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Gujarat High Court · body

2016 DIGILAW 1274 (GUJ)

Anilkumar Amarchand v. Ashish B. Zode

2016-07-08

ABDULLAH GULAMAHMED URAIZEE

body2016
JUDGMENT : Abdullah Gulamahmed Uraizee, J. 1. This group of five petitions are disposed of by the present common judgment as the issue involved therein, is common. 2. These petitions are filed under section 482 of the Code of Criminal Procedure, 1973 to quash and set aside the criminal complaints No. 1002/2009, 9993/2009, 9998/2009, 9996/2009, 7314/2009 lodged against the present appellant and others by respondent No. 1. 3. The respondent No. 1 filed the above referred complaints for the offences punishable under section 138 of the Negotiable Instruments Act ("N.I. Act"), 1881, for dishonour of the cheque in the Court of learned Metropolitan Magistrate, the N.I. Special Court No. 2, Ahmedabad. The learned Magistrate, after recording the verification of respondent No. 1 was pleased to issue process against the applicant and others for offence punishable under section 138 of N.I Act. The applicant has approached this court under section 482 of the Code, for quashment of the complaint on various grounds. 4. I have heard Mr. Aditya Choksi, learned advocate for Mr. Ajaykumar Choksi for the appellant, and Mr. K.L Pandya learned Additional Public Prosecutor for the State. The respondent no1, original complainant has not entered appearance either in person or by duly instructed advocate despite service of notice of rule. 5. Mr. Choksi, learned advocate has stoutly urged that the complaints lodged against the present applicant are as vague as they could be. He submits that there is no specific allegation against the applicant nor is there any role attributed to him, in the complaint. He further submits that the applicant is not involved in the day to day affairs of the company, as he was busy with his medical practise at Jaipur. He further urged that the disputed cheque is not signed by the applicant, and that the applicant cannot be held vicariously liable for the transaction in question merely because he was the Director of the said company. He further urges that the applicant cannot be vicariously held liable for the illegal acts of other directors. In support of his contentions he has relied upon the decision of the Supreme Court in the case of National Small Industries Corporation Limited Vs. Harmeet Singh Paintal and another, (2010) 3 SCC 330 and in the case of Aparna A. Shah Vs Sheth Developers Private Limited and another, (2013) 8 SCC 71 . In support of his contentions he has relied upon the decision of the Supreme Court in the case of National Small Industries Corporation Limited Vs. Harmeet Singh Paintal and another, (2010) 3 SCC 330 and in the case of Aparna A. Shah Vs Sheth Developers Private Limited and another, (2013) 8 SCC 71 . He submits that the learned Magistrate has not recorded the verification as directed by this Court in the case of Dr. Rajan Sanatkumar Joshi Vs. Rajnikant Govindlal Shah and Anr., 2007 Cri.L.J. 2318. He, therefore, urges that the impugned complaint so far as it relates to the present applicant may be quashed and set aside. 6. Before examining the various contentions canvassed by learned advocate Mr. Choksi, for the applicant, it would be apposite to refer to section 141 of the N.I Act which is in respect of the offences by the companies which reads as under: 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. 1. 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: 2. 1. 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: 2. a [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 sub-section (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 company, 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. 3. Explanation.-For the purposes of this section.- 4. (a) "company" means any body corporation and includes a firm or other association of individuals; and 5. (b) "director", in relation to a firm, means a partner in the firm. 7. The reading of the above provision of section 141 of N.I. Act makes it vividly clear that if an offence is committed, by a company, the person in charge of, and was responsible, for 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 under the N.I Act. 8. The Supreme Court in the case of National Small Industries Corporation Limited Vs. Harmeet Singh Paintal and another, (2010) 3 SCC 330 , which reads as under: "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. 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 cheques on behalf of the company then also it is not necessary to make specific averment in complaint. (vii) The person sought to be made liable should be incharge 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." 9. As laid down in the aforesaid proposition, it becomes manifestly clear from the provisions of section 141 of the N.I Act as well as the principles enunciated by the Supreme Court in the case of National Small Industries Corporation Limited Vs. Harmeet Singh Paintal (supra) that in case the offence punishable under section 138 of the N.I Act is committed by a company, for fastening the criminal liability, there is no presumption that every Director knows about the transaction. 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. 10. 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. 10. If we consider the provisions of section 141 of the N.I Act coupled with the fact of National Small Industries Corporation Ltd. (supra) in the context of the complaint filed against the present applicant, it is cryptic and vague as far as the averments and role qua the present applicant are concerned. It is necessary to specifically aver in the 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 the business of the company. Such an averment is an essential requirement of section 141 and has to be made in the complaint. In the instant case the complaints nowhere state that it was the applicant who was looking after the day to day affairs of the company and was conducting the business of the company. Moreover, the complaint refers to the status of the applicant as the Director of the company while accused No. 2, Jayanta K. Roy, is stated to be the managing director of the company. The complaint is silent as to who had signed the disputed cheque and a general statement is made in the complaint that the accused persons have signed the cheque whereas the disputed cheque does not bear the signature of the present applicant. 11. This Court in the case of Dr. Rajan Sanatkumar Joshi Vs. Rajnikant Govindlal Shah and Anr. (supra) while emphasising the importance of proper verification has laid down as under: "15. The trial Court shall, therefore, carry out proper verification before issuing summons in a criminal case under Section 138 of Negotiable Instruments Act. While registering the complaint, the following verifications are required; [1] The verification of a complaint on oath by the complainant is the first important step in the process of taking cognizance by the Court upon the complaint. The verification is not an empty formality but, when a complaint is verified by the complainant on oath, then the verification would attach authenticity to the averments made in the complaint, and if found or proved false, then even cost can be imposed upon such complainant. The verification is not an empty formality but, when a complaint is verified by the complainant on oath, then the verification would attach authenticity to the averments made in the complaint, and if found or proved false, then even cost can be imposed upon such complainant. Therefore, verification has to be in a proper manner, i.e. all the facts necessary to constitute the offence must be borne out from the verification and the factual aspect should also be made very amply clear by the complainant, so that the Court may not be misled by incomplete verification or incomplete details of facts necessary to take cognizance upon the complaint. [2] If the complaint is by a Company, i.e. by a legal entity, then the Court should verify as to whether the person representing the Company has been duly authorized or not. On the date of the verification of the complaint itself, the Court should peruse the authorization, empowering a particular person to file the complaint on behalf of the legal entity. [3] Whether the complainant has supplied complete postal address of the complainant as well as the complete postal address of the persons named as accused in the complaint or not and whether the said addresses are correct or not. [4] Shall verify the statement of the complainant that all the accused persons who are named in the complaint are Directors/Partners of the firm/Company in question as on the date of the offence and/or the complaint and, as to whether they are liable under the Negotiable Instruments Act or not. It shall also verify the status of the accused person/s and the extent of involvement of the accused persons in the commission of the alleged offence. Before a person can be made vicariously liable and is summoned before the Court, strict compliance of the statutory requirements should be insisted. In terms of Section 200 of the Cr.P.C., the Court should take care to see that the complainant makes a statement on oath as to how the offence has been committed and as to how the accused persons are responsible therefor. On appropriate verification of the complaint, ultimately, if it is found by the Court concerned that the complaint is frivolous or otherwise mala fide, the same may be dismissed u/s. 203 of the Cr.P.C. [5] Whether the accused is the signatory to the instrument in question or not. On appropriate verification of the complaint, ultimately, if it is found by the Court concerned that the complaint is frivolous or otherwise mala fide, the same may be dismissed u/s. 203 of the Cr.P.C. [5] Whether the accused is the signatory to the instrument in question or not. [6] There must be a specific averment in the complaint itself as regards the fact that the Payee of the cheque had issued the statutory Notice to the Drawer and that the Drawer has received the statutory Notice. The Court should insist for some formal proof in the form of acknowledgment receipt, unless, the complainant, while verifying the complaint on oath, states that the accused has deliberately evaded the service of Notice or otherwise. In the absence of such averment in the complaint as well as the statement on oath during the course of verification, the complaint can straightway be dismissed u/s. 203 of the Cr.P.C. [7] Whether the concerned Firm/Company, Society/Institution, Partner/Director or Proprietor are joined as parties or not. [8] Whether the complaint has been filed within the period of limitation as prescribed under Section 138 of the Act. [9] Whether there are any specific allegations against each accused or not in accordance with the ratio laid down in the cases of Sabitha Ramamurthy & anr. v. R.B.S. Channabasavaradhya reported in AIR 2006 SC 3086 : 2006 (1) SCC 581, 2006 AIR S.C.W. 4582, 2006 Cri. LJ 4602, 2006 (9) Scale 212 ) and Saroj Kumar Poddar Vs. State (NCT of Delhi) reported in 2007 (2) SCALE 36 ." 12. It seems that learned trial judge without applying his mind, on the averments and allegations made in the impugned complaint, mechanically recorded the verification and ordered, issue of process against the present applicant in a casual and routine manner. Had the learned Magistrate applied his mind to the averments and allegations made in the impugned complaint he would have easily noticed that the impugned, complaint lacks the necessary details and particulars to warrant issuance of process against the applicant as the complainant is silent on very important aspects such as status of the applicant in the company, conducting the day to day business of the company and whether he has signed the disputed cheque or not. In absence of these material details as required under section 141 of the N.I Act and as per the proposition of law expounded by the Supreme Court in National Small Industries Corporation (supra), and this Court in Dr. Rajan Sanatkumar Joshi (supra), learned Magistrate could not have issued process under section 138 of the N.I Act against the present applicant. So far as the decision of the Supreme Court in the case of Aparna A. Shah Vs. Sheth Developers Private Limited and another (2013)8 SCC 71 , in my view it has no application to the facts of the present case, as the Supreme Court was dealing with the case of joint bank account in the name of husband and wife. The cheque was signed by the husband and wife and they are sought to be roped in the criminal proceedings under section 138 of the N.I Act in the case on hand. Section 141 of the N.I Act is applicable so far as the proceedings under section 138 against the company are concerned Directors who are in charge of the conduct of the business of the company aside from the person who has signed the disputed cheque are liable to be proceeded against for the offence punishable under section 138 of the N.I Act. Therefore, the applicant cannot take a stand that he cannot be proceeded against 138 of N.I Act only because he has not signed the disputed cheque. Had the respondent No. 1 original complainant made some averments and allegations as to the status of the applicant in the affairs of the company, he would not have exonerated and the process against him would not have been quashed by this Court only on the ground that he is not the signatory to the disputed cheque. 13. For the forgoing reasons, the present group of petitions succeed and are hereby allowed. The Criminal complaints Nos. 1002/2009, 9993/2009, 9998/2009, 9996/2009, 7314/2009 pending in the Court of Metropolitan Magistrate, the N.I. Special Court No. 2. Ahmedabad and the process issued thereon qua the present applicant are hereby quashed and set aside. Rule is made absolute. 14. It is made clear that the complaints and process issued thereon against the applicant alone are quashed and set aside. 1002/2009, 9993/2009, 9998/2009, 9996/2009, 7314/2009 pending in the Court of Metropolitan Magistrate, the N.I. Special Court No. 2. Ahmedabad and the process issued thereon qua the present applicant are hereby quashed and set aside. Rule is made absolute. 14. It is made clear that the complaints and process issued thereon against the applicant alone are quashed and set aside. The criminal complaint against rest of the accused persons is not quashed and set aside and the learned trial court shall proceed with the complaints against rest of the accused person in accordance with law.