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Rajasthan High Court · body

2006 DIGILAW 2496 (RAJ)

S. S. Brar v. K. S. L. Industries Ltd.

2006-08-18

HARBANS LAL

body2006
Honble LAL, J.–These six petitions, three by petitioners S.S. Brar and three by petitioner Ramesh Inder Singh have been filed under Section 482 Cr.P.C. for quashing of the order dated 11.5.2004 passed by the learned Additional Chief Judicial Magistrate No. 10, Jaipur City, Jaipur in three complaints taking cognizance against them along with 9 others for offence under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter called in short the ``Act). (2). Since these petitions seek the same relief and the legal controversy involved in these petitions is identical and common, I have heard learned counsel for the parties jointly on the admission of these petitions which are being disposed of by this common order. (3). Briefly stated, the relevant facts which are not disputed are that complainant-non-petitioner is a Company duly incorporated and registered under the companies Act, 1956. It was earlier incorporated by the name of M/s. Krishna Texport India Ltd. which name has now been duly changed on 27.1.2004. Likewise, M/s. Punjab Wireless Systems Ltd. is also a Company duly incorporated and registered under the Companies Act, 1956. The complainant-non-petitioner-Company provided loan facility to M/s. Punjab Wireless Systems Ltd. in the year 1988 who issued various cheques in favour of the complainant-non-petitioner-Company from time to time but the same were dishonoured about which complaints for offences under Section 138 read with Section 141 of the Act were filed in the competent courts which, it is said, are still pending. (4). M/s. Punjab Wireless Systems Ltd., the accused-Company also issued three cheques bearing Nos. 01417157, 575490 and 0635083 for Rs. 1 Crore, Rs. 1 Crore and Rs. 2 Crores, respectively on 1.9.2003 in favour of the complainant-non-petitioner-Company. These cheques were issued in the earlier name of M/s. krishna Texport India Ltd. and were signed by Vedprakash arrayed as accused No. 4 in the complaints. These cheques were presented separately for payment, but were dishonoured and returned with the remark ``exceed arrangement and refer to drawer. The complainant-Company after due notice and other necessary formalities filed three separate complaints for offence u/S. 138 read with Section 141 of the Act in the Court of learned Additional Chief Judicial Magistrate No. 10, Jaipur City, Jaipur arraying the petitioners as accused Nos. 5 and No. 7 in these three complaints. The complainant-Company after due notice and other necessary formalities filed three separate complaints for offence u/S. 138 read with Section 141 of the Act in the Court of learned Additional Chief Judicial Magistrate No. 10, Jaipur City, Jaipur arraying the petitioners as accused Nos. 5 and No. 7 in these three complaints. The Punjab State Industrial Development Corporation which is wholly the State owned financial institution of the Punjab State, extended financial assistance to M/s. Punjab Wireless Systems Ltd. and to protect the financial interest of the State the Punjab State Industrial Development Corporation was given a right under Article 128(a) of the Articles of Association and under Article 158 of the Articles of Memorandum to nominate Directors on the Board of the aforesaid Company. (5). Petitioner S.S. Brar being an officer of the Indian Administrative Service of the Punjab cadre (who is presently on deputation with the Government of India as Joint Secretary in the Ministry of Health & Family Welfare) was appointed/nominated as the Managing Director of P.S.I.D.C. as Director on the Board of Directors of M/s. Punjab Wireless Systems Ltd. vide letter dated 17.11.1997 which letter was withdrawn vide letter dated 11.7.2000. Petitioner Ramesh Inder Singh being also an officer of the Indian Administrative Service of the Punjab Cadre (who is presently on deputation with the Government of India as Joint Secretary in the Ministry of Chemicals and Fertilizers) in his capacity as Principal Secretary to the Chief Minister of the Punjab State with the additional charge of the post of Secretary, Department of Industries was nominated as Director on the Board Directors of M/s. Punjab Wireless Systems Ltd. vide letter dated 3.3.1997 which was withdrawn vide letter dated 9.6.2000 as the provisions of Sections 27, 41, 41A and 44 of the State Financial Corporation Act, 1951 (hereinafter called in short the ``Act of 1951) were made applicable to the Punjab State Industrial Development Corporation vide Notification dated 5.10.1989. (6). (6). The complainant-non-petitioner has pleaded that all the accused persons including the present petitioners are incharge of and responsible for the management of the business of the accused-Company whereas the case of the present petitioners is that they being nominee Directors of the accused-Company in their official capacity they are neither incharge of nor responsible for day to day management of the business of the accused-Company as they have not signed the cheques and they were not on the Board of Directors at the time the cheques in question were issued. So, the prosecution against them is incompetent and liable to be quashed. (7). Learned counsel for the petitioners has contended that as per the second proviso of Section 141 of the Act and provision of Section 41A of the Act of 1951, no prosecution is legally maintainable against the petitioners. The order taking cognizance and the criminal proceedings commenced and pending as against them tantamount to abuse of the process of the court and the same deserve to be quashed. He has also submitted that the petitioners being not Directors on the Board of Directors at the relevant time the cheques were issued by the accused-Company in favour of the complainant-non-petitioner-Company, they cannot be held responsible therefor. (8). Learned counsel for the petitioners has referred to the cases in Pepsi Foods Ltd. and Anr. vs. Special Judicial Magistrate and Ors. : (1998) 5 SCC 749 , K.P.G. Nair vs. Jindal Menthol India Ltd. : (2001) 10 SCC 218 , State of Haryana and Ors. vs. Bhajan Lal and Ors. : 1991 Supp. (1) SCC 335, M.S.M. Sharma vs. Sri Krishana Sinha and Ors. : AIR 1959 SC 395 , Pankaj Mehra and Anr. vs. State of Maharashtra and Ors. : (2000) 2 SCC 756 , Dwarka Prasad vs. Dwarka Das Saraf : AIR 1975 SC 1758 , Ram Narain Sons Ltd. and Ors. vs. Asstt. Commissioner of Sales Tax and Ors. : AIR 1955 SC 765 , S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla and Anr. : (2005) 8 SCC 89 = RLW 2005(4) 2386 (SC) and State of Orissa vs. Debendra Nath Padhi : (2005) 1 SCC 568 = RLW 2005(3) SC 414. (9). vs. Asstt. Commissioner of Sales Tax and Ors. : AIR 1955 SC 765 , S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla and Anr. : (2005) 8 SCC 89 = RLW 2005(4) 2386 (SC) and State of Orissa vs. Debendra Nath Padhi : (2005) 1 SCC 568 = RLW 2005(3) SC 414. (9). Learned counsel for the complainant-non-petitioner has contended that it was not disclosed that the petitioners were nominee Directors and were not incharge of and responsible to the company for its day to day management of the business. He has also submitted that proviso second inserted in Section 141 of the Act nullifies and negatives the Section itself and, therefore, this cannot be pressed into service in favour of the petitioners. (10). I have considered the rival submissions made at the bar and have also perused the relevant record. It would be pertinent to extract here the provisions of Section 41A of the Act of 9151 and Section 141 of the Act which read as under:- ``S. 41-A. No suit/prosecution or other proceedings shall lie against any person appointed as Director, Administrator, Managing Agent or Manager by the Financial Corporation in pursuance of Section 27 of Section 32-A for anything which is in good faith done or initiated to be done by him as such Director, Administrator, Managing Agent or Manager. ``S. 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 punished accordingly: Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge or that he had exercised 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. 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. The aforesaid second proviso regarding nominee Directors was inserted vide amendment made in the year 2002 in the Act. (11). In the instant case, it is not disputed that both the petitioners namely; S.S. Brar and Ramesh Inder Singh are officers of the Indian Administrative Service of the Punjab Cadre. They were nominated on the Board of Directors of M/s. Punjab Wireless Systems Ltd. in their official capacity in order to protect the interest of the State. They were not in any way incharge of and responsible for day to day management of the business of the said company. They did not play any role in the day to day management of the business of the company. It also cannot be disputed that petitioner S.S. Brar remained nominee Director w.e.f. 17.11.1997 to 11.7.2000 and petitioner Ramesh Inder Singh remained nominee Director w.e.f. 3.3.1997 to 9.6.2000. Thereafter, they seized to be even the nominee Directors of the accused-Company. The cheques in question were issued long thereafter on 1.9.2003 and admittedly the cheques were signed by Vedprakash arrayed as accused No. 4 and not by the present petitioners. They therefore, cannot be held responsible for the dishonour of aforesaid cheques in any manner whatsoever. This apart, provisions of Section 41-A of the Act of 1951 and proviso second to Section 141 of the Act prohibits prosecution of the nominee Directors. So, the prosecution of the present petitioners for offence under Section 138/141 of the Act is clearly barred and is not maintainable as against the petitioners. The order dated 11.5.2004 taking cognizance against them in the three complaints and the criminal proceedings commenced and pending pursuant thereto clearly tantamount to abuse of the process of the court which deserve to be quashed and set-aside in exercise of the inherent powers of this Court under Section 482 Cr.P.C. because it would result in sheer harassment of the petitioners without any fruits. I am fortified by the aforesaid authorities relied upon by the learned counsel for the petitioners. (12). I am fortified by the aforesaid authorities relied upon by the learned counsel for the petitioners. (12). In this view of the matter, therefore, the prosecution launched against the petitioners in these three complaints is barred by law and is clearly untenable which deserve to be quashed in exercise of inherent jurisdiction of this Court for securing ends of justice. In the result, these petitions under Section 482 Cr.P.C. are allowed and the orders dated 11.5.2004 passed by the learned Additional Chief Judicial Magistrate No. 10, Jaipur City, Jaipur in three complaints taking cognizance against petitioners S.S. Brar and Ramesh Inder Singh and the criminal proceedings commenced and continuing as against them pursuant thereto are hereby quashed and set-aside.