Himachal Pradesh High Court
Dev Raj vs Bir Singh Malhotra on 15 June, 2022
Author: Sandeep Sharma
Bench: Sandeep Sharma
REPORTABLE
IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA
ON THE 15TH DAY OF JUNE, 2022
BEFORE HON'BLE MR. JUSTICE SANDEEP SHARMA
.
CRIMINAL MISC. PETITION (MAIN) U/S 482 CRPC NO. 509 OF 2019
BETWEEN:-
1. DEV RAJ
S/O SHRI BASHI RAM,
R/O WARD NO. 7, KATHUA,
TEHSIL AND DISTRICT KATHUA, JAMMU & KASHMIR,
AGED ABOUT 51 YEARS
2. SARBJEET SINGH
SON FO LATE SH. HARJINDER SINGH,
VILLAGE AND POST OFFICE BALBEHRA,
TEHSIL AND DISTRICT PATIALA,
PUNJAB,
AGED ABOUT 29 YEARS
PETITIONERS
(BY MR. RAJIV RAI AND MR. ALOK RANJAN, ADVOCATES)
AND
1. BIR SINGH MALHOTRA
SON OF SH. GURUMUKHA SINGH
RESIDENT OF VILLAGE KARIAN,
POST OFFICE HARDASPUR
TEHSIL AND DISTRICT CHAMBA,
HIMACHAL PRADESH
RESPONDENT/COMPLAINANT
2. RISHI RANA
SONOF SH. JAI SINGH
RESIDENT OF VILLAGE AND POST OFFICE BHULLANA
TEHSIL BAIJNATH, DISTRICT KANGRA, H.P.
RESPONDENT/ACCUSED
This petition coming on for orders this day, the court passed the following:
ORDER
By way of instant petition filed under S.482 CrPC, prayer has been made on behalf of petitioners/accused for quashing and setting aside order dated 3.3.2018, whereby application under Section 319 CrPC filed ::: Downloaded on - 17/06/2022 20:02:23 :::CIS 2 by the respondent No.2/complainant (hereinafter, 'complainant') praying therein to array the petitioners as an accused in case No. 67 of 2016, having been filed by him under S.138 of the Negotiable Instruments Act pending adjudication before Chief Judicial Magistrate, Chamba, Tehsil .
and District Chamba, came to be allowed.
2. Precisely the facts, as emerge from the record are that the complainant instituted a complaint under S.138 of the Act in the court of learned Chief Judicial Magistrate, Chamba, District Chamba, against respondent No.2/accused-Rishi Rana (hereinafter, 'accused'), alleging therein that the above named accused approached him in the month of March, 2016, seeking loan of Rs. 5.00 Lakh for his domestic use.
Complainant, who had cordial relations with the accused, advanced Rs.
5.00 Lakh in the month of March, 2016 with the understanding that the same shall be returned by the accused within a period of one month.
Since the accused failed to make payment in the month of April, 2016, he issued cheque bearing No. 063983 dated 25.4.2016 to the complainant for a sum of Rs. 5.00 Lakh drawn at Punjab National Bank Sultanpur, Chamba, against saving bank account No. 7893002100000314. However, the fact remains that the said cheque on its presentation was dishonoured on account of insufficient funds. Since despite issuance of legal notice, accused Rishi Rana failed to make the payment, complainant instituted proceedings under S.138 of the Act in the court of learned Chief Judicial Magistrate, Chamba.
3. After recording of evidence in the case, complainant preferred an application under S.319 CrPC, (Annexure P-4), praying therein to array ::: Downloaded on - 17/06/2022 20:02:23 :::CIS 3 petitioners herein as an accused on the ground that the cheque in question was also signed by them. In the aforesaid application, complainant averred that during the course of cross-examination, it transpired that the cheque in question is issued from a current account, .
which is in the name of the firm and the same has been signed by the persons sought to be arrayed as an accused, in addition to Rishi Rana.
Apart from above, complainant also averred that inadvertently notice under S.138 of the Act was only issued to Rishi Rana being the authorized signatory but since the petitioners also signed the cheque, they are required to be arrayed as an accused.
4. Learned court below vide order dated 3.3.2018, (Annexure P-5) allowed the application and issued notice returnable for 5.8.2018 to the petitioners herein. In the aforesaid background, petitioners have approached this court in the instant proceedings, praying therein to set aside order dated 3.3.2018 as well as complaint instituted under S.138 of the Act.
5. Pursuant to notice issued in the instant proceedings, respondent No.1 has filed reply, wherein it is averred that S. 319 CrPC provides that in the course of any inquiry or trial of an a offence it appears from the evidence that any person not being the accused has committed any offence for which such person could be tried together with the accused, the court may proceed against such person for the offence which he appears to have committed. Learned counsel for the respondent No.1 argued that once there is no dispute that the cheque in question has been signed by petitioners and the cheque has been issued by the firm, ::: Downloaded on - 17/06/2022 20:02:23 :::CIS 4 no illegality can be said to have been committed by learned court below, while arraying petitioners herein as an accused in case filed under S.138 of the Act. Above named counsel while placing reliance upon an order dated 3.9.2019 passed by Hon'ble Apex Court in Kishore Sharma v.
.
Sachin Dubey, Cr. Appeal No. 1326 of 2019, argued that otherwise the issue sought to be decided in the instant proceedings being triable one, cannot be decided in the instant proceedings. He argued that the factum with regard to issuance of legal notice and consequence thereof cannot be looked into in these proceedings, rather the same being triable issue is required to be tried by learned trial Court.
6. Mr. Rajiv Rai and Mr. Alok Ranjan, Advocates representing the petitioners, while inviting attention of this court to complaint under S. 138 of the Act as well as application under S.319 CrPC, vehemently argued that at no point of time, allegation if any ,ever came to be leveled against the petitioners that the loan of Rs. 5.00 Lakh was advanced to them, rather, there is a precise allegation in the complaint that respondent /complainant lent Rs. 5.00 Lakh in the month of March, 2016 to respondent No.2 /accused Rishi Rana for his domestic use and as such, there is no liability, if any, of theirs. He further argued that it is not the case of the complainant that the money was lent to the firm and as such, petitioners herein being partners in the firm, issued notice and as such, petitioners cannot be held liable for action if any, of one of the partners i.e. respondent No.2 Rishi Rana, who had raised personal loan. Above named counsel further argued that since at no point of time, legal notice, if any, ever came to be issued against the petitioners before initiation of ::: Downloaded on - 17/06/2022 20:02:23 :::CIS 5 proceedings under S.138 of the Act, complaint, if any, qua them otherwise is not maintainable.
7. To substantiate aforesaid submission learned counsel for the petitioners invited attention of this Court on a judgment of Hon'ble Apex .
Court in Ashoke Mal Bafna v. Upper India Steel Mfg. & Engg. Co. Ltd., (2018)14 SCC 202, wherein, it has been held that before summoning an accused under Section 138 of the Act, the Magistrate is expected to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof.
8. Having heard learned counsel for the parties and perused the material available on record, vis-à-vis reasoning assigned by learned court below, while passing the order impugned in the instant proceedings, this court finds force in the submission of learned counsel for the petitioners that, at no point of time, allegation, if any, with regard to advancement of loan to the petitioners ever came to be leveled rather, the complainant specifically stated in the complaint that in March, 2016, he on the request of accused Rishi Rana advanced him loan to the tune of Rs.
5.00 Lakh for his domestic use. There is not even a whisper in the complaint that the loan to the tune of Rs. 5.00 Lakh was advanced to some firm or other partners of accused Rishi Rana. It is only after conclusion of evidence, that the complainant filed an application under S. 319 CrPC praying therein to array the petitioners as an accused on the ground that they have also signed cheque alongwith accused Rishi Rana.
It has been further averred in the reply that inadvertently before instituting complaint under S.138, no notice could be issued to the petitioners.
::: Downloaded on - 17/06/2022 20:02:23 :::CIS 69. Once there is no allegation in the complaint that Rs. 5.00 Lakh was advanced to the firm or to other partners of the accused Rishi Rana, complaint against the petitioners is otherwise not maintainable. Mere fact that they have also signed the cheque in question, is not sufficient to .
conclude complicity of the petitioners in the case, especially when there is no allegation in the complaint that the complainant had advanced loan to the tune of Rs. 5.00 Lakh to the firm or the persons sought to be arrayed as accused.
10. True it is that in the case at hand, cheque in question has been signed by petitioners alongwith respondent/accused Rishi Rana, but once there is no liability if any of these persons towards complainant, they otherwise cannot be held liable for issuance of cheque, which ultimately came to be dishonoured on account of insufficient funds.
11. Hon'ble Apex Court in Ashok Malbafna supra has held that before summoning an accused under Section 138 of the Act, the Magistrate is expected to examine the nature of allegations made in the complaint and the evidence both oral and documentary. It is necessary for Courts to ensure strict compliance of the statutory requirements as well as settled principles of law before making a person vicariously liable. To fasten vicarious liability under S.141 of the Act on a person, law is well settled that the complainant should specifically show as to how and in what manner, accused was responsible.
12. Hon'ble Apex Court in Dilip Hariramani v. Bank of Baroda, Cr.
Appeal No. 767 of 2022, decided on 9.5.2022, has held as under:
::: Downloaded on - 17/06/2022 20:02:23 :::CIS 7"10. We would also refer to the summarisation of law on Section 141 by this Court in National Small Industries Corporation Limited v. Harmeet Singh Paintal and Another,10 to the following effect: 10 (2010) 3 SCC 330: The case dealt with challenge to a summoning order. Withal, interference by .
the courts at the stage of summoning order is restricted/limited.
"39. From the above discussion, the following principles emerge:
(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction.
(ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.
(iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.
(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred.
xx xx xx
(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 liability of a Director in such cases."
11. In the present case, we have reproduced the contents of the complaint and the deposition of PW-1. It is an admitted case of the respondent Bank that the appellant had not issued any of the three cheques, which had been dishonoured, in his personal capacity or otherwise as a partner. In the absence of any evidence led by the prosecution to show and establish that the appellant was in charge of and responsible for the conduct of the affairs of the firm, an expression interpreted by this Court in Girdhari Lal Gupta v. D.H. Mehta and Another11 to mean 'a person in overall control of the day-to-day business of the company or the firm', the conviction of the appellant has to be set aside. 12 The appellant cannot ::: Downloaded on - 17/06/2022 20:02:23 :::CIS 8 be convicted merely because he was a partner of the firm which had taken the loan or that he stood as a guarantor for such a loan. The Partnership Act, 1932 creates civil liability. Further, the guarantor's liability under the Indian Contract Act, 1872 is a civil liability. The .
appellant may have civil liability and may also be liable under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. However, vicarious liability in the criminal law in terms of Section 141of the NI Act cannot be fastened because of the civil liability. Vicarious liability under sub-section (1) to Section 141 of the NI Act can be pinned when the person is in overall control of the day- to-day business of the company or firm. Vicarious liability under sub-section (2) to Section 141 of the NI Act can arise because of 11 (1971) 3 SCC 189 12 State of Karnataka v. Pratap Chand and Others, (1981) 2 SCC 335. the director, manager, secretary, or other officer's personal conduct, functional or transactional role, notwithstanding that the person was not in overall control of the day-to- day business of the company when the offence was committed. Vicarious liability under sub-section (2) is attracted when the offence is committed with the consent, connivance, or is attributable to the neglect on the part of a director, manager, secretary, or other officer of the company."
13. Interestingly in the case at hand, there is no allegation worth the name in the complaint against the petitioners, that they had taken loan from complainant and they with a view to discharge their liability issued cheque which subsequently came to be dishonoured on account of insufficient funds.
14. Otherwise also it is well settled by now that only the person who was at the helm of affairs of the Company and in charge of and responsible for the conduct of the business at the time of commission of an offence will be liable ::: Downloaded on - 17/06/2022 20:02:23 :::CIS 9 for criminal action. Hon'ble Apex Court has held in Ashoke Mal Bafna supra, as under:.
"10. To fasten vicarious liability under Section 141 of the Act on a person, the law is well settled by this Court in a catena of cases that the complainant .
should specifically show as to how and in what manner the accused was responsible. Simply because a person is a Director of defaulter Company, does not make him liable under the Act. Time and again, it has been asserted by this Court that only the person who was at the helm of affairs of the Company and in charge of and responsible for the conduct of the business at the time of commission of an offence will be liable for criminal action [See : Pooja Ravinder Devidasani v. State of Maharashtra (2014) 16 SCC 1 : AIR 2015 SC 675].
11. In other words, the law laid down by this Court is that for making a Director of a Company liable for the offences committed by the Company under Section 141 of the Act, there must be specific averments against the Director showing as to how and in what manner the Director was responsible for the conduct of the business of the Company.
12. Turning to the case on hand, admittedly the cheques dated 28-12-2004 were issued while the appellant was Director of the Company with validity for a period of six months but during that period they were not presented for realization at the bank. The appellant has resigned as Director w.e.f 2- 1-2006 and the fact of his resignation has been furnished by Form 32 to the Registrar of Companies on 24-03-2006 in conformity with the rules. Thereafter, the appellant had played no role in the activities of the default Company. This fact remains substantiated with the Statement filed by the default Company on 20-02-2006 with the Registrar of Companies that in an advertisement of the Company seeking deposits (Annexure P3), only the names of three Directors of the Company were shown as involved in the working of the Company and the name of appellant was not therein. Indisputably, therefore, the cheques bounced on 24-08-2006 due to ::: Downloaded on - 17/06/2022 20:02:23 :::CIS 10 insufficient funds were neither issued by the appellant nor the appellant was involved in the day to day affairs of the Company.
13. Before summoning an accused under Section 138 of the Act, the Magistrate is expected to examine the nature of allegations made in the .
complaint and the evidence both oral and documentary in support thereof and then to proceed further with proper application of mind to the legal principles on the issue. Impliedly, it is necessary for Courts to ensure strict compliance of the statutory requirements as well as settled principles of law before making a person vicariously liable.
14. The Superior Courts should maintain purity in the administration of Justice and should not allow abuse of the process of Court. Looking at the facts of the present case in the light of settled principles of law, we are of the view that this is a fit case for quashing the complaint. The High Court ought to have allowed the criminal miscellaneous application of the appellant because of the absence of clear particulars about role of the appellant at the relevant time in the day to day affairs of the Company."
15. No doubt under S.319 CrPC, court enjoys vast power to order impleadment of those persons as accused against whom, some evidence appears during trial or enquiry that he has also committed offence alongwith other accused but in the case at hand, there is /was no material available before court below to arrive at a conclusion that persons sought to be arrayed as accused i.e. petitioners herein had committed offence punishable under S.138 of the Act.
16. No doubt, Hon'ble Apex Court in Kishore Sharma, supra has held that the question with regard to issuance of notice prior to initiation of proceedings under S.138 of the Act, being triable is to be decided by the trial court and on the basis of same, complaint cannot be ordered to be ::: Downloaded on - 17/06/2022 20:02:23 :::CIS 11 quashed, but in the case at hand, for the reasons discussed herein above, prayer made on behalf of the petitioners for quashment of complaint qua them, deserves to be allowed in light of judgment rendered by Hon'ble Apex Court in Ashoke Mal Bafna supra.
.
17. Consequently in view of above, present petition is allowed.
Order dated 3.3.2018 passed by learned Chief Judicial Magistrate, Chamba, Himachal Pradesh in Case No. 67/2016 is quashed and set aside.
18. Petition stands disposed of in the afore terms, alongwith all pending applications.
. r (Sandeep Sharma)
Judge
June 15, 2022
(Vikrant)
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