Bombay High Court
Sharad Deoraj Jain And Ors vs The State Of Maharashtra And Anr on 6 June, 2023
Author: Sarang V. Kotwal
Bench: Sarang V. Kotwal
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL WRIT PETITION NO. 321 OF 2023
Sharad Deoraj Jain & Ors. ..Petitioners
Versus
The State of Maharashtra & Anr. ..Respondents
__________
Mr. Hrishikesh Mundargi a/w. Pushkraj Deshpande, Piyush
Pandhare and Rohan Marathe i/b. ALMT Legal for Petitioners.
Mr. Arfan Sait, APP for State/Respondent No.1.
Mr. Mithilesh Mishra, for Respondent No.2.
__________
CORAM : SARANG V. KOTWAL, J.
DATE : 6 JUNE 2023
PC :
1. In this matter, learned Advocate Shri. Mithilesh Mishra
waives service for the Respondent No.2.
2. Heard Mr. Hrishikesh Mundargi, learned counsel for the
Petitioners, Mr. Arfan Sait, learned APP for the State/Respondent
No.1 and Mr. Mithilesh Mishra, learned counsel for the Respondent
No.2.
3. The Petitioners have challenged the order dated
05/02/2022 passed by Metropolitan Magistrate, 43rd Court,
Borivali, Mumbai, in C.C. No.4300120/SC/2021. The process is
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issued U/s.138 r/w. 141 of the Negotiable Instrument Act, 1881
(hereinafter referred to as 'N.I.Act'). The Petitioners are the
original accused Nos.4 to 8. The Respondent No.2 is the original
complainant which is a private limited company. The complaint is
filed against the accused No.1 M/s. Suumaya Industries Limited
and other accused.
4. The case of the complainant is that, there was an
agreement dated 19/04/2021 executed between the complainant
and the accused No.1. The agreement was entered into to record
and govern the ultimate supply of Agro products to Dentsu
Communications India Private Limited (hereinafter referred to as
'Dentsu'); which according to learned counsel for the Respondent
No.2 was another company. The arrangement was that the
complainant i.e. the Respondent No.2 was providing Trade credit,
wherein the principal process of the supply was carried out and
facilitated by the accused No.1. The goods were to be shifted
directly by the accused to Dentsu at the address provided to the
accused No.1. The complainant was merely acting as the Trade
Finance partner between Dentsu and the accused No.1. As per the
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agreement dated 19/04/2021 the accused No.1 agreed to provide
back to back indemnities against any losses, damages or liabilities
in case of inadequate performance. Pursuant to that agreement,
since the liabilities arose, the cheques which are the subject matter
of this complaint were issued in the name of complainant company
by the accused No.1 firm. Those cheques were dishonoured. The
complainant completed the procedure of issuing notice and after
completing the staturoty requirements for filing the complaint
U/s.138 r/w. 141 of N.I. Act, filed the complaint. As mentioned
earlier, learned Magistrate took cognizance and issued process
against all the accused.
5. Learned counsel for the Petitioners submitted that the
averments against the present petitioners do not make out a case
U/s.138 r/w. 141 of the N.I. Act. The averments are not sufficient
against the Petitioners even to issue process and to take cognizance
against them. He invited my attention to the averments made in
the complaint in paragraph Nos.5 to 16 wherein reference is made
to the petitioners. He relied on the Judgment of the Hon'ble
Supreme Court in case of Sunita Palita and others Versus Panchami
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Stone Quarry1. He submitted that the Petitioners were Non
Executive Directors. He relied on the Registrar of Companies'
record for that purpose to show that they were Non Executive
Directors. He submitted that the description of the Petitioners in
the complaint does not attract the provisions of Section 141 of the
N.I. Act. As far as description of the Petitioners as "Officer who is
in default" is concerned, as per Section 2(60) of the Companies
Act, 2013 the said description is only for the purpose of provision
of the Companies Act and it cannot be used U/s.141 of the N.I.
Act. He submitted that the description of "Key Managerial
Personnel" as defined U/s.2(51) of the Companies Act, 2013 also
does not attract the provision of Section 141 of the N.I. Act and the
Petitioners do not fall in any of the categories U/s.2(51) of the
Companies Act, 2013. He, therefore, submitted that, the order of
issuance of process was liable to be set aside.
6. On the other hand, learned counsel Shri. Mishra
appearing for the Respondent No.2 submitted that the averments
in the aforementioned paragraphs and the complaint are sufficient
1 (2022) 10 Supreme Court Cases 152
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to attract the provision of Section 141 of the N.I. Act which lay
down the liabilities of the petitioners' vicariously to attract the
penal provision of Section 138 of N.I. Act. He submitted that, those
averments are sufficient for issuance of process and details of their
responsibilities can be established at the time of trial by leading
evidence. Shri. Mishra further submitted that the fact situation is
not restricted to this complaint alone, but there was a bigger fraud
for which an F.I.R. is lodged. All these facts concerning the
petitioners have surfaced in that investigation subsequently and,
therefore, their involvement in the fraud is not reflected in the
complaint as of today.
7. I have considered these submissions. At the outset, it
needs to be mentioned that, if there is any other investigation
going on in respect of the alleged malpractice or alleged fraud
committed by the accused No.1 and others, it is an entirely
different subject matter for which investigation is already going
on, as submitted by Shri. Mishra. In the present petition, I am only
examining the correctness and legality of the order of issuance of
process passed by learned Magistrate. For that purpose, the
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averments in the complaint, as they stand without adding or
subtracting anything further from the complaint, are to be
examined. In this situation, the important averments in the
complaint are reproduced as follows:
"5. The Accused No.3 is being sued in his capacity as
Joint Managing Director and CEO (KMP - Key Managerial
Personnel) of the Company at the time of execution of the
Agreement with the Complainant. The Accused No. 4 to 13
are being sued in their capacity as Directors/KMP of the
Company who are vested with powers to ensure the
compliance of the Agreement entered with the Complainant
and the cheques issued in pursuance of the Agreement.
6. ........
7. The Accused No.4 is the Director and engaged, in
charge and responsible to the Accused No.1 Company in the
conduct of the business and is also responsible to take key
and strategic decisions with the Board of Directors of the
Accused No.1 Company.
8. The Accused No.5 is the Director and engaged, in
charge and responsible to the Accused No.1 Company in the
conduct of the business and is also responsible to take key
and strategic decisions with the Board of Directors of the
Accused No.1 Company.
9. The Accused No.6 is the Director and engaged, in
charge and responsible to the Accused No.1 Company in the
conduct of the business and is also responsible to take key
and strategic decisions with the Board of Directors of the
Accused No.1 Company.
10. The Accused No.7 is the Director and engaged, in
charge and responsible to the Accused No.1 Company in the
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conduct of the business and is also responsible to take key
and strategic decisions with the Board of Directors of the
Accused No.1 Company.
11. The Accused No.8 is the Director and engaged, in
charge and responsible to the Accused No.1 Company in the
conduct of the business and is also responsible to take key
and strategic decisions with the Board of Directors of the
Accused No.1 Company.
12. The Accused No.9 is the Director and engaged, in
charge and responsible to the Accused No.1 Company in the
conduct of the business and is also responsible to take key
and strategic decisions with the Board of Directors of the
Accused No.1 Company.
13. The Accused No.10 is the Director, Finance and
engaged, in charge and responsible to the Accused No.1
Company in the conduct of the business and is also
responsible to take key and strategic decisions with the
Board of Directors of the Accused No.1 Company.
14. ........
15. ........
16. The Accused Nos. 2 to 13 are Directors and/or (KMP
- Key Managerial Personnel) of the Accused No.1 Company
who fall under the ambit of being "Officer in Default" as
defined under Section 2(60) of the Companies Act, 2013, as
being Directors/KMP of the Accused No.1 Company at the
time of execution of the said Agreement/Dishonour of
Cheque which was approved by the Board in toto, therefore
they are equally liable and responsible to be accused for this
Complaint for Dishonour of Cheque."
8. This is how the complaint describes the Petitioners and
these are the averments on the basis of which the Petitioners are
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sought to be arraigned as accused.
9. The Hon'ble Supreme Court has referred to other
Judgments in the case of Sunita Palita (supra) and in particular
there is reference with approval to the observations made in the
case of National Small Industries Corpn. Ltd. V. Harmeet Singh
Paintal2. The paragraph Nos.13 and 14 of the said Judgment are
re-produced in paragraph-28 of Sunita Palita's (supra) case.
Paragraph Nos.13 and 14 of National Small Industries Corpn.Ltd.
(supra) reads thus:-
"13. Section 141 is a penal provision creating vicarious
liability, and which, as per settled law, must be strictly
construed. It is therefore, not sufficient to make a bald
cursory statement in a complaint that the Director (arrayed
as an accused) is in charge of and responsible to the
company for the conduct of the business of the company
without anything more as to the role of the Director. But
the complaint should spell out as to how and in what
manner Respondent 1 was in charge of or was responsible
to the accused Company for the conduct of its business.
This is in consonance with strict interpretation of penal
statutes, especially, where such statutes create vicarious
liability.
14. A company may have a number of Directors and to
make any or all the Directors as accused in a complaint
merely on the basis of a statement that they are in charge
of and responsible for the conduct of the business of the
company without anything more is not a sufficient or
2 (2010) 3 SCC 330
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adequate fulfilment of the requirements Under Section
141."
10. These observations clearly mention that it is not
sufficient to make a bald cursory statement that, Director is in
charge of and responsible to the company for conduct of the
business of the company without anything more as to the role of
Director, but the complaint should spell out as to how and in what
manner the said accused was in charge of or was responsible to the
accused company.
11. The paragraph-42 of Sunita Palita's case (supra) is
important which reads thus:-
"42. Liability depends on the role one plays in the affairs
of a company and not on designation or status alone as
held by this Court in S.M.S. Pharmaceuticals Ltd. V. Neeta
Bhalla reported in (2005) 8 SCC 89. The materials on
record clearly show that these Appellants were
independent, non-executive Directors of the company. As
held by this Court in Pooja Ravinder Devidasani v. State
of Maharashtra and Anr. Reported in (2014) 16 SCC 1 a
non-Executive Director is not involved in the day-to-day
affairs of the company or in the running of its business.
Such Director is in no way responsible for the day-to-day
running of the Accused Company. Moreover, when a
complaint is filed against a Director of the company, who
is not the signatory of the dishonoured cheque, specific
averments have to be made in the pleadings to
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substantiate the contention in the complaint, that such
Director was in charge of and responsible for conduct of
the business of the Company or the Company, unless such
Director is the designated Managing Director or Joint
Managing Director who would obviously be responsible
for the company and/or its business and affairs."
12. In the present case, there are documents annexed to this
petition showing that the petitioners are Non Executive Directors,
therefore, these observations are prima facie applicable to the
present case, as well. In all similarly worded paragraphs different
petitioners are described as Directors who were in charge and
responsible to the accused No.1 company in the conduct of the
business and were responsible to key and managerial decision with
the Board of Director of accused No.1 company. Their exact role
and as to how they were responsible to the conduct of the business
of the company is not described or avered in the complaint at all.
There is another vague and general statement that the accused
Nos.4 to 13 (including present petitioners) were being sued in
their capacity as Directors/ Key Managerial Personnel of the
company who are vested with power to ensure compliance of
agreement.
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13. In this case, as pointed out by Shri. Mundargi, the Key
Managerial Personnel is defined U/s.2(51) of the Companies Act,
2013. There is no averment in the complaint to show as to how
any of the petitioners can be categorized as 'Key Managerial
Personnel'. Section 2(51) of the Companies Act, 2013 reads thus:
"2. Definitions....
(51) "key managerial personnel", in relation to a
company, means -
(i) the Chief Executive Officer or the managing
director or the manager;
(ii) the company secretary;
(iii) the whole-time director;
(iv) the Chief Financial Officer; and
(v) such other officer as may be prescribed.
14. There is substance in the submission of Shri. Mundargi
that the 'officer who is in default' is mentioned in Section 2(60) of
the Companies Act speaks about such officer only for the purpose
of provisions of the Companies Act.
15. Thus, based on the above discussion, the petitioners
have made out a case for admission of the petition. The matter
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requires consideration.
16. Hence, the following order:
ORDER
i) Rule.
ii) Shri. Mithilesh Mishra, learned counsel waives service for final hearing on behalf of the Respondent No.2.
iii)There shall be interim relief in terms of prayer clause (d); qua the present petitioners only.
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