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2013 DIGILAW 290 (GUJ)

Manoj @ Mike Ambalal Shah v. State of Gujarat

2013-05-10

R.M.CHHAYA

body2013
JUDGMENT : R.M. Chhaya, J. As common question of facts and law arise out of these applications and these applications relate to identical complaints being Criminal Case No.2953 of 2002, Criminal Case No.3363 of 2002 and Criminal Case No.3362 of 2002 pending before the Court of ld. Judicial Magistrate First Class, Anand, they are being heard together and decided and disposed of by this common judgment. 2. Criminal Misc. Application No. 8869 of 2012 is preferred by the petitioner-original accused No.10 under Section 482 of the Code of Criminal Procedure, 1973, for quashing and setting aside the impugned complaint being Criminal Case No.2953 of 2002 filed by respondent No.2-original complainant under Section 138 read with Section 141 of the Negotiable Instruments Act, which is pending before the learned Judicial Magistrate First Class, Anand. 3. Criminal Misc. Application No. 9147 of 2012 is preferred by the petitioner-original accused No.10 for quashing and setting aside the impugned complaint being Criminal Case No.3363 of 2002 filed by respondent No.2-original complainant under Section 138 read with Section 141 of the Negotiable Instruments Act pending in the Court of learned Judicial Magistrate First Class, Anand. 4. Criminal Misc. Application No. 9162 of 2012 is preferred by the petitioner-original accused No.10 for quashing and setting aside the impugned complaint being Criminal Case No.3362 of 2002 filed by respondent No.2-original complainant under Section 138 read with Section 141 of the Negotiable Instruments Act in the Court of learned Judicial Magistrate First Class, Anand. 5. The above mentioned impugned complaints have been filed by respondent No.2-original complainant against the petitioner, who is shown as an accused No.10 and other 12 accused persons for dishonour of cheques dated 03.05.2002, 10.05.2002 and 17.05.2002 under Section 138 read with Section 141 of the Act, out of which original accused no.1 is the Company viz. Home Trade Limited. It is evident from the bare reading of the complaints that, the petitioner is shown as accused No.10, as he was the Director of the original accused No.1-Company. Learned Magistrate has issued summons against the petitioner as well as other accused persons for the offence punishable under Section 138 read with Section 141 of the Act and being aggrieved by the same, present petition is filed by the present petitioner being accused No.10 in all three complaints. 6. Mr. Learned Magistrate has issued summons against the petitioner as well as other accused persons for the offence punishable under Section 138 read with Section 141 of the Act and being aggrieved by the same, present petition is filed by the present petitioner being accused No.10 in all three complaints. 6. Mr. Deep D. Vyas, learned counsel for the petitioner in all three applications, Ms.Moxa Thakkar, learned Assistant Public Prosecutor for respondent No.1-State in all three applications and Mr.C.B.Upadhyay, learned counsel for respondent No.2-original complainant in all three applications. 7. Mr. Vyas, learned counsel for the petitioner has contended that the petitioner has not committed any offence under Section 138 read with Section 141 of the Act, as alleged. He further contended that the cheques in question dated 03.05.2012, 10.05.2012 and 17.05.2012 respectively have been issued by original accused No.1 viz. Home Trade Ltd., and the same are signed by original accused No.9. Mr.Vyas, relying upon the extracts of the record of the Registrar of Companies, contended that the present petitioner was only non-executive Director and was not in day-to-day management and affairs of the Company, hence, the petitioner was not responsible for any day-to-day management of the Company. He further relying upon Form-32 (at Annexure-C to the application), submitted that the petitioner resigned as Director of the original accused No.1-Company w.e.f 24.04.2002 and the same has also been recorded in the records of the Registrar of Companies. He relying upon such extracts of Form-32 submitted that the petitioner had ceased to be the non-executive Director when the cheques were issued. Even if the complaints are taken at their face value, no allegations are made against the present petitioner and the petitioner has been arraigned as an accused only as the petitioner was a non-executive Director of the Company-accused No.1. He further submitted that in the impugned complaints, there is not a single averment made which shows that the petitioner had played any role in day-to-day management of the Company original accused No.1. He further submitted that as such, the petitioner was non-executive Director and during his tenure, he has not attended any meeting of the said Company and he had not been confirmed by any statutory power, neither authorised to sign any document or banking transaction including issuing cheques. He further submitted that as such, the petitioner was non-executive Director and during his tenure, he has not attended any meeting of the said Company and he had not been confirmed by any statutory power, neither authorised to sign any document or banking transaction including issuing cheques. He further relying upon the report submitted by SEBI dated 16.02.2006, contended that even SEBI has disposed of the case against the petitioner and specifically observed that the petitioner is non-executive Director and not involved in any decision-making process in day-to-day affairs of the Company. He further submitted that in identical facts situation, wherein another bank namely Valsad Peoples Cooperative Bank Ltd., had filed a similar complaint under Section 138 of the Act against 19 persons including the present petitioner which was subject matter of an application filed by the petitioner under Section 482 of the Code of Criminal Procedure, 1973 being Criminal Misc. Application No.15995 of 2008 and the same is allowed by this Court (Coram: M.R.Shah, J.) vide order dated 20.12.2011. He further contended that the ingredients of Section 138 of the Act are not found in the impugned complaints, even if it is taken at their face value and therefore, this Court may exercise its inherent powers under Section 482 of the Code of Criminal Procedure, 1973 and quash and set aside the impugned complaint as prayed for to secure the ends of justice. 8. Mr. Vyas, further relying upon the judgments of the Hon'ble Apex Court in the case of SMS Pharmaceuticals v. Neeta Bhalla, reported in 2005 (8) SCC 89 , National Small Industries Corporation Ltd. v. Harmeet Singh Paintal, reported in 2010 (3) SCC 330 , Central Bank of India v. M/s.Asian Global Ltd., Reported in 2010 (11) SCC 203 and Mrs. Anita Malhotra v. Apparel Export Promotion Council, reported in 2012 (1) SCC 520 , has specifically contended that no specific averments/allegations are made against the petitioner. He further submitted that the cheques in question have been issued and the complaints have been filed when the petitioner was not even the Director and therefore, the complaints deserve to be quashed, as prayed for and order of process issued by the learned Magistrate in all three complaints deserve to be quashed. 9. He further submitted that the cheques in question have been issued and the complaints have been filed when the petitioner was not even the Director and therefore, the complaints deserve to be quashed, as prayed for and order of process issued by the learned Magistrate in all three complaints deserve to be quashed. 9. Ms.Moxa Thakkar, learned Assistant Public Prosecutor for respondent No.1-State submitted that this Court may pass appropriate order looking to the facts and circumstances of the case. 10. Mr. C.B.Upadhyay, learned counsel for respondent No.2-original complainant in all three applications submitted that the averments and allegations are made in the complaints against the petitioner, who was the Director of the Company and was responsible for day to day management and affairs of the original accused No.1-Company are appropriate. He relying upon the affidavit filed in this proceedings, submitted that the allegations made in the complaints are sufficient for the purpose of imposing vicariously liable against the petitioner in addition to other Directors. Relying upon the ratio laid down by the Hon'ble Apex Court in the case of K.K. Ahuja v. V.K. Vora and Anr., reported in 2009 (10) SCC 48 , contended that basic allegations against the petitioner would be sufficient for holding a particular person vicariously liable and no specific averment is required to be made in the complaint as to role of each accused. 11. Mr. Upadhyay, further submitted that all the ingredients of Section 138 read with Section 141 of the Act are fulfilled in the instance case and therefore, all three applications deserve to be dismissed. He has also relied upon the judgment of Hon'ble Apex Court in the case of National Small Industries Corporation Ltd. v. Harmeet Singh Paintal, reported in 2010 (3) SCC 330 and Central Bank of India v. M/s. Asian Global Ltd. Reported in 2010 (11) SCC 203 . Heard learned counsel for the respective parties at length and considering the averments made in the complaints against the petitioner, it is noteworthy that the impugned complaints in paragraph No.4, it is specifically stated that accused Nos.2 to 9 had entered into agreement for the purpose of security on 12.11.2001. Except the accused No.10 is Director of accused No.1- Company, nothing is stated against the petitioner in the impugned complaints. The complaints also indicate that all three cheques were signed by original accused No.9 on behalf of accused No.1- Company. Except the accused No.10 is Director of accused No.1- Company, nothing is stated against the petitioner in the impugned complaints. The complaints also indicate that all three cheques were signed by original accused No.9 on behalf of accused No.1- Company. There are no averments made in the complaints to the effect that the petitioner-accused No.10 is in-charge and responsible for day-to-day management of the Company. It is important to note that the cheques in question are dated 03.05.2002, 10.05.2002 and 17.05.2002 respectively, whereas the petitioner retired as non-executive Director from accused No.1-Company with effect from 24.04.2002 and it is crystal clear from the documents produced that when the impugned three cheques in question came to be issued by original accused No.1-Company, signed by original accused No.9, the petitioner was not even Director of the original accused No.1- Company. The Hon'ble Apex Court in the case of National Small Industries Corporation Ltd. (Supra), while considering the vicarious liability of the Director of Company under Section 138 read with Section 141 of the Act and has observed thus:" 12. In the light of the above provision and the language used therein, let us, at the foremost, examine the complaint a filed by National Small Industries Corporation Limited and the DCM Financial Services Ltd. In the case of National Small Industries Corpn. Ltd., the High Court has reproduced the entire complaint in the impugned order and among other clauses, clause 8 is relevant for our consideration which reads as under: "8. That the accused No. 2 is the Managing Director and accused No. 3 is the Director of the accused Company. The accused No. 2 and 3 are the in-charge and responsible for the conduct of the business of the Company accused No. 1 and hence are liable for the offences." In the case of DCM Financial Services Ltd., in complaint-Annexure-P2 the relevant clause is 13 which reads as under:" "13. That the accused No. 1 is a Company/Firm and the accused Nos. 2 to 9 were in charge and were responsible to the accused No. 1 for the conduct of the business to the accused No. 1 at the time when offence was committed. Hence, the accused Nos. That the accused No. 1 is a Company/Firm and the accused Nos. 2 to 9 were in charge and were responsible to the accused No. 1 for the conduct of the business to the accused No. 1 at the time when offence was committed. Hence, the accused Nos. 2 to 9 in addition to the accused No. 1, are liable to be prosecuted and punished in accordance with law by this Hon'ble Court as provided by Section 141 of the N.I. Act, 1881. Further the offence has been committed by the accused No. 1 with the consent and connivance of the accused Nos. 2 to 9." 14. Now, let us consider whether the above-mentioned complaint in both cses has satisfied the necessary ingredients to attract Section 141 insofar as the respondents, namely, Directors of the Company are concerned. Section 141 of teh Act has been interpreted by this Court in various decisions. As to the scope of Section 141 of the act, a three-Judge Bench of this Court considered the following questions which had been referred to it by a two-Judge Bench of this Court in SMS Pharmaceuticals v. Neeta Bhalla and Anr., (2005) 8 SCC 89 : "(a) Whether for purposes of Section 141 of the Negotiable Instruments Act, 1881, it is sufficient if the substance of the allegation read as a whole fulfil the requirements of the said Section and it is not necessary to specifically state in the complaint that the person accused was in charge of, or responsible for, the conduct of the business of the Company. (b) Whether a director of a Company would be deemed to be in charge of, and responsible to, the Company for conduct of the business of the Company and, therefore, deemed to be guilty of the offence unless he proves to the contrary. (c) Even if it is held that specific averments are necessary, whether in the absence of such averments the signatory of the cheque and or the managing directors or joint managing director who admittedly would be in charge of the Company and responsible to the Company for conduct of its business could be proceeded against."While considering the above questions, this Court held as under: "18. To sum up, there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. To sum up, there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under Section 141 of the Act is sought to be fastened vicariously on a person connected with a Company, the principal accused being the Company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of Section 141 has to be spelled out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within Section 141, he would issue the process. We have seen that merely being described as a director in a Company is not sufficient to satisfy the requirement of Section 141. Even a non-director can be liable under Section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial. 19. In view of the above discussion, our answers to the questions posed in the reference are as under: (a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the Company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied. (b) The answer to the question posed in sub-para (b) has to be in the negative. Merely being a director of a Company is not sufficient to make the person liable under Section 141 of the Act. A director in a Company cannot be deemed to be in charge of and responsible to the Company for the conduct of its business. Merely being a director of a Company is not sufficient to make the person liable under Section 141 of the Act. A director in a Company cannot be deemed to be in charge of and responsible to the Company for the conduct of its business. The requirement of Section 141 is that 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. (c) The answer to Question (c) has to be in the affirmative. The question notes that the managing director or joint managing director would be admittedly in charge of the Company and responsible to the Company for the conduct of its business. When that is so, holders of such positions in a Company become liable under Section 141 of the Act. By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the Company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141." Therefore, this Court has distinguished the case of persons who are in-charge of and responsible for the conduct of the business of the Company at the time of the offence and the persons who are merely holding the post in a Company and are not in-charge of and responsible for the conduct of the business of the Company. Further, in order to fasten the vicarious liability in accordance with Section 141, the averment as to the role of the concerned Directors should be specific. The description should be clear and there should be some unambiguous allegations as to how the concerned Directors were alleged to be in- charge of and was responsible for the conduct and affairs of the Company. 20. Relying on the judgment of this Court in Everest Advertising Pvt. Ltd. v. State Govt. The description should be clear and there should be some unambiguous allegations as to how the concerned Directors were alleged to be in- charge of and was responsible for the conduct and affairs of the Company. 20. Relying on the judgment of this Court in Everest Advertising Pvt. Ltd. v. State Govt. of NCT of Delhi & Ors., (2007) 5 SCC 54 , learned Counsel for the appellants argued that this Court has not allowed the recalling of 18 summons in a criminal complaint filed under Sections 138 and 141. However, a perusal of the judgment would reveal that this case was of recalling of summons by the Magistrate for which the Magistrate had no jurisdiction. Further, para 22 of the judgment would reveal that in the complaint "allegations have not only been made in terms of the wordings of Section but also at more than one place, it has categorically been averred that the payments were made after the meetings held by and between the representative of the Company and accused Nos. 1 to 5 which would include Respondent Nos. 2 and 3." In para 23, this Court concluded that "it is therefore, not a case where having regard to the position held by the said respondents in the Company, they could plead ignorance of the entire transaction". Furthermore, this Court has relied upon S.M.S. Pharamaceutical's case (three-Judge Bench) (supra), Saroj Kumar Poddar's case (supra) and N. K. Wahi's case (supra). 21. Relying on the judgment of this Court in N. Rangachari v. Bharat Sanchar Nigam Ltd., (2007) 5 SCC 108 , learned Counsel for the appellants further contended that a payee of cheque that is dishonoured can be expected to allege is that the persons named in the complaint are in-charge of its affairs and the Directors are prima facie in that position. However, it is pertinent to note that in this case it was specifically mentioned in the complaint that (i) accused No. 2 was a director and in charge of and responsible to the accused Company for the conduct of its business; and (ii) the response of accused No. 2 to the notice issued by BSNL that the said accused is no longer the Chairman or Director of the accused Company was false and by not keeping sufficient funds in their account and failing to pay the cheque amount on service of the notice, all the accused committed an offence. Therefore, this decision is clearly distinguishable on facts as in the said case necessary averments were made out in the complaint itself. Furthermore, this decision does not and could not have overruled the decisions in S.M.S. Pharmaceutical's case (three- Judge Bench)(supra), Ramraj Singh's case (three-Judge Bench) (supra), Saroj Kumar Poddar's case (supra) and N.K. Wahi's case (supra) wherein it is clearly held that specific averments have to be made against the accused Director. Learned Counsel for the appellants after elaborately arguing the matter, by inviting our attention to Paresh P. Rajda v. State of Maharashtra & Anr., (2008) 7 SCC 442 contended that a departure/digression has been made by the Court in the case of N. Rangachari v. BSNL (supra). However, in this case also the Court has observed in para 4 that the High Court had noted that an overall reading of the complaint showed that specific allegations had been leveled against the accused as being a responsible officer of the accused Company and therefore, equally liable. In fact, the Court recorded the allegations in the complaint that the Complainant knew all the accused and that accused No. 1 was the Chairman of the accused Company and was responsible for day to day affairs of the Company. This Court though has only noted the decision in N. Rangachari's case (supra) and observed that an observation therein showed a slight departure vis-a-vis the other judgments (i.e. S.M.S. Pharmaceuticals first case and S.M.S. Pharmaceutical's second case), but then Court went on to record that in N. K. Wahi's case (supra) this Court had reiterated the view in S.M.S. Pharmaceutical's case (supra). The Court then concluded in para 11 that it was clear from the aforequoted judgments that the entire matter would boiled down to an examination of the nature of averments made in the complaint. On facts, the Court found necessary averments had been made in the complaint." The Hon'ble Apex Court in the case of National Small Industries Corporation Ltd. v. Harmeet Singh Paintal, reported in 2010 (3) SCC 330 , after considering the catena of decision, more particularly the decision cited by both the learned counsel including the case of K.K.Ahuja (supra) and has observed thus:- "39.From the above discussion, the following principles emerge: (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 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 accused therein vicariously liable for offence committed by Company along with averments in the petition containing that 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 accused is Managing Director or 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 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 complainant. (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. (vi) If 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 complainant. (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. 13. Under the circumstances, the petitioner was not even the Director of the Company, when the cheques in question have been issued and also considering the fact that the petitioner was only non-executive Director of the original accused No.1-Company and considering the ratio laid down by the Hon'ble Apex Court in the case of National Small Industries Corporation Ltd. (supra), Central Bank of India (supra) and S.M. Pharmaceuticals (supra) as well as judgment passed by this Court (Coram : M.R.Shah, J.) in the case of petitioner himself and considering the averments made in the complaint, the petitioner cannot be held vicariously liable under Section 141 of the Act for dishonour of the cheques, which were issued by original accused No.1. 14. Even if the allegations made in the complaints are taken at their face value, it does not constitute any offence under Section 138 of the Act qua the petitioner. Except a mention that petitioner-original accused No.10 is a Director, no specific role is attributed in the impugned complaint, to the petitioner. 15. Considering the averments made in the application, contentions raised by learned counsel for the parties and also considering the ratio laid down by the Hon'ble Apex Court as well as this Court, it appears that to continue criminal proceedings against the petitioner would be unnecessary harassment to the petitioner. The same would amount to abuse of process of law and Court. Hence, to secure the ends of justice, the impugned complaints are required to be quashed and set aside in exercise of inherent jurisdiction under Section 482 of the Code of Criminal Procedure, 1973, qua the petitioner only. 16. It is however made clear that observations made in this judgment shall not apply to any other accused and the trial Court shall consider the complaints on its merits qua other accused persons. 17. For the reasons stated hereinabove, the present applications are allowed. 16. It is however made clear that observations made in this judgment shall not apply to any other accused and the trial Court shall consider the complaints on its merits qua other accused persons. 17. For the reasons stated hereinabove, the present applications are allowed. The impugned complaints being Criminal Case No.2953 of 2002, Criminal Case No. 3363 of 2002 and Criminal Case No. 3362 of 2002 filed by respondent No.2 qua the petitioner-original accused No.10 are hereby quashed. Rule is made absolute to the aforesaid extent only.