NEUTRAL CITATION
R/CR.MA/19675/2021 ORDER DATED: 05/10/2023
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 19675 of 2021
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KISHANLAL FAKIRCHAND JINDAL
Versus
STATE OF GUJARAT
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Appearance:
JITEN H AHUJA(7739) for the Applicant(s) No. 1,2
MR. JAINISH P SHAH(7033) for the Applicant(s) No. 1,2
for the Respondent(s) No. 2
MR CHINTAN DAVE, APP for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE SANDEEP N. BHATT
Date : 05/10/2023
ORAL ORDER
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 complaints being Criminal Case No4940 of 2019, pending before the 3 rd Additional Senior Civil Judge & JMFC, Ahmedabad (Rural) under the provisions of Section 138 of the Negotiable Instruments Act (`NI Act' for short).
2. The brief facts as stated in the application are such that the applicant is partner of the partnership firm by name of Chemical & Allied Products and respondent no.2, through its proprietorship firm were having long business relations and used to transact on regular basis with the said partnership firm; that prior to 2015, the accused no.1 firm Page 1 of 17 Downloaded on : Fri Oct 06 20:45:40 IST 2023 NEUTRAL CITATION R/CR.MA/19675/2021 ORDER DATED: 05/10/2023 undefined gave certain undated security cheques to the respondent no.2;
subsequently, the accused no.1 closed its account and thereafter the respondent no.2 deposited the said cheques on various dates, which were returned with the endorsement `account closed'; that the respondent no.2 issued notice for payment against the cheques; however, the applicants did not pay the amounts as, according to them, they did not have any legal dues, the impugned complaint is filed, which is sought to be quashed by way of this application.
3. Heard learned advocates for the parties.
3.1 Learned advocate for the applicants that the cheques in question were signed by accused no.2 and not the present applicants; that the applicants were never aware of the said cheques and were never involved in transactions or negotiations with respondent no.2; that subsequently the partnership firm of the applicants have closed its account from which the cheques were issued; that the respondent no.2 had filled the said blank security cheques without knowledge of the applicants and deposited the said cheques in its bank accounts, which were returned with the endorsement `account closed'; that the notices were issued to the applicants for making payment of the cheque amount, but as there were no legal dues, the applicants did not make the payment; that Page 2 of 17 Downloaded on : Fri Oct 06 20:45:40 IST 2023 NEUTRAL CITATION R/CR.MA/19675/2021 ORDER DATED: 05/10/2023 undefined the respondent no.2, in order to harass, pressurize and extort money from the applicants, filed the impugned complaints;
that the applicants are not signatory to the cheques and they were not involved in the day to day business of the accused no.1-partnership firm; that on bare perusal of the complaint as well as the affidavit as well as mandatory notice issued by respondent no.2, no allegations have been levied against the applicants and only bald averments are made merely to join the applicants as co-accused in the complaint; that the complainant has to specify the role of the accused in such disputes which is not available in the present dispute and therefore he prayed to allow this application and quash the impugned complaint.
4. Per contra, learned APP for respondent no.1-state has objected this application 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 prayed to dismiss this application.
5. I have considered the rival submissions and perused the material on record.
6. At the outset, the provisions of Sections 138 and Page 3 of 17 Downloaded on : Fri Oct 06 20:45:40 IST 2023 NEUTRAL CITATION R/CR.MA/19675/2021 ORDER DATED: 05/10/2023 undefined 141 of the NI Act are required to be seen, which 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 Page 4 of 17 Downloaded on : Fri Oct 06 20:45:40 IST 2023 NEUTRAL CITATION R/CR.MA/19675/2021 ORDER DATED: 05/10/2023 undefined said amount of money by giving a notice, in writing, to the 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:
Page 5 of 17 Downloaded on : Fri Oct 06 20:45:40 IST 2023NEUTRAL CITATION R/CR.MA/19675/2021 ORDER DATED: 05/10/2023 undefined 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 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."
7. 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 partners of the partnership firm-accused no.1; that there is nothing contrary coming on the record to Page 6 of 17 Downloaded on : Fri Oct 06 20:45:40 IST 2023 NEUTRAL CITATION R/CR.MA/19675/2021 ORDER DATED: 05/10/2023 undefined 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; though the applicants are not signatory of the cheques in question, there is nothing on the record to show that they are not in knowledge of the same and that they have not actively participated in the meetings with the respondent no.2-
complainant.
8. The averments made in this application that the cheques were given as security and that they were deposited without the knowledge of the applicants and that they are deposited with a view to harass the applicants are all points of trial. This Court cannot conduct mini trial or roving inquiry at the stage of exercising the powers under Section 482 of of the Code. Prima facie, it is clear that the applicants are the partners of the accused no.1-firm and the cheques were given by the accused no.1-firm which were dishonoured and the ingredients of Section 138 of the NI Act are fulfilled. The applicants have also not filed any reply to notice under Section 138 of the NI Act and the applicant has failed to produce some impeachable and incontrovertible evidence beyond suspicion of doubt.
9. At this stage, it is also fruitful to refer to the Page 7 of 17 Downloaded on : Fri Oct 06 20:45:40 IST 2023 NEUTRAL CITATION R/CR.MA/19675/2021 ORDER DATED: 05/10/2023 undefined 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 and 46, which read as under:
"33. Thus, the legal principles discernible from the aforesaid decision of this Court may be summarised as under:
(a) Vicarious liability can be fastened on those who are in- charge of and responsible to the company or firm for the conduct of its business. For the purpose of Section 141, the firm comes within the abmit of a company.
(b) It is not necessary to reproduce the language of Section 141 verbatim in the complaint since the complaint is required to be read as a whole;
(c) If the substance of the allegations made in the complaint fulfill the requirements of Section 141, the complaint has to proceed in regards the law.
(d) In construing a complaint a hyper technical approach should not be adopted so as to quash the same.
(e) The laudable object of preventing bouncing the cheques and sustaining the credibility of commercial transactions resulting in the enactment of Sections 138 and 141 respectively should be kept in mind by the Court concerned.
(f) These provisions create a statutory presumption of dishonesty exposing a person to criminal liability if payment is not made within the statutory period even after the issue Page 8 of 17 Downloaded on : Fri Oct 06 20:45:40 IST 2023 NEUTRAL CITATION R/CR.MA/19675/2021 ORDER DATED: 05/10/2023 undefined of notice.
(g) The power of quashing should be exercised very sparingly and where, read as a whole, the factual foundation for the offence had been laid in the complaint, it should not be quashed.
(h) The Court concerned would owe a duty to discharge the accused if taking everything stated in the complaint is correct and construing the allegations made therein liberally in favour of the complainant, the ingredients of the offence are altogether lacking.
40. The principles discernible from the aforesaid decision of this Court in the case of Ashutosh Ashok Parasrampuriya (supra) is that the High Court should not interfere under Section 482 of the Code at the instance of an accused unless it comes across some unimpeachable and incontrovertible evidence to indicate that the Director/ partner of a firm could not have been concerned with the issuance of cheques. This Court clarified that in a given case despite the presence of basic averments, the High Court may conclude that no case is made out against the particular Director/ partner provided the Director/partner is able to adduce some unimpeachable and incontrovertible evidence beyond suspicion and doubt.
43. In the case on hand, we find clear and specific averments not only in the complaint but also in the Page 9 of 17 Downloaded on : Fri Oct 06 20:45:40 IST 2023 NEUTRAL CITATION R/CR.MA/19675/2021 ORDER DATED: 05/10/2023 undefined 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.
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 Page 10 of 17 Downloaded on : Fri Oct 06 20:45:40 IST 2023 NEUTRAL CITATION R/CR.MA/19675/2021 ORDER DATED: 05/10/2023 undefined 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, 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 Page 11 of 17 Downloaded on : Fri Oct 06 20:45:40 IST 2023 NEUTRAL CITATION R/CR.MA/19675/2021 ORDER DATED: 05/10/2023 undefined 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 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 Page 12 of 17 Downloaded on : Fri Oct 06 20:45:40 IST 2023 NEUTRAL CITATION R/CR.MA/19675/2021 ORDER DATED: 05/10/2023 undefined 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 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."
10. It is also fruitful to refer to the judgment in the case of S.Krishnamoorthy V/s Chellammal reported in (2015)4 SCC 559, wherein the Hon'ble Apex Court has held in paragraphs nos.5,7 and 8 of which read as under:
Page 13 of 17 Downloaded on : Fri Oct 06 20:45:40 IST 2023NEUTRAL CITATION R/CR.MA/19675/2021 ORDER DATED: 05/10/2023 undefined "5. The above defence of the respondent (accused) before the High Court, in the petition filed under Section 482 of the Code, is nothing but absolutely factual in nature, which is neither admitted by the complainant, nor apparent on the face of the record. Such type of disputed factual defences could have been appreciated only by the trial court, after the parties led their evidence. In our opinion, the High Court committed grave error of law in examining the allegations and counter allegations which are disputed and factual in nature in a proceeding under Section 482 of the Code.
7. In view of the above position of law, we have no option but to set aside the order passed by the High Court as it has entered into highly disputed questions of fact and concluded that the material before it was sufficient to cause reasonable suspicion in the case of the complainant. That is not the ground on which powers under Section 482 of the Code can be exercised by the High Court.
8. Therefore, the appeal is allowed. The impugned order dated 5.8.2009 passed by the High Court of Judicature at Madras in Criminal O.P. No. 7989 of 2009 is hereby set aside. The Criminal complaint (CC No. 120 of 2007) pending before the Judicial Magistrate, Dharapuram, shall stand Page 14 of 17 Downloaded on : Fri Oct 06 20:45:40 IST 2023 NEUTRAL CITATION R/CR.MA/19675/2021 ORDER DATED: 05/10/2023 undefined revived. The trial court shall proceed in accordance with law."
11. Further, in the case of A.R.Radha Krishna V/s Dasari Deepthi and Others, reported in (2019)15 SCC 550, wherein, the Hon'ble Apex Courth as held in paragraphs 7 to 10 as under:
"7. Having heard learned counsel for the parties and carefully scrutinizing the record, we are of the considered opinion that the High Court was not justified in allowing the quashing petitions by invoking its power under S.482, Cr.P.C. In a case pertaining to an offence under S. 138 and S. 141 of the Act, the law requires that the complaint must contain a specific averment that the Director was in charge of, and responsible for, the conduct of the company's business at the time when the offence was committed. The High Court, in deciding a quashing petition under S. 482, Cr.P.C., must consider whether the averment made in the complaint is sufficient or if some unimpeachable evidence has been brought on record which leads to the conclusion that the Director could never have been in charge of and responsible for the conduct of the business of the company at the relevant time. While the role of a Director in a company is ultimately a question of fact, and no fixed formula can be fixed for the same, the High Court must exercise its power under S. 482, Cr.P.C.Page 15 of 17 Downloaded on : Fri Oct 06 20:45:40 IST 2023
NEUTRAL CITATION R/CR.MA/19675/2021 ORDER DATED: 05/10/2023 undefined when it is convinced, from the material on record, that allowing the proceedings to continue would be an abuse of process of the Court. [See Gunamala Sales Private Limited v. Anu Mehta and Ors., (2015) 1 SCC 103]
8. A perusal of the record in the present case indicates that the appellant has specifically averred in his complaint that the respondent nos. 1 and 2 were actively participating in the dayto day affairs of the accused no.1 - company. Further, the accused nos. 2 to 4 (including the respondent nos. 1 and 2 herein) are alleged to be from the same family and running the accused no.1 - company together. The complaint also specificies that all the accused, in active connivance, mischievously and intentionally issued the cheques in favor of the appellant and later issued instructions to the Bank to "Stop Payment". No evidence of unimpeachable quality has been brought on record by the respondent nos. 1 and 2 to indicate that allowing the proceedings to continue would be an abuse of process of the court.
9. In the above view of the matter, the instant appeals are allowed and the impugned order dated 22.09.2017, passed by the High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh in Criminal Petition Nos.6508, 6530 & 6531 of 2017, is set aside and that of the trial court is restored.
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10. Before parting with the matter, we make it clear that we have not expressed any opinion on the merits of the case pending before the trial court. Needless to say, the trial court will adjudicate the matter on its own merits uninfluenced by any of the observations made herein."
12. 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.
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 respective Criminal Case No.4940 of 2019 pending before the 3 rd Additional Senior Civil Judge & JMFC, Ahmedabad (Rural), in accordance with law and as expeditiously as possible.
13. Resultantly, this application is dismissed.
(SANDEEP N. BHATT,J) SRILATHA Page 17 of 17 Downloaded on : Fri Oct 06 20:45:40 IST 2023