Criminal Application (Apl) No.36 of 2014,Criminal Application (Apl) No.37 of 2014

1st April, 2014.

Petitioner Counsel: Shri ROHIT DEO
Respondent Counsel: Shri A.T. PUROHIT, Shri c

Cases Cited:
National Small Industries Corporation Limited Vs. Harmeet Singh Paintal and Anr., 2010 ALL MR (Cri) 921 (S.C.)=2010 (3) SCC 330 [Para 3,6]
Pratik Jain Vs. Ved Prakash Kaushik and Anr., 2013 (205) DLT 425 [Para 4]
K.K. Ahuja Vs. V.K. Vora and Anr., 2009 ALL SCR 1524=2009(10) SCC 48 [Para 4,7]
Rallis India Limited Vs. Poduru Vidya Bhushan and Ors., 2011 ALL MR (Cri) 1645 (S.C.)=2011(13) SCC 88 [Para 4,7]

JUDGMENT

JUDGMENT :- Admit. Heard finally by consent of the parties. Shri A.T. Purohit, the learned Counsel waives notice on behalf of respondent No.1 and Shri R.S. Nayak, learned Additional Public Prosecutor waives notice on behalf of respondent No.2.

2. On perusal of the order sheet, it reveals that on 11th March, 2014, Shri M.W. Mathew, the learned Counsel made a statement that he had instructions to appear on behalf of non-applicant No.6 and prayed for some time to file power as well as reply on behalf of non-applicant No.6. Today, Shri M.W. Mathew, the learned Counsel is not present. The other respondents though duly served, none appears on their behalf.

3. The applicant/petitioner before this Court in the present applications is an accused No.8 in Criminal Complaint Nos.26112/2013 and 26113/2013 respectively lodged in the Court of Judicial Magistrate, First Class, Court No.35 and Special Court for cases u/s 138 of Negotiable Instruments Act, Nagpur. Shri Rohit Deo, the learned Counsel for the applicant, by inviting my attention to the complaint, submits that the complaint falls too short leaving apart the necessary requirements of the provisions of Section 138 of the Negotiable Instruments Act against the applicant to be referred to as an accused. The learned Counsel for the applicant, by inviting my attention to the complaint, further submits that the material portion against the present applicant in para 2 is that accused No.8 is the Director/Promoter of accused No.1/Company. In para 3 of the complaint it is stated that the accused No.8 is the Promoter of accused No.1 and is having 17 per cent of shares of accused No.1. The accused Nos.2 to 8 were and are in charge of and also responsible for the day to day affairs and for the conduct of the business of accused No.1 at the relevant point of time. Para 4 is the reiteration of the contents of the complaint in para 3 with a reference that the website of Ministry of Corporate Affairs, Government of India confirming that the accused No.8 is having 17 per cent shares of accused No.1. Shri Rohit Deo, the learned Counsel for the applicant further submits that taking these contents together, even, by no stretch of imagination, criminal liability can be fastened against the present applicant. He further submits that it is not in dispute that the applicant is having 17 per cent of shares in the company and was the promoter, but, merely because the applicant is having certain share capital in the company, cannot lead to the conclusion that the applicant was in charge of and was responsible for day to day affairs and for the conduct of the business of accused No.1/Company. Insofar as the reference to the applicant/accused No.8 being promoter of the company is concerned, it is the submission of the learned Counsel for the applicant that the act of the promoter was prior to the formation of the company. A promoter may be a person along with some other person facilitating that group of persons to form a company but, not necessarily means that a promoter is a director or a person in charge or having control of day to day affairs of the company. Shri Deo submits that with such contentions in the complaint asking the applicant to face a criminal proceeding is an abuse of the process of law and this Court, by exercising its powers under Section 482 of the Code of Criminal Procedure, can certainly prevent such abuse of process of law. The learned Counsel for the applicant, in support of his submission, places reliance on the judgment of the Apex Court in the case of National Small Industries Corporation Limited .v. Harmeet Singh Paintal and another (reported in 2010 (3) SCC, 330 : [2010 ALL MR (Cri) 921 (S.C.)].

4. Per contra, Shri A.T. Purohit, the learned Counsel appearing on behalf of non-applicant No.1 submits that the complaint reflects the material more than the requirement of the law. He further submits that the applicant was having 17 per cent of shares in the company. The learned Counsel then, by inviting my attention to para 2 of the complaint, submits that it is stated in the complaint that accused Nos.2 to 8 are the directors/promoters of the accused No.1. He further submits that in para 6 of the complaint, it is spelt out that the accused Nos.2 to 8 approached the complainant and in para 7 it is submitted that the accused Nos.2, 3 and 8 approached the complainant and asked him that the accused Nos.2 to 8 had decided to request for providing financial assistance from the complainant and told the complainant that the accused No.1 is suffering from financial crisis and requested to provide financial assistance for a period of 12 to 15 months in order to fulfill the business commitments of the accused No.1. It is the submission of the learned Counsel for non-applicant No.1 that reading the contents of paras 2, 3, 6 and 7, the complainant established the necessary requirement i.e. the applicant/ accused No.8 was in charge of and was responsible for the day to day affairs and for the conduct of business of accused No.1 at the relevant point of time. In support of his submission, Shri A.T. Purohit, the learned Counsel for non-applicant No.1, places reliance on the judgment of the Delhi High Court in the case of Pratik Jain .v. Ved Prakash Kaushik and another (reported in 2013 (205) DLT, 425); the judgments of the Apex Court in the case of K.K. Ahuja .v. V.K. Vora and another (reported in 2009(10) SCC, 48 : [2009 ALL SCR 1524]) and in the case of Rallis India Limited .v. Poduru Vidya Bhushan and others (reported in 2011(13) SCC, 88 : [2011 ALL MR (Cri) 1645 (S.C.)]). It is the submission of Shri A.T. Purohit, the learned Counsel for the applicant that the complaint satisfies the requirement of Section 141 clause (1). He further submits that clause (1) of Section 141 would attract against the person who may not be even the director/partner of the company and who may be responsible to the company for the conduct of the business of the company and this provision is incorporated to see that the persons are not Scot free only on account that they are not either the directors or the partners of the company.

5. On hearing both the learned Counsel appearing on behalf of the respective parties at length, in my opinion, the complaint falls too short to fasten criminal liability against the present applicant. The only averments in the complaint are in respect of holding of 17 per cent share capital of the applicant in the company being the promoter of the company. Even accepting this fact as it is and on its face value, by no stretch of imagination, one can arrive at a conclusion that these are the contents sufficient enough to attract and fasten a criminal liability against the applicant so as to say that the applicant was in charge of and was responsible for the day to day affairs and for the conduct of business of accused No.1/company at the relevant point of time. Though Shri A.T. Purohit, the learned Counsel for non-applicant No.1 submits that para 7 refers to the act of the applicant to fasten criminal liability against the applicant, I am unable to accept the submission of Shri Purohit. At the cost of repetition, even if one reads the contents in para 7 as it is, what reflects is the acquaintance of this accused with the complainant, having known that the complainant was possessing huge agricultural land in Haryana, accused Nos.2 and 8 i.e. the applicant approached the complainant and decided to request for providing financial assistance expressing their financial constraints and crisis and the complainant was ready to oblige them. Now taking these facts in any way, these contents fall too short to say that the applicant was in charge of and was responsible for the day to day affairs and for the conduct of business of accused No.1/company.

6. It will be useful to refer to the judgment of the Apex Court in the case of National Small Industries Corporation Limited .v. Harmeet Singh Paintal and another, [2010 ALL MR (Cri) 921 (S.C.)] (cited supra) relied upon by the learned Counsel for the applicant Shri Rohit Deo on the controversy and at the backdrop of the relevant provisions namely, Sections 141, 138 and 142, the Apex Court in para 39 of the judgment laid down certain principles guiding us to understand the term for considering the persons falling under the category of persons who are responsible to the company for the conduct of the business of the company and in charge of the business of the company. These principles are crystallized as follows :-

"(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 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 the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the 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 the accused is a Managing Director or a 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 the 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 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."

7. Shri A.T. Purohit, the learned Counsel for non-applicant No.1 makes an attempt to rely on the judgment of the Apex Court in the matter of K.K. Ahuja .v. V.K. Vora and another, [2009 ALL SCR 1524] (cited supra). Considering the judgment of the Apex Court, it is clear that the Apex Court, in clear words, disapproved the submissions made by the learned Counsel. Shri A.T. Purohit, the learned Counsel for non-applicant No.1 makes an attempt to say that the clause (1) of Section 141 makes a person responsible and criminal liability can be fastened to any person related with the company and as such it may not be required to refer to clause (2) of Section 141. It will be interesting to note the observations of the Apex Court. The Apex Court held as under:-

"If a mere reproduction of the wording of Section 141(1) in the complaint is sufficient to make a person liable to face prosecution, virtually every officer/employee of a company without exception could be impleaded as accused by merely making an averment that at the time when the offence was committed they were in charge of and were responsible to the company for the conduct and business of the company. That would be absurd and not intended under the Act. As the trauma, harassment and hardship of criminal proceedings in such cases, may be more serious than the ultimate punishment, it is not proper to subject all and sundry to be impleaded as accused in a complaint against a company, even when the requirements of Section 138 read with Section 141 of the Act are not fulfilled. (emphasis supplied)"

Shri Purohit, the learned Counsel relies on para 26 of the judgment in support of his submission. I am unable to accept the submission of Shri Purohit on the backdrop of the clear words of the Apex Court referred to above. Shri A.T. Purohit, the learned Counsel for non-applicant No.1 relied on the judgment of the Apex Court in the case of Rallis India Limited .v. Poduru Vidya Bhushan and others, [2011 ALL MR (Cri) 1645 (S.C.)] (cited supra). On perusal of the said judgment, it is clear that the Apex Court found that the sufficient averments were made in the complaint in respect of the respondents being the partners of the firm and they were looking after day to day affairs of the partnership firm at the relevant point of time. On that backdrop of the fact, the Apex Court further observed that a preliminary burden was discharged by the complainant.

8. In the present case, such is not the fact. What the complainant wants is to accept the contents in respect of holding of share capital of the applicant and the applicant being promoter is sufficient to say that the complainant had discharged his preliminary burden. The same cannot be accepted. Shri A.T. Purohit, the learned Counsel also made an attempt to submit that the receipt is also placed on record to support the submission of the learned Counsel. Perusal of the receipt which is placed on record to the reply filed by non-applicant No.1 as "Annexure-III" reads thus:-

In Criminal Application No.36 of 2014

"We decided to take Rs.10,00,000/- (rupees ten lacs only) from Shri Brij Bhushan Garg resident of 23, Indra Sagar Apartments, Civil Lines, Nagpur-440001 and issued this receipt upon getting payment.

For repayment of the said amount, account payee cheque bearing No.425855 dated 10.09.2013 for Rs.10,00,000/- only is issued in favour of Shri Brij Bhushan Garg. We undertake to repay the said amount in 15 months with interest @ 18 % p.a."

In Criminal Application No.37 of 2014

"We decided to take Rs.20,00,000/- (rupees twenty lacs only) from Shri Brij Bhushan Garg resident of 23, Indra Sagar Apartments, Civil Lines, Nagpur-440001and issued this receipt upon getting payment.

For repayment of the said amount, account payee cheque bearing No.425855 dated 10.09.2013 for Rs.20,00,000/- only is issued in favour of Shri Brij Bhushan Garg. We undertake to repay the said amount in 15 months with interest @ 18 % p.a."

9. It is difficult to accept the submission of the learned Counsel for the non-applicant No.1 that by this receipt the complainant has discharged his initial burden of showing that the applicant/accused No.8 was in charge of or the person responsible for day to day affairs of the accused No.1/company. This receipt leads nowhere to establish the initial burden by the complainant.

10. Thus, considering the above referred facts, in my opinion, the learned Counsel for the applicant has made out a case for warranting interference at the hands of this Court by exercising the powers under Section 482 of the Code of Criminal Procedure. On such insufficient and absurd material asking the applicant to face the criminal prosecution under the provisions of the Negotiable Instruments Act i.e. under Section 138 of the Negotiable Instruments Act would be an abuse of process of law. It is now settled position of law that the powers of this Court under Section 482 of the Code of Criminal Procedure can sparingly be used to prevent the abuse of process of law and the present applications are one of such matters where this Court can sparingly exercise these powers to prevent abuse of process of law.

11. In the result, the applications are thus allowed. The order dated 02.01.2014 in Criminal Complaint Nos.26112/2013 and 26113/2013 passed by 35th Judicial Magistrate First Class, Nagpur is quashed and set aside.

Application allowed.