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2014 DIGILAW 1614 (BOM)

Sharda Poly Colours Pvt. Ltd. v. Sanjay

2014-07-24

P.N.DESHMUKH

body2014
Judgment : 1. Admitted. Heard finally by consent of learned counsel for both sides. 2. This petition takes exception to the order of issuance of process passed by the 31st Joint Civil Judge (Jr.Dn.) and Judicial Magistrate (F.C.), Nagpur in Criminal Complaint Case No.22888 of 2013 and the order passed in Criminal Revision No.25 of 2014 whereby revision preferred by the petitioners against the order of issuance of process came to be rejected. 3. Facts in brief necessary to understand the controversy involved can be stated as follows- Respondent/original complainant has filed above numbered Complaint under Section 138 read with 142 of the Negotiable Instruments Act, alleging therein that petitioner No.1/Ori.Accused No.1 is a Private Limited Company registered under the Companies Act, 1956 of which petitioners Nos.2 to 6/ori. accused are the Directors and are responsible for its day to day business affairs. Respondent is a Chartered Accountant by profession and since 2006, he is working for petitioners - company and was assisting in their Income Tax and other financial transaction and as such in the course of time developed cordial relations with them. It is stated that when the petitioners required any financial assistance to run their business smoothly, respondent used to provide financial assistance by way of loan by issuing cheque and/or cash and as such has provided loan to the petitioner Company to the extent of Rs.9,25,000/-. It is the case of respondent that towards refund of said loan, on 15th of April, 2013, petitioner No.3 issued cheque No.204325 dated 7th of May, 2013 drawn on H.D.F.C. Bank Ltd. Shankar Nagar, Nagpur under his signature, towards discharge of legal liability for himself and for other petitioners Nos.1, 2, 4 to 6. 4. The cheque so issued was presented by the respondent in his Bank i.e. H.D.F.C. Bank Ltd. Kingsway, Nagpur, however, same was dishonoured for the reasons "funds insufficient" vide Bank Memo dated 25th of July, 2013. Respondent, therefore, issued registered notice calling upon petitioners to make payment of the cheque amount within fifteen days from receipt thereof which was duly received by the petitioners. However, without acting upon the same, petitioners rejected the claim of the respondent by not making payment of Rs.9,25,000/-. Thus, respondent filed Criminal Complaint as stated aforesaid. 5. Respondent, therefore, issued registered notice calling upon petitioners to make payment of the cheque amount within fifteen days from receipt thereof which was duly received by the petitioners. However, without acting upon the same, petitioners rejected the claim of the respondent by not making payment of Rs.9,25,000/-. Thus, respondent filed Criminal Complaint as stated aforesaid. 5. The Trial Court by its order dated 7th of November, 2013 issued process against the petitioners, which was assailed by the petitioners in Criminal Revision No.25 of 2014 before the learned Sessions Judge, Nagpur and said Court finding that the documents upon which the petitioners had relied their claim to get themselves absolved of the charge, are not authenticated copies nor they are even certified by the Registrar of the Company, dismissed the Criminal Revision vide its order dated 28th of March, 2014 against which present petition is preferred. 6. Heard Shri Amit Khare, learned counsel for the petitioners. He has submitted that except the allegations in para no.1 of the complaint there are no any averements made against the petitioners establishing their involvement in the alleged offence. It is further submitted that the impugned cheque is admittedly issued by petitioner No.3, under his signature which is dated 7th of May, 2014. However, prior to this date petitioner no.3 was no more a Director of petitioner no.1 -Company since he had already resigned on 17th of April, 2013. However, learned counsel for the petitioner has fairly conceded that having admitted that the cheque in question bears signature of petitioner no.3, the petition is not pressed insofar as petitioner no.3 is concerned. 7. Insofar as involvement of petitioner Nos.2 and 4 is concerned, it is contended that both these petitioners had also resigned as Directors much prior to the issuance of impugned cheque and as such they have no role to play nor there are specific averements made against these petitioners in the complaint. In support of above contention, learned counsel for the petitioners has referred to the documents filed on record, being Form No.32, issued in accordance with the provisions of Companies Act, 1956 stating therein particulars of appointment of Managing Director, Directors, Manager and Secretary and the changes among them or consent of candidate to act as a Managing Director or Director or Manager or Secretary of a Company and/or undertaking to take and pay for qualification shares are issued. Both these Forms No.32 in respect of petitioner Nos.2 and 4 amply establish that much prior to issuance of cheque, they had already resigned w.e.f. 13th of January, 2013 and as such were not in any way associated with petitioner No.1 Company. Both these Forms No.32 in respect of petitioner nos.2 and 4 can be duly considered and relied upon, being authenticated copies thereof, issued under the digital signature of one Mr.Anil Mayekar and are duly verified by the Company Secretary from MCA Portal and found to be correct. The documents are procured by the petitioners from the Ministry of Corporate Affairs on making requisite payment as is established from the receipt on record. In view of contents of Form No.32 establishing that petitioner nos.2 and 4 have resigned as Directors on 13th of January, 2013 itself, while the impugned cheque is dated 7th of May, 2013 and even on considering the limited averements against the petitioners which are reproduced as under, "That, the accused No.1 is a Private Limited Company registered under the Companies Act. The Accused nos.2 to 6 are directors of accused no.1 and responsible for its day to day business affairs." I find much substance insofar as case of petitioner Nos.2 and 4 are concerned. Insofar as case of petitioner nos.5 and 6 are concerned, though admittedly they are Directors of petitioner no.1 -Company, it is necessary to see whether any vicarious criminal liability can be fastened upon them with reference to their involvement. Learned counsel Shri Amit Khare appearing for the petitioners relied upon the decision in the case of National Small Industries Corporation Ltd. vs. Harmeet Singh Paintal and anr. reported in (2010)3 SCC 330 and has contended that since no role is described against the petitioner Nos.5 and 6 the petition be allowed so far as petitioner nos.2, 4, 5 and 6 are concerned. 8. Learned counsel for the respondent Shri Bachwani did not choose to file affidavit-in-reply and has contended that though petitioner no.3, who has issued the cheque dated 7th of May, 2013 on 15th of April, 2013, claims to have resigned as a Director of petitioner No.1 - Company w.e.f. 17th of April, 2013, has filed Special Civil Suit No.742 of 2013 for recovery for certain amount against respondent and one other, which is pending on the file of Civil Judge (Sr.Dn.), Nagpur. Learned counsel for the respondent also contended that the impugned cheque is dated 7th of May, 2013 and was issued on 15th of April, 2013, before petitioner No.3 resigned and has further contended that as issuance of cheque is not disputed, no case is made out for said petitioner. However, having considering the fact that the petition is not pressed so far as petitioner no.3 is concerned, above submissions need no consideration. 9. In view of the case as stated above, in respect of petitioner nos.2 and 4, no submissions are advanced on behalf of the respondent. Insofar as petitioner Nos.5 and 6 are concerned, it is contended that, admittedly, since both these petitioners continued to remain as Directors of the petitioner no.1 -Company, the petition needs to be dismissed against them in view of averements in the complaint. In the background of above facts involved in the petition and on considering the law laid down by the Apex Court in the case of National Small Industries (supra), I find no substance in the case of respondent, particularly in view of only averements made in the complaint as aforesaid. In this case, referring to the decision in the case of Saroj Kumar Poddar vs. State reported in (2007) 3 SCC 693 wherein case of S.M.S. Pharmaceuticals Ltd. (1) vs. Neeta Bhalla reported in (2005) 8 SCC 89 is considered, in which it is held that - "With a view to make the Director of a company vicariously liable for the acts of the company, it was obligatory on the part of the complainant to make specific allegations" as are required under the law and under Section 141 of the Act and further held that in the absence of such specific averments in the complaint showing as to how and in what manner the Director is liable, the complaint should not be entertained." It is further observed thus - (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. 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 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 cheque 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. 10. In the background of above legal proposition and on considering the limited averments made in the complaint same being not specific at all do not establish involvement of petitioner Nos.2, 4, 5 and 6. Even otherwise the documents placed on record establish that petitioner Nos.2 and 4 ceased to be Directors of petitioner no.1 -Company, much prior to issuance of cheque, and from contents in the complaint, I am of the considered view that it is abundantly clear that there are no specific averments made in the complaint disclosing the role of said petitioners in the alleged crime. In the law relied as above, it is specifically stated that the criminal liability can be fastened only on those who, at the time of commission offence, were in charge of and responsible for the conduct of the business of the Company. In that view of the matter, the limited averments in the complaint cannot sustain nor can be sufficient for the Trial Court to issue process as it is obligatory on the part of the complainant to state how and in what manner the Directors, who are arrayed as accused, were responsible for the conduct of business of the Company at the relevant time. It goes without saying that the Trial Court on the basis of averments in the complaint and documents filed in support thereof alone can consider the fact of issuance of process and as such it is necessary for the complainant to place such complaint and documents for enabling the Magistrate to decide as to whether the process can be issued or not against a particular Director. The averments made against the petitioners in the complaint as aforesaid do not establish as to what is the role attributed against the petitioners, as allegations are vague. In fact, it is noted that, admittedly, since respondent for a sufficient long period and on the date of issuance of cheque was working as a Chartered Accountant of the petitioner -Company, he can be said to be fully aware of above said facts, however, in spite of same he has filed a complaint without attributing therein specific role against the petitioners. 11. In that view of the matter, the petition is liable to be allowed, as averments made against petitioner nos.2, 4, 5 and 6 in the complaint are not at all sufficient to make them vicariously liable for the offence punishable under Section 138 of the Negotiable Instruments Act. In that view of the matter, the Criminal Complaint pending against them in the court of 31st Joint Civil Judge (Jr.Dn.) and Judicial Magistrate (F.C.), Nagpur, being Criminal Complaint Case No.2288 of 2013 as well as order passed by the Revisional Court in Criminal Revision No.25 of 2014 need to be quashed and set aside. In view of above, petition is partly allowed and following order is passed. 12. In view of above, petition is partly allowed and following order is passed. 12. The order dated 28th of March, 2014, passed in Criminal Revision No.25 of 2014 and order dated 7th of November, 2013, to issue process against respondent Nos.2, 4, 5 and 6 passed by the learned 31st Joint Civil Judge, Junior Division and Judicial Magistrate (F.C.), Nagpur, in Criminal Complaint Case No.22888 of 2013 are quashed and set aside. Bail bonds, if any, of above numbered petitioners stand cancelled. Petition stands dismissed against petitioner No.3, as not pressed. Ad-interim relief stands vacated.