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Andhra High Court · body

2006 DIGILAW 271 (AP)

D. Raj Kumar v. Venkateswara Cotton Ginning Mills

2006-03-01

P.S.NARAYANA

body2006
( 1 ) THIS batch of Criminal Petitions are filed under Section 482 of Criminal Procedure code (hereinafter in short referred to as code for the purpose of convenience) to quash the criminal complaints filed as against certain of the Directors and the Managing director of the Company in question-the first accused on several grounds. The petitioners in all these quash petitions are admittedly persons who had not issued the cheques. In other words they are said to be either managing Director or the Directors of the company in question other than those who had issued the cheques in question which were said to have been dishonoured. In criminal Petition No. 1000 of 2003, it is stated that A-5 and A-6 issued cheque on behalf of a-1 company. It is stated that in other cases, a-3 and A-6 had issued the said cheques and those accused who had issued the cheques are not questing the proceedings in this batch of criminal petitions. ( 2 ) SRI Abinand Kumar Shavili, the learned counsel representing the petitioners in all these criminal petitions would maintain that as per his instructions in almost all the matters the amounts had been settled and in certain of the matters the complaints in fact had been withdrawn and in certain of the matters such applications are said to be pending and this aspect may have to be taken into consideration. The learned counsel also had drawn the attention of this Court to the allegations made in the different complaints and in fact drawn distinction between the batch of complaints which were referred to as Allagadda branch and Nandayal branch of Kurnool and also pointed out that except vague allegations that these accused also had given the consent and they had knowledge about these transactions and issuance of cheques, specific allegations to satisfy the requirements of Section 141 of the negotiable Instruments Act 1881 (in short hereinafter referred to as the Act) had not been made in the respective complaints. The learned counsel meticulously had taken this court through the averments made in the different complaints and had pointed out that this vague allegation that the other accused other than A-1 also are aware of the business transactions of the first accused company and they had knowledge about the issuance of cheques, these allegations may not be sufficient and hence, the proceedings are liable to be quashed. The learned counsel also pointed out that even otherwise these petitioners had resigned as Managing Director or Directors and the specific dates had been given and the documents in relating thereto are being produced and in view of the same that inasmuch as the resignations had been accepted and these being the public documents, no further proof would be required and on this ground also the proceedings are liable to be quashed. The learned counsel also would contend that the settlement between the parties is well evidenced by several receipts which are being produced and in view of the same, the same can be taken note of and on this ground also these proceedings need not be further proceeded with. ( 3 ) SRI Padmanabha Reddy, the learned senior counsel representing the contesting respondents-complainants in all these matters would contend that as far as criminal petition Nos. 1037 of 2003, 1040 of 2003, 1043 of 2003,1035 of 2003 and 1039 of 2003 are concerned, the concerned C. Cs. in fact had been withdrawn in view of the fact that the matters had been settled. The learned counsel also would maintain that in other matters, commenting in all fairness had submitted that no doubt if these complaints are carefully analyzed there is some slight difference in the language employed in the averments made but in substance the requirements of Section 141 of the Act had been complied with and hence, the proceedings need not be interfered with at this stage. The learned counsel also would contend that in the light of the view expressed by this Court that the resignation of the directors may have to be gone into only at the appropriate stage and on that ground the proceedings cannot be quashed in a complaint under Section 138 of the Act. The decision of the Madras High Court cannot be said to be binding decision. Hence, these questions are left open to be decided at appropriate stage. The learned senior counsel placed reliance on certain decisions in this regard. ( 4 ) HEARD the counsel. The decision of the Madras High Court cannot be said to be binding decision. Hence, these questions are left open to be decided at appropriate stage. The learned senior counsel placed reliance on certain decisions in this regard. ( 4 ) HEARD the counsel. ( 5 ) AS already referred to supra A-5 and a-6 in C. C. 1000 of 2003 and A-3 and A-6 in other matters had issued the cheques in question and the cheques had been dishonoured and consequently the complaints had filed these complaints as against A-1 -company in question and others, the Managing Director or Directors of the company. The allegations had been made though slightly in variant form that the other accused 2 to 9 also are fully aware of the business transactions of the first Accused company and they had knowledge about the issuance of the cheques. In fact, the specific allegation relating to incharge of day to day affairs had also been made though in certain of the complaints such specific allegation is not there. In substance, such allegation had been made. Two grounds which had been argued in elaboration are that the Managing directoror other Directors resigned on certain dates specified in Form No. 32, entered by the Registrar of Companies and these being public documents these proceedings are to be quashed. The other ground is that none of the petitioners were in charge or responsible for the conduct of the business or day to day affairs of the company and hence in the absence of specific allegation in this regard, the proceedings are liable to be quashed. No doubt yet another contention advanced is that inasmuch as the matters having been virtually settled, it would be a futile exercise to continue these complaints and on that ground also the proceedings are liable to be quashed. ( 6 ) THE learned Judge of Madras high Court in B. Shambu Kumar v. M/s. Raghavendra Steels Ltd. , Court, held that where complaint was filed against person who retired from partnership and the same was notified in Gazette on 30-9-1998 and the dishonour of cheque was dated 31-12-1998, the trial Court dismissed the discharge petition and the High Court set-aside the said order and discharged the petitioner as his retirement as notified in the Gazette did not require any further proof. ( 7 ) YET another learned Judge of the madras High Court in G. Hubert Fenelon v. D. Sridharaif, held at Paras 10, 11, 16, 17 and 18 as hereunder:"the Company Law Board has passed orders only on 11 -4-2000. The complaint in this case had been filed on 22nd march, 2000. Therefore, the order passed by the Company Law Board cannot have the effect of nullifying the consequences on the completed offence. An order passed by the Company Law board can only be prospective in its effect. Only Parliament or Legislative assembly has the power to make retrospective laws or retroactive laws. The Company Law Board has no such power to make its orders retrospective or retroactive. Therefore, the Company law Board s order cancelling all the cheques drawn after 1 11-1999 will not have any bearing on those cheques drawn till 11-4-2000. In M/s. Modi cements Limited v. Kuchil Kumar A/and/, 1998 (1) CTC402; AIR 1998 SC 1057 , the Supreme Court has held, Once the cheque is issued by drawer, subsequent notice by the drawer to the drawee or to the bank on which it is drawn intimating stoppageof payment would not preclude action, under Section 138 of the negotiable Instruments Act. Further, as held by the Supreme Court in the case pankaj Mehra v. State of Maharashtra, 2000 (1) CTC 603; 2000 (2) SCC 756 referred to above, even the commencement of the proceedings of winding up of a company does not absolve the liability for payment and it will not have any effect on the applicability of Section 138 of the negotiation Instruments Act. Once a cheque is issued and it is dishonoured and the demand has been made to pay the amount by notice, on the completion of notice period, the offence is complete. Section 402 of the Companies Act contemplates issue of directions with reference to administration and management of the affairs of the company. It does not contemplate directions regarding debt due to third parties. The power under this Section does not extend to deny the liabilities of the company or for staying the liability of the company. Cancellation of cheques already issued is tantamountto denying the liability or staying the liability. Hence, the Company Law Board has no power under Section 402 (g) of the Act to cancel the cheques already issued for its liability. Cancellation of cheques already issued is tantamountto denying the liability or staying the liability. Hence, the Company Law Board has no power under Section 402 (g) of the Act to cancel the cheques already issued for its liability. When the offence under Section 138 of the Negotiable Instruments Act is committed, it gives rise to a cause of action for filing a criminal complaint; such a cause of action cannot be wiped off by the Company Law Board exercising the powers, under sections 397 or 398 of the Companies act; such complaints must reach its finality only as per the provisions of the criminal Procedure Code. Since the company is a distinct entity, any change in the board of directors does not affect the pending prosecution. It is well settled that for offence under section 138 of the Negotiable instruments Act, the company as well as the directors who manage the affairs of the company are to be prosecuted, the criminal complaint therefore is maintainable only against those persons who are directors on the date of commission of offence. In this case the date of complaint under Section 138 of the Negotiable Instruments Act is anterior to the date of order of the company Law Board. Hence, the order passed by the Company Law Board cannot have any effect on the complaint. But, the revision petitioners were removed as directors by order dated 18-1 -2000; hence, no complaint can be filed against them for the offence committed subsequent to that date. Therefore, the criminal complaint in so far as these revision petitions are concerned cannot be maintained; they are liable to be quashed". ( 8 ) IN Ashok Muthanna, Managing Director, m/s. Fidelity Industries Ltd. , and others v. Wipra Finance Limited, it was held:"in regard to the first point in relation to the second petitioner V. G. Subbaraman (A-3 ). Therefore, the criminal complaint in so far as these revision petitions are concerned cannot be maintained; they are liable to be quashed". ( 8 ) IN Ashok Muthanna, Managing Director, m/s. Fidelity Industries Ltd. , and others v. Wipra Finance Limited, it was held:"in regard to the first point in relation to the second petitioner V. G. Subbaraman (A-3 ). I find merit in the contention of the learned counsel for the petitioners, inasmuch as Form No. 32 issued by the registrar of Companies, which has been produced before this Court and the same has not been disputed by the counsel for the respondent/complainant, would reveal that the said second petitioner retired on 28-3-1998 itself and as such, he did not function as a Director either on the date when the cheques were issued (i. e.) on 23-1-1999 or when the cause of action arose for non-payment of the cheque amount on receipt of the statutory notice on 10-7-1999. Though the said document does not form part of the complaint and other records accompanied with the complaint, this can be taken into consideration by this Court since the contents of the said document, which is a public document, is not disputed by the learned counsel for the respondent. As held by the Supreme Court in Satish mehra v. Delhi Administration and another (1996 93) Crimes 85 (S. C.), the court is within its powers to consider even materials which the accused may produce even before the commencement of trial for the purpose of deciding whether the accused could be discharged, when those documents are not in dispute. In the present case, as noted above, the document Form No. 32 would reveal that the second petitioner was not the director who was in charge of and responsible for the affairs of the company during the relevant period and as such, the proceedings as against the second petitioner are liable to be quashed and accordingly quashed". ( 9 ) IN Bharat Kumar Modi v. Pennar peterson Securities Limited, it was held by a. P. High Court that Form No. 32 produced by the accused and other documents kept at the Registrar of Companies under the Act, though admissible in evidence, need to be proved at trial. ( 10 ) THE learned judge of this Court in smt. Davinderkaurv. ( 10 ) THE learned judge of this Court in smt. Davinderkaurv. Small Scale Industries development Bank of India, at para 8 held:"moreover, whether these petitioners had discontinued as Directors of the company by the date of issuance of these cheques as contended by them, is a question of fact and normally, the questions of fact cannot be decided by this Court while dealing with the petition under Section 482 Cr. P. C. The material on record does not conclusively establish that these petitioners had ceased to be the Directors of the company by the date of issuance of these cheques. It is well settled that under Section 482 Cr. P. C. , the High court has to confine to the facts as alleged in the complaint by the prosecution and no investigation into the facts should normally be done by the High Court. Truth or otherwise of the allegations made by the prosecution has to be determined only by the trial court after evidence has been let in by both sides. The High Court has to see whether the allegations made in the complaint make out a prima facie offence and whether the accused has prima facie committed the offence. As seen from the complaints in these cases, there is prima facie case against these petitioner also. Hence, I do not find any justifiable grounds to quash the proceedings initiated against these petitioners in C. C. No. 245 of 97 and c. C. No. 246 of 97". ( 11 ) IT is brought to the notice of this Court that all the matters had been settled and the amounts had been paid but there is some controversy between the parties in relation thereto. The learned senior counsel submitted that only five matters had been settled and in fact the complaints had been withdrawn. ( 12 ) SIMILAR question came up for consideration before the Delhi High Court in m/s. Nijjeragra Foods Limited and others v. Nasib Chand and another, but however, the view expressed by the Delhi High Court was reversed by the Apex Court in State Forma corporation of India Ltd. v. M/s. Nijjer Agro foods Ltd. and others, wherein the three judge Bench of the Apex Court held at Paras 2 and 3 as hereunder:"two complaints under Section 138 of the Negotiable Instruments Act were filed by the appellant against the respondents. In those complaints, the metropolitan Magistrate, New Delhi issued summons to the respondents. An application filed by them for dropping the proceecungs was dismissed in terms of the order of learned Magistrate, dated 26th April, 1999, holding that "whether the cheques were issued for discharge of debt/liability can be decided only after recording evidence. At the stage of summoning the respondents Court has just to see whether prima facie case is made out against the accused or not under Section 133 of the N. I. Act". Further, it was held, whether the respondents have made payment by way of bank drafts in lieu of the cheques which are subject matter of complaints can also be decided at the trial and not at the stage of summoning and by way of an application seeking to drop the criminal complaint proceedings. Quite strangely the High Court, by impugned judgment dated 14th October, 2003, while exercising revisional jurisdiction, examined the defence on merits and allowed the criminal revision petition filed by the respondents and reversed the decision of the Magistrate declining to drop the proceedings by holding that by making payment of Rs. 40 lacs, the respondents had discharged their liability. It was no stage to examine the defence of the respondents. Though, at this stage, we are not going into the merits, but we may only note that the subject matter of the two complaints are four cheques in all amounting to Rs. 76,55,917. 47 ps. According to the respondent, they made payment of Rs. 40 lakhs by six bank drafts after the issue of some of the cheques. Whether the said payment has been made or it is towards some of the amounts covered by the cheques are all the questions which can be decided only at the trial of the complaint cases under Section 138 of the negotiable Instruments Act and could not have been made the basis of allowing the revision petition. The approach of the High Court is clearly erroneous". ( 13 ) IN the light of the aforesaid decisions, dropping of the proceedings on the ground of settlement at this stage may not be permissible. The approach of the High Court is clearly erroneous". ( 13 ) IN the light of the aforesaid decisions, dropping of the proceedings on the ground of settlement at this stage may not be permissible. It is no doubt true that the Madras high Court had opined that the resignation of director or resignation of personnel notified may be issued as a public document and the same can be given effect to by exercising powers under Section 482 of the Code but however, this Court in the decisions referred to supra expressed a contra opinion. ( 14 ) BE that as it may, the fact whether the managing Directororother Directors resigned from the company-the first accused, it is a matter to be decided at the appropriate stage. In M/s. Narmada Enterprises v. State of a. P. 8, the learned judge of this Court held that a complaint under Section 138 of the Act cannot be quashed on the basis of the defence plea. This appears to be the consistent view. Hence, in view of the facts and circumstances of the case, this Court is of the considered opinion that these are the aspects which may have to be decided at the appropriate stage and definitely not at this stage. No doubt strong reliance was placed on the decision of the three Judge Bench in s. M. S. Pharmaceuticals Ltd. v. Neeta Bhalla and another. It was decided on reference by the Apex Court. ( 15 ) IT is no doubt stated that C. C. Nos. 414 of 2001, 448 of 2001, 449 of 2001, 461 of 2001, at Allagadda had been settled and the complaints in fact had been withdrawn and these are the subject matter of Criminal petition Nos. 1035 of 2003, 1037 of 2003, 1039 of 1003, 1040 of 2003 and 1043 of 2003. Hence, in view of the fact that the complaints had been withdrawn, no further orders are required to be passed in these criminal petitions and accordingly the said criminal petitions are hereby closed. ( 16 ) SO far as other criminal petitions are concerned, no doubt submissions had been made at length that these matters also had been settled but however, the learned senior counsel representing the complaints in all these matters had taken a stand that in fact, no such settlement had been arrived and no amounts had been paid. ( 16 ) SO far as other criminal petitions are concerned, no doubt submissions had been made at length that these matters also had been settled but however, the learned senior counsel representing the complaints in all these matters had taken a stand that in fact, no such settlement had been arrived and no amounts had been paid. In normal course, this Court would have left the matter here leaving all the questions open to be decided at the appropriate stage i. e. at trial. But, however, in the light of the peculiar facts and circumstances which had been placed before this Court by virtue of subsequent events i. e. the resignation of these petitioners in question as Managing Director or Directors of the company and also in the light of the submissions made and some material produced before this Court relating to settlement arrived at between the parties, though these are the aspects to be decided during trial, and taking into consideration the fact that certain of the complaints already had been withdrawn by virtue of settlement arrived at between the parties, it would be just and proper to give liberty to these petitioners to move appropriate applications praying for discharge and the learned magistrate to take into consideration all the facts and circumstances and pass appropriate orders on such applications which may be made in this regard. Except making these observations, nothing else can be done at this stage. With the above observation, the criminal Petitions shall stand dismissed.