Gujarat High Court
Rahul Chaturbhai Vaghasia vs State Of Gujarat & on 3 February, 2017
Author: Biren Vaishnav
Bench: Biren Vaishnav
R/CR.MA/5481/2011 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CRIMINAL MISC.APPLICATION NO. 5481 of 2011
With
CRIMINAL MISC.APPLICATION NO. 5482 of 2011
With
CRIMINAL MISC.APPLICATION NO. 5963 of 2011
With
CRIMINAL MISC.APPLICATION NO. 5964 of 2011
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE BIREN VAISHNAV
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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RAHUL CHATURBHAI VAGHASIA....Applicant(s)
Versus
STATE OF GUJARAT & 1....Respondent(s)
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Appearance:
MR AR GUPTA, ADVOCATE for the Applicant(s) No. 1
MR. HIMANSHU K PATEL, ADDITIONAL PUBLIC PROSECUTOR for the
Respondent(s) No. 1
THAKKAR AND PAHWA ADVOCATES, ADVOCATE for the Respondent(s)
No. 2
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R/CR.MA/5481/2011 CAV JUDGMENT
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CORAM: HONOURABLE MR.JUSTICE BIREN VAISHNAV
Date : 03 /02/2017
CAV JUDGMENT
1 Since all these Applications involve a common issue and have been clubbed together at the time of admission,they are also being disposed of by this common judgement.
2 M/s Kandla Logistics Pvt.Ltd a Company registered under the Act, are in the business of Clearing, Forwarding and Shipping agents.(hereinafter referred to as the "complainant") In their course of business, they carried out clearing and forwarding of the Cargo from Kandla and Mundra of a Company being Vaghasia Company Ltd.(hereinafter referred to as the "accused no.1"). Bills were sent for work done. The Accused No.1 is said to have issued two cheques, bearing nos.009423 and 009424 dated 31/03/2010 for a sum of Rs.17,00,000 and Rs.75,000,respectively,drawn on Union Bank Of India in favour of the complainant towards the Bills raised by the complainant.
Page 2 of 26 HC-NIC Page 2 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT 3 Both cheques were dishonoured by the Rajkot Branch of the Union Bank Of India with an endorsement "TODAY'S OPENING BALANCE IS INSUFFICIENT".Notices were issued by the complainant under Section 138 (b) of the Negotiable Instruments Act,1881,which were refused by all except the accused no.4.who did not claim the same.
4 Since two cheques were issued which had been dishonoured, two separate complaints were filed by the Complainant therefore before the Additional Chief Judicial Magistrate,First Class,Gandhidham. They were numbered as Criminal Case No.s 995 of 2010 and 996 of 2010,respectively.
5 In the Complaints so filed the Company,namely Vaghasia Limited was arrayed as Accused No.1.Jamnadas Karshanbhai Ukani was accused no.2,who according to the complaiant was a Director who had signed the cheque. Rahul Chaturbhai Vaghasia and Ghanshyam Chaturbhai Vaghasia were arrayed as Accused Nos3 and 4 respectively and one Manoj Kachrabhai Vasoya was arrayed as Accused No.5.
Page 3 of 26 HC-NIC Page 3 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT 6 Rahul Chaturbhai Vaghasia,Accused No.3 in Criminal Complaint Nos.995 and 996 of 2010 has come before this Court by filing Criminal Miscellaneous Applications NO. 5481 of 2011 and Criminal Miscellaneous Application No.5482 of 2011. 7 Ghanshyam Chaturbhai Vaghasia, Accused No.4, similarly has approached this Court by filing Criminal Miscellaneous Application Nos. 5963 of 2011 and 5964 of 2011.
8 Both these Accused have invoked the jurisdiction of this Court under Section 482 of the Code of Criminal Procedure and requested that the Court quash these two complaints against the two accused as,they were not in charge of the affairs of the Company and there is no allegation in the complaint that the two were responsible for the affairs of the Company. Apart from the fact that the procedure for filing the complaint having not been followed as required by a judgement of this Court reported in 2005(1) GLH 373,the complaints did not fulfil the Page 4 of 26 HC-NIC Page 4 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT basic requirments of Sections 138 and 141 of the Negotiable Instruments Act,1881, inasmuch as, the complaint did not fulfil the basic requirement of an averment in such complaints that the accused nos.3 and accused nos 4 were in charge of and responsible for the affairs of the Company. The issuance of process by the Learned Magistrate therefore was not warranted against the accused in view of the basic flaws in the complaint so filed.
9 Mr.A.R.Gupta,learned Advocate for the Applicants in all these Applications has taken me through the contents of the complaints and contended that:
a). That the only averment in the complaint is that the accused nos.2 to 5 are Directors of the Company.
b).No specific averment is made that both the Applicants of Criminal Miscellaneous Applications i.e Accused Nos 3 and 4 were in charge of and responsible of the affairs of the Company and therefore the basic requirement of Section 141 was not satisfied.
c).Even as per the averments in the complaint, Page 5 of 26 HC-NIC Page 5 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT particularly para 3 of the complaint clearly stated that the accused no.2,being a director and responsible person for the conduct of business of the accused no.1 M/S Vaghasia Limited, has issued a cheque. Therefore even as per the case in the complaints,only accused no.2 was the Director who could be arrayed.
d).Both, accused nos.3 and 4 admittedly even as per the cause title are residing in the United States of America and no specific role has been attributed to them as Directors of the Company. Even otherwise they were not in charge of the affairs of the Company and therefore the complaints ought to be quashed as the pendency of such complaints against the accused nos.3 and 4 were of no use when admittedly it was the accused no.2 who even as per the complainant was a signatory of the cheque and responsible for the day to day affairs.
In order to support these contentions,Learned Advocate Mr.A.R.Gupta has relied on the decision of the Supreme Court,in the case of K.K.Ahuja Versus Page 6 of 26 HC-NIC Page 6 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT V.K.Vora and Another reported in (2009) 10 SCC 48 and in the case of Gunmala Sales Private Limited Versus Anu Mehta and Others reported in (2015) 1 SCC 103. He has also relied in the case of Standard Chartered Bank Versus State Of Maharashtra and Others reported in (2016) 6 SCC 62.
9.1 Mr.Nandish Thakkar, learned advocate has appeared on behalf of M/S Thakkar And Pahwa Advocates, learned advocates for Respondent No.2, Original Complainant. According to him the complaint against the Accused Nos. 3 and 4 was maintainable as ingredients of Section 138 and Section 141 were satisfied. Para 2 of the complaint clearly stated that the accused nos.2 to 5 are the Directors of the accused no.1 Company and further as stated in the complaint, notices were refused by all accused except accused no.4.These statements made in the complaint are sufficient enough to satisfy the basic requirement and therefore this Court ought not to quash the complaint in exercise of its powers under Section 482 of the Code of Criminal Procedure.
Page 7 of 26 HC-NIC Page 7 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT 9.2 Mr.Nandish Thakkar also relied on the decision in the case of Gunmala Sales (supra) to contend that the issue has now been diluted and merely on a failure to make the basic averment would not deter a trial and, only once the facts are tested in the trial would a particular conclusion be possible and the complaint at the threshold should not be interjected and quashed,without the accused nos.3 and 4 being made to undergo a trial.
10 Based on the submissions so made,this Court,would have to appreciate whether,the Complaints so filed,stand the test of making that basic averment, which is an essential requirement or making of such an averment though essential, something more in order to persuade the High Court whether to quash or not to quash the process needs to be stated.
11 Judgments in the case of K.K.Ahuja and Gunmala Sales (supra) will have to be read to come to a particular conclusion.
11.1 The question before the Supreme Court in Page 8 of 26 HC-NIC Page 8 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT the case of K.K.Ahuja (supra) was whether the Complaint filed at the instance of the appellant, visavis Accused No.9 could be maintainable. Accused no.9 therein was the Deputy General Manager of the Company. He approached the High Court under Section 482 of the Code of Criminal Procedure stating that the Complaint be quashed against him as he was not "in charge of and was responsible to the Company for the conduct of the business of the Company".In absence of any averment therefore as to how the accused was in charge and responsible the complaint be quashed. Though this fact was even conceded by the Complainant, it was the case of the complainant before the High Court that even when evidence was yet to be led, only on the basis of an admitted position of the absence of an averment as stated, should not give the High Court a pretext of quashing the complaint. The High Court quashed the complaint on the ground that the accused no.9 was not a signatory to the cheque and also not a party to the decision to allow the cheque. The Supreme Court,after referring to the Judgement Page 9 of 26 HC-NIC Page 9 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT in the case of SMS Pharmaceuticals Ltd.vs Neeta Bhalla reported in (2007) 4 SCC 70 it was categorically held in the aforesaid case that merely because a person is a Director of a company would not by itself be sufficient to make him liable under Section 141 of the Act. A Director cannot be deemed to be in charge of and responsible. A clear statement of fact has to be made that the Director was in charge of and responsible. In the case of K.K.Ahuja (supra) the Supreme Court after discussing the Judgement of SMS Pharmaceuticals (supra) in Paras 27 and Para 28 summarised the position as under:
" 27 The position under Section 141 of the Act can be summarised 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 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 Page 10 of 26 HC-NIC Page 10 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT 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 subsection (2) of Section 141.
(iii) In the case of a Director, Secretary or Manager [as defined in section 2(24) of the Companies Act] or a person referred to in clause
(e) and (f) of Section 5 of the 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 company is necessary to bring the case under Section 14(1) of the Act. 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 subsection.
(iv) Other officers of a company cannot be made liable under Subsection (1) of Section 141.
Other Officers of a company can be made liable only under Subsection (2) of Section 141, by 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. 28 If a mere reproduction of the wording of Section 14(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 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 Page 11 of 26 HC-NIC Page 11 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT were responsible to the company for the conduct of the business of the company. That would be absurd and not intended under the Act." Accordingly the Supreme Court held that only in case of a Director who signed the cheque on behalf of the Company it is not necessary to make an averment in the complaint.However in case of a Director other than the one who signed the Cheque an averment in the complaint that he was in charge of,and responsible to the Company,for the conduct of business of the company is necessary to bring the case under Section 141(1) of the Act.
11.2 Both the Learned Advocates for the respective parties have relied on the decision in the case of Gunmala Sales (supra) to support their respective stand. In the case of Gunmala Sales (supra) the question was whether the High Court was justified in quashing the proceedings initiated by the Magistrate on the ground that there was merely a bald assertion in the complaint that the Directors were at the time when the offence was committed in charge of and responsible for the conduct and daytoday Page 12 of 26 HC-NIC Page 12 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT business of the Company. In the complaint, which was filed and which was quashed by the High Court, giving rise for the Appeal at the behest of the complainant, an assertion was made that the "Directors thereof were at the time when the offence was committed, in charge of and responsible for the conduct of dayto day business of the Accused No.1 Company. Assertion, bald as it may be, was made. According to the submissions of the AppellantComplainant before the Supreme Court, once such an averment is made the same is sufficient and no further elaboration be made in the complaint to elaborate the role played by the Director in the transaction. According to the accused mere bald statement or averment is not sufficient and the complaint must indicate how and in what manner the role of the Director makes him so liable. It is in light of these submissions that the Supreme Court in Gunmala's case held as under:
"28 We are concerned in this case with Directors who are not signatories to the cheques. So far as Directors who are not 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 above mentioned cases 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 Page 13 of 26 HC-NIC Page 13 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT committed, the Directors were in charge of and were responsible for the conduct of the business of the company. This is a basic requirement. There is no deemed liability of such Directors. 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 SMS Pharma (1) 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 of the Code which recognise the Magistrate's discretion to reject complaint at the threshold if he finds that there is no sufficient ground for proceeding. Thus, if this basic averment is missing the Magistrate is legally justified in not issuing process. But here we are concerned with the question as to what should be the approach of a High Court when it is dealing with a petition filed under Section 482 of the Code for quashing such a complaint against a Director. If this averment is there, must the High Court dismiss the petition as a rule observing that the trial must go on? Is the High Court precluded from looking into other circumstances, if any? Inherent power under Section 482 of the Code is to be invoked to prevent abuse of process of any court or otherwise to secure ends of justice. Can such fetters be put on the High Court's inherent powers? We do think so.
29 SMS Pharma (1), undoubtedly, says that it is necessary to specifically aver in the complaint that the Director was in charge of and responsible for the conduct of the company's business at the relevant time when the offence was committed. It says that this is a basic requirement. And as we have already noted, this averment is for the purpose of persuading the Magistrate to issue process. If we revisit SMS Pharma (1), we find that after referring to the various provisions of the Companies Act it is observed that those provisions show that what a Page 14 of 26 HC-NIC Page 14 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT Board of Directors is empowered to do in relation to a particular company depends upon the roles and functions assigned to Directors as per the memorandum and articles of association of the company. There is nothing which suggests that simply by being a Director in a company, one is supposed to discharge particular functions on behalf of a company. As a Director he may be attending meetings of the Board of Directors of the company where usually they decide policy matters and guide the course of business of a company. It may be that a Board of Directors may appoint subcommittees consisting of one or two Directors out of the Board of the company who may be made responsible for the day today functions of the company. This Court further observed that what emerges from this is that the role of a Director in a company is a question of fact depending on the peculiar facts in each case and that there is no universal rule that a Director of a Company is in charge of its everyday affairs. What follows from this is that it cannot be concluded from SMS Pharma (1) that the basic requirement stated therein is sufficient in all cases and whenever such an averment is there, the High Court must dismiss the petition filed praying for quashing the process. It must be remembered that the core of a criminal case are its facts and in factual matters there are no fixed formulae required to be followed by a court unless it is dealing with an entirely procedural matter. We do not want to discuss "the doctrine of indoor management" on which submissions have been advanced. Suffice it to say, that just as the complainant is entitled to presume in view of provisions of the Companies Act that the Director was concerned with the issuance of the cheque, the Director is entitled to contend that he was not concerned with the issuance of cheque for a variety of reasons. It is for the High Court to consider these submissions. The High Court may in a given case on an overall reading of a complaint and having come across some unimpeachable evidence or glaring circumstances come to a conclusion that the petition deserves to be allowed despite Page 15 of 26 HC-NIC Page 15 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT the presence of the basic averment. That is the reason why in some cases, after referring to SMS Pharma (1) but considering overall circumstances of the case, this Court has found that the basic averment was insufficient, that something more was needed and has quashed the complaint.
30 When a petition is filed for quashing the process, in a given case, on an overall reading of the complaint, the High Court may find that the basic averment is sufficient, that it makes out a case against the Director, that there is nothing to suggest that the substratum of the allegation against the Director is destroyed rendering the basic averment insufficient and that since offence is made out against him, his further role can be brought out in the trial. In another case, the High Court may quash the complaint despite the basic averment. It may come across some unimpeachable evidence or acceptable circumstances which may in its opinion lead to a conclusion that the Director could never have been in charge of and responsible for the conduct of the business of the company at the relevant time and therefore making him stand the trial would be an abuse of process of court as no offence is made out against him.
31 When in view of the basic averment process is issued the complaint must proceed against the Directors. But, 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 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 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 Page 16 of 26 HC-NIC Page 16 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT 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.
32 xxx xxxx xxxx xxxx
33 xxx xxxx xxxx xxxx
34 We may summarise our conclusions as follows:
34.1 Once in a complaint filed under Section 138 read with Section 141 of the NI Act the basic averment is made that the Director was in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed, the Magistrate can issue process against such Director.
34.2 If a petition is filed under Section 482 of the Code for quashing of such a complaint by the Director, the High Court may, in the facts of a particular case, on an overall reading of the complaint, refuse to quash the complaint because the complaint contains the basic averment which is sufficient to make out a case against the Director.
34.3 In the facts of a given case, on an overall reading of the complaint, the High Court may, despite the presence of the basic averment, quash the complaint because of the absence of more particulars about the role of the Director in the complaint. It may do so having come 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 abuse of process of Court. Despite the presence of basic averment, it may come to a conclusion that no case is Page 17 of 26 HC-NIC Page 17 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT made out against the Director. Take for instance a case of a Director suffering from a terminal illness who was bedridden at the relevant time or a Director who had resigned long before issuance of cheques. In such cases, if the High Court is convinced that prosecuting such a Director is merely an arm twisting tactics,the High Court may quash the proceedings. It bears repetition to state that to establish such case unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or some totally acceptable circumstances will have to be brought to the notice of the High Court. Such cases may be few and far between but the possibility of such a case being there cannot be ruled out.
In the absence of such evidence or circumstances, complaint cannot be quashed. 34.4 No restriction can be placed on the High Court's powers under Section 482 of the Code. The High Court always uses and must use this power sparingly and with great circumspection to prevent inter alia the abuse of the process of the court. There are no fixed formulae to be followed by the High Court in this regard and the exercise of this power depends upon the facts and circumstances of each case. The High Court at that stage does not conduct a mini trial or roving inquiry, but nothing prevents it from taking unimpeachable evidence or totally acceptable circumstances into account which may lead it to conclude that no trial is necessary qua a particular Director." 11.3 In Gunmala's case therefore admittedly the complaint did contain the basic averment that the Directors were in charge and responsible for the conduct of daytoday business. It is in light of this fact the Supreme Court held that it is necessary to aver in the complaint that the Director Page 18 of 26 HC-NIC Page 18 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT who, otherwise was not a signatory to the cheque was in charge of and responsible for the conduct of daytoday business. This was a basic requirement. There is no deemed liability of Directors. The Supreme Court specifically observed in Para 28 that if this basic averment is missing in the complaint the Magistrate is legally justified in not issuing process. It is in this context that the Supreme Court observed that there can be no fetters on the High Court to invoke powers under Section 482 of the Code of Criminal Procedure.
12 Reading the conclusions in the facts of the case it is apparent that what the Supreme Court said is that when such a basic averment is made,the Director, who approaches the High Court for quashing a complaint has to show or furnish some sterling incontrovertible material to substantiate his contentions. He cannot get the complaint quashed merely on the ground that apart from the basic averment no particulars are given.(emphasis supplied).
12.1 It is in this context the Supreme Court concluded that once a basic averment is made the Page 19 of 26 HC-NIC Page 19 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT Magistrate can issue a process. If a petition is filed under Section 482 of the code for quashing of such a complaint by the Director,the High Court may,in the facts of a case, on an overall reading of the complaint, refuse to quash the complaint because the complaint contains the basic averment which is sufficient to make out a case against the Director.
(emphasis supplied) 13 Therefore on reading the decision in the case of Gunmala's case,it is evidently clear that the complaint has to make a basic averment in order to withstand the test of Section 141(1) of the Act. The only further issue which the Supreme Court elaborated was that once such a basic averment was made, no further expansion of how the Director was responsible needs to be stated and the High Court ought not to interject a complaint only on the ground that no further elaboration was made, once the basic averment was made. This is the only departure in Gunmala's case and no dilution of the "basic averment"
principle.Page 20 of 26
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14 Even in the case of Standard Chartered Bank (supra) it would be appropriate to observe that the Supreme Court categorically stated that in Gunmala's case the Court was concerned with Directors who had issued the cheques. " This authority,as we notice,has to be appositely understood."
"26 In Gunmala sales (P) Ltd, the Court was concerned with Directors who issued the cheques. This authority, as we notice, has to be appositely understood. The twoJudge Bench referred to S.M.S.Pharma I2 and other earlier decisions, and came to hod that: [Gunmala Sles (P) Ltd. Case, SCC pp. 124125, para 3031] 30 When a petition is filed for quashing the process, in a given case, on an overall reading of the complaint, the High Court may find that the basic averment is sufficient, that it makes out a case against the Director, that there is nothing to suggest that the substratum of the allegation against the Director is destroyed rendering the basic averment insufficient and that since offence is made out against him, his further role can be brought out in the trial. In another case, the High Court may quash the complaint despite the basic averment. It may come across some unimpeachable evidence or acceptable circumstances which may in its opinion lead to a conclusion that the Director could never have been in charge of and responsible for the conduct of the business of the company at the relevant time and therefore making him stand the trial would be an abuse of process of court as no offence is made out against him.
31 When in view of the basic averment process is issued the complaint must proceed against the Directors. But, if any Director wants the Page 21 of 26 HC-NIC Page 21 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT 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 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." [Emphasis supplied] The Supreme Court observed that since a specific averment was made in the complaint that the Directors were in charge of the day to day management,the complaint could not have been quashed.
15 Therefore on reading the three judgements namely K.K.Ahuja; Gunmala Sales and Standard Chartered (Supra) it is clear that a basic averment that visa vis a Director who has not signed the cheque, that such a Director is in charge of and responsible for the day to day conduct of the management has to be made. That is the basic requirement. Gunmala Sales Page 22 of 26 HC-NIC Page 22 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT does not dilute that requirement as is canvassed by Mr Nandish Thakkar. On the contrary I agree with Mr Gupta's submission that it reiterates the stand taken in K.K.Ahuja (Supra) and SMS Pharmacuticals (supra). Even otherwise on facts in the case of Gunmala Sales (supra) the complaints did contain a basic averment which is not even made in the complaints which are before the Court in the present case.
16 The averments in the complaint have now to be read in context of the legal position.
"1 That M/s. Kandla Logistics Pvt Ltd., is a private limited company, registered under Indian Companies Act, 1956 and having its Office at 105 Square Apartment, Plot No. 313, ward 12, Near LIC, Gandhidham who are doing the business of Clearing, Forwarding and shipping agent. The present complaint is being filed through its one of the Directors Shri Ravi Thacker s/o. Shri Dinesh Thacker.
2 That accused No. 1 is a Limited Company, registered under the Indian Companies Act, 1956 and accused No. 2 to 5 are the directors of accused No.1. The accused have approached the complainant at Gandhidham for the Clearing and Forwarding of their cargo from Kandla Port and Mundra Port for which the complainant agreed and had completed the Clearing and Forwarding work of their cargo. The complainant has sent Bills to the accused for Clearing and Forwarding charges etc. of their cargo. As such the accused and the complainant are having business contacts with each other.Page 23 of 26
HC-NIC Page 23 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT 3 That the accused No.2, being the director and responsible person for the conduct of the business of Accused No.1 M/s. Vaghasia Limited, has issued a cheque bearing No. 009424 dated 31/03/2010 for a sum of Rs.75,000/ (Rupees Seventy Five Thousand), drawn on Union Bank of India, Rajkot, in favour of our clients in discharge of the aforesaid liability. 4 That the complainant maintain their account with Kotak Mahindra Bank, Gandhidham branch and the above said cheque being A/c/Payee, our clients presented and handed over the same to the Kotak Mahindra Bank, Gandhidham for collection, encashment and realization for the amount which was sent to the drawee bank through clearing house.
5 That Union Bank of India, Rajkot Branch has dishonored the above said cheque through their memo dated 28/09/2010 with endorsement "Today's Opening Balance is Insufficient". Our clients received intimation regarding bouncing/return of the said cheque as unpaid vide Memorandum of Union Bank of India, rajkot Branch, dated 28/09/2010.
6 That the complainant received intimation regarding bouncing.return of the cheque as unpaid through their bank viz. Kotak Mahindra Bank, Gandhidham branch on 28/09/2010 and the complainant issued notice dated 13/10/2010 U/s. 138(b) of Negotiable Instruments Act, 1881 as amended up to date through their counsel to the accused at their office and respective residences and the same was posted by Registered A.D.Post and made a demand of Rs.75,000/ (Rupees Seventy five thousand), from the accused and called upon them to make the payment within 15 days of the receipt of the notice.
7 That the aforesaid notice was refused by all the accused except accused No.4 who has not claimed the same. However the said notice sent to accused No.2 at his residence was served upon him. All the accused failed to make the payment of the amount of the cheque referred above. 8 That the accused issued the cheques in favour of the complainant for the discharge of their liability to make the payment of the Page 24 of 26 HC-NIC Page 24 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT complainant and the same having been bounced/ returned unpaid by their banker with endorsement " Today's opening balance is insufficient". The accuse having failed to make the payment within 15 days of the receipt of notice, in defiance with the notice dated 13.10.2010. As such the accused have committed the offense punishable u/s. 138 of Negotiable Instruments Act as amended up to date.
9 That accused have issued cheque to the complainant at Gandhidham, the same was presented in bank at Gandhidham and the accused was to make the payment at Gandhidham. As such the offense is committed at Gandhidham. Hence the Hon'ble Court has the jurisdiction to try the complaint."
17 Admittedly the only averment is that the accused nos 2 to 5 (Accused Nos. 3 and 4 are before this Court seeking quashing of the complaint) are the Directors of the Accused No.1 Company. That the Accused No.2, being the Director and responsible person for the conduct of business of the Accused No.1 Company has issued a Cheque. Therefore, even as per the version in the Complaint it is the Accused No.2 who has issued the cheque and is responsible for the conduct of business. It is not stated as to how the Applicants as Accused Nos.3 and 4 are in charge of and responsible for the day to day management of the Company. Let alone this averment there is nothing except stating that they are Directors. Clearly therefore there is no compliance of Section 141(1) of the Negotiable Page 25 of 26 HC-NIC Page 25 of 26 Created On Sat Feb 04 01:40:57 IST 2017 R/CR.MA/5481/2011 CAV JUDGMENT Instruments Act,1881.In the facts of the case therefore I deem it fit to exercise the jurisdiction vested in this Court under Section 482 of the Code of Criminal Procedure. Criminal Complaints 995 of 2010 and 996 of 2010 pending before the Additional Chief Judicial Magistrate First Class, Gandhidham,against the Accused Nos. 3 and 4 are accordingly quashed. 18 Criminal Miscellaneous Applications Nos. 5481/2011, 5482/2011, 5963/2011 and 5964/2011 are accordingly allowed. Rule made absolute.
(BIREN VAISHNAV, J.) Bimal Page 26 of 26 HC-NIC Page 26 of 26 Created On Sat Feb 04 01:40:57 IST 2017