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Gujarat High Court · body

2017 DIGILAW 810 (GUJ)

Nilesh Yashwant Shah v. State of Gujarat

2017-04-13

B.N.KARIA

body2017
JUDGMENT : B.N. Karia, J. 1. As common question of law and facts arise between the same parties, both these applications are disposed of by this common judgment. 2. Criminal Misc. Application No. 12896/2011 and Criminal Misc. Application No. 12897/2011 have been filed under Section 482 of the Code of Criminal Procedure, 1973 ("CrPC" for brevity) by the applicants-original accused Nos. 3 and 4 to quash and set aside Criminal Case No. 804/2011 and Criminal Case No. 979/2011 respectively pending in the Court of learned Additional Chief Judicial Magistrate, Jamnagar, which have been filed by the respondent No. 2-original complainant for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881, so far as original accused No. 3 and 4 are concerned. 3. Brief facts of the case are that the accused No. 1 is the Company and the accused No. 2 is the authorized signatory and Director of the said Company. Whereas, accused No. 3, 4 and 5 are the Directors of the accused No. 1-Company. That, the accused No. 1-Company is engaged in the business of readymade garments. The Company had opened its showrooms for selling readymade garments by taking a shop on rent at Jamnagar through the accused No. 2 and all the work thereof relating to Jamnagar had been handed over to the complainant and monthly rent thereof was agreed at Rs. 75,000/- per month but, the accused did not pay rent for last many months to the shop owner, and therefore, as per say of the accused No. 2, the complainant was paid such rent of Rs. 3,67,985/-. When the complainant demanded such legal amount of rent from the accused No. 2, the applicant No. 1 issued a (1) cheque No. 627683 for Rs. 1,00,000/- of ICICI Bank Limited, Mumbai Branch dated 23.06.2010 and (2) cheque No. 627737 for Rs. 1,00,000/- of ICICI Bank Limited, Mumbai Branch dated 25.10.2010 in favour of Fashion Palace and gave assurance to the complainant that these cheques will be honoured when they would be presented to the Bank. Thus, the complainant presented the cheque No. 627683 on 24.06.2010 in the bank, but cheque was returned with an endorsement "Fund insufficient". 1,00,000/- of ICICI Bank Limited, Mumbai Branch dated 25.10.2010 in favour of Fashion Palace and gave assurance to the complainant that these cheques will be honoured when they would be presented to the Bank. Thus, the complainant presented the cheque No. 627683 on 24.06.2010 in the bank, but cheque was returned with an endorsement "Fund insufficient". Thereafter, the complainant informed the accused No. 2 about return of cheque and as per request of the accused No. 2, the complainant again presented the cheque on 25.10.2010, but once again, it was returned with an endorsement of "Stop payment" and thereafter, once again, as per the say of the accused No. 2, the complainant presented the said cheque on 25.11.2010, but it was returned on the same day with am endorsement "Stop payment". Therefore, the complainant issued a notice through his advocate on 23.12.2010, and when the accused could not make arrangement to pay dues to the complainant, the complainant lodged a complaint, being Criminal Case No. 804/2011, before the Court of learned Additional Chief Judicial Magistrate, Jamnagar. 4. Likewise, when the complainant presented cheque No. 627737 on 25.10.2010, it was returned with an endorsement "Fund Insufficient" and thereafter, once again, as per say of the accused No. 2, when the said cheque returned back dishonoured, the complainant issued a notice thereof through his advocate on 23.12.2010, and when the accused could not make arrangement to pay dues to the complainant, and therefore, a separate complaint came to be lodged before the Court of learned Additional Chief Judicial Magistrate, Jamnagar, being Criminal Case No. 979/2011. 5. Heard learned advocate Mr. Premal S. Rachh appearing on behalf of the applicants, learned advocate Mr. MD Thakkar for Mrs. Sangeeta N. Pahwa appearing on behalf of the respondent No. 2 and learned APP Mr. KP Raval appearing on behalf of the respondent No. 1-State. 6. Learned advocate Mr. Premal S. Rachh appearing on behalf of the applicants has stated that there is no averment made in the complaint much less specific averment that in what manner the applicants are involved in the day to day affairs of the Company. That, merely because the applicants were directors of the Company, at one point of time, they cannot be held vicariously liable for act of the company. That, the applicants have not signed the cheques in question. That, merely because the applicants were directors of the Company, at one point of time, they cannot be held vicariously liable for act of the company. That, the applicants have not signed the cheques in question. That, the applicants have already resigned as Directors of the Company by 20.08.2010, while the cheques in question was deposited and dishonoured on 25.11.2010 and notice under Section 138 of NI Act came to be issued on 23.12.2010. That, even in the impugned complaint, no allegations are made and no role is attributed against the applicants. That, they are roped in as a pressurizing tactic with a sole intention to harass them by using criminal prosecution as a lever. That, the cheques in question were not given by present applicants in any capacity. There is no legally enforceable debt of the complainant pending or existing against the applicants. That, the impugned complaint did not fulfill the mandatory requirement of Section 141 of the Negotiable Instruments Act. 7. Learned advocate Mr. Premal S. Rachh invited attention of this Court to the documents produced on the record, particularly, Form No. 20B, Form No. 32, Form No. 62 in respect of the applicants, informing the Registrar of Companies about their resignations from the post of Director of the Company, alongwith Annual Report of the Company signed by the accused No. 2; date of appointments of the applicants as Directors in the Company; date of their resignation from the Company, date of appointment of the accused No. 2 as a Managing Director in the Company, both the resolutions accepting resignation of the applicants, modification and correcting mistake in respect of accused No. 4 etc., He further argued that against 2 other criminal complaints which were filed by the respondent No. 2 against the applicants, two different quashing petitions were preferred by the applicants, being Criminal Misc. Application No. 6151/2011 and Criminal Misc. Application No. 6152/2011. The said complaints filed by the respondent No. 2 have been quashed and set aside by this Court vide common oral judgment dated 26th August, 2011. In support of his arguments, learned advocate Mr. Premal S. Rachh relied on the judgments reported in 2005 (8) SCC 89 , 2008 (8) SCC 1 and 2011 (3) SCC 351 . The said complaints filed by the respondent No. 2 have been quashed and set aside by this Court vide common oral judgment dated 26th August, 2011. In support of his arguments, learned advocate Mr. Premal S. Rachh relied on the judgments reported in 2005 (8) SCC 89 , 2008 (8) SCC 1 and 2011 (3) SCC 351 . Ultimately, it was requested by him to quash and set aside the impugned complaints filed by the respondent No. 2 before the learned Additional Chief Judicial Magistrate, Jamnagar, being Criminal Case No. 804/2011 and Criminal Case No. 979/2011. 8. Per contra, learned advocate Mr. MD Thakkar appearing on behalf of the respondent No. 2-complainant has encountered the submissions made on behalf of the applicants, he submitted that the petitioner No. 1 was the Managing Director and the applicant No. 2 was the promoter Director of the accused-Company, and therefore, as per the ratio laid down by the Hon'ble Apex Court in the case of SMS Pharmaceuticals v. Neeta Bhaila and Anr., reported in (2005) 8 SCC 89 , no specific averments are required to be made in case of Managing Director, since Managing Director of the Company is admittedly in-charge of all the affairs of the Company for the conduct of its business. He further submitted that Form No. 32 filed before the Registrar of Companies shows their position as Managing Director and promoter Director respectively. He added that since the applicants were admittedly in-charge of the Company, therefore, no averments were required to be made in the complaint in respect of their vicarious liability towards the Company. That, so far as the accused No. 2 is concerned, two different documents are produced on record and in Form No. 32, accused No. 2 is shown as a Managing Director w.e.f. 20th August, 2012 as a Managing Director, working with the Company-accused No. 1, no specific averments of his liability are required as he is deemed to be a liable for the affairs of the Company. He is further liable under Section 141 of the Negotiable Instruments Act as on the date of filing of the complaint, the accused No. 3 was working as a Managing Director in the Company. That, in form 20B, due date of AGM is shown as 30th September, 2011. He is further liable under Section 141 of the Negotiable Instruments Act as on the date of filing of the complaint, the accused No. 3 was working as a Managing Director in the Company. That, in form 20B, due date of AGM is shown as 30th September, 2011. Later on, in a rectification proceedings, if any change is made, then accused No. 3 cannot escape from his liability as a Managing Director of the Company. That, Form No. 32 was rectified later on. That, in a previous quashing petitions preferred by the petitioners, no findings were given on the disputed facts involved in the petition, and therefore, the order passed by this Court would not be binding to the complainant. That, accused No. 3 is vicariously liable for the affairs of the Company, as at the relevant point of time, he was under knowledge that rent was not paid to the complainant. That, resignation of the accused No. 3 would not exonerate him from criminal liability. That, discretionary jurisdiction under Section 482 CrPC may not be exercised in favour of the applicants. Ultimately, it was requested by him to dismiss present applications. 9. Mr. KP Raval, learned APP appearing on behalf of the respondent No. 1 does not dispute the factual aspects of the matter, and therefore, requested the Court to pass necessary orders. 10. Having considered the facts of the case, submissions made by learned advocates appearing on behalf of the respective parties and documentary evidence produced on the record, on a bare reading of the complaint, it appears that all the allegations, which are levelled against the accused No. 2 and the present applicants are general; except stating in para 1 of the complaint that they are Directors of the accused No. 1-Company. Here, profitably, this Court would like to reproduce Section 141 of the Negotiable Instruments Act, which reads as under; Section 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: Provided that nothing contained in this subsection 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: [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. Explanation.- For the purposes of this section,- (a) "company" means anybody corporate and includes a firm or other association of individuals; and (b) "director", in relation to a firm, means a partner in the firm.]" 11. From the complaint, it appears that no specific averments are made by the complainant to attract the provisions of Section 141 of the Negotiable Instruments Act. It can be said that the cheques in question were not given by the present applicants in any personal capacity. It also appears that no legal enforceable debt of the complainant is pending against the present applicants. It can be said that the cheques in question were not given by the present applicants in any personal capacity. It also appears that no legal enforceable debt of the complainant is pending against the present applicants. No averments are made in the complaint by the respondent No. 2 that the applicants are involved in day-to-day affairs of the Company at the time when the offence was committed, or they were in charge of, and were responsible to the Company for the conduct of the business of the Company. It can be said that there is no cause of action against present applicants, as stated by the respondent No. 2. Here, this Court would like to refer to a judgment in the case of Pooja Ravinder Devidasani v. State of Maharashtra, reported in 2014 (0) AIJEL-SC-56018, wherein, in the entire complaint, no specific role of the accused was specified in the commission of alleged offence. In light of these facts, it was held that to attract a case under Section 141 of the NI Act, a specific role must have been played by a Director of the Company for fastening vicarious liability. But, in the cited case, the appellant was neither Director of the accused-Company nor in-charge of, or was responsible in a day-to-day affairs of the Company at the time of commission of alleged offence. There is not even a whisper or shared of evidence on record to show that there is any act committed by the appellant, from which, a reasonable interference can be drawn that the appellant could be vicariously held liable for the offence, with which, she is charged. Under the circumstances, complaint was quashed by Hon'ble Supreme Court by setting aside the judgment passed by the High Court. 12. In case of Harshendra Kumar v. Rebatilata Koley, reported in 2011 (0) GLHEL-SC-49391, a complaint was filed under Sections 138 and 141 of NI Act when the cheque was dishonoured. The question of liability of Director of the Company was involved in the petition preferred by the accused in a petition preferred under Section 482 CrPC. In this case, Metropolitan Magistrate issued summons to all the accused persons, including appellant therein. The appellant had challenged the proceedings initiated by the complainant. The question of liability of Director of the Company was involved in the petition preferred by the accused in a petition preferred under Section 482 CrPC. In this case, Metropolitan Magistrate issued summons to all the accused persons, including appellant therein. The appellant had challenged the proceedings initiated by the complainant. It was held that dishonoured cheques were issued by the Company on 30.04.2004 i.e., much after appellant resigned from the post of Director of the Company. Acceptance of appellant's resignation gets duly reflected in the resolution dated 02.03.2004. It was not even the case of complainants that dishonoured cheques were issued by the appellant. On the date when the alleged offence was committed by the Company, the appellant was not the Director; he had nothing to do with the affairs of the Company. It was held that if criminal complaints are allowed to proceed against the appellant, it would result in gross injustice to appellant as it tantamounts to an abuse of process of the Court. Therefore, the summons against appellant was quashed by the Hon'ble Supreme Court. 13. Here also, it is observed by this Court that no sufficient or specific averments are made in the complaint that the present applicants were either in-charge of and/or were responsible to the Company for the conduct of its business. That, the complainant should spell out as to how and in what manner, the accused No. 3 was in charge of, and what was responsible to the accused-Company for the conduct of its business, which should be in consonance with strict interpretation of penal statues, especially, where such statutes create vicarious liability. It is clear that merely because the applicants were Directors of the Company, at one point of time, they cannot be held vicariously liable for acts of the Company. 14. In case of Gunmala Sales Private Ltd. Versus Navkar Infra Projects Private Limited & Ors., reported in 2014 (0) AIJEL-SC 55840, it is observed that the complaint was filed under Section 138 and 141 of the NI Act for dishonour of cheque against the company and its Directors. The question was whether the complaint was maintainable against Director of the Company, who has resigned and whether the Director, who has resigned, can be prosecuted after his resignation, has been accepted by the Board of Directors of the Company. The question was whether the complaint was maintainable against Director of the Company, who has resigned and whether the Director, who has resigned, can be prosecuted after his resignation, has been accepted by the Board of Directors of the Company. The High Court was pleased to quash the complaint against the Directors on the ground that there were bald allegations against the Directors that they were looking after business of the Company etc., Hon'ble Supreme Court held that complaint cannot be quashed on the ground that apart from basic averments, no particulars are given. 15. It appears from the record that two identical complaints were also filed by the respondent No. 2 against the present applicants in respect of two different cheques and both the complaints were challenged by the applicants before this Court by filing two different quashing petitions, being Criminal Misc. Application No. 6151of 2011 and Criminal Misc. Application No. 6152 of 2011. It also appears that both the petitions were quashed by a common oral judgment dated 26th August, 2011. Copy of the common oral judgment passed by this Court in Criminal Misc. Application No. 6151of 2011 and Criminal Misc. Application No. 6152 of 2011 is produced on record. Learned advocate Mr. MD Thakkar appearing on behalf of the respondent No. 2 has admitted that quashment of the aforesaid two petitions and the order passed in both these petitions are not challenged. 16. From the complaint, it appears that no ingredients of offence punishable under Section 138 of the Negotiable Instruments Act are made out against the present applicants. None of the applicants have signed any cheque in question and both of them have resigned as Directors of the Company on 20th August, 2010, while the cheque in question were deposited and dishonoured on 25th November, 2010. Notice under Section 138 of the NI Act was issued on 23rd December, 2010 ie., after resignation of the applicants. No allegations are made in the complaint in respect of the role attributed by the present applicants. Under Section 141 of the NI Act, it is necessary to specifically aver in the complaint that at the time of alleged offence, the accused person was in charge of, and/or responsible for the conduct of the business of the Company. This averment is an essential ingredient for arraigning the accused under Section 141. Under Section 141 of the NI Act, it is necessary to specifically aver in the complaint that at the time of alleged offence, the accused person was in charge of, and/or responsible for the conduct of the business of the Company. This averment is an essential ingredient for arraigning the accused under Section 141. Without this averment being made in the complaint, requirements of Section 141 cannot be said to be satisfied. Merely being a Director of a Company, as alleged in the impugned complaint, would not be sufficient to make any person liable under Section 141 of the NI Act. A Director in a Company cannot be held to be in charge of and/or responsible to the Company for conduct of its business. The requirement of Section 141 is that the person sought to be 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. The respondent No. 2 being Managing Director would admittedly be in-charge of the Company and responsible for the conduct of its business. 17. It appears from the record that in all the documents; including Form No. 20B in clause IV, details of Directorss, Managing Director, Manager and Secretary as on the date of AGM, the respondent No. 2-Omprakash Pannalal Gupta has put his signature in the capacity of Managing Director, as he was appointed on 9th March, 2009. It also appears that in a form of Annual Return of the Company having a share capital under Section 159 of the Companies Act, the respondent No. 2-Omprakash Pannalal Gupta has put his signature on behalf of the Company as the Chairman & Managing Director. In Form No. 20B, due date of AGM is shown as 30th September, 2011. On 20th August, 2010, the applicant No. 1-accused No. 3 has resigned from the Company by tendering his resignation from the office of Director of the Company with immediate effect under his signature as well as the applicant No. 2-accused No. 4, on 20th August, 2010, has tendered her resignation from the office of Director of the Company with immediate effect. They also requested the concerned persons for filling necessary Form No. 32 to the Registrar of Companies in the matter with immediate effect. They also requested the concerned persons for filling necessary Form No. 32 to the Registrar of Companies in the matter with immediate effect. It also appears that the resignation was accepted under the signature of accused No. 2- Mr. Omprakash Pannalal Gupta accepting resignation of the applicant No. 1- Mr. Nilesh Yashwant Shah from the office of Director of the Company with effect from 20th August, 2010, as well as applicant No. 2-Mrs. Neeta Nilesh Shah with effect from same date. It is further resolved that the appreciation of her services to the Company should be conveyed to the applicant No. 2- Mrs. Neeta Nilesh Shah, through the Chairman of the Board. It also appears from the record that the applicant No. 1-accused No. 3 had not drawn any Salary or Director's remuneration from the accused-Company during the period from 01.04.2008 to 31.03.2009. In a Form No. 20B produced on record, in clause-IV-the details of Managing Director or Director of the Company, name of the accused No. 2-Mr. Omprakash Pannalal Gupta is shown as Managing Director. The accused No. 2-Mr. Omprakash Pannalal Gupta was appointed as Managing Director by the Company by passing of a resolution on 25th February, 2010 18. It appears that in form No. 32 filed at the time of appointment and the one which was filed at the time of resignation of the applicant No. 1 Mr. Nilesh Yashwant Shah as a Director, as there was a clerical error in Form-32, as he was wrongly shown as Managing Director of the Company, whereas, he had never held the office of Managing Director and never acted as such during the tenure of his Directorship, which could be found from the record of the Company, and therefore, he requested to revise Form-32. The accused-company has also resolved that the revised Form-32 for appointment and revised Form 32 for resignation as a Director of Mr. Nilesh Yashwant Shah be filed to rectify clerical error in Form-32 filed at the time of incorporation for appointment and Form-32 and Form-32 filed for resignation of the applicant No. 1 as Director. 19. It also appears that Form-32 was rectified and he was shown as a Director on the date of appointment on 10th September, 2008 as well as in Form-32 produced on record, his resignation was shown with effect from 20th August, 2010 as a Director. 19. It also appears that Form-32 was rectified and he was shown as a Director on the date of appointment on 10th September, 2008 as well as in Form-32 produced on record, his resignation was shown with effect from 20th August, 2010 as a Director. Therefore, whatever the clerical mistake was made was rectified accordingly by the Registrar of the Companies in both the forms. Therefore, the arguments advanced by learned advocate Mr. MD Thakkar appearing on behalf of the respondent No. 2 that these are the factual aspects, which requires evidence before the trial court cannot be accepted. None of the applicants were responsible for the affairs of the Company, at the time of issuing of the cheques in dispute. Both of them have resigned from the Company and thereafter, the cheques were deposited by the respondent No. 2. No averments are made in the impugned complaint by the respondent No. 2 reflecting vicarious liability of the present applicants and their responsibility for the conduct of business of the company as Directors. 20. For the foregoing reasons, these applications are accordingly allowed. Complaints viz., Criminal Case No. 804/2011 and Criminal Case No. 979/2011 pending in the Court of learned Additional Chief Judicial Magistrate, Jamnagar are hereby quashed, qua the applicants. Consequential proceedings; if any, arising out of and in connection with the said proceeding shall stand quashed. 21. Rule nisi issued in each case is made absolute to the aforestated extent. Ad-interim relief granted earlier stands confirmed. No costs.