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2012 DIGILAW 92 (GUJ)

A. K. Singhania v. Gujarat Sate Fertilizer Co. Ltd.

2012-02-07

ANANT S.DAVE

body2012
JUDGMENT : ANANT S. DAVE, J. 1. These petitions under Section 482 of the Code of Criminal Procedure, 1973 is filed by the defiant reluctant Director of the Company who had paid the complainant to the tune of Rs.15,13,300/- and the like amount for years together prays for quashing of Criminal Complaint pending in the Court of Chief Judicial Magistrate, Vadodara. 2. Short facts as per the case of the complainant are as under: 2.1. That complainant company is a public limited company registered under the Companies Act, 1956 and is engaged in the business of chemicals, fertilizer etc. and the accused company with whom the complainant company had business dealings and a regular customer of the complainant company was purchasing Caprolactam used for manufacturing Nylon Filament Yarn and normal credit facility was given in terms of the business arrangement. Supply of the goods/materials as above was made and against the said supply post dated cheques and specific amount on various dates were issued. Thus, cheques worth Rs.10,63,88,760/- were not drawn by the accused Company in favour of the complainant Company and upon depositing the said cheques came to be dishonoured as the payment was stopped by the drawer. 3. In the above backdrop of facts as required under the provisions of Section 138 of Negotiable Instruments Act, the complainant upon issuance of notice ought not realised the amount of the cheque, filed the complaint before the Court by learned Chief Judicial Magistrate Baroda/Vadodara by specifically averting as under: "3. The accused no.14 is a Limited Company registered under the Companies Act, 1956 and are doing business of chemicals, synthetics etc. The accused No.1 is Managing Director of accused company No. 14 and accused No.2 is Deputy Managing Director, accused No.3 is Chairman, accused No.4 is Whole Time Director, accused No.5 is Finance Director, accused No. 6 to 12 are the Directors and accused No.13 was Senior Manager (Finance) of accused company No.14 Esslon Synthetics Ltd. 4. All the business and financial affairs of the accused company No.14 are decided, organised administered by accused No.1 being Managing Director and accused No.2 being Deputy Managing Director, accused No.3 Chairman, accused No.4 Whole Time Director, accused No. 5 Finance Director with consultation of other Directors from accused Nos. 6 to 12 and accused No.13 was Sr. Manager (Finance) of accused company No.14. So accused Nos. 6 to 12 and accused No.13 was Sr. Manager (Finance) of accused company No.14. So accused Nos. 1 to 12 and accused No.13 are also responsible for all the transactions and business affairs done on behalf of accused Company No.14 and are responsible for all the financial affairs and administration of accused company No.14." 4. Para 8 contained different cheque numbers, date on which such cheques were issued and for the amount mentioned in each of the cheque and para 10 of the complaint specifically averred, mischievous intention, deliberate and malafide intention on the part of the accused to issue cheque and thereafter upon depositing the cheques it came to be dishonoured and so returned unpaid on the ground of closed account. Since dishonoured intention to cheat the complainant knowingly and willingly by the accused, the above complaint came to be filed in January, 1996. The complainant even while verifying also specifically mentioned Board of Director, the applicant herein accused No. 7 as responsible for the affairs of the Company and in no uncertain terms it was averred that all the transaction and business affairs done on behalf of accused company No.14 were responsible for financial as well as administrative affairs of accused company No. 14. 5. In the above backdrop of factual averments made in the complaint, the challenge is made in this petition under Section 482 of the Code of Criminal Procedure, 1973, without taking a recourse for final discharge application before the competent court having jurisdiction on the ground that accused No.14 company was at the most managed by professional and whole time Director, Managers and Executives and the applicant herein being non Executive Director was not responsible for business affairs of the Company and in absence of any specific averments in this regard the complaint deserves to be quashed and set aside. It is further submitted that the applicant has not signed the cheques and had no responsibility qua the alleged dates and therefore, requirement of Section 141 of Negotiable Instruments Act are not specified and in support of the arguments as above the applicant has referred following decisions namely : 1. S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla & Anr. [ 2005 (3) GLH 513 ] : [2005] 127 Comp Cas 563 (SC). 2. Loknath Bhattacharya Managing Director & Anr. v. State of Gujarat & Anr. [ 2009 (1) GLH 540 ] 3. S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla & Anr. [ 2005 (3) GLH 513 ] : [2005] 127 Comp Cas 563 (SC). 2. Loknath Bhattacharya Managing Director & Anr. v. State of Gujarat & Anr. [ 2009 (1) GLH 540 ] 3. Central Bank of India v. M/s. Asian Global Ltd. [ AIR 2010 SC 2835 ] : [2011] 163 Comp Cas 398 (SC). 4. Girdhari Lal Gupta v. D.H. Mehta [ AIR 1971 SC 2162 ] 6. The decision in the case of S.M.S. Pharmaceuticals Ltd. (supra) , the Director of the company is incharge of or conduct of business. Another decision in the case of Central Bank of India (supra), a case where the applicant had filed discharge petition before the competent Court and the Court below rejected such application on an erroneous ground and action in absence of specific averments qua the Director of the Company relying on S.M.S. Pharmaceuticals Ltd. (supra) quashed and set aside the complaint. The decision in the case of Loknath Bhattacharya Managing Director and Anr. (supra) was in the backdrop of Food Adulteration Act, 1954 and relevant provisions contained therein and considering subsection (2) of Section 17, by which, the Directors of the Company had nominated the persons concerned to be liable and responsible for the breach of provisions of the Act. The impugned proceedings came to be quashed and set aside. The decision in the case of Girdhari Lal Gupta (supra) was again arising out of interpretation of section 23C(1) and section 23C(2) of foreign exchange regulation Act, 1947 which defines the person incharge and responsible for conduct of affairs of the Company in the context of overall control for day to day business and at relevant time contravention of the said Act has no barring on the facts of this case. 7. That, the law and the subject about Section 138 and 141(1) (2) of Negotiable Instruments Act, 1881 is summarised by the Apex Court in the case of K.K. Ahuja v. V.K. Vora and Anr. 7. That, the law and the subject about Section 138 and 141(1) (2) of Negotiable Instruments Act, 1881 is summarised by the Apex Court in the case of K.K. Ahuja v. V.K. Vora and Anr. [(2009) 10 SCC48] and in para 27 held as under: "The position under Section 141 of the Act can be summarised thus: (i) If the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is 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 or Joint Managing Director at the relevant time. This is because the prefix "Managing" to the word "Director" makes it clear that they were in charge of and are responsible to the company, for the conduct of the business of the company. (ii)In the case of a Director or an officer of the Company who signed the cheque on behalf of the company, there is no need to make a specific averment that he was in charge of an was responsible to the company, for the conduct of the business of the company or make any specific allegation about consent, connivance or negligence. The very fact that the dishonoured cheque was signed by him on behalf of the company, would give rise to responsibility under subsection (2) of Section 141. (iii)In the case of a Director, secretary or manager [as defined in Section 2(24) of the Companies Act] or a person referred to in clauses (e) and (f) of Section 5 of the Companies Act, an averment in the complaint that he was in charge of, and was responsible to the company, for the conduct of the business of the company is necessary to bring the case under Section 141(1) of the Act. No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable under Section 141(2) by making necessary averments relating to consent and connivance or negligence, in the complaint, to bring the matter under that subsection. (iv)Other officers of a company cannot be made liable under subsection (1) of Section 141. No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable under Section 141(2) by making necessary averments relating to consent and connivance or negligence, in the complaint, to bring the matter under that subsection. (iv)Other officers of a company cannot be made liable under subsection (1) of Section 141. Other officers of a company can be made liable only under subsection (2) of Section 141, by averring in the complaint their position and duties in the company and their role in regard to the issue and dishonour of the cheque, disclosing consent, connivance or negligence." 8. Upon consideration of submissions and decision relied on by the learned advocate for the applicant, law on the subject about Sections 138 and 141 of Negotiable Instruments Act, 1881 and liability of Director, Managing Director, Joint Managing Director and signatory of the cheque is no more res integra but at the same time close look is necessary to the averments and allegations levelled in the complaint and each case is to be decided on facts and circumstances of the case. 9. As the paragraphs of the complaint reproduced in earlier part of decision specifically para 4 and subsequent paragraphs would reveal that the applicant in the capacity of Director was responsible for business affairs and he was incharge of the Company. Not only that but nowhere it can be said that the applicant was non Executive Director and even if it is so the said argument is in realm of defence to be decided by Court trying the case under the Negotiable Instruments Act. Since sufficient averments attracting of Section 138 of Negotiable Instruments Act are the foundation of the complaint and it is further averred that cheques were issued with mischievous, dishonest intention, knowingly and willingly to cheat the complainant company. Arguments canvassed by learned advocate for the applicant do not require any further deliberation in exercise of powers under Section 482 of the Code since quashing the complaint would not secure end of justice but would result into miscarriage of justice. However, the Court taking up the Negotiable Instruments Act cases shall not be influenced by the observation made herein above and shall dispose of all cases within six months from the date of receipt of writ/order of this Court as they are pending since 1996. 10. However, the Court taking up the Negotiable Instruments Act cases shall not be influenced by the observation made herein above and shall dispose of all cases within six months from the date of receipt of writ/order of this Court as they are pending since 1996. 10. In absence of the merit, these applications are summarily rejected. No order as to costs.