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2004 DIGILAW 409 (KAR)

C. P. SRINIVAS RAO v. S. S. NAGARAJ

2004-06-30

S.B.MAJAGE

body2004
S. B. MAJAGE, J. ( 1 ) IT is the case of the petitioner-accused no. 5 that he was not a Director of the A1 - Company on the date of issue of cheque and transaction as he had tendered his resignation long back on 28-2-1997 and, that in the complaint, there are no allegations against him except that he is a Director of the accused No. 1 (Company) and the cheque has been issued with his knowledge and consent and hence all the accused are liable to be proceeded, and as such, he cannot be prosecuted and consequently, the proceedings require to be quashed. After notice to the respondent complainant, heard both sides and perused the records. ( 2 ) IT was vehemently argued for the petitioner that unless there is specific allegation in the complaint that he was a Director, who was in charge of and responsible to the Company (A1) for the conduct of the business of the Company, he cannot be prosecuted, more so, when he was not even a director of the accused No. 1- Company during the relevant period of transaction and issue of cheque. On the other hand, it was submitted for the respondent complainant that whether or not the petitioner-accused no. 5 was a Director and responsible in the transaction is purely a matter of evidence, which cannot be gone into/decided by this court at this stage in proceedings under section 482 of Cr. P. C. and consequently, the petition requires to be rejected. ( 3 ) IT is true, in the complaint, the allegations against the petitioner/a-5 are, he is a director of the accused No. 1 - Company and the cheque was issued with his knowledge and consent, and not that he was in charge of and responsible to the A1-Company for the conduct of the business of the first accused - Company. But, Section 141 (2) of the N. I. Act says that where any offence under that 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, such Director shall also be deemed to be guilty of the offence and shall be liable to be prosecuted and punished accordingly. So, the decision of the Supreme Court in the case of Katta Sujatha (Smt.) v. Fertilizers and chemicals Travancore Limited, ILR 2003 kant 4856 relied on for the petitioner does not help him much. ( 4 ) PROBABLY for that reason, the learned counsel for the petitioner relied on a decision of Andhra Pradesh High Court in the case of P. Ravinder Reddy, Chairman v. M/s. N. C. C. Finance Limited (1998) 3 Crimes 4 , wherein it is held that vague allegations that cheques were issued by Managing Director with consent, knowledge and connivance of other accused are not sufficient to hold such other accused was actually in charge of and responsible for the conduct of the business of the Company and as such, proceeding against such accused was abuse of process of Court and liable to be quashed. In fact, same view was taken even by this court also in the case of M/s. Anantharamaiah woolen Factory v. The State 1981 Lab IC 538. Certainly, said decisions are in favour of the petitioner/a-5. But, facts of the case cannot be ignored while applying decision or decisions to it. ( 5 ) IN the present case, the respondent complainant had issued a demand notice to the petitioner before the initiation of proceedings, but he did not claim it. It was submitted for the petitioner that the petitioner, rightly did not claim the notice because of his resignation, he was in no way concerned with the transaction and/or with the accused No. 1- Company. ( 6 ) IN fact, to show his resignation, the petitioner has produced before this Court a xerox copy of the resignation letter sent by him and received by the Managing Director of accused No. l- Company on 28-2-1997 and relied on a decision of Bombay High court in the case of Pandurang Camotim sancoalcar v. Suresh Prabhakar Prabhu (2003) 113 Comp. Cas. 600 : (2001 Cri LJ 2945) wherein it is held that date shown in the letter of resignation can be taken as the date of resignation. Cas. 600 : (2001 Cri LJ 2945) wherein it is held that date shown in the letter of resignation can be taken as the date of resignation. ( 7 ) SO also, on another decision of Bombay high Court in the case of Saumil Dilip mehta v. State of Maharashtra (2003) 113 comp Cas 443 : (AIR 2002 Bombay 194) wherein it is held that duty of Director is only to give intimation to the Company about his resignation and not to fill up Form No. 32 or inform the Registrar of Companies because that is the duty of the Company secretary and as such, according to the petitioner, in the case on hand when he has produced the record of resignation dated 28-2-1997, that could be taken into consideration and proceedings be quashed. ( 8 ) SIMILARLY, in the case of Dushyant D. Anjaria v. Wall Street Finance Ltd. (2001) 105 comp Cas 655 : (2003 CLC 96) (Bombay), it is held that the resignation of a Director is effective from the date he submits it, because of his Intention to resign and it is for the Company to comply with the formalities. required under Section 302 or Section 303 of the Act. In the same decision, it is also held that if there was any delay or negligence or laches on the part of the Company in Initiating the date of resignation to the registrar, the Director, who has resigned cannot be saddled with any responsibility and liability. ( 9 ) IN this connection, a number of decisions right from the case of Glossop v. Glossop (1907) Ch. D. 370 could be referred to hold that the resignation of a Director becomes effective on and from the date it is tendered or submitted. ( 10 ) SINCE the petitioner has produced xerox copy of his resignation letter, he may also rely on a decision of the Supreme Court in the case of Satish Mehra v. Delhi Administrator (1996) 3 Crimes 85 (SC) wherein it is held that the Court is within its powers to consider materials, which the accused may produce even before the commencement of trial for the purpose of deciding whether the accused could be discharged or not. ( 11 ) BUT, none of the said decisions comes to the aid of the petitioner. ( 11 ) BUT, none of the said decisions comes to the aid of the petitioner. This is because the question before this Court is not, when the so-called resignation given by the petitioner and received by the Managing Director of the Company on 27-2-1997 became effective and whether or not said record could be acted upon by this Court at this stage. Before this Court, the question is, whether or not, the prosecution of the petitioner could be quashed at this stage? ( 12 ) IN the present case, the petitioner was issued with a demand notice by the respondent before launching prosecution as required under law and an opportunity was given to him to come forward with plea, if any, as to why he should not be prosecuted for the dishonoured cheque if not going to pay the amount of cheque within 15 days. So, it was open to him to reply about this resignation on 28-2-1997 and consequently he cannot be proceeded with. But, unfortunately, for the reasons best known to him, he did not give any reply to that demand notice. Had he replied then and the respondent-complainant had still prosecuted him without ascertaining /verifying the authenticity of such plea of resignation and/or getting any material to show that in spite of such letter of resignation, still he continued to be a Director of the A-1 Company, that would have come to his help but not now. It is not understandable, why he did not claim notice sent by respondent complainant and reply. It is not his case that he was unaware of such a demand notice issued by the complainant. On the other hand, it was argued for him that he did not claim that notice as he had tendered his resignation and has no concern with A1-Company or its business. So, based on the ground of his resignation, it cannot be countenanced at this stage before this Court that he could not have been prosecuted. ( 13 ) IT is true that in the case of M/s. Hotline Shares and Securities Limited v. Dinesh Ganeshmal Shah, ILR 2002 Kant 3174 : (2002 Cri LJ 3291 : 2002 AIR Kant hcr 1975), this Court has held that where cheques are issued on behalf of Company, all the Directors need not be arrayed as parties unless there is specific allegation against them. But, in the same decision, it is also held that proceedings as against the Directors cannot be quashed because the question that has to be examined is, whether the directors are also responsible to repay the loan is purely a matter of evidence. Again, same view has been taken by this Court in the case of Smt. Deveeramma v. Shivalingappa, ILR 2002 Kant 1026 : (2002 cri LJ 374 : 2002 AIR- Kant HCR 2932) ( 14 ) FIRST after considering said decisions and other decisions, including decisions of the Supreme Court, this Court in the case of M/s. Prudential Engineers v. Kuskoor bharath Ram, ILR 2003 Kant 4617 : (2004 cri LJ 672 : 2004 AIR-Kant HCR 120) has held that when notice was Issued to the partners, it is the duty of the partners to come forward with a specific stand as to why they are not responsible in the transaction and could not be prosecuted. If not done so, process issued against partners is not bad in law to quash it. ( 15 ) IN the case on hand, as noted already, in spite of issue of notice, the petitioner did not prefer to claim the same. This was said to be on the ground that he was not a Director of the first accused -Company. This shows his callous attitude due to which he had to approach this Court. Had he replied the notice sent to him without returning it as 'not claimed', the respondent complainant would not have impleaded /proceeded against him at all and, even if prosecuted without any material to show that in spite of resignation letter still he continued to be a Director and with his consent and knowledge cheque was issued and as such responsible, the matter would have been different, but not now. ( 16 ) IT is pertinent to note that during argument, for the first time, xerox copy of resignation letter has been filed before this court and as such, the stand of the respondent-complainant is not known regarding that resignation letter. ( 16 ) IT is pertinent to note that during argument, for the first time, xerox copy of resignation letter has been filed before this court and as such, the stand of the respondent-complainant is not known regarding that resignation letter. So, in the facts and circumstances of the case, it would be proper to leave the matter to the learned Magistrate to consider the memo or application, if any, to be filed by the petitioner, if advised to do so, for dropping the proceedings against him on the ground that he was not a Director of the A1- Company as on the date of transaction and as such the proceedings cannot continue against him. This will afford an opportunity to the respondent-complainant to come out with material, if any, in support of the allegation that the petitioner was director and responsible /liable in the transaction along with other Directors and, based on that, the trial Court will be in a better position to record its finding about dropping proceedings or framing charge for the offence alleged. So, it is not necessary for this Court to invoke Section 482 of Cr. P. C. and quash the proceedings at the threshold without giving an opportunity to the respondent-complainant in the circumstances of the case, that too, when the trial Court itself could drop the proceedings as observed above. ( 17 ) LASTLY, a faint attempt was made for the petitioner on the ground of non-service of notice to him personally and submitted that thus, one of the requirements to lodge complaint is missing and hence, on this ground also, complaint was not maintainable. This point has been already considered by this Court in the case of Neelesh kumar v. Janardhan (Crl. P. No. 3520/2003 decided on 21-7-2004) (2004 AIR- Kant HCR 2669) holding that issue relating to non-service of notice could be decided on evidence adduced by the parties and not at this stage and proceedings cannot be quashed on that ground. No other point was pressed into service. In the result, the petition is rejected. However, the petitioner A-5 is at liberty to move the trial Court by filing a memo or application, as the case may be, along with the record of his letter of resignation and plead for his discharge or dropping the proceedings, if advised to do so. No other point was pressed into service. In the result, the petition is rejected. However, the petitioner A-5 is at liberty to move the trial Court by filing a memo or application, as the case may be, along with the record of his letter of resignation and plead for his discharge or dropping the proceedings, if advised to do so. If done so, the trial court to consider and decide it in accordance with law. Petition rejected. --- *** --- .