Karnataka High Court
Amar Pandey, vs Saifullakhan S/O Gaffarkhan Sawakar, on 29 May, 2019
Equivalent citations: AIRONLINE 2019 KAR 1076
IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 29TH DAY OF MAY 2019
BEFORE
THE HON'BLE MR.JUSTICE B.A.PATIL
CRL.P. NO. 100125.2017
BETWEEN
1. AMAR PANDEY,
AGED: 32 YEARS, OCC BUSINESS,
R/O: TRICOM FRUIT PRODUCTS LTD.,
GAT NO: 336, 338, 341,
AT: ANDORI VILLAGE, TQ: KHANDELA,
DIST: SATARA,
STATE: MAHARASHTRA-415521,
NOW AT 701/A, I.C. COLONY,
BORIVALI-WEST, MUMBAI-400103,
STATE: MAHARASHTRA.
2. SANDEEP GUPTA,
AGED: 50 YEARS, OCC BUSINESS,
R/O: TRICOM FRUIT PRODUCTS LTD.,
GAT NO: 336, 338, 341,
AT: ANDORI VILLAGE,
TQ: KHANDELA, DIST: SATARA,
STATE: MAHARASHTRA-415521,
NOW AT 21, SHALIMAR,
GULMOHAR CROSS ROAD,
NO.10, JUHU SCHEME MUMBAI,
MAHARASHTRA-400049.
... PETITIONERS
(BY SRI.ANANT HEGDE, ADV.)
:2:
AND
SAIFULLAKHAN S/O GAFFARKHAN SAWAKAR,
PROPRIETOR OF M/S. VALIDAIN AND COMPANY,
AGED: 28 YEARS, OCC: BUSINESS,
R/O: PATHAN BUILDING,
MALAPUR, DHARWAD-580008.
... RESPONDENT
(BY SRI.K L PATIL, ADV.)
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482
OF CR.P.C., SEEKING TO QUASH THE ORDER DATED
12.07.2016 PASSED IN CRIMINAL CASE NO. 649 OF 2016 BY
PRINCIPAL CIVIL JUDGE AND PRL. JMFC AT DHARWAD
PRODUCED AT ANNEXURE-A FOR THE OFFENCE PUNISHABLE
UNDER SECTION 138 N.I. ACT SO FAR AS PETITIONERS ARE
CONCERNED.
THIS PETITION COMING ON FOR ORDERS THIS DAY, THE
COURT MADE THE FOLLOWING:
ORDER
This petition has been filed by the petitioners- accused Nos.3 and 4 under Section 482 of Cr.P.C. praying this Court to quash the order dated 12.07.2016 passed by Prl. Civil Judge and Prl. JMFC at Dharwad produced at Annexure-A for the offence punishable under Section 138 of Negotiable Instruments Act so for as petitioners-accused are concerned. :3:
2. I have heard the learned counsel for the petitioners-accused Nos.3 and 4 and the learned counsel for respondent-Complainant.
3. It is the submission of the learned counsel for the petitioners-accused Nos.3 and 4 that the Court below while passing the impugned order dated 12.07.2016 has not bestowed its attention to the Section 141 of the Negotiable Instrument Act (in short herein after called as NI Act). It is his submission that in order to make the directors criminally liable, the Court must determine the date of the offence alleged to have been taken place. Directors of the company who are in-charge of the said Company and if the petitioners-accused are not in-charge of the said Company then under such circumstances, the cognizance taken itself by the Court below, is, not sustainable and the same is liable to be quashed. :4:
4. He further submitted that petitioners- accused Nos.3 and 4 were not in-charge of the affairs of the company at the time of the alleged commission of the offence as contemplated under Section 141 of the Act. He further, submitted that in the reply given, it has been specifically contended that they are not the directors and they were not the signatories to the said cheque and even without there being any records, plainly without applying the mind, the trial Court has taken cognizance and issued the summons.
5. He further submitted by relying upon the decision in the case of A.K.SINGHANIA V/S GUJARATH STATE FERTILIZER COMPANY LIMITED AND ANOTHER, (2013) 16 SUPREME COURT CASES 630, if the provisions of Section 141 of the Act is not applied and every person who at the time of the offence was not in-charge of the said company, he shall not be deemed to be guilty under Section 138 of the Act. He further submits that in the said case also, it has been observed :5: that Section 141 of the Act makes the Directors in- charge responsible for the Company, for the conduct of the business of the Company within the mischief of Section 138 of NI Act and not particular business for which the cheque was issued. In the instant case on hand, the said principle has not been applied and without application of the mind the Courts below ha proceeded to issue the summons. Alternatively, he also further submitted if at all this Court come to the conclusion that the Court below has not applied mind to the Section 141 of the Act, matter may be remitted back by setting aside the impugned order and a direction may be issued to the Court below directing to bestow its attention to Section 141 of the Act, thereafter an appropriate order has to be passed and even by exempting the presence of accused Nos.3 and 4, the learned counsel may be permitted to assist the Court to arrive to the proper conclusion. On these grounds he :6: prays to allow the petition and to quash the proceedings dated 12.07.2016.
6. Per contra, the learned counsel appearing on behalf of the respondent-complainant vehemently argued and submitted that the accused No.2 was a Chairman and accused Nos.3 and 4 are active directors. It is his further submission that the contents of the complaint itself clearly goes to show that at the time of issuance of the cheque, the accused Nos. 3 and 4 were the directors of accused No.1 Company and even it has been specifically averred in the complaint that the accused Nos.3 and 4 got issued the said cheques, drawn the balance demand from accused No.2 Company and accused No.2 Company has issued the said cheques in consultation with accused Nos.3 and 4.
7. He further submitted that the trial Court after considered all the materials has come to a right conclusion. He further submitted that in the reply :7: given, they have admitted the fact that they were directors and it is contended in the said reply that already the payment has been made through RTGS. In order to substantiate the said fact no documents have been produced.
8. He further submitted that it is specific contention of the petitioners/accused that they are not in-charge of the affairs of the Company but in order to substantiate the said facts neither before Court below nor before this Court, they have produced any documents. If really they were not in-charge, definitely they could have produced the documents. It is further submission that if the said issue, if it has to be considered, it requires the substantial evidence to be produced before the Court by both the parties. Then, after considering material placed on record, the Court has to come to proper conclusion. At the time of taking cognizance, the Court has only to look into prima facie material which is available and take the cognizance. :8: Accordingly, the trial Court has properly applied its mind and come to right conclusion that there is a material to proceed against the accused-petitioners. There is no illegality and irregularity in passing such order.
9. He also relied upon the decision of Apex Court in A.K.SINGHANIA V/S GUJARATH STATE FERTILIZER COMPANY LIMITED AND ANOTHER, (2013) 16 SUPREME COURT CASES 630 quoted supra and further submitted that Section 141 of the Act does not make all the Directors liable for the offence. The Criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the Company. Vicarious liability can be inferred against a Company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition are made so as to make the accused :9: therein vicariously liable for offence committed by the company along with averments in the petitioner contending that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.
10. It is further submission that when cheque has been issued during the year 2012-13, at that time the accused-petitioners were directors of the said Company and they have actively participated in the affairs of the Company and as such even there is a compliance of Section 141 of the Act. On these grounds, he prays that petitioners-accused has not made out any good grounds to quash the impugned order and prays to dismiss the petition.
11. I have carefully and cautiously gone through the submission made by learned counsel for the parties. Perused the records.
: 10 :
12. I have given my conscious attention to the decision quoted by the learned counsel for the petitioners as well as learned counsel for the respondent-complainant.
13. As could be seen from the records, the facts reveals that the accused Company has purchased the Alphanso mangoes from the complainant during June- 2012 worth Rs.1,28,13,167/- and accused has made part payment to the complainant on different dates. Towards arrears balance of dues the complainant approached all the accused persons. All of them were involved in purchase of mangos from the complainant firm. The complainant met the accused Nos.3 and 4 and requested them to make payment of balance dues. Thereafter the accused Nos.3 and 4 got issued the cheques towards payment of balance dues from the accused No.2-Chairman of Accused No.1 under his signatures in consultation with the accused Nos.3 and 4.
: 11 :
14. It is further averred that when the said cheques have been presented before the bank, the same have been dishonored and returned with shara 'FUNDS INSUFFICIENT' and thereafter the legal notice has been issued and within the stipulated period amount has not been paid, thereby it attracts Section 138 of NI Act.
15. It is the contention of the learned counsel for the petitioners-accused that accused Nos.3 and 4 that they were not in-charge of affairs of the company and responsible for the conduct of the business of the company at the prescribed time and that no offence has been committed at the time, when the said cheques have been presented. The said offence has taken place only when it is presented and it was returned with share 'FUNDS INSUFFICIENT' and thereafter the legal notice came to be issued and even after reply, no payment has been made, they were not directors as on the date. Under such circumstances cognizance taken itself is not sustainable in law.
: 12 :
16. For the purpose of brevity, I quote, the decision of the Hon'ble Apex Court in the case of A.K.SINGHANIA V/S GUJARATH STATE FERTILIZER COMPANY LIMITED AND ANOTHER, (2013) 16 SUPREME COURT CASES 630 at para Nos.12 and 14. It has been observed as under:
"12. We have perused the complaints and, in fact, the relevant portions of the allegations have been reproduced in the foregoing paragraphs of the judgment. From that it is difficult to infer that there is any averment that these two accused were in- charge of and responsible for the conduct of the business of the company at the time the offence was committed. The allegations in the complaints in sum and substance mean that business and financial affairs of the company used to be decided, organized and administered by accused Nos. 2 to 6 and while doing so, other Directors including the two accused herein were consulted. The inference drawn by the complainant on that basis that these two accused, therefore, are in- charge and responsible to the company for the conduct of its business, is absolutely misconceived. We are, therefore, of the opinion that essential averment in the complaints is lacking.": 13 :
"14. From a plain reading of the aforesaid provision it is evident that every person who at the time the offence was committed was in charge of and responsible to the Company shall be deemed to be guilty of the offence under Section 138 of the Act. In the face of it, will it be necessary to specifically state in the complaint that the person accused was in charge of and responsible for the conduct of the business of the Company? In our opinion, in the case of offence by Company, to bring its Directors within the mischief of Section 138 of the Act, it shall be necessary to allege that they were in charge of and responsible to the conduct of the business of the Company. It is necessary ingredient which would be sufficient to proceed against such Directors. However, we may add that as no particular form is prescribed, it may not be necessary to reproduce the words of the section. If reading of the complaint shows and substance of accusation discloses necessary averments, that would be sufficient to proceed against such of the Directors and no particular form is necessary. However, it may not be necessary to allege and prove that, in fact, such of the Directors have any specific role in respect of the transaction leading to issuance of cheque. Section 141 of the Act makes the Directors in charge of and responsible to the Company "for the conduct of the business of the Company" within the mischief of Section 138 of the Act and not particular business for which the : 14 : cheque was issued. We cannot read more than what has been mandated in Section 141 of the Act.
17. Under the facts and circumstances, I am not having any difference of opinion with regard to the ratio laid down by the decision quoted by the learned counsel for the petitioner, but in the same decision at para No.16, it has been observed as under;
"16. This Court in National Small Industries Corpn. Ltd. v.s. Harmeet Singh Paintal, after reviewing all its earlier judgments summarized the legal position as follows:- (SCC pp. 345-46, para 39).
"39. From the above discussion, the following principles emerge:
(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable.
For fastening the criminal liability, there is no presumption that every Director knows about the transaction.
(ii) )Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company. : 15 :
(iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.
(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred.
(v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.
(vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint.
(vii) The person sought to be made liable should be in charge of and responsible for the conduct of the business of the company : 16 : at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases."
18. On close reading of both the paragraphs of the above said decision, it clearly makes a point that the Section 141 does not makes all the directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company and even it is observed that vicarious liability can also be applicable in this behalf. The said paragraphs, if it would be perused, the contents of the complaint therein, it is specifically averred at para No.2 that accused No.1 is the Company registered under the Indian Companies Act, Accused No.2 is a Chairman of accused No.1 Company and Accused Nos.3 and 4 respondent the active Directors of the Accused No.1-Company. : 17 :
19. It is further stated that after the consultation of accused Nos.3 and 4 cheques have been issued by accused No.2 and they have also actively participated in this behalf. No doubt, the learned Magistrate while taking the cognizance has not specifically mentioned in his order that he has perused the provisions of Section 141 of the Act and thereafter he has come to the conclusion that the directors were actively participated in the said transaction. It clearly goes to show that the learned Magistrate has gone through the complaint, sworn statement and material available on record and thereafter he has satisfied himself that there is sufficient ground to proceed against the petitioners- accused and cognizance has been taken and issued the summons.
20. It is well settled preposition of law that while quashing of the proceedings, the merits of the case cannot be ascertained at that stage. This preposition of law has been laid down by the Hon'ble Apex Court in : 18 : TARAMANI PARAKH V/S STATE OF MADHYA PRADESH AND OTHERS, (2015) 11 SUPREME COURT CASES 260.
21. Though several contentions have been raised by the learned counsel for the petitioners-accused but at this juncture to re-appreciate the things, it requires assistance of both the parties. Without production of the appropriate documents and considering them with regard to administrative and other aspect, Court cannot come to the conclusion that the accused has made out the reasons under Section 141 of the Act.
22. Under the said facts and circumstances of the case, I feel that all these contentions can be raised before the Court below at the time of leading the evidence and thereafter the Court below can pass an appropriate order as contemplated under Section 258 of Cr.P.C. If at all petitioners-accused were not directors and were not in-charge and has been not responsible for : 19 : the conduct of the business of the company and if it established then under such circumstances, Court can exercise its power and discharge them by stoping the further proceedings against them in accordance with law.
23. During the course of argument, the learned counsel for the petitioners-accused submitted that the petitioner-accused Nos.3 and 4 are residents of Bombay and it is very difficult for them to attend the Court every now and then and they are ready to assist the Court to come to proper conclusion.
24. In the light of the submissions, the Court can exempt their physical presence and direct them to be present before the Court as and when their presence is very much required and at the same time it has been clarified that the petitioners-accused must also co- operate in assisting the Court by producing relevant : 20 : documents needed to come to a proper conclusion in this behalf.
With the above observations, petition is disposed off.
Sd/-
JUDGE Hmb