Criminal Application No.696 of 2014,Criminal Application No.715 of 2014

22nd December, 2014

Petitioner Counsel: Mr. JATIN P. SHAH
Respondent Counsel: Mr. AJAY PATIL, A.P.P.

Cases Cited:
National Small Industries Corporation Limited Vs. Harmeet Singh, 2010 ALL MR (Cri) 921 (S.C.)=(2010) 3 SCC 330 [Para 2,3]
GHCL Employees Stock Option Trust Vs. Kranti Sinha, (2013) 4 SCC 505 [Para 2,3]
Pooja Ravinder Devidasani Vs. State of Maharashtra, 2015 ALL MR (Cri) 419 (S.C.)=Cri.A. No.2604 2610/2014, Dt.17.12.2014 [Para 4,5]

JUDGMENT

JUDGMENT :- The applicants in Criminal Application Nos.696 to 715 of 2014 are facing trial for the offence punishable under Section 138 of the Negotiable Instruments Act in Summary Criminal Case Nos.924 of 2013, 925 of 2013, 926 of 2013, 1205 of 2013, 1214 of 2013 to 1219 of 2013, 1094 of 2013, 1098 of 2013, 1097 of 2013, 1096 of 2013, 1095 of 2013, 1271 of 2013 to 1274 of 2013 and 1257 of 2013 respectively pending before the Judicial Magistrate First Class, Kolhapur. Respondent No.2 - Priyadarshani Polysacks Limited is the complainant in all the complaints. The complaints have been filed by one of the directors of the complainant. As far as applicants are concerned, the role attributed to them is described in paragraph 2 of the complaint. Paragraph 2 of the complaint can be reproduced as under:

"2) That accused No.1 is a company registered under Companies Act, accused No.2 is the managing director of the company while accused No.3 to 13 are directors of the company while accused No.14 is the secretary of the company. All accused look after the business of the company and all accused are responsible to the company for the conduct of the business of the company. The search report of the company secretary to ascertain the director body of the accused company is obtained, the same is attached with the complaint along with the complaint, the same be treated as part of the complaint."

2. Mr. Jatin Shah, learned Advocate appearing on behalf of the applicants has submitted that the allegations made against the applicants are not sufficient to bring them in the array of the accused with the help of Section 141 of the Negotiable Instruments Act. It is submitted by the learned Advocate that no specific role is assigned to any of the applicants in the complaints by the respondent No.2. My attention was invited to the judgment of this Court in Criminal Application No.437 of 2013 of Nagpur Bench decided on 28th October 2014. This Court, while dealing with the similar issue, had referred two cases of the Hon'ble Supreme Court. The first case referred by this Court in the said judgment was National Small Industries Corporation Limited Vs. Harmeet Singh reported at (2010) 3 SCC 330 : [2010 ALL MR (Cri) 921 (S.C.)]. The second judgment referred by this Court was GHCL Employees Stock Option Trust Vs. Kranti Sinha reported at (2013) 4 SCC 505.

3. In National Small Industries Corporation Limited, [2010 ALL MR (Cri) 921 (S.C.)] (supra), the Hon'ble Supreme Court had taken a view that to fasten the vicarious liability on the directors of the company and the company secretary, it was necessary for the complainant to make specific averments as are required under the law so as to make the accused vicariously liable. It was further observed that for fastening the criminal liability, there is no presumption that every director knows about the transaction. The Hon'ble Supreme Court in the case of GHCL Employees Stock Option Trust (supra) has observed that in the order issuing summons, the learned Magistrate has to record his satisfaction about the prima facie case as against those directors and the role played by them in the capacity of director or managing director or company secretary, as the case may be. The relevant portion of the said judgment of the Hon'ble Supreme Court can be found at para 19 of the judgment, which runs as under:

"19. In the order issuing summons, the learned Magistrate has not recorded his satisfaction about the prima facie case as against respondent Nos.2 to 7 and the role played by them in the capacity of Managing Director, Company Secretary or Directors which is sine qua non for initiating criminal action against them. Recently, in the case of M/s. Thermax Ltd. Vs. K. M. Johny while dealing with a similar case, this Court held as under :-

"38. Though Respondent No.1 has roped all the appellants in a criminal case without their specific role or participation in the alleged offence with the sole purpose of settling his dispute with appellant-Company by initiating the criminal prosecution, it is pointed out that appellant Nos. 2 to 8 are the Ex-Chairperson, Ex-Directors and Senior Managerial Personnel of appellant No.1 Company, who do not have any personal role in the allegations and claims of Respondent No.1. There is also no specific allegation with regard to their role

39. Apart from the fact that the complaint lacks necessary ingredients of Sections 405, 406, 420 read with Section 34 IPC, it is to be noted that the concept of 'vicarious liability' is unknown to criminal law. As observed earlier, there is no specific allegation made against any person but the members of the Board and senior executives are joined as the persons looking after the management and business of the appellant-Company."

4. In the recent judgment in Criminal Appeal Nos.2604-2610 of 2014 (Pooja Ravinder Devidasani Vs. State of Maharashtra), decided on 17th December 2014 : [2015 ALL MR (Cri) 419 (S.C.)], the Hon'ble Supreme Court, while dealing with the issue of vicarious liability, has observed in paragraph 28 as under:

"28. In the entire complaint, neither the role of the appellant in the affairs of the Company was explained nor in what manner the appellant is responsible for the conduct of business of the Company, was explained. From the record it appears that the trade finance facility was extended by the Respondent No. 2 to the default Company during the period from 13th April, 2008 to 14th October, 2008, against which the Cheques were issued by the Company which stood dishonored. Much before that on 17th December, 2005 the appellant resigned from the Board of Directors. Hence, we have no hesitation to hold that continuation of the criminal proceedings against the appellant under Section 138 read with Section 141 of the N.I. Act is a pure abuse of process of law and it has to be interdicted at the threshold."

5. As such, it is clear that the bare allegations that a particular director was responsible to the company for the conduct of business of company would not be sufficient to issue process against the said director under Section 138 of the Negotiable Instruments Act with the help of Section 141 of the said Act. The judgments of the Hon'ble Supreme Court clearly indicate that it is necessary for the complainant to describe specific role played by the particular director or company secretary, as the case may be, to make him criminally liable for the offence under the Negotiable Instruments Act. In the case of Pooja Ravinder Devidasani, [2015 ALL MR (Cri) 419 (S.C.)] (supra), the Hon'ble Supreme Court has further observed in paragraph 30 as under:

"30. Putting the criminal law into motion is not a matter of course. To settle the scores between the parties which are more in the nature of a civil dispute, the parties cannot be permitted to put the criminal law into motion and Courts cannot be a mere spectator to it. Before a Magistrate taking cognizance of an offence under Section 138/141 of the N.I. Act, making a person vicariously liable has to ensure strict compliance of the statutory requirements. The Superior Courts should maintain purity in the administration of Justice and should not allow abuse of the process of the Court. The High Court ought to have quashed the complaint against the appellant which is nothing but a pure abuse of process of law."

6. In the present case also, considering the nature of the averments made in paragraph 2 of the complaint against the applicants, it can safely be said that it is nothing but abuse of process of law and, therefore, the interest of justice requires that this Court quashes the proceedings pending against the applicants in the above stated Summary Criminal Cases pending in the Court of Judicial Magistrate First Class, Kolhapur. Hence, I pass the following order:

a. All the Applications are allowed;

b. The criminal cases pending against the applicants in the Court of Judicial Magistrate First Class, Kolhapur vide Summary Criminal Case Nos.924 of 2013, 925 of 2013, 926 of 2013, 1205 of 2013, 1214 of 2013 to 1219 of 2013, 1094 of 2013, 1098 of 2013, 1097 of 2013, 1096 of 2013, 1095 of 2013, 1271 of 2013 to 1274 of 2013 and 1257 of 2013 are hereby quashed;

c. Bail bonds of the applicants, if any, be canceled.

7. All the Criminal Applications are accordingly disposed of.

Applications allowed.