Calcutta High Court
Bibek Raychaudhuri And Ors. vs Virama Enterprises Private Limited ... on 30 March, 2007
Equivalent citations: 2007(2)CHN660
JUDGMENT S.P. Talukdar, J.
1. The petitioners by filing an application under Section 482 of the Criminal Procedure Code sought to quash the proceedings of Case No. C-6736 of 2003 under Section 138 of the Negotiable Instruments Act. The backdrop of the present case may briefly be stated as follows:
Mr. Amal Kumar Sanyal, as the authorised representative of M/s. Virama Enterprises Private Limited, lodged a complaint before the Chief Metropolitan Magistrate, Calcutta, alleging commission of offence punishable under Section 138 of the Negotiable Instruments Act by the petitioners. The said complaint was registered as Case No. C-6736 of 2003. It was alleged in the said complaint that a cheque bearing No. 133968 dated 30.9.2003 was drawn on United Bank of India, Calcutta Branch for an amount of Rs. 15,12,000/- in favour of the opposite party/company against the dues. The O.P. through its Advocate by letter dated 16.10.2003 requested the petitioners to make payment of the aforesaid amount but no payment was made.
2. On receipt of the said petition of complaint, learned Chief Metropolitan Magistrate, Calcutta after taking cognizance of the offence transferred the case to the learned 11th Court of Metropolitan Magistrate, Calcutta. The learned Transferee Court after examining the witnesses, by order dated 24.11.2003 being prima facie satisfied, directed issuance of process upon the present petitioners. In terms of an agreement entered into by and between the O.P. and M/s. Otto India Limited, the latter under cover of a letter dated 27.10.2000 handed over to the O.P. three post-dated account payee cheques all drawn on the U.B.I. Calcutta Branch. The said cheques were No. 133966 dated 30.9.2001 for an amount of Rs. 12,83,310/- No. 133967 dated 30.9.2002 for an amount of Rs. 15,59,250/- and No. 133968 dated 30.9.2003 for Rs. 15,12,000/- only. The said post-dated cheques were handed over on 27.10.2000 by the erstwhile management of M/s. Otto India Limited. The petitioners joined as Directors of the said M/s. Otto India Ltd. on 14.11.2002. Petitioner Nos. 1 and 2 resigned from the Board of Directors of Company on 14.06.2003 and No. 3 resigned on 05.08.2003 and, thereafter, petitioner No. 4 also resigned from the Board on 26.09.2003. Thus, at the time of handing over of the said post-dated cheques to the O.P., the present petitioners were not in the Board of Directors. They also ceased to be Directors when the cause of action for dishonour of the cheques arose in the month October, 2003. The present petitioners were non-executive rotational Directors only attending the periodic Board Meetings of the company during their short tenure of their office between the period 14.11.2002 to 26.09.2003. They were never looking after the day-to-day affairs of running of the business of the company, during the tenure of their office.
3. Opposite party sent a notice dated 16.10.2003 for dishonour of the cheque dated 30.9.2003 for Rs. 15,12,000/- and demand was made for payment of the said amount within 15 days of receipt of the said notice. The present petitioners duly replied to the same thereby intimating that the present petitioners were not in charge of or responsible for the conduct of the business of the company at the relevant time. The petitioners called upon the Advocate of the O.P. to recall, rescind, withdraw or cancel the impugned notice dated 16.10.2003 but instead of doing the same the said O.P. lodged the petition of complaint under Section 138 of the Negotiable Instruments Act.
4. Subsequently, the authorised representative of M/s. Virama Enterprises Private Limited lodged a complaint before the learned Chief Metropolitan Magistrate, Calcutta, under Section 138 of the N.I. Act and the same was registered as Case No. C-6736.
5. In the said petition it was alleged that a cheque bearing No. 133968 dated 30.9.2003 for Rs. 15,12,000/- was drawn on United Bank of India, Calcutta Branch in favour of the O.P./company by the petitioners against the dues. By Advocates letter dated 16.10.2003 the petitioners were to make payment of the aforesaid amount. The same having not been paid, the petitioners committed an offence punishable under Section 138 of the N.I. Act. Learned C.M.M., Calcutta, after taking cognizance of the offence transferred the case to the learned Metropolitan Magistrate, 11th Court, Calcutta for enquiring and/or trial.
6. Learned Trial Court on receipt of the same examined witnesses on behalf of the O.P. Being satisfied about existence of prima facie case, learned Court by order dated 24.11.2003 directed issuance of process. The present petitioners were directed to appear before the learned Court on 23.12.2003.
7. The petitioners being not Directors at the time of issuance of the cheque or at the time of accrual of cause of action, the proceeding against them is liable to be quashed.
8. In such circumstances, the said application was filed under Section 482 of the Criminal Proceedure Code praying for quashing of the proceeding.
9. Similar application praying for quashing of the proceeding was also filed by the petitioners/accused persons namely, Mr. S.K. Nanda thereby giving rise to C.R.R. No. 419 of 2004.
10. Naturally, both the matters were heard at a time. Mr. Sibdas Banerjee, appearing as learned Counsel for the petitioners, submitted that the petitioners were not involved with the functioning of the concerned organisation at the relevant time and, as such, they could not be roped in. He submitted that there is clear difference in the matter of investigation of an offence and proceeding with a matter before a Court. Mr. Banerjee submitted that the word "cognizance" presupposes application of judicial mind for the purpose of proceeding further. While applying mind, the learned Court could not just shut its eyes and close the doors of its mind and was under legal obligation to ascertain who exactly were responsible for the alleged dishonour of the cheque under reference.
11. Learned Counsel, Mr. Nandy, going a step further submitted that notice was sent in personal capacity and as such, it could not be said to be valid notice. He, in fact, echoed the voice of Mr. Banerjee while categorically submitting that the petitioner was not in service on the date of alleged commission of the offence.
12. In response to this, Mr. Bagchi, as learned Counsel for the opposite party, submitted that anxiety of the petitioners is premature. He emphatically submitted that after learned Court was prima facie satisfied, it had no option but to proceed with the matter. Mr. Bagchi further submitted that law does not permit the learned Magistrate to take any stand different from what had been done.
13. Attention of the Court was drawn to the allegations made in the petition of complaint which was filed before the learned Court. The relevant paragraph of the said petition of complaint may be reproduced as follows:
The accused No. 2 is the Chairman of the accused No. 1 company. The accused persons No. 2 to 5 are the Directors of the accused No. 1 company. The accused person No. 6 is the company Secretary and General Manager (Finance) of the accused No. 1 company. The accused Nos. 7 to 12 were the principal officers of the accused No. 1 company at the time of commission of the offence. The accused Nos. 13 and 14 were the signatories of the said cheques and the said cheques were signed and issued upon the specific direction and with the knowledge, consent and connivance of the other accused persons. All the accused persons at the time of commission of the alleged offence were in charge of, and responsible to, the accused No. 1 company for its day-to-day business.
14. After giving due regard to the submission made by learned Counsel for the parties and the materials on record, it appears that this Court in response to the two revisional applications, as referred to earlier, is required to decide whether continuation of this criminal proceeding under reference will amount to abuse of process of Court.
15. Learned Counsel for the parties in response to their respective contention relied upon various decisions including a few of the Hon'ble Apex Court.
16. Mr. S. Banerjee, learned Counsel for the petitioners (in C.R.R. No. 2720/2003) submitted that a Magistrate may take cognizance of an offence under Section 190(1)(c) of the Code upon receiving a complaint of fact which constitute such offence. This essentially means that the basic fact and materials on which the allegation is founded are required to be stated.
17. In the case of J TH ZWART and Ors. v. Indrani Mukherjee 1990 C.Cr.LR (Cal) 1, the learned Division Bench of this Court held that "to be a complaint under Section 2(d) of the Code only an allegation of the sort that somebody has committed the murder of 'A' is sufficient. But to enable a Magistrate to take cognizance of such a complaint, such allegation would be not sufficient; and the basic fact and circumstances on the basis of which the above allegation are being made are required to be stated."
18. Mr. Nandy, as learned Counsel for the petitioner (in C.R.R. No. 419/04) referred to the decision in the case of Lachhman P. Udhani and Ors. v. Redington (India) Ltd. 2006(3) Crimes 731 in support of his contention that in a case where a certified copy of form 32 is filed by the accused to show that he had resigned from the post of Director prior to the issuance of cheque an challenge thereto is innocuous, Court has to accept it and relieve director from ordeal of trial.
19. Attention of the Court was drawn to the decision in the case of S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Anr. .
20. It was contended by Mr. Banerjee that the fact that a Magistrate has the power to reject a complaint at the threshold suggests that the complaint should make out a case for issue of process. In the case of S.M.S. Pharmaceutical Ltd. (supra), it was observed that "liability depends on the role plays in the affairs of a company and not on designation or status. If being a director or manager or secretary was enough to cast criminal liability, the section would have said so. Instead of 'every person' the section would have said 'every director, manager or secretary in a company is liable'...etc. The legislature is aware that it is a case of criminal liability which means serious consequences so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action."
21. It was further held that "the conclusion is inevitable that the liability arises on account of conduct, act or omission on the part of a person and not merely on account of holding of office or a position in a company. Therefore, in order to bring a case within Section 141 of the Act the complaint must disclose the necessary facts which make a person liable."
22. On behalf of the petitioners, reference was also made to the Apex Court decision in the case of Sabitha Ramamurthy and Anr. v. R.B.S. Channabasavardhya reported in 2006(7) Supreme 168, in support of the contention that what is required is a clear statement of fact so as to enable the Court to arrive at a prima facie opinion that the accused are vicariously liable. It was submitted that before a person can be made vicariously liable, strict compliance of the statutory requirements would be insisted.
23. The Apex Court in the said case observed as follows:
In terms of Section 200 of the Code of Criminal Procedure, the complainant is bound to make statements on oath as to how the offence has been committed and how the accused persons are responsible therefor. In the event, ultimately, the prosecution is found to be frivolous or otherwise mala fide, the Court may direct registration of case against the complainant for mala fide prosecution of the accused. The accused would also be entitled to file a suit for damages. The relevant provisions of the Code of Criminal Procedure are required to be construed from the aforementioned point of view.
24. In course of submission, reference was also made to the decision in the case of State of Haryana and Ors. v. Bhajan Lal and Ors. . The Apex Court in the said case dealt with the High Court's power under Article 226 or under Section 482 of the Code of Criminal Procedure to interfere in proceedings relating to cognizable offences to prevent abuse of the process of any Court or otherwise to secure the ends of justice. It was specifically observed that such power can be exercised sparingly and that too, in the rarest of rare cases.
25. Mr. Bagchi, as learned Counsel for the opposite party, submitted that the trial of the case must be allowed to proceed and reach its logical conclusion. He referred to the decision in the case of Delhi Development Authority v. Rajinder Sharma as reported in JT 2001(5) SC 572.
26. Relying upon the decision in the case of State of Bihar and Anr. v. P.P. Sharma, IAS and Anr. reported in 1992 SCC (Cri) 192, it was submitted by Mr. Bagchi that there could be no scope for treating affidavits or documents as sought to have been relied upon by the petitioners/accused persons as evidence. In the said case the Apex Court observed that it would be a serious error in putting an end to the prosecution at its inception by going into merits in a pre-trial on consideration of the affidavits and documents which, unless proved to be true and reliable in regular trial, cannot form the basis of any decision regarding commission of offence.
27. In the case of Sreekant Bangur v. State of West Bengal and Anr. reported in 2000 C.Cr.LR (Cal.) 363, the Single Bench of this Court held that whether a person was a director of a company or not can be determined at the time of trial by taking evidence. Before entering appearance in the case and raising the issue before the learned Trial Court, approaching this Court with a prayer for quashing of the proceeding was not appreciated. Similarly, in the case of K.P.G. Nair v. Jindal Menthol India Ltd. reported in 2000 Cr. LJ 1213, it was held that question whether or not petitioner had resigned as director before issuance of offending cheques is a disputed question of fact.
28. Mr. Bagchi further referred to the decision in the case of Raj Lakshmi Mills v. Shakti Bhakoo, in support of his contention that at the stage of summoning when evidence was yet to be led by the parties, the High Court could not on an assumption of facts come to a finding of fact that the respondent was not responsible for the conduct of the business.
29. Attention of the Court was drawn to the decision in the case of State of Punjab v. Kasturi Lal and Ors. , wherein it was held that exercise of power under Section 482 of the Code should be the exception and not the rule. The Apex Court observed that "in respect of contraventions by a company, besides the company itself every person who was in charge of, and was responsible to, the company for the conduct of the business at the time when the contravention was committed and any director, manager or secretary or other officer of the company with whose consent or connivance or because of whose neglect, the offence has been committed could be prosecuted and punished."
30. It was the categorical assertion of the learned Counsel for the opposite party that if the allegations made in the complaint and evidence collected support the allegation of commission of offence, there can be no scope for quashing (Ref: N. Chandrasekhar and Ors. v. Allwyn Hyderabad and Ors. 1999 Cr. LJ 4630).
31. In the case of State of M.P. v. Awadh Kishore Gupta and Ors. reported in 2004 SCC (Cri) 353, the Apex Court observed that it was impermissible for High Court to look into materials, the acceptability of which was essentially a matter for trial. It was further held that the annexures to the petitions under Section 482 of Cr. PC cannot be termed as evidence without being tested and proved.
32. This Court's attention was also invited to the decision in the case of Bharat Kumar Modi and Ors. v. Pennar Peterson Securities Ltd. and Ors. reported in 1999 Cr. LJ 3803, in support of the stand that documents like Form 32 indicating that the petitioners were not directors at the relevant time are to be proved in trial.
33. There is hardly any scope for any dispute or controversy as regards the scope of an application under Section 482 of the Code of Criminal Procedure. It certainly recognizes the power of this Court to pass an order in order to ensure that there is no abuse of the process of Court. It gives this Court the power to pass an order in order to secure the ends of justice. It also cannot be disputed that the petitioner in an application under Section 482 of Cr. PC cannot expect the learned Court to quash a proceeding relying upon the copies of various documents etc. annexed to the application. Such documents can only be properly and effectively scrutinized and tested at the time of trial of a case.
34. It is also the settled position of law that this Court in exercise of its power under Section 482 of the Code cannot really embark upon an enquiry. Such power is never intended to be stretched to an extent which would make other provisions of the Code redundant. The question that next arises as the whether this Court can afford to remain a passive onlooker when it finds that the learned Court of Magistrate while taking cognizance and directing issue of process did not really even consider the merits of the grievance.
35. As indicated earlier, the petition of complaint filed before the learned Trial Court in this context contained specific allegations. Paragraph 4 of the said complaint reflects the status of the accused while specifically mentioning that all the accused persons at the time of commission of the alleged offence were in charge of, and responsible to, the accused No. 1 company for its day-to-day business.
36. It may be submitted that such a casual statement giving the status of the accused persons may not be considered to be sufficient material so as to justify the learned Court for proceeding against all the accused persons. It was claimed on behalf of the petitioners that the exact nature of involvement of the accused persons in the day-to-day running of the business and their specific role in the matter of dishonour of the cheques issued on behalf of the accused No. 1 company does not find proper mention in the petition of complaint. Thus, it was argued that a clear picture was not available before the learned Trial Court.
37. The Apex Court in a Division Bench judgment in the case of Saroj Kumar Poddar v. State (NCT of Delhi) and Anr. reported in 2007(1) Supreme 239, held that "with a view to make a Director of a company vicariously liable for the acts of the company, it was obligatory on the part of the complainant to make specific allegations as are required in law. In the case before the learned Bench there was no averment in the complaint petitions as to how and in what manner the appellant was responsible for the conduct of the business of the company or otherwise responsible to it in regard to its functioning."
38. In the case under reference, the complainant in paragraph 16 of the petition of complaint made the following specific allegations:
That the reply received from the accused Nos. 2, 3, 4 and 5 all dated 29th October, 2003 and letter dated 30th October, 2003 received from accused Nos. 7, 8, 9, 10, 11 and 12 contains incorrect statements. The complainant denies the allegations contained in the said letters and the same are untrue and untenable. The accused person No. 6 after receipt of the aforesaid demand notice, by his letter dated 20.10.2003 addressed to the complainant's Advocate M/s. Meharia & Co., acknowledged the receipt of the demand notice upon the accused No. 1 and himself and further stated that the same have been forwarded to the accused No. 2 for necessary action. The complainant states that at the time when the said cheque was issued and/or when the said cheques remained unpaid and when the said cheque was presented and was dishonoured, each one of the aforesaid accused person has due notice and knowledge of the said cheque and the offence have been committed by the aforesaid accused persons with the common consent or connivance and are in any event attributable to the neglect on the part of each one of the accused persons and each of the accused person is guilty of the offence complained of.
39. This naturally places the present case on a footing different from many others. In the present case, the complainant appears to have taken care of all such aspects and the petition of complaint which was filed before the learned Trial Court, did not leave much scope for confusion and controversy. The categorical and specific allegations made against the petitioners/accused persons in the petition of complaint can only be judged in the context of the evidence to be adduced at the time of trial. The challenge thrown by the complainant can be properly and effectively responded at a subsequent stage, as this Court is not expected to rely solely how on the various documents including form 32 reportedly filed before the Registrar of Companies.
40. In such facts and circumstances, this Court is of the view that the manner in which allegations have been made against the present petitioners in the case under reference do not appear to be so vague that it could be suggested that there was no sufficient material before the learned Court for taking cognizance.
41. Having regard to the nature and background of the case under reference, it cannot be said that the present petitioners are entitled to get the benefit of the decision of the Apex Court in the case of Saroj Kumar Poddar (supra). The present applications being C.R.R. No. 2720 of 2003 and C.R.R. No. 419 of 2004 stand accordingly dismissed.
42. Interim orders, if any, stand vacated.
43. Send copy of this order to the learned Trial Court for information and necessary action.
44. The learned Trial Court is directed to take all possible steps for expeditious disposal of the case.
45. Xerox certified copy of this order be supplied to the parties, if applied for, as expeditiously as possible.