Delhi District Court
Nafed vs . M/S. Earthtech Enterprises & Ors. Page ... on 10 January, 2022
IN THE COURT OF SH. ANSHUL SINGHAL, MM-03
(NI ACT), NEW DELHI DISTRICT, PHC, NEW DELHI
In the matter of: - CC No.: 5691/19
CNR No. : DLND02-009897-2019
National Agricultural Cooperative
Marketing Federation of India Ltd. (NAFED)
NAFED House
1, Sidharta Enclave,
Ashram Chowk, Ring Road,
New Delhi-110014
Through Authorised Representative
Shri S.K.Maggu, Dy. Manager(F&A)
......Complainant
versus
1. M/s Earthtech Enterprises Pvt Ltd.
39, Second floor,
Sadhana Enclave,
New Delhi-110017
2. O.P.Agarwal
39, Second floor,
Sadhana Enclave,
New Delhi-110017.
Also At:
S-474, Greater Kailash Part-II,
New Delhi-110048.
3. Rajesh Kumar Gulati
39, Second floor,
Sadhana Enclave,
New Delhi-110017
CC No. 5691/19
NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 1 of 67
Also At:
B-42, Ashoka Niketan,
Delhi-110092.
4. Ravi Sawhny (Deceased),
39, Gate No.2, Sadhna Enclave,
New Delhi
Also At:
C-203, Defence Colony
New Delhi-110017.
5. Mr. Mahavir Prasad Mishra
39, Second floor,
Sadhana Enclave,
New Delhi-110017
Also At:
R/o B-165, Shanti Kunj,
J-4/40, Khirki Village,
Malviya Nagar, New Delhi.
6. Mr. Avdhesh Kumar Singh
39, Second floor,
Sadhana Enclave,
New Delhi-110017.
Also At:
F-242, Pandav Nagar,
Delhi-110092.
7. Inder Verma
39, Second floor,
Sadhana Enclave,
New Delhi-110017.
Also At:
3/5, Pant Nagar,
Jangpura, New Delhi-110092.
........Accused
CC No. 5691/19
NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 2 of 67
JUDGMENT
Date of Institution of Complaint : 03.02.2007 Offence Complained of : u/s. 138 of NI Act Plea of Accused : Not Guilty Date of Final Arguments Heard : 04.01.22 Decision Qua Accused No. 1 : Conviction Decision Qua Accused No. 2 : Acquittal Decision Qua Accused No. 3 : Acquittal Decision Qua Accused No. 4 : Proceedings abated Decision Qua Accused No. 5 : Conviction Decision Qua Accused No. 6 : Acquittal Decision Qua Accused No. 7 : Acquittal Date of Decision : 10.01.22 BRIEF FACTS AND REASONS FOR DECISION OF THE CASE
1. By this judgment, I will dispose of the present complaint U/s. 138 of N.I.Act, 1881 filed by the complainant against accused on account of dishonour of cheques bearing no. 220512 dated 31.05.2006 for a sum of Rs.5,00,00,000/- each drawn on the HDFC Bank Ltd S-355, Panchsheel Park, New Delhi issued by the accused in favour of the complainant (hereinafter referred to as the cheques in question).
2. Brief facts of the case as per the complaint are that complainant is a cooperative society duly registered under Multi State Cooperative Societies Act, 2002 and is engaged in the business of Marketing of Agricultural Products. It is CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 3 of 67 further submitted that accused no.1 is a company incorporated and registered under the Indian Companies Act. It is further submitted that the accused no.1 represented to the complainant society that it is an international trader dealing in various agro & non-agro products internationally. It is further submitted that the accused no. 2 to 7 are the Directors, Authorised Signatory and responsible for the day to day affairs of the accused no.1. It is further submitted that Accused no. 6 is the authorised representative of accused no.1 and a signatory of the MOU and accused no. 5 is the authorised signatory to the bank account and the present cheque. It is further submitted that accuse no.1 approached the complainant society through accused no. 2, 3 & 6 followed by various meetings and a formal proposal dated 28.08.2003 under the signature of accused no. 7 was then sent to the complainant society and sought for a financial help from the complainant society on fund / non-fund based financial facilities. It is further submitted that based on the representations and assurances the accused company entered into a Memorandum of understanding dated 16.10.2003 with the complainant society through accused no. 6. It is further submitted that based upon the aforesaid MOU and assurances of the accused persons, the complainant society extended LC facilities to the accused to the extent of Rs. 1344.24 Crores out of which a sum of Rs. 524 Crores (approx.) remained outstanding and to be repaid by the accused persons. It is further submitted that vide its letter dated 11.01.2006 the accused persons informed and CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 4 of 67 proposed to the complainant society that out of total outstanding against the accused persons a sum of Rs. 250/- Crores shall be repaid by them on or before 31.05.2006. It is further submitted that in discharge of its legally enforceable debts and liability, the accused persons issued post dated cheques in question towards part payment of the same. But when the complainant presented the cheque(s) in question with its bankers, the same was returned dishonoured with the remarks "Payment stopped by drawer"
on 29.11.2006. The complainant thereafter sent a legal notice dated 23.12.2006 to the accused informing about the dishonour of cheque and further asked them to make the payment along with interest within 15 days, but in vain. Hence, the present complaint has been filed.
3. Accused no.1 company was proceeded in absentia as despite service of summons the company had failed to appoint an AR to pursue the case on its behalf and this court while exercising its power U/s 305 Cr.P.C proceeded with the case in absence of any representation on behalf of the accused no.1 company.
4. Vide order dated 25.06.2019, the current proceedings against accused no. 4, Mr. Ravi Sawhny were abated since it was submitted that he has expired. Perusal of the record shows that his death certificate is also on file.CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 5 of 67
5. A notice explaining the accusation to the accused no. 1 company, M/s. Earthtech Enterprises, O.P.Agarwal, Rajesh Kumar Gulati, Mahavir Prasad Mishra, Avdhesh Kumar Singh and Inder Verma U/s 138 of N.I. Act was served on 07.07.10 and their pleas were recorded. They did not plead guilty and claimed trial. Matter was then fixed for CE. During CE, the complainant relied upon the following documents:-
(i) Copy of authority letter dated 11.02.2019 in his favour is Ex-CW1/A (original is filed in CC No. 969/17).
(ii) Copy of formal proposal dated 28.08.2003 is Ex-
CW1/B(OSR).
(iii) Copy of MOU dated 16.10.2003 along with
addendum dated 12.02.2004 is Ex-CW1/C
(Certified copy is filed in CC No. 969/17);
(iv) Copy of letter dated 11.01.2006 is Ex-
CW1/D(OSR).
(v) Original cheque bearing no. 220512 dated 31.05.2006 is Ex-CW1/E.
(vi) Original returning memo dated 29.11.2006 is Ex-
CW1/F.
(vii) Copy of legal notice dated 23.12.2006 is Ex-
CW1/G.
(viii) Original postal receipts dated 26.12.2006 are Ex-
CW1/H-1 to CW1/H-13.
(ix) DTDC Courier receipts are Ex-CW1/I-1 to Ex-
CW1/I-13.
CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 6 of 67(x) Eight original acknowledgement cards are Ex-
CW1/J-1 to Ex-CW1/J-8.
(xi) Reply of accused no.7 dated 03.01.2007 & 22.01.2007 are Ex-CW1/K-1 & Ex-CW1/K-2 respectively (original in CC No. 1653/17).
(xii) Reply of accused no. 2 dated 30.12.2006 is Ex-
CW1/L. During Cross examination of the witness, following documents were put to the witness or were called for production from the witness at the behest of accused per- sons and the same has been exhibited as follows:
(i) Second letter dated 11.01.2006 containing the details of 30 cheques is Ex-CW1/CX1 (OSR).
(ii) Payments received by complainant from the accused no.1 company from 20.10.2005 to 03.07.2006 which is Ex-CW1/DX3(OSR).
(iii) Copy of letter dated 28.08.2003 written by accused no.1 company to complainant society which is Ex-
CW1/DX4(OSR) (also exhibit CW1/B in the present matter).
(iv) Minutes of meeting of the complainant society of various dates which is Ex-CW1/DX5.
(v) Copy of letter dated 05.09.2005 written by accused no.1 company to complainant society which is Ex- CW1/DX6(OSR).
CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 7 of 67(vi) Certified copy of reply filed by the complainant society before Hon'ble High Court of Delhi in Crl. M.A. No. 1717/2007 is Ex-CW1/DX7(OSR).
(vii) Copy of letter dated 01.02.2006 written by accused no.1 company to complainant society which is Mark Z (not exhibited as objected to by counsel for accused Mahavir Prasad Mishra as to the mode and manner of proof of the document, the document being a photocopy).
(viii) Arbitral Award dated 30.07.2016 is Ex-CW1/X.
6. CW1 was duly cross-examined by all the counsels for accused persons. In view of the submissions of the AR of the complainant, CE was closed on 23.08.2021.
7. All accused persons were thereafter examined U/s 281 r/w Sec 313 Cr.P.C on 31.08.2021, putting entire incriminating evidence against them. During examination of all the accused persons U/s 281 r/w Sec 313 Cr.P.C amongst other things, they have stated that they were not Incharge of or responsible to the company for the conduct of business of the company. They have further stated that there is no legally enforceable liability in favour of the complainant and against the accused persons as on the date of issuance of the cheque in question.
CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 8 of 678. Accused Mahavir Prasad Mishra has examined himself as DW1 after his application U/s 315 Cr.P.C. was allowed vide order dated 06.10.2021. He has relied upon the following documents:
(i) Bank account statements of the accused from April 2004 to October 2003 from HDFC Bank and from April 2009 to March 2018 from Axis Bank is Ex-
DW1/1.
During cross-examination of the accused the following documents were put to the accused by the complainant:
(i) Statements made before CBI by the witness which is Ex-DW1/X1(colly)(OSR) (document earlier Mark DW1/X1(colly) later exhibited on production of certified copy on 30.11.2021).
(ii) Annual returns of the financial years ending 2006 and 2007 of the accused no. 1 company which are Ex-DW1/X2(colly) along with certificate u/s. 65B Indian Evidence Act which is Ex-DW1/X3(colly) (Both documents objected to by Ld. Counsel for the accused on the ground that mandatory requirements u/s. 65B Indian Evidence Act have not been followed. The objection was kept pending to be decided at the stage of final arguments. However, during final arguments, Ld. Counsel for the accused has not addressed any arguments in this regard at the final arguments neither has anything been addressed CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 9 of 67 in the written arguments by the Ld. Counsel. It appears to the court that the accused has nothing to say to support his objection, accordingly, this objection stands overruled.)
9. Accused Rajesh Gulati has examined himself as DW2 after his application U/s 315 Cr.P.C. was allowed vide order dated 06.10.2021. He has relied upon the following documents:
(i) Copy of Form 32 to show the date of joining of the accused is Mark-DW2/1.
(ii) Certified Copy of Form 32 to show the date of resignation of the accused is Ex-DW2/2.
During cross-examination of the accused the following documents were put to the accused by the complainant:
(i) Balance sheets of accused company for various years is Ex-DW2/X1(colly) (objected to by Ld. Counsel for accused as to the mode and manner of proof of the document. Objection was kept pending to be decided at the stage of final arguments. In my considered opinion, since it is the submission of the complainant that the document has been downloaded from the website of Ministry of Corporate Affairs and has been supported with certificate u/s. 65B of Indian Evidence Act, 1872, the objection is hereby overruled).CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 10 of 67
(ii) Notice of AGM and other related documents such as director's report etc. including financial results is Ex-DW2/X2(colly) (objected to by Ld. Counsel for accused as to the mode and manner of proof of the document. Objection was kept pending to be decided at the stage of final arguments. In my considered opinion, since it is the submission of the complainant that the document has been downloaded from the website of Ministry of Corporate Affairs and has been supported with certificate u/s. 65B of Indian Evidence Act, 1872, the objection is hereby overruled).
(iii) Form 20B for the year 2006 of the accused no. 1 company is Ex-DW2/X3(colly) (objected to by Ld. Counsel for accused as to the mode and manner of proof of the document. Objection was kept pending to be decided at the stage of final arguments. In my considered opinion, since it is the submission of the complainant that the document has been downloaded from the website of Ministry of Corporate Affairs and has been supported with certificate u/s. 65B of Indian Evidence Act, 1872, the objection is hereby overruled).
(iv) Certified copy of petition filed by accused Rajesh Gulati and the reply filed by accused no. 1 company in those proceedings are Ex-DW2/X4(colly) and Ex-DW2/X5(colly) respectively.CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 11 of 67
(v) Another petition filed by accused Rajesh Gulati which is Ex-DW2/X6(colly). (objected to by Ld. Counsel for accused as to the mode and manner of proof of the document. Objection was kept pending to be decided at the stage of final arguments. I have perused the document. Objection is overruled).
(vi) Photocopy of evidence by way of affidavit filed by accused Rajesh Gulati before the arbitral tribunal which is Ex-DW1/X7(colly).
10. Accused Avdesh Kumar Singh has examined himself as DW3 after his application U/s 315 Cr.P.C. was allowed vide order dated 06.10.2021. He has relied upon the following documents:
(i) Copy of Form no. 32 showing resignation of accused as director which is Ex-DW3/1.
(ii) Copy of order of discharge given by Hon'ble Allahabad High Court which is Ex-DW3/2(colly).
(iii) Form no. 32 filed by the complainant in file bearing CC No. 5689/19 which is Ex-DW3/3(colly) and Ex-
DW3/4.
During cross-examination of the accused the following documents were put to the accused by the complainant:
(i) Statements made before CBI by the witness which is Ex-DW3/X1(colly)(OSR) (document earlier Mark CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 12 of 67 DW3/X1(colly) later exhibited on production of certified copy on 30.11.2021).
(ii) Annual return of the accused company for the financial year 2005 which is Ex-DW3/X2(colly).
11. Accused Inder Verma has examined himself as DW4 after his application U/s 315 Cr.P.C. was allowed vide order dated 06.10.2021. He has relied upon the following documents:
(i) Copy of complaint made by accused Inder Verma to AGM, Union Bank of India, Overseas Branch dated 03.08.2006 is Mark DW5/1.
(ii) Copy of complaint made by accused Inder Verma to Director, CBI dated 15.04.2010 is Mark DW5/2.
12. DE was closed on 25.11.21 and the matter was adjourned for final arguments. Final arguments were heard by this court on 30.11.21, 02.12.21, 06.12.21, 07.12.21 & 08.12.21.
13. I have heard counsel for the parties, perused the record and have gone through the relevant provisions of the law.
14. Before moving forward towards the merits of the case at hand, it is pertinent to reproduce the penal provision of section 138 NI Act:
"138. Dishonour of cheque for insufficiency, etc., of funds in the account.-CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 13 of 67
Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless--
(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice.
Explanation.--For the purposes of this section, 'debt or other liability' means a legally enforceable debt or other liability."
(Emphasis Supplied) CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 14 of 67
15. At the very outset, it is pertinent to lay down the ingredients of the offence under section 138 of NI Act. In Jugesh Sehgal v. Shamsher Singh Gogi, (2009) 14 SCC 683, the Hon'ble Supreme Court of India culled out the following ingredients in order to constitute an offence u/s. 138 of NI Act:
"13. It is manifest that to constitute an offence under Section 138 of the Act, the following ingredients are required to be fulfilled:
(i) a person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account;
(ii) the cheque should have been issued for the discharge, in whole or in part, of any debt or other liability;
(iii) that cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity whichever is earlier;
(iv) that cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of the account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with the bank;
(v) the payee or the holder in due course of the cheque makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;
(vi) the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 15 of 67 cheque within 15 days of the receipt of the said notice.
Being cumulative, it is only when all the aforementioned ingredients are satisfied that the person who had drawn the cheque can be deemed to have committed an offence under Section 138 of the Act."
16. Ld. Counsel for the complainant has submitted that there exists legally enforceable liability in favour of the complainant on behalf of the accused on the basis of Ex.CW1/B(OSR), Ex-CW1/C, Ex-CW1/D(OSR), Ex- CW1/CX1(OSR), Ex-CW1/DX4(OSR), Ex-CW1/DX5, Ex- CW1/DX6(OSR), Ex-CW1/X & Mark Z on behalf of the complainant which letter dated 01.02.2006 written by accused company to the complainant society. He has further submitted that the cheque in question was issued to the complainant which is Ex-CW1/E. He has further submitted that the dishonour of the cheque is proved by the cheque return memo which is Ex-CW1/F. Further, copy of the legal notice is Ex. CW1/G and postal receipts, courier slips along with AD card are Ex-CW1/H-1 to Ex. CW1/J-8. He has further submitted that the complainant received no payment within 15 days of the service the legal notice. Ld. Counsel for complainant has thus submitted that all the ingredients laid down u/s. 138 NI Act are fulfilled and the accused persons should be convicted.
Defence of the accused
17. All the accused persons have primarily taken two defences.
The first defence that the accused persons have taken is that there is no legally enforceable liability in favour of the CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 16 of 67 complainant and against the accused as on the date of the cheque in question or on the date of its presentation. Furthermore, they have taken a defence that they were not incharge of or responsible to the company for the conduct of business of the accused no. 1 company as on the date of the cheque in question or on the date of its presentation.
Defence of all the accused persons that there does not exist any legally enforceable liability of debt.
18. Before moving forward with the contentions of the accused persons, it is pertinent to discuss the relevant provisions of law which deal with legally enforceable debt or liability under the NI Act which are section 118(a) and 139 of the NI Act. Section 118(a) of the NI Act deals with the presumption of consideration and section 139 of NI Act deals with presumption of legally enforceable debt or liability and reads as follows:
"118. Presumptions as to negotiable instruments- Until the contrary is proved, the following presumptions shall be made:
(a) of consideration: that every negotiable instrument was made or drawn for consideration, and that every such instrument when it has been accepted, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration;
***
139. Presumption in favour of holder-
It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 17 of 67 the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability."
19. It is further pertinent to mention the relevant judgments on the point of presumption of legally enforceable debt or liability. Reliance is placed upon the following observations of Hon'ble Supreme Court in India in the judgment of Rangappa v. Sri Mohan, (2010) 11 SCC 441:
"28. In the absence of compelling justifications, re- verse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of "pre- ponderance of probabilities". Therefore, if the ac- cused is able to raise a probable defence which cre- ates doubts about the existence of a legally enforce- able debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evi- dence of his/her own."
(Emphasis Supplied)
20. Further reliance is placed upon the following observations of the Hon'ble Supreme Court of India in Bharat Barrel & Drum Mfg. Co. vs. Amin Chand Payrelal, (1999) 3 SCC 35:
"12. Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 18 of 67 note is admitted, the presumption under Section 118(a) would arise that it is supported by a consider- ation. Such a presumption is rebuttable. The defen- dant can prove the non-existence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was im- probable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the non-existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by ref- erence to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defen- dant fails to discharge the initial onus of proof by showing the non-existence of the consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under Section 118(a) in his favour. The court may not insist upon the de- fendant to disprove the existence of consideration by leading direct evidence as the existence of negative evidence is neither possible nor contemplated and even if led, is to be seen with a doubt. The bare de- nial of the passing of the consideration apparently does not appear to be any defence. Something which is probable has to be brought on record for getting the benefit of shifting the onus of proving to the plaintiff. To disprove the presumption, the defendant has to bring on record such facts and circumstances upon consideration of which the court may either believe that the consideration did not exist or its non-existence was so probable that a prudent man would, under the circumstances of the case, shall act upon the plea that it did not exist."CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 19 of 67
21. Further reliance is placed upon the following observations of the Hon'ble Supreme Court of India in Kumar Exports vs. Sharma Carpets, (2009) 2 SCC 513:
"20. The accused in a trial under Section 138 of the Act has two options. He can either show that consid- eration and debt did not exist or that under the par- ticular circumstances of the case the non-existence of consideration and debt is so probable that a pru- dent man ought to suppose that no consideration and debt existed. To rebut the statutory presumptions an accused is not expected to prove his defence beyond reasonable doubt as is expected of the complainant in a criminal trial. The accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him. However, the court need not insist in every case that the ac- cused should disprove the non-existence of consid- eration and debt by leading direct evidence because the existence of negative evidence is neither possi- ble nor contemplated. At the same time, it is clear that bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To dis- prove the presumptions, the accused should bring on record such facts and circumstances, upon consider- ation of which, the court may either believe that the consideration and debt did not exist or their non-ex- istence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist. Apart from adducing di- rect evidence to prove that the note in question was not supported by consideration or that he had not in- curred any debt or liability, the accused may also rely upon circumstantial evidence and if the circum- stances so relied upon are compelling, the burden may likewise shift again on to the complainant. The CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 20 of 67 accused may also rely upon presumptions of fact, for instance, those mentioned in Section 114 of the Evidence Act to rebut the presumptions arising un- der Sections 118 and 139 of the Act."
22. Further reliance is placed upon the following observations of the Hon'ble Supreme Court of India in Bir Singh vs. Mukesh Kumar, (2019) 4 SCC 197:
"20. Section 139 introduces an exception to the gen- eral rule as to the burden of proof and shifts the onus on the accused. The presumption under Section 139 of the Negotiable Instruments Act is a presumption of law, as distinguished from presumption of facts. Presumptions are rules of evidence and do not con- flict with the presumption of innocence, which re- quires the prosecution to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law and presumptions of fact unless the accused adduces evidence showing the reason- able possibility of the non-existence of the presumed fact as held in Hiten P. Dalal [Hiten P. Dalal v. Bratindranath Banerjee, (2001) 6 SCC 16 :
2001 SCC (Cri) 960] .
***
33. A meaningful reading of the provisions of the Negotiable Instruments Act including, in particular, Sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been is-
sued for payment of a debt or in discharge of a lia- bility. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted."
CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 21 of 6723. On the basis of the aforesaid discussion, it is clear that one of the most basic ingredient to be seen by this court is whether there exists legally enforceable debt or liability in favour of the complainant and against the accused.
24. The basic contention raised by the accused persons is that the present cheques in question were signed cheques filled with complete particulars but were meant only for security purposes. It has been further submitted that it was the intention of the parties that in case, the accused company is not able to make the payment of the dues, then in such a case, the complainant will be at liberty to present the cheque in question.
25. Ld. Counsels for the accused have tried to show from the documentary evidence available on record that the cheque in question is a security cheque. Ld. Counsels for the accused have stated that as per Ex-CW1/D(OSR), which is the letter dated 11.01.2006 which was issued by the accused no. 1 company, a payment schedule of Rs. 250 crores was made out of which Rs. 50 crores were to be paid every month starting the end of January 2006 till May 2006. Thereafter, another letter dated 11.01.2006 was issued by the accused company which is Ex-CW1/CX1 by which 30 cheques of Rs. 5 crore each have been issued. Thereafter, another letter dated 01.02.2006 was issued by the accused company which is Mark Z by which 20 cheques of Rs. 5 crore each have CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 22 of 67 been issued. Out of the said 20 cheques, two are the cheques in question.
26. Ld. Counsels for the accused have further relied on the payment schedule which is Ex-CW1/DX3(OSR) wherein the various payments received by the complainant have been stated between the period commencing 20.10.2005 to 03.07.2006.
27. It is pertinent to note here that none of these payments have been made by way of the encashment of the cheques which are mentioned in the two letters dated 11.01.2006 which are Ex-CW1/D(OSR) and Ex-CW1/CX1(OSR) or in letter dated 01.02.2006 which is Mark Z. Admittedly, some amount was received by the complainant after issuance of these letters and pursuant to which 15 of the 50 cheques obtained by the complainant vide letters dated 11.01.2006 and 01.02.2006 were returned back to the accused.
28. Perusal of letter dated 11.01.2006 and letter dated 01.02.2006 shows that the date of the 50 cheques start from 15.02.2006 to 30.06.2006 and perusal of the earlier letter dated 11.01.2006 shows that the accused was to pay Rs. 50 Crores in the month of January itself. In these circumstances, it cannot be said that the cheques have been given towards payment of outstanding amount and it appears that they have been given as collateral security.
CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 23 of 6729. In view of the aforesaid facts and circumstances, I find it difficult to give a finding that the cheques in question are not security cheques. The schedule of actual payment done which is Ex-CW1/DX3 clarifies the intention of the parties that the cheques in question were handed over as a security and the same were given duly filled only for safeguarding the issuer of the cheque against any misuse in this regard. Moreover, returning of 15 cheques upon receiving of payment through other modes as evident in Ex-CW1/DX3, can only prove one thing which is that the cheques in question were given as security cheques.
30. Ld. Counsel for the complainant has placed reliance on several judgments of the Hon'ble Supreme Court of India to show that the accused persons are liable even in cases of security cheques. He has mainly placed reliance on the judgment of the Hon'ble Court in Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Ltd., (2016) 10 SCC 458 wherein the Hon'ble Court held as follows:
"9. We have given due consideration to the submis- sion advanced on behalf of the appellant as well as the observations of this Court in Indus Airways [In- dus Airways (P) Ltd. v. Magnum Aviation (P) Ltd., (2014) 12 SCC 539 : (2014) 5 SCC (Civ) 138 :
(2014) 6 SCC (Cri) 845] with reference to the expla-
nation to Section 138 of the Act and the expression "for discharge of any debt or other liability" occur-
CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 24 of 67ring in Section 138 of the Act. We are of the view that the question whether a post-dated cheque is for "discharge of debt or liability" depends on the na- ture of the transaction. If on the date of the cheque, liability or debt exists or the amount has become legally recoverable, the section is attracted and not otherwise.
***
12. The crucial question to determine applicability of Section 138 of the Act is whether the cheque rep- resents discharge of existing enforceable debt or lia- bility or whether it represents advance payment without there being subsisting debt or liability."
31. Ld. Counsel for the complainant has further placed reliance on a recent judgment of the Hon'ble Supreme Court of India in Sripati Singh vs. State of Jharkhand & Anr., 2021 SCC OnLine SC 1002 wherein the Hon'ble Court held as follows:
"17. A cheque issued as security pursuant to a finan- cial transaction cannot be considered as a worthless piece of paper under every circumstance. 'Security' in its true sense is the state of being safe and the se- curity given for a loan is something given as a pledge of payment. It is given, deposited or pledged to make certain the fulfilment of an obligation to which the parties to the transaction are bound. If in a transaction, a loan is advanced and the borrower agrees to repay the amount in a specified timeframe and issues a cheque as security to secure such repay- ment; if the loan amount is not repaid in any other form before the due date or if there is no other un- derstanding or agreement between the parties to de- fer the payment of amount, the cheque which is is- sued as security would mature for presentation and the drawee of the cheque would be entitled to present the same. On such presentation, if the same CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 25 of 67 is dishonoured, the consequences contemplated un- der Section 138 and the other provisions of N.I. Act would flow.
18. When a cheque is issued and is treated as 'secu- rity' towards repayment of an amount with a time period being stipulated for repayment, all that it en- sures is that such cheque which is issued as 'secu- rity' cannot be presented prior to the loan or the in- stalment maturing for repayment towards which such cheque is issued as security. Further, the bor- rower would have the option of repaying the loan amount or such financial liability in any other form and in that manner if the amount of loan due and payable has been discharged within the agreed pe- riod, the cheque issued as security cannot thereafter be presented. Therefore, the prior discharge of the loan or there being an altered situation due to which there would be understanding between the parties is a sine qua non to not present the cheque which was issued as security. These are only the defences that would be available to the drawer of the cheque in a proceedings initiated under Section 138 of the N.I. Act. Therefore, there cannot be a hard and fast rule that a cheque which is issued as security can never be presented by the drawee of the cheque. If such is the understanding a cheque would also be reduced to an 'on demand promissory note' and in all circum- stances, it would only be a civil litigation to recover the amount, which is not the intention of the statute. When a cheque is issued even though as 'security' the consequence flowing therefrom is also known to the drawer of the cheque and in the circumstance stated above if the cheque is presented and dishon- oured, the holder of the cheque/drawee would have the option of initiating the civil proceedings for re- covery or the criminal proceedings for punishment in the fact situation, but in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation."CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 26 of 67
32. Ld. Counsel for the complainant has further submitted that the above quoted judgments have been followed by Hon'ble Supreme Court of India in Sunil Todi vs. State of Gujarat & Anr., 2021 SCC OnLine SC 1174.
33. Thus, the legal position that emanates from the above quoted judgments of the Hon'ble Supreme Court of India is that it does not make a difference whether the cheque has been given towards payment actually due or for security purposes, what has to be seen by this court is that there should be existing legally enforceable debt or liability as on the date mentioned on the cheque and the security cheque should not be a cheque pertaining to advance payment to be made by the accused.
34. Since it has already been established that the cheques in question have been issued as a collateral security, the next question that is to be dealt is whether there was any legally enforceable liability equivalent to the cheque amount in question as on the date of drawal of the cheque or the date of presentation of the cheque.
35. The documents proving the liability of the accused no. 1 company as on the date of the drawal of the cheque and on the date of its presentation are the proposal dated 28.08.2003 which is Ex-CW1/B(OSR), MOU dated 16.10.2003 between the parties and addendum dated CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 27 of 67 12.04.2004 extending the MOU for a further period of one year both of which are Ex-CW1/C, two letters dated 11.01.2006 which are Ex-CW1/D(OSR) and Ex-CW1/CX1 (OSR) as also the letter dated 01.02.2006 by the accused company to the complainant society which is Mark Z, Copy of letter dated 28.08.2003 written by accused no.1 company to complainant society which is Ex-CW1/DX4(OSR), Minutes of meeting of the complainant society of various dates which is Ex-CW1/DX5, Copy of letter dated 05.09.2005 written by accused no.1 company to complainant society which is Ex-CW1/DX6(OSR) and lastly, the arbitral award in favour of the complainant which is Ex-CW1/X.
36. In the first letter dated 11.01.2006 which is Ex-CW1/D (OSR), the accused company has issued a letter to the complainant with the subject, "Payment of our Outstanding against the LCs opened by NAFED". This letter has given a re-payment schedule of Rs. 250 Crores which is admittedly the outstanding liability of the accused company towards the complainant society as on 11.01.2006. Along with this letter another letter of even date has been written which is Ex- CW1/CX1 with the subject, "Payment of Rs. 150 Crores"
and the details of 30 cheques of Rs. 5 crores each. Another letter dated 01.02.2006 has been written which is Mark Z with the subject, "Payment of Rs. 100 Crores" and the details of 20 cheques of Rs. 5 crores each out of which two are the cheques in question. Furthermore, as per Ex-CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 28 of 67
CW1/DX3, which is the payment schedule produced at the behest of accused Mahavir Prasad Mishra during proceedings shows that the entire payment of Rs. 250 crores has not been received by the complainant till the date of presentation of the cheque in question.
37. Ld. Counsels for the accused persons have not produced even a single evidence on record which disproves or contradicts any of the documents as mentioned in Ex- CW1/B (OSR), Ex-CW1/C, Ex-CW1/D (OSR), Ex- CW1/CX1 (OSR), Mark Z, Ex-CW1/DX4(OSR), Ex- CW1/DX5, Ex-CW1/DX6(OSR) and Ex-CW1/X. The only defence they have taken is that the complainant has not given the credit of Rs. 1 crore which was the security deposit given by the accused company while signing the MOU. In my considered opinion, even if the security deposit of Rs. 1 Crore is adjusted, then also, the liability would be much larger than the amount of cheques in question.
38. Perusal of the Legal Demand Notice which is Ex-CW1/G and the complaint shows that the claim that has been made by the complainant in this present complaint is only Rs. 5 Crores. On the basis of aforesaid documents, it cannot be said that there was not even the liability of Rs. 5 crores as on the date of issuance of the cheque in question or on the CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 29 of 67 date of presentation of the cheque before the bank for encashment.
39. Accordingly, I hold that there was legally enforceable liability in favour of the complainant and against the accused company equivalent to the amount of cheque in question and as on the date of the issuance and the presentation of the cheque in question and also on the date of handing over the cheque in question by the accused company to the complainant society.
Defence of the accused persons that they were not incharge of or responsible to the company for the conduct of the business of the company.
40. Before moving forward with the defence of the accused persons that they were not incharge of or responsible to the company for the conduct of the business of the company, it is pertinent to reproduce the provisions of section 141 NI Act which reads as follows:
"141. Offences by companies:
(1) If the person committing an offence un-
der Section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the con- duct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and pun- ished accordingly:
CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 30 of 67Provided that nothing contained in this sub-sec- tion shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due dili- gence to prevent the commission of such offence. Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be li- able for prosecution under this chapter. (2) Notwithstanding anything contained in sub-sec-
tion (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or con- nivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other of- ficer of the company, such director, manager, secre- tary or other officer shall also be deemed to be guilty of that offence and shall be liable to be pro- ceeded against and punished accordingly. Explanation.--For the purposes of this section,--
(a) "company" means any body corporate and in- cludes a firm or other association of individuals; and
(b) "director", in relation to a firm, means a partner in the firm."
(Emphasis Supplied)
41. In addition to the above stated provision, it is essential to reproduce relevant part of the authoritative judgment of the Hon'ble Supreme Court of India in National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330 wherein the Hon'ble Court enunciated the various principles dealing with the liability of the directors in offences u/s. 138 NI Act.
CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 31 of 67"37. A combined reading of Sections 5 and 291 of Companies Act, 1956 with the definitions in clauses (24), (26), (30), (31) and (45) of Section 2 of that Act would show that the following persons are con-
sidered to be the persons who are responsible to the company for the conduct of the business of the com- pany:
(a) the Managing Director(s);
(b) the whole-time Director(s);
(c) the Manager;
(d) the Secretary;
(e) any person in accordance with whose directions or instructions the Board of Directors of the com- pany is accustomed to act;
(f) any person charged by the Board of Directors with the responsibility of complying with that provi-
sion:
Provided that the person so charged has given his consent in this behalf to the Board;
(g) where any company does not have any of the of-
ficers specified in Clauses (a) to (c), any Director or Directors who may be specified by the Board in this behalf or where no Director is so specified, all the Directors:
Provided that where the Board exercises any power under Clause (f) or Clause (g), it shall, within thirty days of the exercise of such powers, file with the Registrar a return in the prescribed form.
38. But if the accused is not one of the persons who falls under the category of "persons who are respon-
sible to the company for the conduct of the business of the company" then merely by stating that "he was in charge of the business of the company" or by stat- ing that "he was in charge of the day-to-day man- agement of the company" or by stating that "he was in charge of, and was responsible to the company for the conduct of the business of the company", he can- not be made vicariously liable under Section 141(1) of the Act. To put it clear that for making a person li- able under Section 141(2), the mechanical repetition of the requirements under Section 141(1) will be of CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 32 of 67 no assistance, but there should be necessary aver- ments in the complaint as to how and in what man- ner the accused was guilty of consent and con- nivance or negligence and therefore, responsible un- der sub-section (2) of Section 141 of the Act.
39. From the above discussion, the following princi- ples 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 vi-
cariously 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 li- able for the offence. The criminal liability can be fastened only on those who, at the time of the com- mission of the offence, were in charge of and were responsible for the conduct of the business of the company.
(iii) Vicarious liability can be inferred against a company registered or incorporated under the Com- panies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the ac- cused therein vicariously liable for offence commit- ted by the company along with averments in the pe- tition 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 pro- ceeded 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 spe- cific averment in the complaint.
CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 33 of 67(vii) 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 there is no deemed lia- bility of a Director in such cases."
Qua Accused Mahavir Prasad Mishra
42. Firstly, dealing with the defence of the accused Mahavir Prasad Mishra that he was not incharge of the day-to-day affairs of the accused company or responsible for the conduct of business.
43. Accused Mahavir Prasad Mishra has taken a defence that he was merely a cashier / low-level accountant in the accused company, however, by connivance of the top management he has been shown as a director in the records of the Registrar of the companies. Ld. Counsel for the accused has placed reliance upon Ex-DW1/1 which is the bank statement of the accused showing various payments received by the accused. Ld. Counsel for the accused has further drawn attention of this court to various entries reading "Salary Earthtech Enterprises". Ld. Counsel for accused has thus submitted that this clearly shows that the accused was merely a salaried employee of the accused no. 1 company and was not a director. Ld. Counsel for the complainant has submitted that from the bank statements, it can be proved that the accused was receiving salary from the accused no. 1 company but it cannot be proved that the accused was not a director.
CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 34 of 6744. Ld. Counsel for the complainant has submitted that the accused Mahavir Prasad Mishra is a director of the accused company as on the date of the issuance of the cheque in question. Furthermore, he has submitted that he is the signatory of the cheque in question. Ld. Counsel for the complainant has further placed reliance upon section 106 of the Indian Evidence Act which reads as follows:
106. Burden of proving fact especially within knowledge.-
When any fact is especially within the knowledge of any person, the burden of proving that fact is upon him.
(Emphasis Supplied)
45. Ld. Counsel for the complainant has further placed reliance upon the judgment of the Hon'ble Supreme Court of India in National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330 and particularly on the following observations:
"39. From the above discussion, the following prin- ciples emerge:
***
(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 spe-
cific averment in the complaint."
46. Ld. Counsel for the complainant has placed reliance on Ex-
DW1/X2 (colly) which is the annual return of the accused no. 1 company for the year ending 2006 and 2007. Ld. CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 35 of 67 Counsel for the complainant has particularly drawn the attention of this court to the signatures appended to the annual return which are of accused Mahavir Prasad Mishra as a director of the accused company. Perusal of the statement of DW1 shows that the accused has not denied the signatures, rather he has not identified the same. Ld. Counsel for the complainant has shown that furthermore the accused in the annual return has been shown as a director of the accused company with the date of appointment being 24.08.2005.
47. Ld. Counsel for the complainant has thus submitted that accused Mahavir Prasad Mishra being the signatory of the cheque in question and being also shown as a director in the accused no. 1 company as per ROC records should be held liable under section 138 r/w. 141 of NI Act being incharge of or responsible to the company for the conduct of the business of the company.
48. It is an established fact that the accused has been shown as a director of the accused no. 1 company w.e.f. 24.08.2005. The accused has maintained his stand throughout the proceedings that he was merely a salaried employee. To prove this, he has also placed on record Ex-DW1/1 which is his bank statements. This document merely proves that the accused was receiving salary from the accused no. 1 company and not that he was or was not the director of the CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 36 of 67 accused no. 1 company as on the date of issuance of the cheque in question and the presentation of the said cheque. No such document has been placed on record by the accused Mahavir Prasad Mishra which contradicts the direct proof of ROC record and the annual return which is Ex-DW1/X2 (colly) in which he himself has signed the annual return as a director. In such circumstances, in terms of section 106 of Indian Evidence Act, 1872, the burden to prove that the accused was not a director of the accused company on the date of issuance and presentation of the cheque in question was on the accused Mahavir Prasad Mishra which he has failed to discharge.
49. Ld. Counsel for the accused has further placed reliance on Ex-DW1/X1(colly) which is the statement of the accused u/s. 161 Cr.P.C given to CBI in connected proceedings and he has submitted that since the complainant has filed this statement and since this statement has not been given in this case itself, this court should read the statement as a part of evidence. Ld. Counsel for the complainant has submitted that the complainant has merely admitted to the fact that the accused has given a statement before the CBI under section 161 Cr.P.C. and has not admitted to the genuineness or the truth of the statements.
50. Ld. Counsel for the complainant has further placed reliance on the judgment of the Hon'ble Supreme Court of India in CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 37 of 67 VK Mishra vs. State of Uttarakhand & Ors., (2015) 9 SCC 588, wherein the Hon'ble court has held that before using the statements made u/s. 161 Cr.P.C by a witness, it must be duly proved by calling the IO to the witness stand. It has been held that if this judgment is to be used for the purposes of contradiction, then only such part of the statement which has been admitted by the witness to have been given before the police can be used by the court without calling the IO to the stand.
51. It is pertinent to note that in the present case the accused has stated that he has given some statement to the CBI but he does not remember if it was this statement or not.
52. I find merit in the submissions of the Ld. Counsel for the complainant and in my considered opinion, it was on the accused Mahavir Prasad Mishra to prove the genuineness and truthfulness of the statements made before CBI which the accused has failed to do. It is further on evidence that accused Mahavir Prasad Mishra was the signatory of the cheque in question. It is further on evidence that he was the director of the accused no. 1 company as on the date of issuance and presentation of the cheque in question. It is further on evidence that the accused has signed the annual returns of the accused no. 1 company in the year 2006-2007. It was then on the accused to prove that he was not the authorised signatory, or that he was not the director, or that CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 38 of 67 he was not incharge of or responsible to the company for the conduct of the business of the company which the accused has failed to do.
53. In view of the aforesaid discussion, I hold that accused Mahavir Prasad Mishra was incharge of or responsible to the company for the conduct of the business of the company.
Qua Accused Rajesh Gulati
54. Secondly, dealing with the defence of the accused Rajesh Gulati that he was not incharge of the day-to-day affairs of the accused company or responsible for the conduct of business.
55. Ld. Counsel for accused Rajesh Gulati has submitted that the accused had joined the present company on 01.11.2003 as a director and had resigned on 18.06.2010. He has further submitted that the accused is not a shareholder in the accused company, nor is the accused incharge of the day to day affairs of the accused company or responsible to the company for the conduct of the business. He has further submitted that the accused is not a signatory to any of the dishonoured cheques nor is he signatory to any document or agreement executed between the parties nor is he signatory to any of the correspondence between the parties and hence the accused cannot be said to have any knowledge of the present transaction. Ld. Counsel for the accused has thus CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 39 of 67 said that the accused did not have any knowledge or involvement in the present transaction.
56. Ld. Counsel for accused has further submitted that since there is no specific averment in the complaint qua the accused regarding his role in the present matter, hence, the accused is liable to be acquitted on this point itself.
57. Ld. Counsel for the accused has relied on the following observations of the Hon'ble Supreme Court of India in National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330:
"38. But if the accused is not one of the persons who falls under the category of "persons who are respon- sible to the company for the conduct of the business of the company" then merely by stating that "he was in charge of the business of the company" or by stat- ing that "he was in charge of the day-to-day man- agement of the company" or by stating that "he was in charge of, and was responsible to the company for the conduct of the business of the company", he can- not be made vicariously liable under Section 141(1) of the Act. To put it clear that for making a person li- able under Section 141(2), the mechanical repetition of the requirements under Section 141(1) will be of no assistance, but there should be necessary aver- ments in the complaint as to how and in what man- ner the accused was guilty of consent and con- nivance or negligence and therefore, responsible un- der sub-section (2) of Section 141 of the Act.
39. From the above discussion, the following princi- ples 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 vi-CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 40 of 67
cariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction.
***"
58. Ld. Counsel for the accused has further relied upon the judgment of Hon'ble Supreme Court of India in GN Verma vs. State of Jharkhand, (2014) 4 SCC 282, Pooja Ravinder Devidasani vs. State of Maharashtra and And., (2014) 16 SCC 1 and Ashoke Man Bafna vs. Upper India Steel Manufacturing and Engineering Company Ltd., (2018) 14 SCC 202. Ld. Counsel for accused has further relied upon the judgments of Hon'ble High Court of Delhi in Shyam Narain Mishra vs. State & And., 206 (2014) DLT 371 and in Crl.M.C. No. 708/2020, titled as Smt. Dharna Goyal @ Dharna Garg vs. M/s. Aryan Infratech Pvt. Ltd. decided on 16.10.2003. It is the contention of Ld. Counsel for the accused that in all the above-cited judgments, the dictum laid down by the Hon'ble Supreme Court of India in National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330 has been followed and the same has been applied strictly and all the complaints against the directors against whom there is no specific averment have been quashed.
59. I have perused all the judgments given by Ld. Counsel for the accused. In all the cases, the Hon'ble High Court while exercising jurisdiction u/s. 482 Cr.P.C. has quashed the complaint itself and not even a single decision applies to the CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 41 of 67 facts of the present case wherein the whole trial has taken place and the complainant is trying to show on the basis of evidence on record as to how accused Rajesh Gulati is involved in the present transaction.
60. Reliance is additionally placed by this court upon the judgment of Ashutosh Ashok Parasrampuriya and another versus M/s Gharrkul Industries Pvt Ltd., 2021 SCC OnLine SC 915, wherein the Hon'ble Supreme Court held that the summons issued by a Magistrate on a complaint under Section 138 of the Negotiable Instruments Act to the Directors of a Company is justified if the complaint contains the basic averment that they were in charge and responsible for the conduct of the business of the company while holding as follows:
"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."
61. In the above-stated case, the Hon'ble Court refused to quash summons as the complaint contained the basic averment in terms of section 141 of NI Act.
CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 42 of 6762. Ld. Counsel for the accused has further relied on certain judgments of the Hon'ble Superior Courts in several cases and particularly in Shyam Narayan Prasad vs. Krishna Prasad & Ors., (2018) 7 SCC 646 to show that the complainant cannot lead evidence beyond the pleadings and since, the complainant has not pleaded specific role of the accused in the present case, accordingly, he should not be allowed to lead evidence in this regard. I have perused all the judgments relied upon by the Ld. Counsel for the accused. Ld. Counsel for the complainant has submitted that all the judgments relied by the accused pertain to civil law and do not pertain to criminal law and specifically to offence u/s. 138 NI Act.
63. Ld. Counsel for accused has then placed reliance upon the judgment of the Hon'ble Supreme Court of India in P. Mohanraj vs. Shah Brothers Spat Pvt. Ltd. (2021) 6 SCC 258, wherein it has been held that an offence u/s. 138 of NI Act is a quasi-criminal offence and it is essentially a civil case given a criminal colour. Ld. Counsel amongst other paragraphs has relied upon the following observations of the Hon'ble Court:
"53.....criminal proceedings are stated to be proceedings in which the larger interest of the State is concerned. Given these tests, it is clear that a Section 138 proceeding can be said to be a "civil sheep" in a "criminal wolf's" clothing, as it is the interest of the victim that is sought to be protected, the larger interest of the State being subsumed in the CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 43 of 67 victim alone moving a court in cheque bouncing cases, as has been seen by us in the analysis made hereinabove of Chapter XVII of the Negotiable Instruments Act."
64. Ld. Counsel for the accused has thus on the basis of the aforesaid judgment has stated that since it is essentially a civil case, hence, the general principle of civil law that no evidence beyond the pleadings can be brought on record by the complainant.
65. Ld. Counsel for the complainant has argued that merely because an offence is of quasi-criminal nature does not mean that the court should start following CPC. He has further submitted that the complainant in its complaint and the AR in his evidence by way of affidavit have specifically stated that the accused Rajesh Gulati was incharge of the affairs of the accused company and through evidence, he is showing how the accused is doing so.
66. Before moving further, it is pertinent to note that it is a general and well-established principle of civil law that a party to a suit cannot argue nor place any evidence beyond its pleadings.
67. I find merit in the submissions of Ld. Counsel for the for the complainant and merely because this is a quasi-criminal proceeding hence the general principles of civil law cannot be applied here. It is a general principle of civil law that a CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 44 of 67 party cannot lead evidence as to some fact which it has not pleaded. In the current case, however, I find that this principle is not applicable since these are quasi-criminal proceedings. Even otherwise when the complainant has taken a stand in its complaint that the accused is in charge of the affairs of the accused company, then the complainant is at liberty to show on the basis of evidence as to how the accused is in charge of the affairs and any evidence so let cannot be said to be beyond the pleadings.
68. Ld. Counsel for the complainant has submitted that the accused Rajesh Gulati has appended his signatures to the annual return which is Ex-DW2/X1, balance sheet which is Ex-DW2/X2(colly) and another annual return which is Ex- DW2/X2(colly) and another annual return which is Ex- DW2/X3. He has further submitted that the accused Rajesh Gulati has signed the cash flow statement as well as the profit & loss statement of the company is Ex- DW2/X2(colly).
69. Ld. Counsel for the complainant has relied heavily on the petitions, replies and counter claims filed before Hon'ble High Court of Delhi and the arbitral tribunal which are Ex- DW2/X4(colly), Ex-DW2/X5(colly), Ex-DW2/X6(colly) and Ex-DW2/X7(colly) and perusal of the same reveals that while filing petitions, replies and counterclaims etc. before CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 45 of 67 the above stated forums, it is Rajesh Gulati who was the authorised representative of the accused company.
70. Accused Rajesh Gulati has maintained a stand throughout the current proceedings that he was only a formal director and had no knowledge of the transaction in question. It is established fact that accused Rajesh Gulati is shown as a whole-time director of the accused company in the records of the Registrar of companies.
71. Ld. Counsel for the complainant has relied on the following observations of the Hon'ble Supreme Court of India in National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330:
"37. A combined reading of Sections 5 and 291 of Companies Act, 1956 with the definitions in clauses (24), (26), (30), (31) and (45) of Section 2 of that Act would show that the following persons are con-
sidered to be the persons who are responsible to the company for the conduct of the business of the com- pany:
***
(b) the whole-time Director(s);
***
39. From the above discussion, the following princi- ples emerge:
***
(vii) 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 there is no deemed lia-
bility of a Director in such cases."
CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 46 of 6772. Ld. Counsel for the complainant has agreed that though there is no specific averment in the complaint as to the role of the accused, however, it has been specifically averred that the accused was incharge of and was responsible to the company for the conduct of the business of the company in terms of point (vii) of para 39 of the above-quoted judgment. Ld. Counsel for the complainant has further submitted that the complainant has proved during evidence that the accused Rajesh Gulati was incharge of and was responsible to the company for the conduct of the business of the company. Ld. Counsel for the complainant has further submitted that accused Rajesh Gulati being the whole-time director and filing petitions & counter-claims as authorised representative of the accused no.1 company was incharge of and was responsible to the company for the conduct of the business of the company.
73. This court places reliance on the following observations of the Hon'ble Supreme Court of India in National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330:
"38. But if the accused is not one of the persons who falls under the category of "persons who are respon- sible to the company for the conduct of the business of the company" then merely by stating that "he was in charge of the business of the company" or by stat- ing that "he was in charge of the day-to-day man- agement of the company" or by stating that "he was in charge of, and was responsible to the company for CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 47 of 67 the conduct of the business of the company", he can- not be made vicariously liable under Section 141(1) of the Act. To put it clear that for making a person li- able under Section 141(2), the mechanical repetition of the requirements under Section 141(1) will be of no assistance, but there should be necessary aver- ments in the complaint as to how and in what man- ner the accused was guilty of consent and con- nivance or negligence and therefore, responsible un- der sub-section (2) of Section 141 of the Act."
74. On the bare perusal of the aforesaid provision of the law and the complaint, it is apparent that the complainant has in fact mechanically reproduced the provisions of section 141 of NI Act for fastening vicarious liability on the accused persons while also stating that accused Rajesh Gulati also approached the complainant company at the time of sending the proposal. As I have already held that what matters is the evidence that the complainant has placed on record for proving as to how and in what manner the accused was responsible for managing the affairs of the accused company in respect of the present transaction.
75. In terms of the aforesaid judgment, it is a settled law that there is no presumption that the accused knows about the transaction in question and secondly that vicarious liability on the part of a person must be pleaded and proved and not inferred. The evidence on which the complainant relies upon to prove that accused Rajesh Gulati was incharge of and responsible for the conduct of the business of the accused company at the time of commission of the offence are CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 48 of 67 contained in Ex-DW2/X2(colly) which are financial results for the year 2004-2005 and also on Ex-DW2/X4(colly),Ex- DW2/X5(colly), Ex-DW2/X6(colly) and Ex- DW2/X7(colly) which are various petitions, replies, counter-claims, affidavits and other documents wherein accused Rajesh Gulati has deposed in relation to the transaction.
76. Ld. counsel for the complainant has additionally relied upon certain documents which form part of reply filed by accused no. 1 company in petition filed on behalf of accused Rajesh Gulati which is Ex-DW2/X5(colly). The counsel has particularly drawn the attention of this court to running page 26 which is a document purported to be signed by accused Rajesh Gulati and which states from point A to A that "the undersigned is the Director, Principal Officer and incharge of the affairs of the company". When this document was put to the accused, the accused had stated that he cannot identify his signatures as the document is a photocopy and he had categorically denied the execution of the said document.
77. It is to be noted here that the burden to prove said document was on the complainant and not on the accused. It is further to be noted here that it is the accused no. 1 who had placed on record the said document and not accused Rajesh Gulati in proceedings before the Hon'ble High Court of Delhi.
CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 49 of 67When the witness has specifically denied the execution of the said document, it was on the complainant then to prove the execution of the document which the complainant has failed to do. Even otherwise, the said document does not prove any involvement of the accused in the matter whatsoever. There may be 50 directors in a company but only those are liable who are actually involved in the transaction under section 138 of NI Act and every director cannot be made liable.
78. Perusal of the record shows that the cheque is question has been issued in the year 2006 and also dishonoured in the same year. Perusal of the record further shows that none of the documents which are Ex-DW2/X4 (colly), Ex-DW2/X5 (colly), Ex-DW2/X6(colly) and Ex-DW2/X7 (colly) pertain to the year 2006 in which the cheque in question has been issued and dishonoured.
79. Ld. Counsel for the accused has submitted that a person as authorised representative of the company deposes on the basis of record and accused Rajesh Gulati had filed the said applications merely as an authorised representative. ARs always depose on the basis of record and it cannot be said that they have knowledge of the transaction or that they were actively involved in the transaction merely because they have deposed as such.
CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 50 of 6780. I find merit in the submissions made by Ld. Counsel for the accused and hold that merely because accused Rajesh Gulati has filed applications/ petitions on behalf of the accused no. 1 company, accordingly, it cannot be held that the accused knew about the transaction. It is an admitted fact by the accused himself that the accused was a whole time director of the accused company. As per the dictum laid down by the Hon'ble Supreme Court of India in National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330, what has to be seen by this court is whether the accused being a director, also had any involvement in the transaction in question.
81. The complainant has failed to prove that the accused had any knowledge of or had any involvement in the present transaction or that the accused was incharge of the affairs of the company or responsible for the conduct of the company on the date of the issuance or the presentation of the cheques in question. Accordingly, I hold that accused Rajesh Gulati was not incharge of and responsible to the company for the conduct of the business of the company on the date of the issuance or the presentation of the cheque in question.
Qua Accused Avdesh Kumar Singh
82. Thirdly, dealing with the defence of the accused Avdesh Kumar Singh that he was not incharge of the day-to-day CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 51 of 67 affairs of the accused company or responsible for the conduct of business.
83. For proving the same, the accused has stated that he had already resigned from the company on 29.08.2005 and as per Ex-DW3/1, which is form 32 of the accused company which shows that the accused has resigned as a director of the accused no. 1 company on 29.08.2005, he has been able to show that the same is also reflected in the records of the Registrar of the Companies. It is further contended by Ld. Counsel for the accused that neither of the letters dated 11.01.2006 have been signed by the accused. Ld. Counsel for the accused has further submitted that the accused has already been discharged in connected case with CC No. 8295/19 by Hon'ble High Court of Allahabad and copy of the order of the same has been placed before court in defence as Ex-DW3/2(colly). Ld. Counsel for accused has further relied upon documents which are Ex-DW3/3 (colly) and Ex-DW3/4 which are documents placed on record by the complainant itself and show that the accused had resigned as a director of the accused company.
84. Ld. Counsel for the accused has relied on the judgments of the Hon'ble Supreme Court of India in S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla, (2005) 8 SCC 89, Sabita Ramamurthy vs. R.B.S. Channabasavaradhya, (2006) 10 SCC 581, Harshendra Kumar D vs. Rebatilata CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 52 of 67 Koley & Ors., (2011) 3 SCC 351, Pooja Ravinder Devidasani vs. State of Maharashtra, (2014) 16 SCC 1, Ashok Mal Bafna vs. Upper India Steel Mfg. Eg Co. Ltd., (2018) 14 SCC 202 and particularly in National Small Industries Corporation Ltd. vs. Harmeet Singh Paintal, (2010) 3 SCC 330 to show that to fasten vicarious liability u/s. 141 of NI Act, there must be specific averments against the directors, showing as to how and in what manner the directors were responsible for the conduct of the business of the company. I have carefully perused and gone through these judgments as cited above. I have also gone through any and all other judgments relied upon by the Ld. Counsel for the accused in addition to the judgments as cited above.
85. It is the case of the complainant that accused falls squarely under clause (e) enumerated in para 37 of the judgment delivered by Hon'ble Supreme Court of India in National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330 which reads as follows:
"37. A combined reading of Sections 5 and 291 of Companies Act, 1956 with the definitions in clauses (24), (26), (30), (31) and (45) of Section 2 of that Act would show that the following persons are con-
sidered to be the persons who are responsible to the company for the conduct of the business of the com- pany:
*** CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 53 of 67
(e) any person in accordance with whose directions or instructions the Board of Directors of the com-
pany is accustomed to act;
***"
86. For showing the same, the complainant has relied upon the reply to the legal notice given by the accused wherein the accused has replied to legal notice as a director of the accused no. 1 company. Ld. Counsel for the complainant has further relied on the fact that the accused has signed the MOU in question and had full knowledge of the transaction.
87. The argument of the counsel for the complainant that the accused has replied to the legal in his capacity as a director of the accused company does not hold good in view of the fact that all the replies have been made by the company advocate and whatever the designations, the complainant has mentioned in the legal notice have been reproduced. The mentioning of accused Avdesh Kumar Singh as a director of the accused company does not appear to be a deliberate attempt. Furthermore, it has never been denied by accused Avdesh Kumar Singh that he did not sign the MOU. However, he has always maintained the stand that he was not present in the accused company at the time when the offence under section 138 NI Act was committed by the accused no. 1 company, i.e., on the date of issuance or the presentation of the cheque in question or on the date when the legal notice has been issued to the accused company.
CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 54 of 6788. In my considered opinion, when the accused had already resigned from the accused company on 29.08.2005, then it cannot be said that the accused was incharge of and responsible to the company for the conduct of the business of the company on the date of the issuance or the presentation of the cheque in question which is well after the resignation of the accused. Furthermore, once it was proved that the accused had resigned, the burden of proof lies on the complainant to prove how the accused was still conducting the business of the accused company or to show that he was incharge of the affairs of the accused company. The complainant has failed to discharge this burden and bring on record any shred of evidence which shows beyond reasonable doubt that the accused was incharge of and responsible to the company for the conduct of the business of the company on the date of the issuance or the presentation of the cheque in question.
Qua accused Om Prakash Aggarwal
89. Fourthly, dealing with the defence of the accused Om Prakash Aggarwal that he was not incharge of the day-to- day affairs of the accused company or responsible for the conduct of business.
90. It is an admitted fact between both the parties that the accused OP Aggarwal had resigned from the accused no. 1 company on 20.08.1997 and the same is also reflected in the CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 55 of 67 ROC records. Furthermore, this fact has also been recorded in order sheet dated 25.11.2021.
91. Ld. Counsel for the accused has further submitted that the accused is not a shareholder in the accused company, nor is the accused incharge of the day to day affairs of the accused company or responsible to the company for the conduct of the business. She has further submitted that the accused is not a signatory to any of the dishonoured cheques nor is he signatory to any document or agreement executed between the parties nor is he signatory to any of the correspondence between the parties and hence the accused cannot be said to have any knowledge of the present transaction. Ld. Counsel for the accused has thus said that the accused did not have any knowledge or involvement in the present transaction
92. Ld. Counsel for the accused has relied on the judgments of the Hon'ble Supreme Court of India in S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla, (2005) 8 SCC 89, Sabita Ramamurthy vs. R.B.S. Channabasavaradhya, (2006) 10 SCC 581, Harshendra Kumar D vs. Rebatilata Koley & Ors., (2011) 3 SCC 351, Pooja Ravinder Devidasani vs. State of Maharashtra, (2014) 16 SCC 1, Ashok Mal Bafna vs. Upper India Steel Mfg. Eg Co. Ltd., (2018) 14 SCC 202 and particularly in National Small Industries Corporation Ltd. vs. Harmeet Singh Paintal, (2010) 3 SCC 330 to show that to fasten vicarious CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 56 of 67 liability u/s. 141 of NI Act, there must be specific averments against the directors, showing as to how and in what manner the directors were responsible for the conduct of the business of the company. I have carefully perused and gone through these judgments as cited above. I have also gone through any and all other judgments relied upon by the Ld. Counsel for the accused in addition to the judgments as cited above.
93. It is the case of the complainant that accused falls squarely under clause (e) enumerated in para 37 of the judgment delivered by Hon'ble Supreme Court of India in National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330 which reads as follows:
"37. A combined reading of Sections 5 and 291 of Companies Act, 1956 with the definitions in clauses (24), (26), (30), (31) and (45) of Section 2 of that Act would show that the following persons are con-
sidered to be the persons who are responsible to the company for the conduct of the business of the com- pany:
***
(e) any person in accordance with whose directions or instructions the Board of Directors of the com-
pany is accustomed to act;
***"
94. Ld. Counsel for the complainant has primarily relied on two facts for proving that even after resignation, accused OP Aggarwal was incharge of and responsible to the company for the conduct of the business which are, firstly, the fact CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 57 of 67 that the accused has been charge-sheeted by the CBI in the connected criminal case and secondly, the fact that another accused Inder Verma and Mahavir Prasad Mishra have deposed against the accused while stating that he was controlling the affairs of the accused company and that they used to report to him. Accused Inder Verma has additionally deposed that it was on the instructions of accused OP Aggarwal that he has signed all the documents.
95. Extensive arguments have been heard by this court on the point of placing reliance on the statements of co-accused for the purposes of proving the case of the complainant against other accused.
96. Ld. Counsel for the complainant has relied upon the judgment of Hon'ble Supreme Court of India in Tribhuvan Nath vs. State of Maharashtra, (1972) 3 SCC 511 wherein the Hon'ble Supreme Court has held as follows:
"29. The first question is whether the trial Judge was right in using the evidence given by Accused 3 which he gave as a witness in his defence? The position with regard to such evidence is that when a person, accused along with others, voluntarily steps in the witness box as a witness in defence, he is in the same position as an ordinary witness (See Peoples Insurance Co. Ltd. v. Sardar Sardul Singh Caveeshar [AIR 1962 Punj 101] and Jibachh Shah v. State [AIR 1965 Pat 331] ) and is therefore, subject to cross-examination by the prosecution counsel and evidence brought out in such cross-CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 58 of 67
examination can be used against his co-accused. (See The King v. James Paul [(1920) 2 KB 183 at 185] .) If such a witness incriminates his co-accused, the other accused, jointly tried with him, has the right to cross-examine him if he wants so to do. (Rex v. Hadwen [(1902) 1 KB 882 at 887-88].) This has been the position in England after 1898 when accused persons were made competent witnesses."
97. Ld. Counsel for the complainant has thus submitted that evidence of a co-accused is relevant as against other co- accused and if such statement incriminate other co-accused, then in such cases, they have the right to cross-examine such co-accused. Admittedly, in the present case, no cross- examination of accused Inder Verma or accused Mahavir Prasad Mishra has been done on behalf of accused Om Prakash Aggarwal.
98. Ld. Counsel for the accused has relied upon the judgments of Hon'ble Supreme Court of India in Kashmira Singh vs. State of M.P., AIR 1952 SC 159, Hari Charn Kurmi & Ors. vs. State of Bihar, (1964) 6 SCR 623 and Surinder Kumar Khanna vs. I.O. DRI, (2018) 8 SCC 271 to show that when the only evidence available against the co- accused is the confession of a co-accused, then such statement cannot be relied upon. I have gone through and have carefully perused the judgments relied upon by Ld. Counsel for the accused. In my considered opinion, all the three judgments deal with the confession of a co-accused and not when the evidence is given by the co-accused CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 59 of 67 during Defence Evidence while incriminating other accused persons. It is pertinent to note that the judgment relied upon by Ld. Counsel for the complainant in Tribhuvan Nath vs. State of Maharashtra, (1972) 3 SCC 511, is on the point when the accused steps into the witness box for the purposes of giving defence evidence.
99. Ld. Counsel for the accused has then tried to show from the evidence on record that accused Inder Verma who has examined himself as DW4 is not a credible witness. She has firstly stated that not a single statement of accused Inder Verma is inculpatory and all the statements made by accused Inder Verma are exculpatory while pinning the blame on other co-accused persons. Secondly she has submitted that in letter addressed to Director, CBI by the accused Inder Verma which is Mark DW5/2, the accused has categorically stated that he went to work for the complainant's chairman, i.e., Mr. Ajit Kumar Singh as a consultant on a part time basis from July 2006.
100. Ld. Counsel for accused has further submitted that even if the evidence of the co-accused is to be taken then also it can be taken only for the purposes of corroborating other evidence already on record. She has further submitted that in the present case there is no shred of evidence against the accused OP Agarwal except the evidence of another co- accused Inder Verma who has no credibility in the eyes of CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 60 of 67 law for the reasons aforementioned. She has further submitted that accused OP Aggarwal has always maintained the stand that he was not present in the accused company at the time when the offence under section 138 NI Act was committed by the accused no. 1 company, i.e., on the date of issuance or the presentation of the cheque in question or on the date when the legal notice has been issued to the accused company.
101. In my considered opinion, when the accused had already resigned from the accused company on 20.08.1997, then it cannot be said that the accused was incharge of and responsible to the company for the conduct of the business of the company on the date of the issuance or the presentation of the cheque in question which is well after the resignation of the accused. Furthermore, once it was proved that the accused had resigned, the burden of proof lies on the complainant to prove how the accused was still conducting the business of the accused company or to show that he was incharge of the affairs of the accused company. The complainant cannot discharge its burden merely by relying on the statement of other co-accused while placing no evidence on record to show as to how the accused was incharge of the affairs of the company even after resignation. The complainant has failed to discharge this burden and bring on record any shred of evidence which shows beyond reasonable doubt that the accused was incharge of and responsible to the company for the conduct CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 61 of 67 of the business of the company on the date of the issuance or the presentation of the cheque in question.
Qua Accused Inder Verma
102. Lastly, dealing with the defence of the accused Inder Verma that he was not incharge of the day-to-day affairs of the accused company or responsible for the conduct of business.
103. Ld. Counsel for the accused has argued that the accused Inder Verma has not signed any cheque in question. He has further submitted that accused was not a director of the accused company at any point of time during his employment. He has further submitted that accused Inder Verma did all the signatures on instructions and directions from the directors and other top management. He has further submitted that the cheques in question have been issued and dishonoured after the accused has been terminated from the employment of accused no. 1 company. He has thus submitted that the accused was not a part of the accused no.1 company on the date of commission of the offence in this case.
104. It is the case of the complainant that accused falls squarely under clause (e) enumerated in para 37 of the judgment delivered by Hon'ble Supreme Court of India in National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330 which reads as follows:
CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 62 of 67"37. A combined reading of Sections 5 and 291 of Companies Act, 1956 with the definitions in clauses (24), (26), (30), (31) and (45) of Section 2 of that Act would show that the following persons are con-
sidered to be the persons who are responsible to the company for the conduct of the business of the com- pany:
***
(c) the Manager;
***"
105. Ld. Counsel for the complainant has further submitted that the accused has signed the proposal letter which is Ex- CW1/DX4(OSR), letter dated 05.09.2005 which is Ex- CW1/DX6 (OSR), both letters dated 11.01.2006 which are Ex-CW1/D (OSR) & Ex-CW1/CX1 as also the letter dated 01.02.2006 which is Mark Z.
106. Ld. Counsel for the accused has argued that the accused Inder Verma has signed only on letters of communication/ covering letters between the parties and that he has not signed any substantive document. He has submitted that the MOU and the addendum have been signed by the accused Avdesh Kumar Singh and the cheques have been signed by accused Mahavir Prasad Mishra as they were both directors at the relevant point of time. He has further submitted that accused was merely a manager in the accused company and thus acted on the basis of the instructions given to him by the directors.
CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 63 of 67107. Ld. Counsel for the complainant has submitted that on the basis of the signatures of the accused on several documents pertaining to the transaction in question, it can be said that the accused Inder Verma being the manager was involved in the transaction in question.
108. Reliance is placed by this court on the judgment of Hon'ble Supreme Court of India in Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129 wherein the Hon'ble Court has held as follows:
"38. A proper understanding of the scheme underlying the provision would thus make it abundantly clear that while the offence is complete upon dishonour, prosecution for such offence is deferred till the time the cause of action for such prosecution accrues to the complainant. The proviso in that sense simply postpones the actual prosecution of the offender till such time he fails to pay the amount within the statutory period prescribed for such payment."
109. Thus, it is a settled position of law that the commission of the offence u/s. 138 NI Act is complete only on the date of dishonour of the cheque and the cause of action arises for filing of the case arises when the accused fails to pay the cheque amount in question within 15 days of the service of legal notice on the accused person.
110. In the facts of the present case, the cheques in question have been dishonoured on 29.11.2006. Admittedly, accused Inder CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 64 of 67 Verma had been terminated from the accused company on 21.04.2006 and complete settlement of accounts between the accused no. 1 company and accused Inder Verma took place on 02.08.2006. Furthermore, it has also come into evidence that accused Inder Verma has given Intimation in this regard to Assistant General Manager, Union Bank of India vide letter dated 03.08.2006 which is Mark DW5/1 stating that he is no longer in the employment of accused no. 1 company and his name should be removed from the bank accounts as authorised signatory of the accused company. It is further to be observed that this letter has also been received by the complainant society on 11.08.2006 and thus, it cannot be said that the complainant did not know that as on the date of the commission of the offence, i.e., on 29.11.2006, accused Inder Verma was not part of the accused no. 1 company. Accused Inder Verma may have signed various letters of communication/ covering letters between the parties, but it cannot be said that he was incharge of and responsible to the company for the conduct of the business of the company on the date of the return of the cheque in question or on the date of the commission of the offence.
111. Thus, on the basis of the aforesaid discussion, I hereby hold that accused Mahavir Prasad Mishra was incharge of and responsible to the company for the conduct of the business of the company on the date of the presentation and return of the cheque in question. However, accused Rajesh Gulati, CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 65 of 67 Avdesh Kumar Singh, OP Aggarwal and Inder Verma were not incharge of and responsible to the company for the conduct of the business of the company on the date of the presentation and return of the cheques in question.
Findings of the Court
112. Thus, in my considered opinion, complainant has been able to prove its case beyond reasonable doubt qua accused no. 1 and accused Mahavir Prasad Mishra. I hold that there was legally enforceable debt or liability in favour of the complainant and against the accused no. 1 company as on the date of the cheque in question and equivalent to the amount of cheque in question. I further hold that accused Mahavir Prasad Mishra is liable under section 138 of negotiable instruments act read with section 141 of negotiable instruments act being the signatory of the cheque in question and also being a director of the accused no.1 company at the time of issuance and presentation of the cheque in question. Furthermore, the accused is deemed to have knowledge of the present transaction in view of the fact that he has signed the cheque in question being the authorised signatory thereof.
113. In my considered opinion and for the reasons afore mentioned, the complainant has not been able to prove its case beyond reasonable doubt against accused Rajesh CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 66 of 67 Gulati, Avdhesh Kumar Singh, OP Aggarwal & Inder Verma and it cannot be said that they were incharge of and responsible to the company for the conduct of the business of the company on the date of the presentation and return of the cheque in question.
114. In view of the aforesaid discussion, accused no. 1 company which is M/s. Earthtech Enterprises Pvt. Ltd. is hereby convicted for offence u/s. 138 of Negotiable Instruments Act, 1881. Accused no. 5 who is Mr. Mahavir Prasad Mishra is hereby convicted for offence u/s. 138 r/w. Section 141 of Negotiable Instruments Act, 1881. Accused no. 2, 3, 6 and 7 who are Mr. OP Agarwal, Mr. Rajesh Gulati, Mr. Avdhesh Kumar Singh and Mr. Inder Verma, respectively, are hereby acquitted for offence u/s. 138 r/w. Section 141 of Negotiable Instruments Act, 1881.
Digitally signedANSHUL by ANSHUL SINGHAL SINGHAL Date: 2022.01.10 16:13:51 +05'30' Announced in Open Court (Anshul Singhal) on 10.01.2022 MM(N.I. Act)-03/NDD/PHC/ND CC No. 5691/19 NAFED vs. M/s. EARTHTECH ENTERPRISES & ORS. Page 67 of 67