Madras High Court
Mrs.Savina Khan vs M/S. Ponne Product Exports
Author: Sathi Kumar Sukumara Kurup
Bench: Sathi Kumar Sukumara Kurup
crl.OP.No. 13044 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved On : 08.07.2022
Delivered On : 06.10.2022
CORAM:
THE HON'BLE MR.JUSTICE SATHI KUMAR SUKUMARA KURUP
Crl.O.P.No.13044 of 2021
and
Crl.M.P.Nos.7171 & 7172 of 2021
Mrs.Savina Khan
Director
M/s. AL-Zoya Overseas Private Limited
No.101, “B” Wing, Premier Residency,
Opp. Kohinoor City,
Kirol Road, Kurla (West),
Mumbai – 400070. ... Petitioner/Accused - 3
Vs.
M/s. Ponne Product Exports
Represented by its Partner
Mr.S.Sastikumar
Son of Mr.K.Singaraj
Ponne Plaza
No.114-B, Paramathi Road,
Namakkal Town and District.
...Respondent/Complainant
PRAYER: Criminal Original Petition has been filed under Section 482 of
Cr.P.C, praying to call for the records relating to the C.C.No.106 of 2020
pending on the file of the learned Judicial Magistrate – I, Namakkal and
quash the same.
1/16
https://www.mhc.tn.gov.in/judis
crl.OP.No. 13044 of 2021
For Petitioner : Mr.Shase
for Mr.M.Guruprasad
For Respondent : Mr.S.Senthil
ORDER
This Petition has been filed to quash the case in C.C.No.106 of 2020 pending on the file of the learned Judicial Magistrate – I, Namakkal.
2. The contention of the learned Counsel for the Petitioner that the first Accused is the Private Limited Company and the second Accused is the Managing Director of the Company. The Petitioner herein is arrayed as third Accused and she is the Director of the first Accused Company. They had placed Orders for the supply of five containers of Buffalo Meat for exporting to clients. The Respondent herein is the Complainant before the Court of learned Judicial Magistrate – I, Namakkal had received the part payment of Rs.10,00,000/- as token advance. Also, the learned Counsel for the Petitioner had issued five cheques for security deposits towards payment of the amount, in the case of supply of five containers of Buffalo Meat for the clients of the Petitioner. The Respondent herein/Complainant before the 2/16 https://www.mhc.tn.gov.in/judis crl.OP.No. 13044 of 2021 learned Judicial Magistrate – I, Namakkal did not supply the same but he had presented the cheques for encashment. The Respondent/Bank returned the cheques issued by the Petitioner/Accused with an endorsement “Stop Payment”. Therefore, the learned Counsel for the Respondent had issued legal notice calling upon the Petitioner herein/Accused to settle the dues, failing which, the Complaint under Section 138 of Negotiable Instruments Act will be filed.
2.1. The learned Counsel for the Petitioner herein had stoutly denied the contention of the learned Counsel for the Respondent/Complainant stating that the Respondent failed to supply five containers of Buffalo Meat to the Petitioner/Accused who had supplied their clients within 15 days.
Instead the Respondent had sought time. Accordingly, the Petitioner had extended the time, still the Respondent had not done so. Under those circumstances, he misused the cheque issued by the Petitioner/Accused.
Further, it is the contention of the learned Counsel for the Petitioner that the second Respondent ought to have supplied the Buffalo Meat on 19.07.2019 instead he had not at all supplied the same. Therefore, he had instructed his 3/16 https://www.mhc.tn.gov.in/judis crl.OP.No. 13044 of 2021 Bank to “stop payment”. The third Accused/Petitioner herein was only the Director of Company and she was not the signatory of the cheques. The Complaint is vague regarding the role of the Accused 2 and 3. It is the contention of the learned Counsel for the Petitioner that the role of the Directors had not been specifically stated as per Section 141 Negotiable Instruments Act. Therefore, the third Accused seeks to quash the Complaint.
2.2. In support of his contention, he had relied on the following reported rulings:
(I) (2005) 8 SCC 89 in the case of S.M.S Pharmaceuticals Ltd Vs. Neeta Bhalla and another A. Negotiable Instruments Act, 1881 – Ss.141 and 138 – Dishonour of cheque – Offence by company – Essential averments to be made in complaint filed in respect thereof – Held, it is necessary to aver that at the time the offence was committed the person accused was in charge of, and responsible for the conduct of business of the company – Without this averment being made in the complaint, the requirements of S.141 cannot be said to be satisfied.4/16
https://www.mhc.tn.gov.in/judis crl.OP.No. 13044 of 2021 B. Negotiable Instruments Act, 1881 – Ss. 141 and 138 – Dishonour of cheque – Offence by company – Liability of a person under S.141, when arises – Director of company if can be deemed to be liable – Held, the requirement of S.141 is that 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- Hence, liability arises on fulfilment of the said requirement and not on the basis of merely holding a designation or office in a company – Person not holding any office or designation in a company may be liable if he satisfies the aforesaid requirement – A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business – Hence, there is no deemed liability of a director in such cases – The aforesaid requirement of S.141 has to be averred as a fact in the Complaint – Director who was not in charge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable under the provision – Corporate Laws – Companies Act, 1956, Ss.291 to 293 and 2(13).
C. Negotiable Instruments Act, 1881 – Ss.141 and 138 – Dishonour of cheque – Offence by company – Liability of managing director or joint managing director of company or 5/16 https://www.mhc.tn.gov.in/judis crl.OP.No. 13044 of 2021 signatory of the cheque – Necessity of specific averments in complaint that the person accused was in charge of, or responsible for, the conduct of the business of the company at the relevant time – Held, the aforesaid persons could be proceeded against even in the absence of such averments.
D. Negotiable Instruments Act, 1881 – Ss.141 and 138 – Dishonour of cheque – Offence by company – Liability of officers of the company – Strict compliance with conditions specified in S. 141, held, is necessary before extending the criminal liability in respect of the said offence to officers of company.
E. Criminal Procedure Code, 1973 – Ss.204 & 203 – Issue of process – Necessary consideration prior to – Dismissal of complaint before issuing process – Condition for – Held, before issuing the process the Magistrate has to apply his mind and see whether the complaint contains material/ground to proceed against the accused – Where allegations in complaint or charge- sheet do not constitute an offence against the accused, the complaint is liable to be dismissed – Negotiable Instruments Act, 1881, Ss.138 and 141.
6/16https://www.mhc.tn.gov.in/judis crl.OP.No. 13044 of 2021 F. Criminal Procedure Code, 1973 – Ss. 204, 228 and 240 – Right of accused to produce any documents or evidence in defence at the stage of issuance of process or at the stage of framing of charge – Held, the accused has no such right – Magistrate cannot be asked to look into the documents produced by an accused at that stage.
G.Negotiable Instruments Act, 1881 – S.141 – Provision under, is an exception to normal rule that no one is to be held criminally liable for an act of another.
(II) MANU/SC/0611/2022 in the case of Dilip Hariramani Vs. Bank of Baroda “ 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 7/16 https://www.mhc.tn.gov.in/judis crl.OP.No. 13044 of 2021 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 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 141 of 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 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.” 8/16 https://www.mhc.tn.gov.in/judis crl.OP.No. 13044 of 2021
3. The learned Counsel for the Respondent/ Complainant by way of reply vehemently objected to the submissions of the learned Counsel for the Petitioner seeking to quash the complaint on the ground that the Director's roles had not been stated in the Complaint.
3.1. In support of his contention, he had relied on the reported ruling in 2021 SCC Online SC 1174 in the case of Sunil Todi and Others Vs. State of Gujarat and Another, the relevant portion is extracted hereunder:
46. Section 145 of the NI Act provides that evidence of the complainant may be given by him on affidavit, which shall be read in evidence in an inquiry, trial or other proceeding notwithstanding anything contained in the CrPC. The Constitution Bench held that Section 145 has been inserted in the Act, with effect from 2003 with the laudable object of speeding up trials in complaints filed under Section 138. Hence, the Court noted that if the evidence of the complainant may be given by him on affidavit, there is no reason for insisting on the evidence of the witnesses to be taken on oath. Consequently, it was held that Section 202(2) CrPC is inapplicable to complaints under Section 138 in respect of the examination of witnesses on 9/16 https://www.mhc.tn.gov.in/judis crl.OP.No. 13044 of 2021 oath. The Court held that the evidence of witnesses on behalf of the complainant shall be permitted on affidavit. If the Magistrate holds an inquiry himself, it is not compulsory that he should examine witnesses and in suitable cases the Magistrate can examine documents to be satisfied that there are sufficient grounds for proceeding under Section 202.
50. Section 141 of the NI Act stipulates that if a company is alleged to have committed an offence under Section 138, then every person who ‘was in charge of, and responsible to, the company for the conduct of the business of the company’ shall also be deemed guilty of the offence. The proviso provides an exception if she proves that the offence was committed without her knowledge or that she had exercised due diligence. In Sunil Bharati Mittal v. CBI 29, a three (2015) 4 SCC 609 judge Bench of this Court observed that the general rule is that criminal intent of a group of people who undertake business can be imputed to the Company but not the other way around. Only two exceptions were provided to this general rule:
(i) when the individual has perpetuated the commission of offence and there is sufficient evidence on the active role of the individual; and (ii) the statute expressly incorporates the principle of vicarious liability. Justice Sikri writing for a three-
judge Bench observed:
10/16https://www.mhc.tn.gov.in/judis crl.OP.No. 13044 of 2021 “43. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made an accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated is in those cases where the statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision.
44. When the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect. One such example is Section 141 of the Negotiable Instruments Act, 1881. In Aneeta Hada [Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 : (2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241] , the Court noted that if a group of persons that guide the business of the company have the criminal intent, that would be imputed to the body corporate and it is in this backdrop, Section 141 of the Negotiable Instruments Act has to be understood. Such a position is, therefore, because of statutory intendment making it a deeming fiction. Here also, the principle of “alter ego”, was applied only in one direction, namely, where a group of persons that guide the business had criminal intent, that is to be imputed to the body corporate and not the vice versa. Otherwise, there has to be a specific act attributed to the Director or any other person allegedly in control and 11/16 https://www.mhc.tn.gov.in/judis crl.OP.No. 13044 of 2021 management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company.”
4. On perusal of the Complaint and on consideration of the rival submissions, it is found that the Respondent/Complainant disputed the claim that he had not supplied Buffalo Meat. He had furnished delivery Chalan regarding the supply of Buffalo Meat.
4.1. On consideration of the Rival submissions, it is found that the contention of the learned Counsel for the Petitioner that the supply is disputed by the Respondent. It is the reason for the Petitioner that he had no sufficient funds, that is why he had communicated the bank "not to pay the cheque" where there was enforceable debt. It is to be considered during the evidence and not at this stage.
4.2. The learned Counsel for the Respondent submitted that there was an amicable settlement talks going on, for which earlier cheques were withdrawn by the Petitioner from the Respondent. Fresh cheques were 12/16 https://www.mhc.tn.gov.in/judis crl.OP.No. 13044 of 2021 issued. Therefore, the Petitioner claims that he was aware of that he has no valuable defence. After issuing fresh cheques, the Petitioner approached this Court to quash the Complaint, since the third Accused claims to be a woman and she had not signed the cheques as per the contention of the learned counsel for the Petitioner. He invited the attention of this Court to the copy of the Complaint filed before the learned Judicial Magistrate No.1, Namakkal. The relevant portion is extracted hereunder:
“1. …........Besides the third Accused is the Director of the first Accused Company and she was in charge of and was responsible for the conduct of the above business transaction and she was also looking after the commercial terms of the above said business transaction along with the second Accused. The second and third Accused had collectively taken all decision pertaining to the above said business transaction with the Complainant Firm.” “3. The Complainant states that the Accused Nos.2 and 3 on behalf of the first Accused Company agreed to pay to the Complainant balance amount of Rs.10,00,000/- by way of transfer through RTGS to their account during September 2019. The Complainant states that the 2nd Accused has issued a hand written note pertaining to the amount due and payable by the first 13/16 https://www.mhc.tn.gov.in/judis crl.OP.No. 13044 of 2021 Accused Company and the particulars of cheques issued by the first Accused Company, confirming liability of the 1st Accused Company towards the Complainant, while issuing the above cheques.” 4.3. On perusal of the Complaint, it had been clearly stated that there had been exchange of notice regarding supply and non- supply. These facts are to be considered by the learned Judicial Magistrate No.1, Namakkal and on appreciation of evidence which cannot be gone into the merits of this case while exercising extraordinary power under Section 482 of Cr.P.C. The contention of the learned Counsel for the Petitioner that the Complaint had been vague regarding the role of the Directors of the Company cannot be accepted in the light of the specific pleadings that the second Accused is the Managing Director and the third Accused/Petitioner is the Director who attended the day-to-day administration of the Company. In the light of the above, the contention of the learned Counsel for the Petitioner cannot at all be accepted in the light of the ruling cited by the learned Counsel for the Respondent. Therefore, the contention of the learned Counsel for the Petitioner is having been rejected.14/16
https://www.mhc.tn.gov.in/judis crl.OP.No. 13044 of 2021 In the result, this Criminal Original Petition is dismissed with direction to the learned Judicial Magistrate-1, Namakkal to dispose of the case within a period of three months from the date of receipt of a copy of this Order. Since the Accused are from Bombay, if the petitioners' Counsel seeks exemption from their appearance, the learned Judicial Magistrate -1, Namakkal can pass appropriate orders considering the plight of the Petitioners. Since the Identity of the petitioners are not disputed by the respondent /complainant and the same could be considered by the court while passing appropriate orders.
06.10.2022 dh Index : Yes / No Internet : Yes / No To
1. The learned Judicial Magistrate – I, Namakkal.
2. The Public Prosecutor, High Court, Madras.
15/16https://www.mhc.tn.gov.in/judis crl.OP.No. 13044 of 2021 SATHI KUMAR SUKUMARA KURUP., J.
dh Pre-delivery order made in Crl.O.P.No.13044 of 2021 06.10.2022 16/16 https://www.mhc.tn.gov.in/judis