Delhi District Court
M/S. Om Marketing vs A-1) M/S. Mark Medicines Pvt. Ltd on 22 September, 2014
IN THE COURT OF SH. ASHU GARG,
Judge, Small Causes Court -cum- Addl. Senior Civil Judge -cum-
Guardian Judge -cum- Metropolitan Magistrate (New Delhi),
Patiala House Courts, New Delhi
CC No. 216/13
Unique Case ID No. 02403R0543812003
Date of Institution: 27.11.2002 [OLDEST]
Date of reserving judgement: 05.09.2014
Date of pronouncement: 22.09.2014
In re:
M/s. Om Marketing
24/4814, Mathur Lane,
Ansari Road, Daryaganj,
Delhi ... Complainant
versus
A-1) M/s. Mark Medicines Pvt. Ltd.
[Under Liquidation]
A-2) Dr. Joginder Mandal, Managing Director
[Declared Absconder]
A-3) Sh. Taranjeet Singh, Director
35, Hope Apartments,
Sector-15. Part-II, Gurgaon, Haryana
A-4) Sh. Mahendra Sarup, Director
C-898, D/A, Sushant Lok, Phase-I,
Gurgaon, Haryana ... Accused persons
CC No. 216/13 Page 1 of 14
JUDGMENT:
1.The present is a complaint filed under section 138 NI Act with respect to dishonour of three cheques no. 158821, 158822 and 158823, 30.04.2002, 31.5.2002 and 30.6.2002, respectively, for a sum of Rs. 2,50,000/- each, drawn on the Punjab National Bank, Kasturba Gandhi Marg, New Delhi, for the reasons "Exceeds Arrangement". The cheques were issued in favour of the complainant M/s. Om Marketing which is stated to be a proprietorship firm, on behalf of the accused no. 1 company M/s. Mark Medicines Pvt. Ltd. The present complainant has been filed by Sh. Rajinder Kumar Jindal, attorney of the Proprietor Sh. Naveen Kumar Jindal. The same has been filed against the accused no. 1 company M/s. Mark Medicines Pvt. Ltd., its Managing Director (accused no. 2) Dr. Joginder Mandal (since declared Absconder) who happens to be the signatory of the cheques, its Director Sh. Taranjeet Singh (accused no. 3) and its erstwhile Director Sh. Mahender Sarup (accused no. 4).
2.At the stage, it is also pertinent to note that accused no. 1 company is stated to be under liquidation. The record shows that upon submission of the parties, the court had also issued notice to the official liquidator. Written submissions were filed by the Asstt. Official Liquidator Sh. S. K. Verma and it was informed that the accused no. 1 company was ordered to be wound up by the Hon'ble High Court of Delhi vide order dated 05.05.2005. As far as the status of a company under liquidation is concerned, no suit or proceedings, CC No. 216/13 Page 2 of 14 including criminal proceedings can continue against such a company when a provisional liquidator has been appointed by the concerned company court, unless the leave of that court is obtained. Section 446 of the Companies Act, 1956 governs the said position. In the present complaint, no such leave has been obtained against the accused no. 1 company and as such, the court cannot proceed against the said company. Therefore, the proceedings against the accused no. 1 company have to remain stayed till the time any such leave is obtained to proceed against it. Further, since the accused no. 2 has already been declared an absconder, the present judgement is with respect to only the accused no. 3 and 4.
3.As per the complaint, the complainant business concern was appointed as its Carrying & Forwarding Agents by the accused company, to receive stocks of the company at its warehouse, store them in its godowns and forward the same in the manner directed by the accused company. An agreement dated 06.05.2000 was executed between them. The complainant was entitled to commission on sale proceeds and the complainant paid a refundable security deposit of Rs. 10 lacs. The said security deposit was to be refunded to the complainant within 30 days on expiry/termination of the agreement. It is averred that the security deposit became refundable due to termination of the agreement on account of non-renewal and undue delay and failure on the part of the accused. The accused then paid Rs. 2.5 lac to the complainant and issued three cheques bearing no. 117869, 117870 and 117871, dated 15.10.20111, 16.11.2001 and CC No. 216/13 Page 3 of 14 16.12.2001, respectively for a sum of Rs. 2.5 lac each. However, vide letter dated 17.12.2001, the accused requested the complainant to return those cheques due to liquidity problems and three post-dated cheques (the cheques in question) were sent vide letter dated 20.03.2002. The cheques were presented at the instructions of the accused but they returned unpaid with the remarks "Exceeds Arrangement" vide memo dated 03.10.2002. Subsequently, demand notice dated 17.10.2002 was sent to the accused persons but despite expiry of fifteen days from the service of demand notice the payment was not made, and hence, the present complaint was filed in the court.
4.Based on the pre-summoning evidence, the accused persons were summoned by the court vide order dated 30.11.2000. Separate notices of accusation under section 251 CrPC for the offence punishable section 138 NI Act were framed against the accused no. 3 and 4 on 05.11.2012 and 06.02.2013. Both of them pleaded not guilty and claimed trial. Accused no. 3 admitted his being a Director in the accused no. 1 Company but claimed that he was not managing its day to day affairs. He stated that he was working as Director (Operations) and the complainant was not known to him or ever interacted with him. Accused no. 4 on the other hand took stand that he had worked as Director of the company from 17.07.2000 to 07.11.2000 only and had already resigned when the cheques had been presented. The accused persons denied their liability to make any payment to the complainant.
CC No. 216/13 Page 4 of 145.In terms of the judgement titled as Rajesh Agarwal v. State [171(2010) DLT 51], the accused persons moved an application under section 145(2) NI Act. Order dated 13.03.2013 shows that the applications were kept for consideration on 14.03.2013 but on that day, no formal order allowing the applications was passed and rather the CW-1 was allowed to be examined and cross-examined. Be that as it may, no party has any issues over this.
6.The complainant examined Sh. Rajinder Kumar Jindal as CW-1. He tendered his affidavit Ex. CW-1/A and reiterated the contents of the complainant. He proved the necessary documents including the cheques in question, cheque returning memo, legal notice postal receipts, etc as well as the reply to the legal notice received from accused no. 4. He was duly cross-examined by the respective Ld. Counsel for the accused no. 3 and 4 wherein he denied that these accused persons had been falsely implicated.
7.CW-2 Ramesh Chand was examined from Central Bank of India, Bhagirath Place Branch, who produced the summoned bank record Ex. CW-2/A pertaining to the account of the accused no. 1 company.
8.Statements of the accused persons under Section 313 CrPC were recorded on 17.04.2014 wherein they denied their liability and pleaded innocence. Accused no. 3 stated that he had no concern with the cheques in question and was not aware why the same had been issued. He stated that he was not aware of any dealing between the accused CC No. 216/13 Page 5 of 14 company and the complainant and claimed that he was and Executive Director in the company. On the other hand, accused no. 4 reiterated that he had resigned from the company on 07.11.2000 and was not aware of the transactions or deals as he was handling the technical matters of the company during his tenure. They chose to lead evidence in defence.
9.Accused no. 4 and accused no. 3 examined themselves as defence witnesses and deposed as DW-1 and DW-2 respectively. They reiterated their stands as taken in their statements under section 313 CrPC.
10.It is in these circumstances that the Ld. Counsel for the complainant has argued that complainant has been able to establish its case against the accused persons as the evidence of the complainant, as corroborated by the documentary evidence and coupled with the presumptions of law in his favour, would be sufficient to make out an offence against them.
11.On the other hand, respective Ld. Counsel for the accused persons have argued that no such case in made out against the named accused persons. It is submitted that there are inherent weakness in the complaint and the evidence of the CW-1 whereby the original documents have not been proved on record. It is further contended that the record is silent as to the roles of the named accused persons so as to ascertain their liability with respect to dishonour of the cheques CC No. 216/13 Page 6 of 14 in question. It is argued that in the absence of any specific role to the directors as to their being in the charge or responsible for the affairs of the company, vicarious liability cannot be attributed to them.
12.I have heard the arguments advanced by both the sides and have carefully perused the material available on record.
13.It is an admitted position that the accused persons are not the signatories to the cheques in question. They are stated to be vicariously liable for the acts of the accused no. 1 company. In case of a company, its Directors, officers or other employees can be held vicariously liable with the aid of section 141 NI Act. However, it is well settled that any and every Director, officer or employee of a company cannot be held liable just because he happens to be in service of the said company. A company is a separate juristic entity and is run by its officials. All such officials cannot be held to be responsible for every act of the company just because of the reason that they hold a particular post. The burden would be upon the complainant only to aver and prove by leading positive evidence to show that such an employee or a Director was in charge of or responsible for the day to day affairs of the accused company so as to hold him vicariously liable. In the absence of such a role specifically attributed to them, any or every Director, officer or employee of a company cannot be held liable. It is also well settled that the complainant has to explain by bringing on record the necessary facts that how and in what manner such persons can be held liable and a CC No. 216/13 Page 7 of 14 bald averment that they were so responsible for the conduct of affairs of the company, would not serve the purpose. The Hon'ble Supreme Court of India in SMS Pharmaceuticals Ltd. v. Neeta Bhalla [(2005) 8 SCC 89] has laid down that it is necessary for the complainant to specifically aver in the complaint that at the time when the offence was committed, the person accused was in charge of or responsible for the conduct of business of the company. Without this averment being made, requirements of section 141 NI Act would not be satisfied. All the Directors in a company (or other officers or employees) cannot be deemed to be in charge of or responsible for the conduct of business of the company. With the exception of a Managing Director or the signatory of the cheque, to implicate any other person as vicariously liable, there has to be specific averment and proof of his role.
14.The Hon'ble Supreme Court of India subsequently in the case titled as National Small Industries Corporation Ltd. v. Harmeet Singh Paintal [167 (2010) DLT 143] held that vicarious liability on the part of a person must be pleaded and proved and not inferred. The said liability does not arrive merely on the basis of designation or office which a person holds in a company and a bald cursory statement in a complaint that a Director made an accused was in charge of or responsible to the company for the conduct of its affairs, without anything more as to his role, would not be sufficient.
CC No. 216/13 Page 8 of 1415.As far as the accused no. 3 is concerned, it is seen that the complaint is totally silent as to his role and involvement in the transaction in question. It is to be noted that specific role has been attributed to the accused no. 2 (since declared absconder) who was the Managing Director and signatory of the cheques and who also wrote letters to the complainant. Specific role has also been attributed to the accused no. 4 to the effect that he was one of the Directors at the time of signing/execution of the agreement. But no such role has been attributed to the accused no. 3, except making a bald averment that he was one of the Directors and "responsible and accountable for the day to day functioning, management, administration and finance of the accused company". Allegations have been levelled generally against all the accused persons, without reference to anyone in particular, that they had "deliberately, mischievously and with mala fide intention issued the three cheques" and that they had "repeatedly assured that the cheque/cheques will be encashed". Further, no such specific role has been mentioned in the affidavit Ex. CW-1/A.
16.It is only during his cross-examination that the CW-1 deposed that he was called by accused no. 2 and 3 a number of times at different offices. CW-1 also stated that a meeting had taken place in the office of accused no. 1 company wherein accused no. 2 and 3 were present along with other officers of the company. Other than this, there is no specific role of accused no. 3. In my considered view, such averments made by CW-1 during his cross-examination, which were never a part of his complaint and affidavit, would not be sufficient to hold that the CC No. 216/13 Page 9 of 14 accused no. 3 was in charge of or responsible for the conduct of business of the accused no. 1 company. Even if the accused no. 3 had called the CW-1 to the offices of the company, or was present at one of the meetings, that would not make him responsible for the affairs of the business of the company, qua the transaction in question. It is to be noted that the agreement Ex. CW-1/B was executed between the complaint and the accused no. 2 only. No letter was written by accused no. 3 to the complainant. The letters placed in record by the complainant, Ex. CW-1/F and Ex. CW-1/G were written by accused no. 2 and one Rajesh Goel (General Manager, Finance) respectively and not by the accused no. 3. There is no documentary evidence to show that the accused no. 3 had any role to play in the transaction in question. The cheques in question do not bear his signatures and they were never handed over to the complainant by him. There is nothing that could connect the accused no. 3 with the issuance of the cheques in question or their dishonour.
17.It is also to be understood that the court is concerned with the role of the accused "at the time of commission of the offence". The cheques in question were issued in the year 2002. As per the complainant, the same had been issued towards refund of the security deposit in terms of agreement dated 06.05.2000. In such a position, even if any person had some involvement or role with the execution of that agreement or even its non-performance, the same cannot be automatically extended to dishonour of the cheques. This is because execution of an agreement cannot be taken as an offence, and as such, CC No. 216/13 Page 10 of 14 time of execution of the agreement shall not determine the time of commission of the offence. In the present complaint and even in the evidence, no role has been assigned to the accused no. 3 at the time of commission of the offence. There is no material to corroborate the general averments in the complaint that the accused no. 3 (or any other accused person for that matter) had deliberately, mischievously and with mala fide intention issued the cheques in question or had repeatedly assured that the cheques would be encashed. Such sweeping allegations would not be sufficient to hold a person criminally liable.
18.Therefore, reliance of the Ld. Counsel for the complainant on document Ex. DW-2/A which is the identity card of the accused no. 3 showing his designation as Director (Operations) valid till Feb 2002, or Ex. DW-2/B which is salary certificate dated nil issued to him by the company, or Ex. DW-2/C1 which is power of attorney signed by the accused no. 3 in favour of the complainant on 31.05.2000, or Ex. DW-2/C2 which is a copy of Memorandum and Articles of Association of the accused no. 1 company certified to be true by the accused no. 3, would not give any benefit to the complainant. None of these documents would give rise to an inference that the accused no. 3 had any role to play in issuance or dishonour of the cheques in question.
19.There is no force in the submissions of the Ld. Counsel for the complainant that every Director is presumed to have committed the CC No. 216/13 Page 11 of 14 offence and that the burden would be upon such Director to prove otherwise. There is no such presumption and the initial burden is only upon the complainant to aver and prove that any particular Director was in charge of or responsible for the conduct of the business of the company at the relevant time when the offence was committed. The precedent cited by the Ld. Counsel for the complainant titled as Anil Sachar v. Shree Nath Spinners Pvt. Ltd. [(2011) 13 SCC 148] would give no benefit to the complainant as in that case, the accused was signatory of the dishonoured cheque.
20.Thus, it can be said that the material on record is not sufficient to attribute vicarious liability to the accused no. 3 for dishonour of the cheques in question issued on behalf of the accused no. 1 company and signed by the accused no. 2.
21.Now moving to the accused no. 4. It is an admitted position that the accused no. 4 had resigned from the post of Director of the accused no. 1 company on 07.11.2000. He had also replied to the demand notice and had sent relevant documents to this effect with his reply. He deposed as DW-1 and reaffirmed his stand on oath. The complainant never denied this position and never took a stand that the documents filed by him were false. It has been never claimed or suggested by the complainant that he had not so resigned or was a director of the accused no. 1 company at the time of commission of the offence. It is thus clear that the accused no. 4 had resigned from the company long prior to issuance of the cheques in question.
CC No. 216/13 Page 12 of 1422.The only averment of the complainant qua accused no. 4 is to the effect that he was a director at the time when the agreement Ex. CW-1/B was executed. Applying the law as discussed above, it is apparent that this fact of his being a director at that time would not be sufficient to fasten vicarious liability upon him for dishonour of the cheques in question. There is no specific role attributed to him and there is nothing to suggest that he was in charge of or responsible for the business of the accused no. 1 company when the cheques had been issued or dishonoured. Every Director, officer or employee of a company who was working with it at the time of execution of the agreement dated 06.05.2000 cannot be made liable for the dishonour of the cheques in the year 2002 without any other role or involvement attributed to them in commission of the offence. Thus, there is no material to hold the accused no. 4 liable for the offence.
23.In view of the above discussion, it can be said that the complainant has not been able to establish that the accused no. 3 and 4 were in charge of or responsible for the business of the accused no.1 company so as to make them vicariously liable for dishonour of the cheques in question. The accused no. 3 and 4 are therefore acquitted of the charges. Their bail bonds shall however remain in force for the next six months in terms of section 437-A, CrPC.
24.File be consigned to the record room. It is made clear that the proceedings against accused no. 1 company shall remain stayed till CC No. 216/13 Page 13 of 14 leave of the concerned company court is obtained as per section 446 of the Companies Act. The proceedings shall also revive as and when the accused no. 2, who has been declared as Absconder, is arrested.
Announced in the open court this 22nd day of September 2014 ASHU GARG JSCC/ASCJ/GJ/MM (New Delhi), PHC CC No. 216/13 Page 14 of 14