Gujarat High Court
M/S vs Synthetics V/S Reliance Capital Ltd. ... on 8 August, 2023
NEUTRAL CITATION
R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023
undefined
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION NO. 3174 of 2017
With
R/CRIMINAL MISC.APPLICATION NO. 6105 of 2017
With
R/CRIMINAL MISC.APPLICATION NO. 6601 of 2017
With
R/CRIMINAL MISC.APPLICATION NO. 9086 of 2017
With
R/CRIMINAL MISC.APPLICATION NO. 9334 of 2017
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE SANDEEP N. BHATT
==========================================================
1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
==========================================================
M/S V S SYNTHETICS
Versus
RELIANCE CAPITAL LTD. THRO. HITESH JOSHI, AUTHORISE OFFICER &
1 other(s)
==========================================================
Appearance:
ADITYA A GUPTA(7875) for the Applicant(s) No. 1
MOHIT A GUPTA(8967) for the Applicant(s) No. 1
MR AR GUPTA(1262) for the Applicant(s) No. 1
MR DHARMESH V SHAH(1050) for the Respondent(s) No. 1
MR LALIT M PATEL(2239) for the Respondent(s) No. 1
MR SOAHAM JOSHI, APP for the Respondent(s) No. 2
==========================================================
CORAM:HONOURABLE MR. JUSTICE SANDEEP N. BHATT
Page 1 of 30
Downloaded on : Sun Sep 17 00:42:40 IST 2023
NEUTRAL CITATION
R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023
undefined
Date : 08/08/2023
COMMON ORAL JUDGMENT
1. All these applications are filed under Section 482 of the Code of Criminal Procedure, 1973 (`the Code' for short) for quashing and setting aside the complaints being Criminal Case Nos.6018 of 2016, 888 of 2017, 5009397 of 2016, respectively qua the applicants, pending before the learned Metropolitan Magistrate, Court No.29, Ahmedabad filed under Section 25 of The Payment and Settlement Systems Act, 2007 (`the Act of 2007' for short).
2. As the common question of facts and law are involved in these applications, at the request of learned advocates for the parties, they are heard together and disposed of by this common oral judgment.
3. The facts as stated in the applications are such that it is alleged by respondent no.1 in the complaint that one M/s V.S.Texmills Pvt.Ltd. Had availed finance/loan from it and had opted for Electronic Clearing Service (ECS) for repayment of finance/lona. As Page 2 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined the ECS initiated by M/s V.S.Texmills Pvt.Ltd., got dishonoured, the complaint is filed.
4. Heard learned advocate Mr.Gupta for the applicants and learned APP Mr.Joshi for respondent no.2- state. Learned advocate for the respondent no.1- complainant was not present.
4.1. Learned advocate for the applicants submitted that in Criminal Miscellaneous Application No.3174 of 2017, the applicant is a proprietorship firm and the proprietor is one Umashankar Agarwal; that the applicant-M/s V.S.Synthetics has neither initiated ECS from an account maintained by it nor is the signatory of ECS mandate and is merely a co-borrower; that the account is not maintained by the applicant with the bank but it is maintained by the company M/s V.S.Texmills Pvt.Ltd., with the bank; that the ECS was initiated by the company M/s V.S.Texmills Pvt.Ltd. And the signatory of the ECS mandate was Ashit Agarwal and therefore the necessary ingredients of Section 25 of the Act of 2007 are not made out; that the applicant is neither partner nor has any relation as set out in Page 3 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined Section 27 of the Act of 2007 with the accused namely M/s V.S.Texmills Pvt.Ltd.
4.2 In Criminal Miscellaneous Application No.9334 of 2017, it is submitted that the applicant-Umashankar Shyamlal Agarwal is one of the director in the accused company M/s V.S.Textile Pvt.Ltd.; that the applicant stated that there is no deemed liability on the director of the company and it is necessary to aver/allege in the complaint that the director is incharge of day-to-day affairs of the company; that the averment/allegation against the director is a condition sine quo non to bring the case under Section 141(1) of the Negotiable Instruments Act (`NI Act' for short) and that Section 27 of the Act of 2007 is pari materia to Section 141 of the NI Act; that the applicant is neither a signatory of ECS mandate and nor he is the managing director of the company.
4.3 In Criminal Miscellaneous Application No.9086 of 2017, the applicant is a proprietorship firm and the proprietor is one Umashankar Agarwal; that the applicant-M/s V.S.Synthetics has neither initiated ECS Page 4 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined from an account maintained by it nor is the signatory of ECS mandate and is merely a co-borrower; that the account is not maintained by the applicant with the bank but it is maintained by the company M/s V.S.Texmills Pvt.Ltd., with the bank; that the ECS was initiated by the company M/s V.S.Texmills Pvt.Ltd. And the signatory of the ECS mandate was Ashit Agarwal and therefore the necessary ingredients of Section 25 of the Act of 2007 are not made out and that the applicant is neither partner nor has any relation as set out in Section 27 of the Act of 2007 with the accused namely M/s V.S.Texmills Pvt.Ltd.
4.4 In Criminal Miscellaneous Application No.6601 of 2017, it is submitted that the applicant-Umashankar Shyamlal Agarwal is one of the director in the accused company M/s V.S.Textile Pvt.Ltd.; that the applicant stated that there is no deemed liability on the director of the company and it is necessary to aver/allege in the complaint that the director is incharge of day-to-day affairs of the company; that the averment/allegation against the director is a condition sine quo non to bring the case under Section 141(1) of the Negotiable Page 5 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined Instruments Act and that Section 27 of the Act of 2007 is pari materia to Section 141 of the NI Act; that the applicant is neither a signatory of ECS mandate and nor he is the managing director of the company. 4.5 In Criminal Miscellaneous Application No.6105 of 2017, the applicant is a proprietorship firm and the proprietor is one Umashankar Agarwal; that the applicant-M/s V.S.Synthetics has neither initiated ECS from an account maintained by it nor is the signatory of ECS mandate and is merely a co-borrower; that the account is not maintained by the applicant with the bank but it is maintained by the company M/s V.S.Texmills Pvt.Ltd., with the bank; that the ECS was initiated by the company M/s V.S.Texmills Pvt.Ltd. And the signatory of the ECS mandate was Ashit Agarwal and therefore the necessary ingredients of Section 25 of the Act of 2007 are not made out and that the applicant is neither partner nor has any relation as set out in Section 27 of the Act of 2007 with the accused namely M/s V.S.Texmills Pvt.Ltd.
4.6 In support of his submissions, learned advocate Page 6 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined Mt.Gupta has relied on the decision of the Hon'ble Apex Court in the case of Jugesh Sehgal V/s Shamsher Singh Goga reported in (2009) 14 SCC 683.
5. Though the learned advocate Mr.Shah for respondent no.1-complainant has not appeared and argued, there is an affidavit-in-reply of respondent no.1- complainant on the record, in which it is stated that the applicant has admitted that he is a co-borrower but deliberately suppressed the fact that out of the two directors who were looking after the day-to-day affairs of the accused no.1-company, he is also one of the directors of the accused no.1-company and at the time of issuance of ECS mandate the applicant was a director or person incharge of and responsible to the affairs and conduct of the business of accused no.1 company and therefore is he guilty of the contravention; that over all reading of the complaint shows that specific allegations had been levelled against the applicant that at the request of the accused and upon agreeing to various written terms, conditions and covenants and execution of the agreement, the complainant had granted the loan and therefore, it cannot be denied that the applicant was party to the Page 7 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined agreement and he was aware about the loan transaction and contravention took place with his knowledge; that the same is a matter of evidence to be proved in trial as to whether the applicant is vicariously liable as one of the director of the accused no.1 company and co- borrower as well. It is, therefore, prayed that these applications be dismissed.
6. Learned APP for respondent no.2-state has objected these applications and submitted that this Court should not exercise its powers by interfering with the proceedings of recovery of amount and the proceedings initiated under Section 138 of the Act are perfectly justified.
7. I have considered the rival submissions and perused the material on record.
8. At the outset, the provisions of Sections 25 and 27 of the Act of 2007 read as under:
"25. Dishonour of electronic funds transfer for insufficiency, etc., of funds in the account.--Page 8 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023
NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined (1) Where an electronic funds transfer initiated by a person from an account maintained by him cannot be executed on the ground that the amount of money standing to the credit of that account is insufficient to honour the transfer instruction or that it exceeds the amount arranged to be paid from that account by an agreement made with a bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions 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 electronic funds transfer, or with both:
Provided that nothing contained in this section shall apply unless--
(a) the electronic funds transfer was initiated for payment of any amount of money to another person for the discharge, in whole or in part, of any debt or other liability;
(b) the electronic funds transfer was initiated in accordance with the relevant procedural guidelines issued by the system provider;
(c) the beneficiary makes a demand for the payment of the said amount of money by giving a notice in writing to the person initiating the electronic funds transfer within thirty days of the receipt of information by him from the bank concerned regarding the dishonour of the electronic funds transfer; and Page 9 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined
(d) the person initiating the electronic funds transfer fails to make the payment of the said money to the beneficiary within fifteen days of the receipt of the said notice. (2) It shall be presumed, unless the contrary is proved, that the electronic funds transfer was initiated for the discharge, in whole or in part, of any debt or other liability. (3) It shall not be a defence in a prosecution for an offence under sub-section (1) that the person, who initiated the electronic funds transfer through an instruction, authorisation, order or agreement, did not have reason to believe at the time of such instruction, authorisation, order or agreement that the credit of his account is insufficient to effect the electronic funds transfer. (4) The Court shall, in respect of every proceeding under this section, on production of a communication from the bank denoting the dishonour of electronic funds transfer, presume the fact of dishonour of such electronic funds transfer, unless and until such fact is disproved. (5) The provisions of Chapter XVII of the Negotiable Instruments Act, 1881 (26 of 1881) shall apply to the dishonour of electronic funds transfer to the extent the circumstances admit.
Explanation.--For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability, as the case may be.
27. Offences by companies.--
Page 10 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023
NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined (1) Where a person committing a contravention of any of the provisions of this Act or any regulation, direction or order made thereunder is a company, every person who, at the time of the contravention, was in-charge of, and was responsible to, the company for the conduct of business of the company, as well as the company, shall be guilty of the contravention and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention.
(2) Notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions of this Act or of any regulation, direction or order made thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.
Explanation.--For the purposes of this section,--
(a) "company" means any body corporate and includes a firm Page 11 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined or other association of individuals; and
(b) "director", in relation to a firm, means a partner in the firm."
9. The present applications are filed for quashing of the proceedings initiated pursuant to the complaint filed under the provisions of the Act of 2007 which are to be considered as a similar provision to Section 141(2) of the NI Act by contending that 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 connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
10. Learned advocate for the applicants has heavily relied on the judgment of the Hon'ble Apex Court in the case of Jugesh Sehgal (supra) which pertains to Section 138 of the NI Act and submitted that such provisions of NI Act like Section 138 as well as Section 141(2) of the NI Act are also applicable in the cases under the Page 12 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined provisions of the Act of 2007.
11. Sections 138 and 141 of the NI Act are required to be seen, which read as under:
"138. Dishonour of cheque for insufficiency, etc., of funds in the account.
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 provisions of this Act, be punished with imprisonment for "a term which may extend to two year", 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 Page 13 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined within the period of its validity, whichever is earlier.
(b) The payee or the holder induce 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 cheques 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 purpose of this section, "debt or other liability"
means a legally enforceable debt or other liability."
"141 Offences by companies. (1) If the person committing an offence under 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 conduct 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 proceeded against and punished accordingly:
Provided that nothing contained in this subsection shall render any person liable to punishment if he proves that the offence Page 14 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined was committed without his knowledge, or that he had exercised all due diligence 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 liable for prosecution under this Chapter. (2) Notwithstanding anything contained in subsection (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 connivance of, or is attribute to, any neglect on the part of, any director, Manager, secretary, or other office of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation. For the purposes of this section,
(a) "company" means any body corporate and includes a firm or other association of individuals; and
(b) "Director", in relating to a firm, means a partner in the firm."
12. Considering the above legal position, in the present case, as the provisions of the said Act of 2007 Page 15 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined are special provisions, it cannot be said that merely the applicant is not a signatory, he is not liable to prosecute pursuant to the complaint filed under Section 25 of the Act of 2007. On the plain reading of the complaint, it transpires that some ECS mandate is issued by the company and obviously such mandate must have been issued by signature of one authorized person of the company and considering the tenor of the complaint, it cannot be said at this stage that no satisfactory ingredients are made out under the provisions of Section 25 of the Act read with Section 27 of the Act.
13. As regards the submission that these provisions of Act of 2007 are pari materia to the provisions of NI Act, though some of the provisions may be identical but the object of one Act may not be applicable to another Act. This Act is a special statute and name of the Act itself discloses that there is specific performance or specific object behind enacting such provision by the legislature. Even considering the facts of this case from the angle that some of the provisions are applicable for the purpose of considering the case of the present applicants with regard to the principles to be considered Page 16 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined for consideration of the offences under the NI Act, then also, it transpires from the complaint itself that though the registered A.D. demand notice is issued by the advocate of the complaint through registered A.D. post, the accused persons have failed to reply to the said notice. It is not coming on the record that such notice is replied or responded.
14. In view of the judgment of the Hon'ble Apex Court in the case of S.P.Mani and Mohan Dairy V/s Dr.Snehalatha Elangovan reported in 2022(13) Scale, page 543, more particularly, paragraphs 33, 40, 43, 46 and 47, which read as under:
"33. Thus, the legal principles discernible from the aforesaid decision of this Court may be summarised as under:
(a) Vicarious liability can be fastened on those who are in-
charge of and responsible to the company or firm for the conduct of its business. For the purpose of Section 141, the firm comes within the abmit of a company.
(b) It is not necessary to reproduce the language of Section 141 verbatim in the complaint since the complaint is required to be read as a whole;
(c) If the substance of the allegations made in the complaint Page 17 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined fulfill the requirements of Section 141, the complaint has to proceed in regards the law.
(d) In construing a complaint a hyper technical approach should not be adopted so as to quash the same.
(e) The laudable object of preventing bouncing the cheques and sustaining the credibility of commercial transactions resulting in the enactment of Sections 138 and 141 respectively should be kept in mind by the Court concerned.
(f) These provisions create a statutory presumption of dishonesty exposing a person to criminal liability if payment is not made within the statutory period even after the issue of notice.
(g) The power of quashing should be exercised very sparingly and where, read as a whole, the factual foundation for the offence had been laid in the complaint, it should not be quashed.
(h) The Court concerned would owe a duty to discharge the accused if taking everything stated in the complaint is correct and construing the allegations made therein liberally in favour of the complainant, the ingredients of the offence are altogether lacking.
40. The principles discernible from the aforesaid decision of this Court in the case of Ashutosh Ashok Parasrampuriya (supra) is that the High Court should not interfere under Section 482 of the Code at the instance of an accused unless it comes across some unimpeachable and Page 18 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined incontrovertible evidence to indicate that the Director/ partner of a firm could not have been concerned with the issuance of cheques. This Court clarified that in a given case despite the presence of basic averments, the High Court may conclude that no case is made out against the particular Director/ partner provided the Director/partner is able to adduce some unimpeachable and incontrovertible evidence beyond suspicion and doubt.
43. In the case on hand, we find clear and specific averments not only in the complaint but also in the statutory notice issued to the respondent. There are specific averments that the cheque was issued with the consent of the respondent herein and within her knowledge. In our view, this was sufficient to put the respondent herein to trial for the alleged offence. We are saying so because the case of the respondent that at the time of issuance of the cheque or at the time of the commission of offence, she was in no manner concerned wtih the firm or she was not in- charge or responsible for day-to-day affairs of the firm cannot be on the basis of mere bald assertion in this regard. The same is not sufficient. To make good her case, the respondent herein is expected to lead umimpeachable and incontrovertible evidence. Nothing of the sort was adduced by the respondent before the High Court to get the proceedings quashed. The High Court had practically no legal basis to say that the averments made in the complaint Page 19 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined are not sufficient to fasten the vicarious liability upon the respondent by virtue of Section 141 of the NI Act.
46. When in view of the basic averment process is issued the complaint must proceed against the Directors or partners as the case may be. But if any Director or Partner wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he is really not concerned with the issuance of the cheque, he must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his contention. He must make out a case hat making him stand the trial woule be an abuse of process of court. He cannot get the complaint quashed merely on the ground that apart from the basic averment no particulars are given in the complaint about his role, because ordinarily the basic averment would be sufficient to send him to trial and it could be argued that his further role could be brought out in the trial. Quashing of a complaint is a serious matter. Complaint cannot be quashed for the asking. For quashing of a complaint, it must be shown that no offence is made out at all against the Director or Partner.
47.Our final conclusions may be summarised as under:- Page 20 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023
NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined a.) The primary responsibility of the complainant is to make specific averments in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no legal requirement for the complainant to show that the accused partner of the firm was aware about each and every transaction. On the other hand, the first proviso to sub-section (1) of Section 141 of the Act clearly lays down that if the accused is able to prove to the satisfaction of the Court that the offence was committed without his/her knowledge or he/she had exercised due diligence to prevent the commission of such offence, he/she will not be liable of punishment.
b.) The complainant is supposed to know only generally as to who were in charge of the affairs of the company or firm, as the case may be. The other administrative matters would be within the special knowledge of the company or the firm and those who are in charge of it. In such circumstances, the complainant is expected to allege that the persons named in the complaint are in charge of the affairs of the company/firm. It is only the Directors of the company or the partners of the firm, as the case may be, who have the special knowledge about the role they had played in the company or the partners in a firm to show before the court that at the relevant point of time they were not in charge of the affairs of the company. Advertence to Sections 138 and Section 141 respectively of the NI Act shows that on Page 21 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined the other elements of an offence under Section 138 being satisfied, the burden is on the Board of Directors or the officers in charge of the affairs of the company/partners of a firm to show that they were not liable to be convicted. The existence of any special circumstance that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial to show that at the relevant time they were not in charge of the affairs of the company or the firm.
c.) Needless to say, the final judgement and order would depend on the evidence adduced. Criminal liability is attracted only on those, who at the time of commission of the offence, were in charge of and were responsible for the conduct of the business of the firm. But vicarious criminal liability can be inferred against the partners of a firm when it is specifically averred in the complaint about the status of the partners 'qua' the firm. This would make them liable to face the prosecution but it does not lead to automatic conviction. Hence, they are not adversely prejudiced if they are eventually found to be not guilty, as a necessary consequence thereof would be acquittal.
d.) If any Director wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he/she is really not concerned with the issuance of Page 22 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined the cheque, he/she must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his/her contention. He/she must make out a case that making him/her stand the trial would be an abuse of process of Court."
15. It is also fruitful to reproduce paragraph 30 of the judgment in the case of Gunmala Sales Private Ltd.
V/s Anu Mehta & Ors. Navkar Infra Projects Pvt.Ltd. & Etc., which reads as under:
"[30] When in view of the basic averment process is issued the complaint must proceed against the Directors. But, if any Director wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he is really not concerned with the issuance of the cheque, he must in order to persuade the High Court to quash the process either furnish some sterling uncontrovertible material or acceptable circumstances to substantiate his contention. He must make out a case that making him stand the trial would be abuse of the process of court. He cannot get the complaint quashed merely on the ground that apart from the basic averment no particulars are given in the complaint about his role, because ordinarily the basic averment would Page 23 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined be sufficient to send him to trial and it could be argued that his further role could be brought out in the trial. Quashing of a complaint is a serious matter. Complaint cannot be quashed for the asking. For quashing of a complaint it must be shown that no offence is made out at all against the Director."
16. When, there is no reply to the demand notice by the otherside, such contentions cannot be taken into consideration while deciding the application under Section 482 of the Code, unless there is some uncontrovertible documents produced on record. In the present case, this Court has found none of such documents are produced along with the present application. Therefore, in my opinion, this Court should not exercise discretion in favour of the present applicants. Let the applicants face trial by contending all the defences raised in the present applications and the trial Court shall decide the same in accordance with law considering the record available, in view of the judgment in the case of Neeharika Infrastructure Pvt.Ltd. V/s State of Maharashtra reported in 2021 SCC Online SC 315, wherein, it is held in paragraph 80 as under:
"80. In view of the above and for the reasons stated above, Page 24 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined our final conclusions on the principal/core issue, whether the High Court would be justified in passing an interim order of stay of investigation and/or "no coercive steps to be adopted", during the pendency of the quashing petition under Section 482 Cr.P.C and/or under Article 226 of the Constitution of India and in what circumstances and whether the High Court would be justified in passing the order of not to arrest the accused or "no coercive steps to be adopted" during the investigation or till the final report/chargesheet is filed under Section 173 Cr.P.C., while dismissing/disposing of/not entertaining/not quashing the criminal proceedings/complaint/FIR in exercise of powers under Section 482 Cr.P.C. and/or under Article 226 of the Constitution of India, our final conclusions are as under:
i) Police has the statutory right and duty under the relevant provisions of the Code of Criminal Procedure contained in Chapter XIV of the Code to investigate into a cognizable offence;
ii) Courts would not thwart any investigation into the cognizable offences;
iii) It is only in cases where no cognizable offence or offence of any kind is disclosed in the first information report that the Court will not permit an investigation to go on;
iv) The power of quashing should be exercised sparingly with circumspection, as it has been observed, in the 'rarest Page 25 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined of rare cases (not to be confused with the formation in the context of death penalty).
v) While examining an FIR/complaint, quashing of which is sought, the court cannot embark upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR/complaint;
vi) Criminal proceedings ought not to be scuttled at the initial stage;
vii) Quashing of a complaint/FIR should be an exception rather than an ordinary rule;
viii) Ordinarily, the courts are barred from usurping the jurisdiction of the police, since the two organs of the State operate in two specific spheres of activities and one ought not to tread over the other sphere;
ix) The functions of the judiciary and the police are complementary, not overlapping;
x) Save in exceptional cases where non-interference would result in miscarriage of justice, the Court and the judicial process should not interfere at the stage of investigation of offences;
xi) Extraordinary and inherent powers of the Court do not confer an arbitrary jurisdiction on the Court to act according to its whims or caprice;
xii) The first information report is not an encyclopaedia which must disclose all facts and details relating to the Page 26 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined offence reported. Therefore, when the investigation by the police is in progress, the court should not go into the merits of the allegations in the FIR. Police must be permitted to complete the investigation. It would be premature to pronounce the conclusion based on hazy facts that the complaint/FIR does not deserve to be investigated or that it amounts to abuse of process of law. After investigation, if the investigating officer finds that there is no substance in the application made by the complainant, the investigating officer may file an appropriate report/summary before the learned Magistrate which may be considered by the learned Magistrate in accordance with the known procedure;
xiii) The power under Section 482 Cr.P.C. is very wide, but conferment of wide power requires the court to be more cautious. It casts an onerous and more diligent duty on the court;
xiv) However, at the same time, the court, if it thinks fit, regard being had to the parameters of quashing and the self-restraint imposed by law, more particularly the parameters laid down by this Court in the cases of R.P. Kapur (supra) and Bhajan Lal (supra), has the jurisdiction to quash the FIR/complaint;
xv) When a prayer for quashing the FIR is made by the alleged accused and the court when it exercises the power under Section 482 Cr.P.C., only has to consider whether the allegations in the FIR disclose commission of a cognizable Page 27 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined offence or not. The court is not required to consider on merits whether or not the merits of the allegations make out a cognizable offence and the court has to permit the investigating agency/police to investigate the allegations in the FIR;
xvi) The aforesaid parameters would be applicable and/or the aforesaid aspects are required to be considered by the High Court while passing an interim order in a quashing petition in exercise of powers under Section 482 Cr.P.C. and/or under Article 226 of the Constitution of India. However, an interim order of stay of investigation during the pendency of the quashing petition can be passed with circumspection.
Such an interim order should not require to be passed routinely, casually and/or mechanically. Normally, when the investigation is in progress and the facts are hazy and the entire evidence/material is not before the High Court, the High Court should restrain itself from passing the interim order of not to arrest or "no coercive steps to be adopted"
and the accused should be relegated to apply for anticipatory bail under Section 438 Cr.P.C. before the competent court. The High Court shall not and as such is not justified in passing the order of not to arrest and/or "no coercive steps" either during the investigation or till the investigation is completed and/or till the final report/chargesheet is filed under Section 173 Cr.P.C., while dismissing/disposing of the quashing petition under Section 482 Cr.P.C. and/or under Article 226 of the Constitution of Page 28 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined India. xvii) Even in a case where the High Court is prima facie of the opinion that an exceptional case is made out for grant of interim stay of further investigation, after considering the broad parameters while exercising the powers under Section 482 Cr.P.C. and/or under Article 226 of the Constitution of India referred to hereinabove, the High Court has to give brief reasons why such an interim order is warranted and/or is required to be passed so that it can demonstrate the application of mind by the Court and the higher forum can consider what was weighed with the High Court while passing such an interim order.
xviii) Whenever an interim order is passed by the High Court of "no coercive steps to be adopted" within the aforesaid parameters, the High Court must clarify what does it mean by "no coercive steps to be adopted" as the term "no coercive steps to be adopted" can be said to be too vague and/or broad which can be misunderstood and/or misapplied."
17. In view of the above discussion, this is not a fit case where this Court should exercise the inherent powers under Section 482 of the Code, as the prima facie case is made out against the present applicants. Accordingly all these applications are dismissed. Rule is discharged in Criminal Miscellaneous Application Page 29 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023 NEUTRAL CITATION R/CR.MA/3174/2017 JUDGMENT DATED: 08/08/2023 undefined Nos.3174 of 2017, 9334 of 2017 and 9086 of 2017. Notice is discharged in Criminal Miscellaneous Application Nos.6601 of 2017 and 6105 of 2017. Interim relief, if any, stands vacated.
(SANDEEP N. BHATT,J) SRILATHA Page 30 of 30 Downloaded on : Sun Sep 17 00:42:40 IST 2023