTNER NIRAJ MITTAL.
2. NIRAJ MITTAL,
MANAGING PARTNER,
TRISHUL DEVELOPERS, MITTAL TOWERS,
NO.109, B WING FIRST FLOOR,
NO.6, MG ROAD,
BANGALORE - 560 001.
ALSO RESIDING AT 94/D, 9TH 'C' MAIN,
RMV EXTENSION,
BANGALORE - 560 080.
3. O.P.MITTAL,
TRISHUL DEVELOPERS,
MITTAL TOWERS,
NO.109, B WING, FIRST FLOOR,
NO.6, MG ROAD,
BANGALORE - 560 001.
ALSO RESIDING AT 94/D,
9TH C MAIN
RMV EXTENSION,
BANGALORE - 560 080.
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4. UMA MITTAL,
TRISHUL DEVELOPERS,
MITTAL TOWERS,
NO.109, B WING, FIRST FLOOR,
NO.6, MG ROAD,
BANGALORE - 560 001.
ALSO RESIDING AT 94/D,
9TH C MAIN, RMV EXTENSION,
BANGALORE - 560 080.
5. JYOTI MITTAL,
TRISHUL DEVELOPERS,
MITTAL TOWERS,
NO.109, B WING, FIRST FLOOR,
NO.6, MG ROAD,
BANGALORE - 560 001.
ALSO RESIDING AT 94/D,
9TH C MAIN,
RMV EXTENSION ,
BANGALORE - 560 080.
...PETITIONERS
(BY SRI.DHANANJAY JOSHI, SENIOR COUNSEL FOR
SRI.VACHAN H.V., ADVOCATE)
AND:
M/S SMART ASSET SERVICES INDIA PVT. LTD.,
COMPANY INCORPORATED UNDER
COMAPNIES ACT 1956,
HAVING ITS REGISTERED OFFICE
AT NO.151, 9TH MAIN,
6TH SECTOR, HSR LAYOUT,
BANGALORE - 560 102.
AND PREVIOUSLY AT NO.367,
14TH CROSS, SADASHIVANAGAR,
BANGALORE - 560 080.
...RESPONDENT
(BY SRI.MONESH KUMAR K.B., ADVOCATE FOR
SRI.VIJETHA R NAIK, ADVOCATE)
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THIS CRIMINAL PETITION IS FILED UNDER SECTION 482
OF CR.P.C. PRAYING TO SET ASIDE THE ORDER DATED
03.02.2016 ON THE FILE OF 25TH ADDITIONAL CHIEF
METROPOLITAN MAGISTRATE AT BANGALORE CITY (ANNEXURE
- A) IN C.C.NO.3207/2016 TAKING CONGNIZANCE OF THE
OFFENCE U/S 138 OF NEGOTIABLE INSTRUMENTS ACT AND
DIRECTING THE REGISTRATION OF A CRIMINAL CASE AGAINST
THE PETITIONERS UNDER SECTION 138 OF THE NI ACT.
THIS CRIMINAL PETITION COMING ON FOR ADMISSION
THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
The respondent-M/s Smart Asset Services India Private Limited has filed a private complaint under Section 200 Cr.P.C. for the offence punishable under Section 138 of the Negotiable Instrument Act, 1881 ('N.I. Act', for short) alleging that the cheques which were issued by the accused when presented for realisation were dishonoured for want of funds. Learned Magistrate after recording the sworn statement took cognizance of aforesaid offence and issued summons.
2. Taking exception to the same, accused Nos. 3 to 5 are before this Court. Learned senior counsel Sri. Dhananjay Joshi appearing for the petitioners would submit that there is no specific averment as against 4 accused Nos. 3 to 5 that they were in-charge and responsible for the affairs of the Company as on the date of the commission of the offence and they were involved in the commission of the offence. In the absence of specific allegation, the complaint as against accused Nos. 3 to 5 is not maintainable as specified under Section 142 of NI Act.
3. In support of the same, the learned senior counsel has placed a reliance on the decision of the Hon'ble Supreme Court, in the case of Katta Sujatha (Smt.) Vs. Fertilizers and Chemicals Travancore Limited and another reported in (2002) 7 Supreme Court Cases 655.
4. Learned senior counsel further submits that the alleged agreement entered into between the complainant and the accused-Company is unlawful and their exists, no legally enforceable debt so as to attract the commission of an offence under Section 138 of NI Act.
5. On the other hand, learned counsel appearing for complainant/respondent submits that specific 5 allegations are made against the accused Nos.3 to 5 in the statutory notice under Section 138 of NI Act which is part of the complaint and as such, the complaint is not hit by Section 142 of NI Act as contended by the learned senior counsel. He further submitted that whether accused Nos.3 to 5 were actually involved and in-charge of the affairs of the Company is a matter which requires to be considered after full-fledged trial and at this stage, the same cannot be considered.
6. In support of the same, the learned counsel has placed a reliance on the decision of the Hon'ble Supreme Court in the case of S.P.Mani and Mohan Dairy Vs. Dr. Snehalatha Elangovan reported in 2022 SCC OnLine SC 1238.
7. The learned counsel further submits that, whether the agreement entered is lawful or not the matter requires to be considered after full-fledged trial and sought for dismissal of the petition.
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8. I have examined the submissions made by the learned counsel for the parties.
9. Perusal of the statutory notice issued under Section 138 of NI Act indicates that there are no specific allegations against accused Nos. 1 and 2 and in the said notice, the complainant has only averred that accused Nos.3 to 5 are the partners of accused No.1 -partnership firm.
10. In reply to the notice, Accused Nos.3 to 5 have specifically taken up the following contention :
"My clients repeat that they are not involved in the affairs of the said Firm Trishul Developers and only Mr.Niraj Mittal manages and is in control of the said Firm. My clients state that Mr.O.P.Mittal and Mrs. Uma Mittal being Mr. Niraj Mittal's parents, Mrs. Jyoti Mittal, being Mr.Niraj Mittal's wife have been made partners of the said Firm by Mr.Niraj Mittal only out of respect and sentimental reasons. None of my clients are involved with the affairs of the Firm nor are they aware of the transaction/s referred to in your Notice under Reply."
11. In the notice, the compliant reads as follows:
"The first of you is a partnership Firm and the second of you is the managing partner. Second to fifth of you are in-charge of managing the first of 7 you. It is pertinent to note that the Second of you was representing and acting for and on behalf of the Third to the fifth of you in the entire transaction. It is also pertinent to note that the Second to fifth being the partners in the First of you are agents of each other. The first of you acting through the second of you, represented that you are a reputed builder and are constructing and developing a project known as "MITTAL PALMS", in Survey No.32/3, 32/4, 32/5, 33/3 and 33/4 of Shivanahalli Village, Yelahanka Hobli, Bangalore North Taluk, Bangalore."
12. Perusal of the complaint indicates that there are no specific allegations that the accused Nos.3 to 5 were either responsible or were in-charge of the affairs of the Company. The Hon'ble Supreme Court in the case of Katta Sujatha (Smt.) supra has held that the term "person in-charge" must mean that the person should be in overall control of the day-to-day business of the company or firm. The person should (sic may) be a party to the policy being followed by a Company and yet not be in-charge of the business of the Company or may be in- charge of but not in overall charge or may be in-charge of only some part of the business. In short the partner of a firm is liable to be convicted for an offence committed by 8 the Firm if he was in-charge of and was responsible to the firm for the conduct of the business of the firm or if it is proved that the offence was committed with the consent or connivance of, or was attributable to any neglect on the part of the partner concerned."
13. The Hon'ble Supreme Court in the case of S.B.Mani and Mohan Dairy supra has held as follows:
"45. Once the necessary averments are made in the statutory notice issued by the complainant in regard to the vicarious liability of the partners and upon receipt of such notice, if the partner keeps quiet and does not say anything in reply to the same, then the complainant has all the reasons to believe that what he has stated in the notice has been accepted by the noticee. In such circumstances what more is expected of the complainant to say in the complaint.
46. When in view of the basic averment process is issued the complaint must proceed against the Directors or partners as the case may be. But, if any Director or Partner wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he is really not concerned with the issuance of the cheque, he must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his contention. He must make out a case that making him stand the trial would be an abuse of process of court. He 9 cannot get the complaint quashed merely on the ground that apart from the basic averment no particulars are given in the complaint about his role, because ordinarily the basic averment would be sufficient to send him to trial and it could be argued that his further role could be brought out in the trial. Quashing of a complaint is a serious matter. Complaint cannot be quashed for the asking. For quashing of a complaint, it must be shown that no offence is made out at all against the Director or Partner.
47. Our final conclusions may be summarised as under:-
a.) The primary responsibility of the complainant is to make specific averments in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no legal requirement for the complainant to show that the accused partner of the firm was aware about each and every transaction. On the other hand, the first proviso to subsection (1) of Section 141 of the Act clearly lays down that if the accused is able to prove to the satisfaction of the Court that the offence was committed without his/her knowledge or he/she had exercised due diligence to prevent the commission of such offence, he/she will not be liable of punishment.
b.) The complainant is supposed to know only generally as to who were in charge of the affairs of the company or firm, as the case may be. The other administrative matters would be within the special knowledge of the company or the firm and those who are in charge of it. In such circumstances, the complainant is expected to allege that the persons named in the complaint are in charge of the affairs of the company/firm. It is only the Directors of the company or the partners of the firm, as the case may be, who have the special knowledge about the role they had played 10 in the company or the partners in a firm to show before the court that at the relevant point of time they were not in charge of the affairs of the company. Advertence to Sections 138 and Section 141 respectively of the NI Act shows that on the other elements of an offence under Section 138 being satisfied, the burden is on the Board of Directors or the officers in charge of the affairs of the company/partners of a firm to show that they were not liable to be convicted. The existence of any special circumstance that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial to show that at the relevant time they were not in charge of the affairs of the company or the firm.
c.) Needless to say, the final judgement and order would depend on the evidence adduced. Criminal liability is attracted only on those, who at the time of commission of the offence, were in charge of and were responsible for the conduct of the business of the firm. But vicarious criminal liability can be inferred against the partners of a firm when it is specifically averred in the complaint about the status of the partners 'qua' the firm. This would make them liable to face the prosecution but it does not lead to automatic conviction. Hence, they are not adversely prejudiced if they are eventually found to be not guilty, as a necessary consequence thereof would be acquittal.
d.) If any Director wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he/she is really not concerned with the issuance of the cheque, he/she must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his/her contention. He/she must make out a case that making him/her 11 stand the trial would be an abuse of process of Court."
14. In the instant case, there is no basic averments, much less specific averment either in the notice or in the complaint that the accused Nos.3 to 5 were in-charge or were responsible for the affairs of the Company.
15. In the absence of specific basic averments, the complaint is not maintainable as speicied under Section 142 of NI Act. The decision of the Hon'ble Supreme Court in the case of S.P.Mani and Mohan Dairy supra is not applicable to the facts of the case, since, in the aforesaid case, there was a specific averment in the statutory notice that the accused therein were responsible and in-charge of the affairs of the Company/Firm.
16. Whether the cheques were issued in pursuance of a lawful contract or not, the same requires to be considered after full-fledged trial and at this stage, the same cannot be gone into.
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In view of the above analysis, I am of the considered view that the continuation of the criminal proceedings insofar as it relates to accused Nos.3 to 5 will be an abuse process of law. Accordingly, the following order is passed :
ORDER
i) The criminal petition is allowed in-part;
ii) The impugned proceedings in C.C.No.3207/2016 pending on the file of XXV A.C.M.M., Bangalore, insofar as it relates to petitioner/accused Nos.3 to 5 is hereby quashed.
The learned Magistrate to conclude the trail within three months from the next date of hearing.
It is needless to state that the complainant as well as accused Nos.1 and 2 are at liberty to take all contentions that are available in law including the orders passed by the Arbitrator.
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In view of the disposal of the writ petition, pending I.A's do not survive for consideration. Accordingly, the same are dismissed.
Sd/-
JUDGE JS/-