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Rajasthan High Court · body

2011 DIGILAW 1809 (RAJ)

Rajeev Gupta v. State of Rajasthan

2011-08-25

PRASHANT KUMAR AGARWAL

body2011
Hon'ble AGARWAL, J.—As the above two criminal misc. petitions arise out of the same order of cognizance and are based on almost similar facts, they were heard together and thus, are being disposed of by this common order. 2. The brief relevant facts for the disposal of these petitions are that the non-petitioner-complainant-M/s. Singhal Builders through its partner Shri Kapoor Chand Singhal filed a complaint for offence under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter to be referred as "the Act") against M/s. Satya Prakash & Brothers Pvt. Ltd. Company and its four Directors Shri Satya Prakash, Shri Ghanshyam, Shri Rajeev Gupta and Shri Sanjay Gupta with the averment that the complainant-non-petitioner undertook some road construction work on behalf of the company and for the repayment of outstanding amount Shri Satya Prakash on behalf of the company issued a cheque dated 3.11.2008 for an amount of Rs. 1,67,91,093 and when the complainant presented that cheque for payment in the Bank of Baroda, Nai Mandi, Bharatpur, it was returned un-paid with an endorsement that the account holder has stopped the payment of the cheque. It was also averred in the complaint that the non-petitioner-complainant served a legal notice asking the company and its Directors to make payment of the cheque amount but the demand made by the complainant was not honoured. It was also averred in the complaint that M/s. Satya Prakash & Brothers Pvt. Ltd. company is a registered company and Shri Satya Prakash, Shri Ghanshyam, Shri Rajeev Gupta and Shri Sanjay Gupta are its Directors and they were responsible for the business of the company at the time when the disputed cheque was issued and they are also jointly and severally liable to make payment of the cheque amount. 3. In support of the complaint, statement of Shri Kapoor Gland Singhal was recorded under Section 200 Cr.P.C. and statement of his witness Shri Om Prakash was recorded under Section 202 Cr.P.C. and the learned trial court i.e. Chief Judicial Magistrate Bharatpur by order dated 29.03.2010 took cognizance against the company as well as all four Directors and ordered that they may be summoned as accused. Feeling aggrieved with the order of cognizance, petitioners of Criminal Misc. Feeling aggrieved with the order of cognizance, petitioners of Criminal Misc. Petition No. 1988/2010 Shri Rajeev Gupta and Shri Sanjay Gupta assailed the order by way of Criminal Revision Petition No.84/2010 but without success and the learned revisional court i.e. Additional Sessions Judge No. 2, Bharatpur vide order dated 13.8.2010 dismissed the revision petition filed by the petitioners Shri Rajeev Gupta and Shri Sanjay Gupta. Still dissatisfied they are, by way of Criminal Misc. Petition No. 1988/2010, before this Court with the prayer that both the orders may be quashed and set aside. The petitioner of Criminal Misc. Petition No.325/2011 Shri Ghanshyam has filed this petition assailing the order dated 29.03.2010 with a prayer that the order of cognizance may be set aside and the proceedings for offence under Section 138 of the Act pending before the trial court i.e. Additional Chief Judicial Magistrate No.1, Bharatpur in Criminal Case No. 170/2009 may be quashed. 4. Assailing the impugned orders, the learned counsel for the petitioners has raised the following submissions: (i) According to Section 141 of the Act there should be specific allegation and averment against the Directors of the company that they were responsible and were also incharge of the Company at the time when the cheque in dispute was issued, but in the present case no such averment has been made in the complaint as well as in the statements recorded under Section 200 and 202 Cr.P.C. Merely because the petitioners are or have been the Directors of the Company they were not in any way responsible for issuing of cheque in dispute and they were not liable to make payment. When the cheque in dispute is not issued by the petitioners, they cannot be prosecuted under Section 138 of the Act. (ii) In the present case merely some vague averments have been made in the complaint as well as in the statements recorded to the effect that the petitioners are responsible for the business of the company and they are also liable to make payment of the cheque amount on behalf of the Company jointly and severally but it is not sufficient to bring the matter within purview of Section 141 of the Act. The Court even at the initial stage of the proceedings can quash and set aside the order of cognizance, if it finds that there is no sufficient pleadings and evidence available on record as to bring the matter within purview of Section 141 of the Act. (iii) Petitioners-Shri Rajeev Gupta and Shri Sanjay Gupta both resigned from their respective Directorship in the year 2002 well before the cheque in dispute was issued and thus, both these petitioners are not in any way responsible for issuance of the cheque in dispute and thus, cannot be prosecuted, even if the cheque was dishonoured. In this regard the learned counsel for the petitioners referred Form No.32 issued under the Companies Act, 1956. It was also submitted that copy of Form No.32 was produced before the learned revisional court, but the court did not consider that fact. (iv) It is an admitted fact that none of the petitioners is signatory to the cheque in dispute and thus, it cannot be said that the cheque was issued by any one of them and looking to the fact that there is no averment and evidence even prima facie showing that the petitioners were in any way responsible for the day to day business of the company, the present is a fit case in which this Hon'ble Court at this initial stage itself by exercising its inherent powers under Section 482 Cr.P.C. must set aside the order of cognizance as well as quash the entire proceedings pending before the trial court to the extent of petitioners. In support of his submissions, the learned counsel for the petitioners relied on the cases of N.K. Wahi vs. Shekhar Singh & Ors. reported in 2007 (2) DCR 117 (SC), Ramraj Singh vs. State of MP & Anr. reported in 2009 (2) JCC (NI) 156 (SC), K.K. Ahuja vs. V.K. Vora & Anr. reported in 2009 (3) JCC (NI) 194 (SC), Everest Advertising Pvt. Ltd. vs. State Govt. of NCT of Delhi & Ors. reported 2007 (1) DCR 653 (SC), Sabitha Ramamurthy & Anr. vs. R.B.S. Channabasavaradhya reported in 2006 (3) JCC (NI) 274 (SC) Saroj Kumar Poddar vs. State (NCT of Delhi) & Anr. reported in 2007 (1) JCC (NI) 60 (SC) = RLW 2007(3) SC 1814 and N. Rangachari vs. Bharat Sanchar Nigam Ltd. reported in §007 (2) JCC (NI) 205 (SC). 5. vs. R.B.S. Channabasavaradhya reported in 2006 (3) JCC (NI) 274 (SC) Saroj Kumar Poddar vs. State (NCT of Delhi) & Anr. reported in 2007 (1) JCC (NI) 60 (SC) = RLW 2007(3) SC 1814 and N. Rangachari vs. Bharat Sanchar Nigam Ltd. reported in §007 (2) JCC (NI) 205 (SC). 5. On the other hand, the learned counsel for the complainant-non-petitioner supporting the impugned orders submitted that M/s. Satya Prakash & Brothers Pvt. Ltd. Company is a company registered under the provisions of the Companies Act, 1956 of which the father Shri Satya Prakash and his three sons Shri Ghanshyam, Shri Rajeev Gupta and Shri Sanjay Gupta present petitioners are the only Directors constituting the above company which is engaged in the work of road construction. It was also submitted that the present case is not of such a nature in which there is only vague averment in the complaint and the statements recorded under Section 200 and 202 Cr.P.C. about the role of present petitioners for issuance of cheque in dispute. It was submitted that in para 2 of the complaint it has been averred that the petitioners are Directors of the Company and were responsible for the business of the company. In para 10 of the complaint it has been averred that the petitioners as Directors of the company were responsible for the business of the company as well as for issuing of the cheque in dispute and are also along with the company liable to make payment of the cheque amount. The complainant-non-petitioner Shri Kapoor Chand Singhal in his statement under Section 200 Cr.P.C. has stated that all four Directors and the company are jointly and severally liable to make payment of the cheque amount. He has also stated that the cheque in dispute was given to him by the Directors of the company. The witness Shri Om Prakash produced on behalf of the complainant in his statement under Section 202 Cr.P.C. has stated that the company and all Directors issued the cheque in dispute in order to make payment of contract money and all of them are liable to make payment of the cheque amount. The witness Shri Om Prakash produced on behalf of the complainant in his statement under Section 202 Cr.P.C. has stated that the company and all Directors issued the cheque in dispute in order to make payment of contract money and all of them are liable to make payment of the cheque amount. If in a case sufficient pleadings and evidence are produced so as to prima facie show that the Directors of the company are also responsible for the business of the company and the cheque in dispute was issued with their knowledge, the proceedings initiated under Section 138 of the Act cannot be quashed at the initial stage and if after trial the Court finds that from the evidence available on record some of the Directors cannot be held liable for the commission of the offence only then the Court can exonerate them. At the initial stage of the proceedings prosecution against Directors can be dropped only when there is no averment and evidence at all even prima facie showing their involvement. It was further submitted that whether petitioners Rajeev Gupta and Sanjay Gupta have resigned from the Directorship of the company is a question of fact which can be decided only after trial on the basis of the evidence produced by the parties and at this initial stage of the proceedings they cannot be exonerated from prosecution only on the basis of copy of Form No.32. It was also contended that copy of Form No.32 has been produced for the first time before this Court. In support his submissions, the learned counsel for the complainant-non-petitioner relied on the case of Malwa Cotton & Spinning Mills Ltd. vs. Visra Singh Sidhu & Ors. reported in 2009 (1) RLW (SC) 156. 6. I have considered the submissions made on behalf of the respective parties and also gone through the material made available for my perusal as well as the relevant legal provisions and the case law cited on behalf of the parties. 7. Before considering the submissions made on behalf of the parties in the light of the legal position and the facts and circumstances of the present case it would be useful to refer the relevant legal provisions which are as follows: "138. 7. Before considering the submissions made on behalf of the parties in the light of the legal position and the facts and circumstances of the present case it would be useful to refer the relevant legal provisions which are as follows: "138. Dishonour of cheque for insufficiency, etc., of funds in the accounts 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 be extended to two years,] 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 within the period of its validity whichever is earlier. (b) the payee or the holder in due 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 cheque 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. 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 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 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 attributable to, any neglect on the part of, any director, manager, secretary or other officer of the compa ny, 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 purpose 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." 8. Explanation: For the purpose 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." 8. From the perusal of various rulings of the Hon'ble Supreme Court the legal position about an offence committed by a company and its officers including directors under Section 138 of the Act in the light of Section 141 of the Act and provisions of the Companies Act, 1956 may be stated as follows: (1) If an offence punishable under Section 138 of the Act is committed by a company, the company is the principal accused and liability of a Director or any other officer of the company is not personal but liability is fastened vicariously on such a person connected with the company under Section 141 of the Act. It is a departure from the rule of criminal law against vicarious liability, so a clear case should be spelled out in the complaint against the person sought to be made liable. (2) If an offence punishable under Section 138 of the Act is committed by a company, then every person who is a Director or employee of the company is not liable merely on account of being a Director or employee of the company. Such person would be liable only if at the time when offence was committed he was in charge and was also responsible to the company for the conduct of the business of the company as well as the company. Merely, being a Director or employee of the company in the absence of above factors will not make him liable. (3) To launch a prosecution against a Director, there must be a specific allegation in the complaint as to the part played by him in the transaction. There should be clear and unambiguous allegation as to how the Director was in charge and responsible for the conduct of the business of the company. In absence of such clear averment or specific evidence the complaint to the extent of Director would not be entertainable. The liability of the Director must be determined on the date on which the offence was committed. Mere some bald or vague statement is not sufficient as to make him liable. In absence of such clear averment or specific evidence the complaint to the extent of Director would not be entertainable. The liability of the Director must be determined on the date on which the offence was committed. Mere some bald or vague statement is not sufficient as to make him liable. A Director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business only by the reason that he is Director of the Company. (4) However, the precise words from the provisions of the Act i.e. Section 141 need not be reproduced in the complaint and the supporting evidence and the court must come to a conclusion in facts of each case but there should be clear statement of fact so as to enable the court to arrive at a prima facie opinion that the accused is vicariously liable. (5) The signatory of the disputed cheque is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141. No specific averment within the purview of Section 141 of the Act is required so as to make him liable. The very fact that the dishonoured cheque was signed by him on behalf of the company would give rise to responsibility under sub-section (2) of Section 141. (6) According to Section 138 read with Section 141 of the Act, when a cheque issued by a company (incorporated under the Companies Act, 1956) is dishonoured, in addition to the company, the following persons are deemed to be guilty of the offence and shall be liable to be proceeded against and punished: (i) 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; (ii) any Director, Manager, Secretary or other officer of the company with whose consent and connivance, the offence under Section 138 has been committed; and (iii) any Director, Manager, Secretary or other officer of the company whose negligence resulted in the offence under Section 138 of the Act, being committed by the company. While liability of persons in the first category arises under sub-section (1) of Section 141, the liability of persons mentioned in categories (ii) and (iii) arises under sub-section (2). While liability of persons in the first category arises under sub-section (1) of Section 141, the liability of persons mentioned in categories (ii) and (iii) arises under sub-section (2). The scheme of the Act, therefore is, that a person who is responsible to the company for the conduct of the business of the company and who is in charge of business of the company is vicariously liable by reason only of his fulfilling the requirements of sub-section (1). But if the person responsible to the company for the conduct of business of the company, was not in charge of the conduct of the business of the company, then he can be made liable only if the offence was committed with his consent or connivance or as a result of his negligence. (7) If a Director, Manager, Secretary or other Officer of the company as referred in sub-section (2) of Section 141 of the Act is to be made liable, then it is necessary to aver consent and connivance, or negligence on his part. The liability of such persons is not on account of any legal fiction but on account of the specific part played-consent and connivance or negligence. For making a person liable under sub-section (2), the mechanical repetition of the requirements under section 141 (1) will be of no assistance, but there should be necessary averments in the complaint as to how and in what manner the accused was guilty of consent and connivance or negligence and therefore responsible under subsection (2) of Section 141 of the Act. (8) By virtue of the office they hold, Managing Director/Joint Managing Director are in charge of and responsible for the conduct of business of the company. Therefore, they would fall under section 141 (1), even though there is no specific averment against them. Thus, if the accused is the Managing Director/Joint Managing Director, it is not necessary to make an averment in the complaint that he in charge of, and is responsible to the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director/Joint Managing Direct at the relevant time. It is sufficient if an averment is made that the accused was the Managing Director/Joint Managing Direct at the relevant time. (9) If there is sufficient averment in the complaint that the accused is a Director and that he is in charge of and is responsible to the company, duly affirmed in the sworn statement, it may be sufficient for the purpose of issuing summons to him. (10) A person in the commercial world having a transaction with a company is entitled to presume that the Directors of the company are incharge of the affairs of the company. If any restrictions on their powers are placed by the memorandum or articles of the company, it is for the Directors to establish it at the trial. If other elements of offence under Section 138 of the Act are satisfied, the burden is on the Board of Directors or the Officers incharge of the affairs of the company to show that they are not liable to be convicted. Any restriction on their powers or 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 such a restriction or to show that at the relevant time they were not incharge of the affairs of the company. (11) If a Director takes a plea that he is no more responsible for the affairs of the company by the reason that he resigned from the Directorship of the company, he must submit material documentary evidence so as to prove at the initial stage that he tendered his resignation on such a date, it was accepted by a resolution passed in meeting of Board of Directors on such a date and that the company duly intimated the fact of resignation and its acceptance within the prescribed period and in the prescribed form to the concerned Registrar of the Company. 9. From the material available on record the relevant facts are as follows: (a) M/s. Satya Prakash & Brothers Pvt. Ltd. Company is a company registered under the provisions of the Indian Companies Act, 1956 and petitioners and their father Shri Satya Prakash Gupta are the Directors of the Company and apart from them no other person is Director in the company. The Registered Office of the company is at A-1 C.C. Colony, Opp. Rampratap Bagh, Delhi. The Registered Office of the company is at A-1 C.C. Colony, Opp. Rampratap Bagh, Delhi. All the directors of the company including the petitioners reside at 2, Cavellory Lane, Delhi. (b) In para 2 of the complaint it has been averred that all the Directors of the company including the present petitioners are responsible for the business of the company. (c) In para 10 of the complaint it has been averred that all the Directors including the present petitioners are discharging the business of the company and at the time of issuing of the cheque all of them were responsible to the company and they are jointly and severally liable to make the payment of the cheque amount. (d) The complainant-non-petitioner Shri Kapoor Chand Singhal in his statement under Section 200 Cr.P.C. apart from other, has stated that the company and all the four Directors including the present petitioners undertook road construction work by contractorship and they sublet the work referred to the complainant and in order to make payment for the work done by the complainant on behalf of the company cheque in dispute was issued by them. It has also been stated that for the non-payment of the cheque amount the company as well as all the four Directors of the company are jointly and severally liable. (e) Shri Om Prakash the witness produced on behalf of the complainant in his statement under Section 202 Cr.P.C. has stated that the complainant took work contract from the company and its Directors and all of them on 3.11.2008 issued the disputed cheque in order to make payment of amount outstanding against them. It has also been stated by him that the company and all its directors are liable to make payment of the cheque amount. (f) There is no documentary evidence available on record revealing that the resignation of petitioners Shri Rajeev Gupta and Shri Sanjay Gupta was accepted by any resolution passed by the company and Form No.32 was filed with the Registrar of Companies. (g) None the three petitioners is the signatory to the cheque in dispute and it was signed by Shri Satya Prakash Gupta. (g) None the three petitioners is the signatory to the cheque in dispute and it was signed by Shri Satya Prakash Gupta. In my considered view, if considered in the light of the facts and circumstances of the present case, it is not such a case in which the order of cognizance and the criminal proceedings pending as a result of that to the extent of the petitioners are liable to be set aside or quashed at this initial stage. In my view there are adequate and sufficient averments and evidence in the complaint and in the statements recorded under Sections 200 and 202 Cr.P.C. so as to hold at this stage of the proceedings that the present petitioners were also incharge of the company and were responsible for issuance of cheque in dispute so as to make payment of outstanding amount against the company for the work done by the complainant-non-petitioner for a road construction work undertaken by the complainant on behalf of the accused-company. Merely by the reason that all the words as provided in Section 141 of the Act has not been reproduced in the complaint and in the statements recorded under the provisions of Cr.P.C, it cannot be held that in the present case the complainant-non-petitioner has failed to fulfill the legal requirement as emerging from various rulings of Hon'ble Apex Court. The Hon'ble Apex Court has held that it is not a legal requirement that all the words used in Section 141 of the Act are to be reproduced in the complaint. It has also been held that whether the legal requirement has been fulfilled or not depends on facts of each case. So far as this contention of petitioners-Shri Rajeev Gupta and Shri Sanjay Gupta that they resigned from the Directorship of the company is concerned, in my view in absence of material documentary evidence only on the basis of Form 32 at this stage of the proceedings it cannot be held that the petitioners are not in any way liable for the offence committed by the company. Whether the petitioners tendered their resignation, whether the company passed a resolution to accept the resignation, whether the Registrar of Companies was intimated about the resignation, are the factual aspects of the matter which can be considered only after trial on the basis of evidence produced by both the parties. Whether the petitioners tendered their resignation, whether the company passed a resolution to accept the resignation, whether the Registrar of Companies was intimated about the resignation, are the factual aspects of the matter which can be considered only after trial on the basis of evidence produced by both the parties. Merely on the basis of copy of Form No.32 at this stage of the proceedings it would not be proper to conclude that petitioners-Shri Rajeev Gupta and Shri Sanjay Gupta resigned from the Directorship of the company well before the cheque in dispute was issued. The petitioners have not made clear when they tendered their respective resignation, when it was accepted by the Board of Directors and when the company intimated this fact to the Registrar of Company. I am of the firm view that the complainant-non-petitioner should be afforded opportunity to prove his contention that the present petitioners were also incharge of the company and were responsible for the discharge of the business of the company and the cheque in dispute was issued with their knowledge. A case in which father and his three sons only constitute a private limited company to undertake the road construction work and no other person is a Director it would not be fair and reasonable to quash the order of cognizance and the criminal proceedings initiated on that basis only on the contentions raised by the petitioners. 11. Consequently, both the criminal misc. petition filed on behalf of the petitioners being devoid of merit are, hereby, dismissed.