Rajeshkumar Madhusoodanan vs State Of Gujarat

                                                                                   NEUTRAL CITATION




    R/CR.MA/22316/2019                             JUDGMENT DATED: 10/11/2023

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             IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

      R/CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
                    FIR/ORDER) NO. 22316 of 2019


FOR APPROVAL AND SIGNATURE:


HONOURABLE MR. JUSTICE SANDEEP N. BHATT

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1     Whether Reporters of Local Papers may be allowed
      to see the judgment ?

2     To be referred to the Reporter or not ?

3     Whether their Lordships wish to see the fair copy
      of the judgment ?

4     Whether this case involves a substantial question
      of law as to the interpretation of the Constitution
      of India or any order made thereunder ?

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                         RAJESHKUMAR MADHUSOODANAN
                                     Versus
                               STATE OF GUJARAT
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Appearance:
MR. R.D.KINARIWALA(6146) for the Applicant(s) No. 1,2,3,4
DS AFF.NOT FILED (N) for the Respondent(s) No. 8
MR PM DAVE(263) for the Respondent(s) No. 2
NOTICE SERVED for the Respondent(s) No. 3
NOTICE UNSERVED for the Respondent(s) No. 4,5,6,7,9
MS MONALI H BHATT, APP for the Respondent(s) No. 1
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    CORAM:HONOURABLE MR. JUSTICE SANDEEP N. BHATT

                               Date : 10/11/2023

                               ORAL JUDGMENT

NEUTRAL CITATION R/CR.MA/22316/2019 JUDGMENT DATED: 10/11/2023 undefined

1. This application is filed under Section 482 of the Code of Criminal Procedure, 1973 (`the Code' for short) for quashing and setting aside the process issued by the learned Metropolitan Magistrate (NI Act), Court No.36 at Ahmedabad in Criminal Case No.59178 of 2019 qua the present applicants filed under the provisions of the Negotiable Instruments Act (`the NI Act' for short).

2. The brief facts leading to filing of this application are such the impugned complaint is filed by the respondent no.2 alleging that the complainant is a non-banking finance company constituted under the Companies Act, 1956; that the company is having its regional office at address mentioned in the cause title of the complaint; that the complainant-

company is in the business of providing various loans. It is further alleged in the complaint that the complainant-

company has sanctioned to the respondent no.3-accused no.1 of credit facility upto Rs.40 crores by way of channels finance facility; that the original accused nos.2 to 4 are the directors/ guarantors of the accused no.1, accused no.5 is Managing Director of the accused no.1; accused no.6 is the Director of the accused no.1, accused nos.7 and 8 are the Additional Directors of accused no.1 and accused nos.9 to 11 are the guarantors of the accused no.1; it is further averred in the complaint that the accused nos.2 to 11 are responsible for Page 2 of 17 Downloaded on : Fri Nov 10 21:12:59 IST 2023 NEUTRAL CITATION R/CR.MA/22316/2019 JUDGMENT DATED: 10/11/2023 undefined the day-to-day business of the accused no.1; that the accused no.3 in his capacity as director/authorized signatory of the accused no.1 has executed a channel finance agreement dated 22.2.2018 with the complainant company and thereby agreed to adhere to and comply with all the terms and conditions of the said agreement; that as per the terms and conditions of the agreement, the accused no.3 has issued the cheque in favour of the complainant towards the repayment of the said facility for Rs.18,99,63,688/- drawn on Kotak Mahindra Bank Ltd., Kunnur and that when the said cheque was presented by the complainant, it was returned dishonoured with an endorsement `Drawer's sign not as per mandate" and that the intimation of the dishonour of the cheque was received by the complainant vide memo/advise dated 10.5.2019;

thereafter the demand notice was issued, however, as the accused failed to make the payment and therefore the complaint is filed and the process is issued against the accused by the learned Metropolitan Magistrate. It is this complaint and process which are prayed to be quashed by way of this application qua the applicants i.e. accused nos.2,3,6 and 1 of the complaint.

3. Rule. Learned APP Ms.Bhatt waives service of notice of rule for respondent no.1 and learned advocate Mr.Dave waives service of notice of rule for respondent no.2.

NEUTRAL CITATION R/CR.MA/22316/2019 JUDGMENT DATED: 10/11/2023 undefined Heard learned advocates for the parties.

4. Learned advocate Mr.Kinariwala for the applicants submits that the applicants herein are the original accused nos.2,3,6 and 1 in the complaint; he submitted that as per Section 138 of the NI Act since the cheque is returned with an endorsement, the same is returned as per the endorsement drawer sign not as per the mandate; that in absence of any notice by the accused, there is no question of making payment by them. Learned advocate for the applicants fairly submitted at this stage that the accused no.3 is a signatory of the cheque. He, therefore, submitted that in absence of receipt of notice, the applicants cannot be prosecuted further pursuant to the impugned complaint and therefore, this application be allowed.

5. In support of his submissions, learned advocate Mr.Kinariwala has relied on the following citations:

(1) Laxmi Dyechem V/s State of Gujarat, reported in 2012(13) SCC 375.

(2) S.P.Mani V/s Mohan Dairy V/s Snehalatha Elangovan reported in 2022(13) Scale 543.

(3) Rajeev Jain and Others V/s Ashtech Industries Pvt.Ltd., reported in 2023 SCC Online Del 3779.

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6. Per contra, learned APP Ms.Bhatt for respondent no.1-state has objected these applications and submitted that this Court should not exercise its powers by interfering with the proceedings of recovery of amount and the proceedings initiated under Section 138 of the Act are perfectly justified and therefore, this Court should not exercise inherent powers under Section 482 of the Code, which otherwise, should be exercised sparingly. He, therefore, prayed to dismiss all these applications.

7. Learned advocate Mr.Dave appearing for respondent no.2-complainant submitted that the applicants herein are accused nos.2,3,6 and 1 in the impugned complaint; that there is a basic/clear averment against each and every accused person that they are vicariously liable in the notice as well as in the complaint; that there is no reply to the notice issued; that it is not the case of the applicants that they resigned prior to the issuance of the cheques; that no cogent and convincing material is produced to show that they are not vicariously liable; that huge financial assistance is availed after execution of channel finance agreement; that uptill now there is no repayment of financial assistance as per agreed terms and conditions; that there is a huge loss of public money and the application is filed to avoid the Page 5 of 17 Downloaded on : Fri Nov 10 21:12:59 IST 2023 NEUTRAL CITATION R/CR.MA/22316/2019 JUDGMENT DATED: 10/11/2023 undefined liability regarding repayment of legally enforceable debt after pocketing huge amount. He, therefore, submitted that these are all points of trial and therefore this application be dismissed.

8. In support of his submissions, learned advocate Mr.Dave has relied on the following citations:

(1) Laxmi Dyechem V/s State of Gujarat reported in 2012(13) SCC 375;

(2) S.P.Mani and Mohan Dairy V/s Dr.Snehalatha Elangovan reported in 2022(13) Scale, page 543;

(3) Gunmala Sales Private Ltd. Etc. V/s Navkar Infra Projects Private Limited & Etc. reported in 2015(1) SCC 103.

(4) V.S.Synthetics Through Umashankar Shyamlal Agrawal V/ s Reliance Commercial Finance Ltd., Through Authorized officer, reported in 2023 JX(Guj) 682.

9. I have considered the submissions made by learned advocates for the parties and perused the material placed on record.

10. At the outset, the provisions invoked in the Page 6 of 17 Downloaded on : Fri Nov 10 21:12:59 IST 2023 NEUTRAL CITATION R/CR.MA/22316/2019 JUDGMENT DATED: 10/11/2023 undefined impugned complaint read as under:

"138. Dishonour of cheque for insufficiency, etc., of funds in the account.

Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall without prejudice to any other provisions of this Act, be punished with imprisonment for "a term which may extend to two year", or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless

(a) The cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier.

(b) The payee or the holder induce course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the Page 7 of 17 Downloaded on : Fri Nov 10 21:12:59 IST 2023 NEUTRAL CITATION R/CR.MA/22316/2019 JUDGMENT DATED: 10/11/2023 undefined drawer, of the cheque, "within thirty days" of the receipt of information by him from the bank regarding the return of the cheques as unpaid, and

(c) The drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Explanation: For the purpose of this section, "debt or other liability"

means a legally enforceable debt or other liability."

"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 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 Page 8 of 17 Downloaded on : Fri Nov 10 21:12:59 IST 2023 NEUTRAL CITATION R/CR.MA/22316/2019 JUDGMENT DATED: 10/11/2023 undefined 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 subsection (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 attribute to, any neglect on the part of, any director, Manager, secretary, or other office 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 any body corporate and includes a firm or other association of individuals; and

(b) "Director", in relating to a firm, means a partner in the firm."

142. Cognizance of offences.--

[(1)] Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),--

(a) no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque;

(b) such complaint is made within one month of the date on Page 9 of 17 Downloaded on : Fri Nov 10 21:12:59 IST 2023 NEUTRAL CITATION R/CR.MA/22316/2019 JUDGMENT DATED: 10/11/2023 undefined which the cause of action arises under clause (c) of the proviso to section 138: 2 [Provided that the cognizance of a complaint may be taken by the Court after the prescribed period, if the complainant satisfies the Court that he had sufficient cause for not making a complaint within such period;]

(c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under section 138.].

[(2) The offence under section 138 shall be inquired into and tried only by a court within whose local jurisdiction,--

(a) if the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account, is situated; or

(b) if the cheque is presented for payment by the payee or holder in due course, otherwise through an account, the branch of the drawee bank where the drawer maintains the account, is situated.

Explanation.--For the purposes of clause (a), where a cheque is delivered for collection at any branch of the bank of the payee or holder in due course, then, the cheque shall be deemed to have been delivered to the branch of the bank in which the payee or holder in due course, as the case may be, maintains the account.] Page 10 of 17 Downloaded on : Fri Nov 10 21:12:59 IST 2023 NEUTRAL CITATION R/CR.MA/22316/2019 JUDGMENT DATED: 10/11/2023 undefined [142A. Validation for transfer of pending cases.-- (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974) or any judgment, decree, order or direction of any court, all cases transferred to the court having jurisdiction under sub-section (2) of section 142, as amended by the Negotiable Instruments (Amendment) Ordinance, 2015 (Ord. 6 of 2015), shall be deemed to have been transferred under this Act, as if that sub-section had been in force at all material times. (2) Notwithstanding anything contained in sub-section (2) of section 142 or sub-section (1), where the payee or the holder in due course, as the case may be, has filed a complaint against the drawer of a cheque in the court having jurisdiction under sub-section (2) of section 142 or the case has been transferred to that court under sub-section (1) and such complaint is pending in that court, all subsequent complaints arising out of section 138 against the same drawer shall be filed before the same court irrespective of whether those cheques were delivered for collection or presented for payment within the territorial jurisdiction of that court.

(3) If, on the date of the commencement of the Negotiable Instruments (Amendment) Act, 2015 (26 of 2015), more than one prosecution filed by the same payee or holder in due course, as the case may be, against the same drawer of cheques is pending before different courts, upon the said fact Page 11 of 17 Downloaded on : Fri Nov 10 21:12:59 IST 2023 NEUTRAL CITATION R/CR.MA/22316/2019 JUDGMENT DATED: 10/11/2023 undefined having been brought to the notice of the court, such court shall transfer the case to the court having jurisdiction under sub-section (2) of section 142, as amended by the Negotiable Instruments (Amendment) Ordinance, 2015 (Ord. 6 of 2015), before which the first case was filed and is pending, as if that sub-section had been in force at all material times.]

11. Now, if the facts of the present case are perused, it transpires from the material on record and the averments made in the complaint as well as this application that the applicants are the company and its directors; that there is nothing contrary coming on the record to show that they are not responsible for the day-to-day affairs of the firm and that they have not actively participated in the transactions with the respondent no.2-complainant; the accused no.3 is admittedly the signatory of the cheque in question; that the averments made that they were not in receipt of the notice issued by the respondent no.2 and therefore they could not reply to the same is a disputed question of fact by the respondent no.2; there is no unimpeachable and uncontroverted evidence produced before the Court to take a different view that they are not responsible for the day-to-day affairs of the company. This Court cannot conduct mini trial or roving inquiry at the stage of exercising the powers under Section 482 of the Code.

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12. At this stage, it is also fruitful to refer to the judgment rendered by the Hon'ble Apex Court in the case of S.P.Mani and Mohan Dairy V/s Dr.Snehalatha Elangovan reported in 2022(13) Scale, page 543, more particularly, paragraphs 43, 46 and 47, which read as under:

"43. In the case on hand, we find clear and specific averments not only in the complaint but also in the statutory notice issued to the respondent. There are specific averments that the cheque was issued with the consent of the respondent herein and within her knowledge. In our view, this was sufficient to put the respondent herein to trial for the alleged offence. We are saying so because the case of the respondent that at the time of issuance of the cheque or at the time of the commission of offence, she was in no manner concerned wtih the firm or she was not in- charge or responsible for day-to-day affairs of the firm cannot be on the basis of mere bald assertion in this regard. The same is not sufficient. To make good her case, the respondent herein is expected to lead umimpeachable and incontrovertible evidence. Nothing of the sort was adduced by the respondent before the High Court to get the proceedings quashed. The High Court had practically no legal basis to say that the averments made in the complaint are not sufficient to fasten the vicarious liability upon the respondent by virtue of Section 141 of the NI Act.

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46. When in view of the basic averment process is issued the complaint must proceed against the Directors or partners as the case may be. But if any Director or Partner wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he is really not concerned with the issuance of the cheque, he must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his contention. He must make out a case hat making him stand the trial woule be an abuse of process of court. He cannot get the complaint quashed merely on the ground that apart from the basic averment no particulars are given in the complaint about his role, because ordinarily the basic averment would be sufficient to send him to trial and it could be argued that his further role could be brought out in the trial. Quashing of a complaint is a serious matter. Complaint cannot be quashed for the asking. For quashing of a complaint, it must be shown that no offence is made out at all against the Director or Partner.

47. Our final conclusions may be summarised as under:-

a.) The primary responsibility of the complainant is to make specific averments in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, Page 14 of 17 Downloaded on : Fri Nov 10 21:12:59 IST 2023 NEUTRAL CITATION R/CR.MA/22316/2019 JUDGMENT DATED: 10/11/2023 undefined there is no legal requirement for the complainant to show that the accused partner of the firm was aware about each and every transaction. On the other hand, the first proviso to sub-section (1) of Section 141 of the Act clearly lays down that if the accused is able to prove to the satisfaction of the Court that the offence was committed without his/her knowledge or he/she had exercised due diligence to prevent the commission of such offence, he/she will not be liable of punishment.

b.) The complainant is supposed to know only generally as to who were in charge of the affairs of the company or firm, as the case may be. The other administrative matters would be within the special knowledge of the company or the firm and those who are in charge of it. In such circumstances, the complainant is expected to allege that the persons named in the complaint are in charge of the affairs of the company/firm. It is only the Directors of the company or the partners of the firm, as the case may be, who have the special knowledge about the role they had played in the company or the partners in a firm to show before the court that at the relevant point of time they were not in charge of the affairs of the company. Advertence to Sections 138 and Section 141 respectively of the NI Act shows that on the other elements of an offence under Section 138 being satisfied, the burden is on the Board of Directors or the officers in charge of the affairs of the company/partners of a Page 15 of 17 Downloaded on : Fri Nov 10 21:12:59 IST 2023 NEUTRAL CITATION R/CR.MA/22316/2019 JUDGMENT DATED: 10/11/2023 undefined firm to show that they were not liable to be convicted. The existence of any special circumstance that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial to show that at the relevant time they were not in charge of the affairs of the company or the firm.

c.) Needless to say, the final judgement and order would depend on the evidence adduced. Criminal liability is attracted only on those, who at the time of commission of the offence, were in charge of and were responsible for the conduct of the business of the firm. But vicarious criminal liability can be inferred against the partners of a firm when it is specifically averred in the complaint about the status of the partners 'qua' the firm. This would make them liable to face the prosecution but it does not lead to automatic conviction. Hence, they are not adversely prejudiced if they are eventually found to be not guilty, as a necessary consequence thereof would be acquittal.

d.) If any Director wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he/she is really not concerned with the issuance of the cheque, he/she must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to Page 16 of 17 Downloaded on : Fri Nov 10 21:12:59 IST 2023 NEUTRAL CITATION R/CR.MA/22316/2019 JUDGMENT DATED: 10/11/2023 undefined substantiate his/her contention. He/she must make out a case that making him/her stand the trial would be an abuse of process of Court."

13. In view of above discussion as well as settled position of law and after considering the facts as alleged in the complaint filed under Section 138 of the NI Act and circumstances of the present case, I am of the opinion that this is not a fit case to exercise the inherent powers under Section 482 of the Code and quash the impugned complaint qua the applicants. Let the trial Court decide all the contentions raised by the parties after giving proper opportunity to the parties in the proceedings of trial of the of Criminal Case No.59178 of 2019 pending before the learned Metropolitan Magistrate (NI Act), Court No.36 at Ahmedabad.

14. Accordingly, this application is dismissed. Rule is discharged. Interim relief, if any, stands vacated.

(SANDEEP N. BHATT,J) SRILATHA Page 17 of 17 Downloaded on : Fri Nov 10 21:12:59 IST 2023