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2023 DIGILAW 625 (KAR)

Kamal Sagar v. Starworth Infrastructure

2023-04-20

R.NATARAJ

body2023
JUDGMENT/ORDER 1. The petitioner has challenged the prosecution initiated against him in C.C.No.54737/2017 pending trial before the LVII Additional Chief Metropolitan Magistrate, Mayohall, at bengaluru, (henceforth to be referred to as 'trial Court') for the offence punishable under Sec. 138 of Negotiable Instrument Act, 1881 (henceforth referred to be as N.I.Act, ) and the order dtd. 19/9/2017 issuance of process against him. 2. A private complaint was filed by the respondent herein in PCR No.53798/2017 alleging the commission of an offence punishable under Sec. 138 of N.I.Act. The respondent had arrayed all the directors of the drawer- Company and alleged that all of them were responsible for the business and day to day activities of the Company. 3. Respondent further alleged that the Company and its directors had furnished corporate guarantee for a sum of Rs.2, 00, 00, 000.00 on 12/3/2015 and passed on a cheque for sum of Rs.2, 00, 00, 000.00 dtd. 27/7/2016 towards repayment. The said cheque when presented was dishonored due to insufficient funds which prompted the respondent to issue a notice of demand on 5/8/2016, which was served on the petitioner herein, who was purportedly one of the directors of the Company. On the failure of the drawer-Company to re-pay the amount, proceedings to prosecute Company and its directors for the offence punishable under Sec. 138 of N.I.Act was initiated. 4. The trial Court after recording the pre summons evidence of the respondent, took cognizance of the offence and issued process in terms of the order dtd. 19/9/2017. Being aggrieved by the order issuing process, the petitioner is before this Court primarily contending that he resigned from the directorship of the accused-company on 22/6/2015 and corresponding DIR-12 was filed before the Registrar of Companies. He further claimed that the cheque in question was issued long after he had retired from the Company and therefore, he was neither responsible for the conduct of the business of the Company nor was he incharge and responsible to the company in any manner whatsoever. 5. Learned counsel for petitioner relied upon the judgment of the Apex Court in the case of "Harshendra Kumar D Vs. 5. Learned counsel for petitioner relied upon the judgment of the Apex Court in the case of "Harshendra Kumar D Vs. Rebatilata Koley and Others" reported in (2011) 3 SCC 351 and invited the attention of this Court to paragraph No.17, he contended that the instant prosecution is only to strong arm the petitioner and force him to pay the amount covered under the cheque in question. 6. Per contra, learned Senior counsel representing the respondent submitted that there were specific assertions made in the complaint that the petitioner along with other directors were responsible for the business of the drawer-Company and that the petitioner was one of the persons who had executed the corporate guarantee. He submits that there were e-mail correspondence by the petitioner even after he allegedly retired from the company and therefore, the claim of the petitioner that he was not a director of the company was a smoke screen created by the petitioner to escape being prosecuted. 7. Learned Senior counsel relied upon the judgment of the Apex Court in the case of "Standard Chartered Bank Vs. State of Maharashtra and Ors." reported in (2016) 6 SCC 62 . He further contended that the petitioner who was served with the statutory notice under Sec. 138 of N.I.Act failed to respond and claim that he was no longer a director of the Company and therefore was not responsible for the affairs of the Company. He therefore submits that it is for the petitioner to appear before the trial Court and establish his defence before the trial Court. 8. I have considered the submissions made by the learned counsel for the petitioner as well as learned Senior counsel representing the respondent. 9. Sec. 141 of the N.I.Act, deals with the person who has to be prosecuted in the event of commission of an offence under Sec. 138 of Negotiable Instruments Act, 1881 committed by a Company and reads as follows: "141. Offences by companies. 9. Sec. 141 of the N.I.Act, deals with the person who has to be prosecuted in the event of commission of an offence under Sec. 138 of Negotiable Instruments Act, 1881 committed by a Company and reads as follows: "141. Offences by companies. ___ (1) If the person committing an offence under Sec. 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 the punished accordingly; Provided that nothing contained in this sub- Sec. 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- Sec. (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 for the other officer shall also be deemed to be guilty of that offence and shall be liable to be proceed against and punished accordingly". 10. Perusal of the above leaves no doubt that in order to avoid any doubt as to who should be prosecuted, when a Company is accused of an offence, Sec. 141 of the N.I.Act, delineates that every person who at the time of commission of offence was incharge of and was responsible to the Company for the conduct of the business of the Company and the company shall be deemed to be guilty and shall be liable to be proceeded and punished. The first proviso to Sec. 141 of N.I.Act, grants an opportunity to the person responsible to prove that the offence committed was without his knowledge, or that he had exercised due diligence to prevent the commission of such offence and thereby escape being punished. 11. It is relevant to note that Sec. 141 of N.I.Act does not restrict the prosecution to a director of a company but indicates that "every person who, at the time of offence was committed, was in charge of" thereby giving an impression that any person even if he is not a director of the company could be prosecuted, if it is shown that he was incharge and was responsible to the conduct of the business of the company. 12. In the case on hand, petitioner was arrayed as one of the directors of the drawer-company. It is claimed that petitioner too was incharge and responsible for the affairs of the company in as much as he was one of the person who had executed the corporate guarantee. The respondent claimed that despite service of a notice of demand, which is refuted by the learned counsel for petitioner, the petitioner did not reply to the claim that he was not director of the Company and was no longer responsible for the affairs of the Company. The e-mail correspondence which are placed on record, demonstrate that notwithstanding his alleged retirement from the Company, the petitioner continued to correspond over official matters of the Company. The contention of the petitioner that these correspondences were based on personal level and not even in official capacity, is a matter of trial and the petitioner has to establish the same before the trial Court and he is also bound to establish before the trial Court that he has retired from the company and was incharge or responsible to the company for the conduct of the business. 13. As rightly contended by the learned Senior counsel for the respondent, there are shades of evidence, which indicates that the petitioner was corresponding with the respondent over the matters concerning the drawer-Company and therefore, the contention of the petitioner that he retired from the directorship of the Company and therefore was insulated from prosecution cannot be accepted at this stage and in that view of the matter, the petition fails and the same is dismissed. It is open for the petitioner to appear before the trial Court and establish his defence in accordance with law. Any observation made herein is only for the limited purpose of disposing of this petition and shall not affect the trial Court in deciding the case on merits. The petitioner shall appear before the trial Court on 21/4/2023 and adduce his evidence and the respondent shall without fail cross-examine the petitioner tomorrow i.e., on 21/4/2023 itself and the trial Court may proceed to pass orders in accordance with law.