Karnataka High Court
Sri Malka Komariah vs M/S Lakshmi Bio Fuels on 23 November, 2021
Author: M. Nagaprasanna
Bench: M. Nagaprasanna
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 23RD DAY OF NOVEMBER, 2021
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
CRIMINAL PETITION No.10201 OF 2017
BETWEEN
SRI MALKA KOMARIAH
S/O LATE SRI M.VENKATAIAH
AGED ABOUT 58 YEARS
CHAIRMAN AND MANAGING DIRECTOR
M/S KONARK POWER PROJECT
7TH FLOOR, MINERVA COMPLEX
NO.94, S.D.ROAD,
R/AT NO. 3-4-132/1,
SECONDERABAD - 500 003
ANDHARA PRADESH STATE
... PETITIONER
(BY SRI SAMPAT BAPAT, ADVOCATE (PHYSICAL HEARING))
AND
M/S LAKSHMI BIO FUELS
NO. 683, 4TH MAIN ROAD,
SRINAGARA,
BENGALURU - 560 050.
AND ALSO AT NO. 138/2,
KADABAGERE GATE,
MACHOHALLI VILLAGE,
MAGADI ROAD, BENGALURU - 560 091.
BY ITS PROP.: SMT. LAKSHMI DEVI,
W/O. BABULAL K,
AGED ABOUT 59 YEARS.
... RESPONDENT
(BY SRI PRASANNA B.R., ADVOCATE (PHYSICAL HEARING))
2
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF
CR.P.C., PRAYING TO QUASH THE CRIMINAL PROCEEDING IN
C.C.NO.17643/2017 ON THE FILE OF THE XII ADDITIONAL CHIEF
METROPOLITAN MAGISTRATE, BANGALORE, NOW TRANSFERRED
TO THE SMALL CAUSES JUDGE AND XXVI A.C.M.M., BENGALURU
IN SO FAR AS THE PETITIONER IS CONCERNED.
THIS CRIMINAL PETITION COMING ON FOR FURTHER
HEARING THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
The petitioner is before this Court calling in question the proceedings in C.C.No.17643 of 2017 pending before the XII Additional Chief Metropolitan Magistrate, Bangalore City, now transferred to Small Causes Judge and XXVI Additional Chief Metropolitan Magistrate, Bangalore.
2. Heard Sri Sampat Bapat, learned counsel for the petitioner and Sri B.R.Prasanna, learned counsel for the respondent.
3. Brief facts as projected by the complainant are as follows:-
3The respondent/complainant is a proprietary firm in the business of supply of raw materials. The petitioner/Chairman and Managing Director of M/s Konark Power Project (for short 'the Company') and the complainant had some business transaction, in furtherance of which, the 3rd accused one Mr. Venugopala Rao of the Company had issued certain cheques.
Those cheques having been dishonoured on account of insufficient funds, a notice was caused upon the Company on 03-02-2017. The petitioner turned a blind eye and a deaf ear to the notice that was issued by the respondent/complainant.
Finding that there was no response to the notice caused to be issued, the complainant registered a private complaint against the Company alleging dishonor of the cheques in P.C.R.No.7887 of 2017 which is now C.C.No.17643 of 2017. It is at that juncture the petitioner knocked the doors of this Court with the present criminal petition.
4. The solitary submission made by the learned counsel for the petitioner is that at the time when cheques were issued, the 4 petitioner was not the Managing Director of the Company as the complaint alleges that he was only a Director and being a Director, the petitioner would not be aware of the day-to-day affairs of the Company, one of which was issuance of cheques in the business transaction.
5. On the other hand, the learned counsel appearing for the complainant would contend that the petitioner was not the Director but the Managing Director of the Company who has signed the cheques and therefore, it is a matter of trial for the petitioner to contend that he is not the Managing Director but was only a Director of the Company.
6. I have given my anxious consideration to the submissions made by the respective learned counsel appearing for the parties and perused the material on record.
7. Since the entire issue springs from the complaint and the ground in the petition also springs from the complaint, some 5 of the paragraphs of which are extracted hereunder for the purpose of quick reference:
"2........ That there was a due of an amount of Rs.74,48,992/-towards the supply of raw materials. For the payment of the said amount, the accused No.3 being the authorized signatory of accused company signed and issued a cheque bearing No.002707 dated 9-01-2017 drawn on ICICI Bank, Tumkur Branch.
3.The complainant submits that, the accused had issued the above said cheque promising that the same would be honoured on its presentation. However when the aforesaid Cheque was presented for collection to the complainant's Bank i.e., Bank of India, Hanumanthanagara Branch, Bengaluru, the aforesaid cheque has been dis-honoured by the accused Bankers i.e., ICICI Bank and returned with an endorsement "FUNDS INSUFFICIENT" dated 10-01-2017.
4. It is submitted that coming to know of the dishonor of the said cheque, the complainant issued legal notice dated 03-02-2017, by R.P.A.D. calling upon the accused to make payments towards the cheque amount of Rs.74,48,992/- within 15 days from the date of receipt of the said legal notice failing which necessary proceedings would be initiated against the accused for the recovery of the amount due against the said cheque as per law. The legal notices sent by RPAD have been served to the accused No.1 and 2 on 06-02-2017. However, the notice sent to the accused No.3 and the unit of the accused No.1 situated at Ballapura Village as mentioned in the cause title returned un-served with the postal shara "addressee left without information and factory lock out". The accused No.1 and 2 in spite of serviced of notice have not replied to the notice and failed to pay the amount in due with the sole intention to defraud and to cause financial loss to the complainant.6
5. The complainant further submits that on 21.09.2016 the accused No.3 being the authorized signatory of accused No.1, company issued a letter in favour of the complainant in respect of the amount in due and issuance of post dated cheque. In the said letter, the accused has mentioned that the post dated cheque dated 15-10-2016, even though said cheque was dated 09.01.2017. The accused No.2 being the Chairman and Managing Director of the first accused, and the respondents No.3 being the signatory of the cheque as well as managing the affairs of the bio-energy unit of First accused company situated at Ballapura Village (as stated in the cause title) are aware of the entire transactions and on account of want of due diligence on their part, the debt in question remained unpaid by the accused company. It is submitted that the accused No.2 and 3 are equally responsible for the day-to-day affairs of the accused company and they are in-charge of managing, control or conduct of business or having responsibility to the management and administration of the first accused company."
In the afore-extracted complaint the complainant narrates that accused No.2 being the Chairman and Managing Director of the 1st accused i.e., the petitioner and accused No.3 being the signatory to the cheques and managing the affairs of bio-energy unit were liable for prosecution under Section 138 of the Negotiable Instruments Act. Based upon the said complaint, the aforesaid proceedings have been initiated and are on.
78. The learned counsel appearing for the petitioner would contend that the petitioner is only a Director and not the Managing Director. The cheques issued by the petitioner Company on 9-01-2017 which were drawn on ICICI Bank for a sum of Rs.74,48,992/- against invoice Nos.1509, 1565, 1595 and 1633. The resignation letter of the petitioner is dated 28-04-2017 from the office of the Director of M/s Konark Power Project Limited. This is officially accepted and notified to become effective from 28-04-2017. Therefore, the resignation of the petitioner from the Company comes about under Section 168 of the Companies Act on 28-04-2017. The cheques had already been issued long before that date.
9. The contention of the learned counsel for the petitioner is that the petitioner was only a Director and not the Managing Director. Disputed questions of fact galore in the case at hand, as the petitioner though contends that he was only the Director of the Company, he describes himself in the present petition as the Chairman and Managing Director of the Company. The 8 petitioner was alleged to be the signatory of the cheques as well.
If the petitioner was only a Director, it is for him to prove the same before the trial Court and come out clean that he was only a Director and not the Chairman and Managing Director. As is alleged in the petition itself, the petitioner narrates that he was made a Chairman and Managing Director of the Company. There is no document that is so unimpeachable that would warrant interference at the hands of this Court at this stage of the proceedings.
10. Insofar as several judgments relied on by the learned counsel for the petitioner in the cases of GUNMALA SALES PRIVATE LIMITED v. ANU MEHTA AND OTHERS - (2015) 1 SCC 103 and S.M.S. PHARMACEUTICALS LIMITED v. NEETA BHALLA AND ANOTHER - (2005) 8 SCC 89 or even the case of N.RANGACHAR v. BHARAT SANCHAR NIGAM LIMITED -
(2007) 5 SCC 108, the present stage is not the stage at which the said judgments would become necessary to be considered.
911. It is the latest judgment of the Apex Court in the case of ASHUTOSH ASHOK PARARAMPURIYA AND ANOTHER v.
GHARRKUL INDUSTRIES PVT.LTD. AND OTHERS1 which is germane to be considered and not the ones that are noticed (supra). The Apex Court in the aforesaid judgment has held as follows:
"21. After so stating, the Court analysed Section 141 of the NI Act and after referring to certain other authorities answered a reference which reads as follows:--
19(a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied.
(b) The answer to the question posed in sub- para (b) has to be in the negative. Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as 1 2021 SCC Online SC 915 10 there is no deemed liability of a director in such cases.
(c) The answer to Question (c) has to be in the affirmative. The question notes that the managing director or joint managing director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under subsection (2) of Section 141."
22. The same principle has been reiterated in S.K. Alagh v. State of Uttar Pradesh; Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd. and GHCL Employees Stock Option Trust v. India Infoline Limited.
23. In the light of the ratio in S.M.S. Pharmaceuticals Ltd. (supra) and later judgments of which a reference has been made what is to be looked into is whether in the complaint, in addition to asserting that the appellants are the Directors of the Company and they are incharge of and responsible to the Company for the conduct of the business of the Company and if statutory compliance of Section 141 of the NI Act has been made, it may not open for the High Court to interfere under Section 482 CrPC unless it comes across some unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be 11 abuse of process of Court. Despite the presence of basic averment, it may come to a conclusion that no case is made out against the particular Director for which there could be various reasons.
24. The issue for determination before us is whether the role of the appellants in the capacity of the Director of the defaulter company makes them vicariously liable for the activities of the defaulter Company as defined under Section 141 of the NI Act? In that perception, whether the appellant had committed the offence chargeable under Section 138 of the NI Act?
25. We are concerned in this case with Directors who are not signatories to the cheques. So far as Directors who are not the signatories to the cheques or who are not Managing Directors or Joint Managing Directors are concerned, it is clear from the conclusions drawn in the afore-stated judgment that it is necessary to aver in the complaint filed under Section 138 read with Section 141 of the NI Act that at the relevant time when the offence was committed, the Directors were in charge of and were responsible for the conduct of the business of the company.
26. This averment assumes importance because it is the basic and essential averment which persuades the Magistrate to issue process against the Director. That is why this Court in S.M.S. Pharmaceuticals Ltd. (supra) observed that the question of requirement of averments in a complaint has to be considered on the basis of provisions contained in Sections 138 and 141 of the NI Act read in the light of the powers of a Magistrate referred to in Sections 200 to 204 CrPC which recognise the Magistrate's discretion to take action in accordance with law. Thus, it is imperative that if this basic averment is missing, the Magistrate is legally justified in not issuing process.
27. In the case on hand, reading the complaint as a whole, it is clear that the allegations in the complaint are that at the time at which the cheques were issued by the 12 Company and dishonoured by the Bank, the appellants were the Directors of the Company and were responsible for its business and all the appellants were involved in the business of the Company and were responsible for all the affairs of the Company. It may not be proper to split while reading the complaint so as to come to a conclusion that the allegations as a whole are not sufficient to fulfil the requirement of Section 141 of the NI Act. The complaint specifically refers to the point of time when the cheques were issued, their presentment, dishonour and failure to pay in spite of notice of dishonour. In the given circumstances, we have no hesitation in overruling the argument made by the learned counsel for the appellants.
28. Indisputedly, on the presentation of the cheque of Rs. 10,00,000/-(Rupees Ten Lakhs only) dated 2nd June 2012, the cheque was dishonoured due to "funds insufficient" in the account and after making due compliance, complaint was filed and after recording the statement of the complainant, proceedings were initiated by the learned Magistrate and no error has been committed by the High Court in dismissing the petition filed under Section 482 CrPC under the impugned judgment.
29. The submission of learned counsel for the appellants that they are the non-executive Directors in the light of the documentary evidence placed on record by Form No. 32 issued by the Registrar of Companies, both the appellants are shown to be the Directors of the Company, still open for the appellants to justify during course of the trial.
30. In our considered view, the High Court has rightly not interfered in exercise of its jurisdiction under Section 482 CrPC for quashing of the complaint.
31. Before concluding, we would like to observe that the proceedings could not be processed further in view of the interim order passed by this Court dated 17th October 2014 and because of the instant appeals, the other cases instituted by the respondent(s)-
13complainant have been held up before the trial Court. Since these are the old cases instituted in the year 2012 and could not be processed further because of the pendency of the appeals in this Court, we may consider it appropriate to observe that let all the three cases of which a reference been made in para 17 of this Judgment be clubbed together and be disposed of expeditiously as possible on its own merits in accordance with law without being influenced/inhibited by the observations made by us in the present judgment not later than six months from the date parties record their attendance before the trial Court. All the parties shall record their attendance before the concerned trial Court on 22nd November, 2021.
32. Consequently, the appeals fail and are accordingly dismissed."
In the light of the subsequent judgment of the Apex Court, the petitioner has to come out clean in the trial. I do not find any merit to interfere with the pending proceedings in C.C.No.17643 of 2017 before the XII ACMM Court at Bangalore, now transferred to Small Causes Judge and XXVI ACMM Court at Bangalore.
12. Therefore, in the light of the aforesaid reasons and the judgment of the Apex Court, the Criminal Petition lacks merit and is dismissed.
14It is made clear that the observations made in the course of the order, in these proceedings, are to be treated to be confined to the proceedings under Section 482 of the Cr.P.C.
only and any other proceedings pending before any other judicial fora shall not be influenced by the observations made in the course of this order.
In view of disposal of the petition, I.A.No.1/2017 does not survive for consideration and accordingly, stands disposed.
Sd/-
JUDGE bkp CT:MJ