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2012 DIGILAW 1360 (PNJ)

Pankaj Badlani v. Nectar Lifesciences Ltd.

2012-10-03

MEHINDER SINGH SULLAR

body2012
JUDGMENT Mr. Mehinder Singh Sullar, J.: (Oral) - As identical points of law and facts are involved, therefore, I propose to dispose of above indicated petitions to quash the impugned complaints & summoning orders, by virtue of this common judgment, in order to avoid the repetition. However, the crux of the facts, which needs a necessary mention for the limited purpose of deciding the core controversy, involved in the instant petitions, has been extracted from (1) CRM No. M-24079 of 2011 titled as “Pankaj Badlani & Ors. Vs. M/s Nectar Lifesciences Ltd. & Ors.” for ready reference in this context. 2. Tersely, the facts & material, culminating in the commencement, relevant for deciding the present petitions and emanating from the record, are that initially, M/s Nectar Lifesciences Limited complainant-respondent No.1 (for brevity “the complainant”) filed the criminal complaints under section 138 of the Negotiable Instruments Act, 1881 (hereinafter to be referred as “the NI Act”), inter-alia, pleading that the impugned cheques issued by the petitioners-accused in order to discharge their legal liability were dishonoured. They did not make the payment, despite legal notices within a statutory period. Thus, they have committed the pointed offence. 3. Taking cognizance of the complaints, the trial Court summoned the petitioners-accused to face the trial under section 138 of the NI Act, by way of impugned summoning order dated 5.3.2011. The similar impugned summoning orders were passed as well in the other connected cases instituted on similar private complaints. 4. Aggrieved thereby, the petitioners-accused preferred the instant petitions to challenge the impugned complaints and summoning orders, invoking the provisions of section 482 Cr.PC. 5. The case, inter-alia set up by the petitioners-accused, in brief in so far as relevant, was that the complainant has filed the false complaints against them. They have been arrayed as accused only in the capacity of Directors of Cecil Pharmaceuticals Private Limited (respondent No.11), without pleading therein that they are in any way responsible for the commission of indicated offence as required u/s 141 of the NI Act. The trial Court was stated to have mechanically summoned them without the application of mind, by way of non-speaking impugned summoning orders. On the strength of aforesaid grounds, the petitionersaccused sought to quash the impugned complaints & summoning orders in the manner depicted here-in-above. 6. The trial Court was stated to have mechanically summoned them without the application of mind, by way of non-speaking impugned summoning orders. On the strength of aforesaid grounds, the petitionersaccused sought to quash the impugned complaints & summoning orders in the manner depicted here-in-above. 6. Faced with the grave situation, although initially, the complainant has vaguely refuted the prayer in question and filed the reply, but during the course of hearing, its learned counsel has very fairly conceded that petitioners-accused have been arrayed as accused only on account of Directors of company-respondent No.11 and no other overtact as contemplated in section 141 of the NI Act is attributed to them. 7. Having heard the learned counsel for the parties, having gone through the record & legal provisions with their valuable help and after bestowal of thoughts over the entire matter, to my mind, the present petitions deserve to be partly accepted in this respect. 8. At the very outset, the learned counsel for the petitioners-accused did not press the prayer, for quashing the impugned complaints at this stage, without prejudice to their rights in any manner. However, the argument of learned counsel that vague, non-speaking impugned summoning orders are not only arbitrary & illegal, but against the statutory provisions of section 141 of the NI Act, has considerable force. 9. As is evident from the record, that the complainant has filed the complaints under section 138 of the NI Act against the petitioners-accused only in the capacity of Directors of company respondent No.11. Section 141 postulates that if the person committed 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. 10. Sequelly, proviso to this section further posits 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. For the purposes of this section, the term “company and director” have been defined in the Explanation contained therein. 11. For the purposes of this section, the term “company and director” have been defined in the Explanation contained therein. 11. A conjoint and meaningful reading of these provisions would reveal that in order to attract the penal provisions of sections 138 and 141 of the NI Act, it was legally incumbent on the part of the complainant to plead that the persons (petitioners) were in-charge of, and responsible to the company for the conduct of its business at the time of commission of indicated offence and not otherwise, which is totally lacking in the present cases. This matter is no more res integra and is now well settled. 12. An identical question came to be decided by Hon’ble Apex Court in case National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, [2010(2) Law Herald (SC) 737] : [2010] 98 SCL 407 (SC). Having considered the relevant provisions of sections 138, 141 of the NI Act and line of earlier decisions on the point, it was ruled as under:- “(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction. (ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company. (iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with. (iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred. (v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with. (iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred. (v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with. (vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint. (vii) 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. This has to be averred as a fact as there is no deemed liability of a Director in such cases.” At the same time, it was held that if the accused is a Managing Director or a Joint Managing Director, then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with. 13. Likewise, the same principle was again reiterated by Hon’ble Supreme Court in case Harshendra Kumar D. v. Rebatilata Koley, [2011(2) Law Herald (SC) 839] : [2011] 106 SCL 159 (SC). 14. Meaning thereby, the petitioners cannot possibly be termed to be accused solely on the ground that they were the Directors of the defaulter company respondent No.11 at the relevant time, unless their complicity is duly pleaded and prima facie proved in terms of section 141 of the NI Act. The trial Magistrate has completely ignored all these vital aspects of the matter with impunity, while summoning the petitionersaccused in a very casual manner. The trial Court ought to have discussed the material on record specifically, relatable to their complicity in view of the statutory provisions of section 141 of the NI Act and to record the valid grounds for forming an opinion that there is prima facie material on record to summon them as accused for the pointed offence. Such order must be informed by reasons, fair, clear and must be structured by rational, relevant material on record and should match the legal statutory requirement (essential ingredients) of the offence, which are deeply lacking in the instant cases in this relevant direction. 15. Such order must be informed by reasons, fair, clear and must be structured by rational, relevant material on record and should match the legal statutory requirement (essential ingredients) of the offence, which are deeply lacking in the instant cases in this relevant direction. 15. What cannot possibly be disputed here is that the criminal prosecution is a serious matter; it affects the liberty of a person. No greater damage can be done to the reputation of a person than dragging him in a criminal case. Criminal law cannot possibly be set into motion as a matter of course. The order of the Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. He has to examine the nature of complaint and the evidence both oral and documentary in support thereof, relatable to the relevant provisions of the offences and that would be sufficient for the complainant to succeed in bringing charge home to the accused. It is not that the Magistrate is a silent spectator at the time of preliminary evidence. The accused cannot be summoned in a routine manner, in view of the law laid down by the Hon’ble Apex Court in cases M/s Pepsi Foods Limited v. Special Judicial Magistrate, 1997(4) RCR (Criminal) 761 : 1998 AIR (SC) 129 and Harshendra Kumar D (supra). The ratio of law laid down in the aforesaid judgments “mutatis mutandis” is applicable to the facts of the present cases and is the complete answer to the problem in hand. 16. Therefore, the impugned summoning orders are not only non-speaking, lack application of mind & illegal, but against the pointed statutory provisions as well. The same cannot be sustained in the eyes of law and deserve to be quashed in the obtaining circumstances of the cases. 17. In the light of aforesaid reasons and without commenting further anything on merits, lest it may prejudice the case of either side during the course of subsequent trials of the complaints, the instant petitions are partly accepted. Consequently, the impugned summoning orders are hereby quashed. The cases are remitted back to the trial Magistrate to decide the matter afresh and to pass the appropriate orders in view of aforesaid observations and in accordance with law. 18. Consequently, the impugned summoning orders are hereby quashed. The cases are remitted back to the trial Magistrate to decide the matter afresh and to pass the appropriate orders in view of aforesaid observations and in accordance with law. 18. The complainant through its counsel is directed to appear before the trial Court on 16.10.2012 for further proceedings. 19. Needless to mention that, nothing recorded here-in-above, would reflect, in any manner, on the merits of the complaints, as the same has been so observed for a limited purpose of deciding the present petitions only.