Gujarat High Court
Dharmesh Prafulchandra Trivedi vs Axis Bank Ltd Through Ashish Vijay ... on 2 July, 2025
NEUTRAL CITATION
R/SCR.A/2975/2017 ORDER DATED: 02/07/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CRIMINAL APPLICATION (QUASHING) NO. 2975 of 2017
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DHARMESH PRAFULCHANDRA TRIVEDI
Versus
AXIS BANK LTD THROUGH ASHISH VIJAY VERGIYA & ORS.
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Appearance:
MR VISHWAS K SHAH(5364) for the Applicant(s) No. 1
MR ANIP A GANDHI(2268) for the Respondent(s) No. 1
NOTICE SERVED BY DS for the Respondent(s) No. 2,3,4
MR TIRTHRAJ PANDYA, APP for the Respondent(s) No. 5
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CORAM:HONOURABLE MR. JUSTICE J. C. DOSHI
Date : 02/07/2025
ORAL ORDER
1. By way of this application under Section 482 of the Code of Criminal Procedure, 1973 (hereinafter referred to as "the Code"), the petitioner has prayed to quash and set aside Criminal Case No.5606 of 2016 qua the petitioner, pending before the Ld. Chief Judicial Magistrate, Rajkot.
3. Brief facts of the case are as under:-
3.1 Axis Bank through power of attorney filed private complaint before learned CJM, Rajkot under section 138 of Negotiable Instrument Act read with section 141 of NI Act, which came to be registered as Criminal Case No.5606 of 2016 against Champion Agro. Ltd. and its Directors. The petitioner is arraigned as accused no.4 in the private complaint. Learned CJM, after recording verification issued process against Champion Agro. Ltd. and its Directors. Case of Axis Bank before the learned Trial Court was that accused nos.2,3 and 4 are Page 1 of 13 Uploaded by SATISH C. VEMULLA(HC00206) on Tue Jul 08 2025 Downloaded on : Tue Jul 08 22:59:46 IST 2025 NEUTRAL CITATION R/SCR.A/2975/2017 ORDER DATED: 02/07/2025 undefined Directors of accused no.1 Company, which is carrying its business under the name and style of Champion Agro. Ltd.
Financial assistance was availed by company from Axis Bank. Pursuant to which, agreement was executed between the parties. The loan amount was repayable at Rajkot to complainant Bank with interest. Accused company did not discharge its duty by paying back credit facility sanctioned and disbursed by Axis Bank. Resultantly, account of accused company has been classified as NPA as per Rules and Regulations of RBI. Proceedings under Securitization Act also started and possession of open land of village - Gundasara was taken under Securitization Act. Aggrieved by said action, Company wrote request letter dated 22.03.2016 to pay sum of Rs.50 Crores by way of Cheque No.000647 dated 28.03.2016 drawn in favour of HDFC Bank as part of outstanding dues. Cheque in question having signed by accused no.2 - Mr.Dhirajlal Hirpara returned unpaid on being deposited for the reason fund insufficient. After completing formalities, Axis Bank and after issuing statory notice, Criminal Case was filed against company and its Directors under section 138 read with section 141 of NI Act. Learned CJM, was pleased to issue process. Hence, present petition.
4. Heard learned advocate Mr.V.K.Shah for petitioner, learned advocate Mr.Anip Gandhi for respondent Bank and learned APP for respondent - State. Others accused are served but did not remain present.
5. Plank of argument of learned advocate Mr.Shah for the petitioner is that Criminal Case filed under section 138 of NI Act Page 2 of 13 Uploaded by SATISH C. VEMULLA(HC00206) on Tue Jul 08 2025 Downloaded on : Tue Jul 08 22:59:46 IST 2025 NEUTRAL CITATION R/SCR.A/2975/2017 ORDER DATED: 02/07/2025 undefined through power of attorney of Axis Bank is not maintainable on the ground that power of attorney is not witness of transaction and thus Criminal Case filed against the petitioner requires to be dismissed. To buttress this proposition, learned advocate Mr.Shah relied on judgment of Hon'ble Apex Court in the case of A.C.Narayanan v/s. State of Maharashtra [(2014) 11 SCC 790]. Further, it is argued that cheque in question which has returned upaid is issued on behalf of Champion Agro. Ltd. - accused no.1 signed by accused no.2. The petitioner did not play any active role in issuance of cheque, authorized signatory is accused no.2. In this circumstances, since the petitioner has not played any active role and is not responsible for day to day affairs of accused company, no prosecution against him can be continued under section 138 read with section 141 of NI Act. Learned advocate Mr.Shah also referred to recent judgment of Hon'ble Apex Court in the case of Susela Padmavathy Amma v/s. M/s. Bharti Airtel Ltd. [Special Leave Petition (Criminal) No.12390- 12391 of 2022] and submitted that private complaint against petitioner should be dismissed.
5.1. Upon above submissions, it is submitted to allow this petition.
6. Per contra, learned advocate Mr. Gandhi for Axis Bank referred to para 11 of complaint and submitted that specific averments are made that accused nos.2,3 and 4 are responsible for conduct of the accused company and accused no.3 and 4 are equally liable and should be punished under section 138 read with section 141 of NI act which brings that sufficient averments is made by the complainant putting criminal liability Page 3 of 13 Uploaded by SATISH C. VEMULLA(HC00206) on Tue Jul 08 2025 Downloaded on : Tue Jul 08 22:59:46 IST 2025 NEUTRAL CITATION R/SCR.A/2975/2017 ORDER DATED: 02/07/2025 undefined upon the petitioner and its Directors of accused no.1 company. He submitted that contention raised in the petition can be subject of trial. It is submitted that Court under section 482 should not hold mini trial to reach to conclusion that no offence is made out against the petitioner on the ground that he is not responsible for day to day affairs of the company.
7. Learned APP for respondent State submitted that it is dispute between private parties and while adopting argument of complainant, he would submit to pass necessary order.
8. Heard learned advocates for the parties. The question for consideration in the matter is whether complainant has made sufficient averments to bring petitioner under accusation on the ground that he is vicariously liable and responsible to launch prosecution under section 138 of NI Act being Director of accused no.1 company.
9. Let refer section 141 of NI Act, which reads as under :-
"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 punished accordingly:
Provided that nothing contained in this sub-section 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 Page 4 of 13 Uploaded by SATISH C. VEMULLA(HC00206) on Tue Jul 08 2025 Downloaded on : Tue Jul 08 22:59:46 IST 2025 NEUTRAL CITATION R/SCR.A/2975/2017 ORDER DATED: 02/07/2025 undefined 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-section (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 or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly."
10. Simply because the petitioner is Director of the accused no.1 Company, it does not necessary that he has fulfilled requirement of launching prosecution against him. Twin condition that the petitioner was in charge of and responsible to the company for conduct of business of company is required to be prima facie established.
11. In the case of S.M.S.Pramaceuticals Ltd. v/s. Neeta Bhalla [(2005) 8 SCC 89], the Hon'ble Apex Court considered the question as to whether it was sufficient to make the person liable for being a director of a company under section 141 of the Negotiable Instrument Act. After referring to definition of the word 'director' as defined in section 2(13) of the Companies Act, 1956, the Hon'ble Apex Court observed as under :-
"8.....There is nothing which suggests that simply by being a director in a Company, one is supposed to discharge particular functions on behalf of a company. It happens that a person may be a director in a company but he may Page 5 of 13 Uploaded by SATISH C. VEMULLA(HC00206) on Tue Jul 08 2025 Downloaded on : Tue Jul 08 22:59:46 IST 2025 NEUTRAL CITATION R/SCR.A/2975/2017 ORDER DATED: 02/07/2025 undefined not know anything about day-to-day functioning of the company. As a director he may be attending meetings of the Board of Directors of the Company where usually they decide policy matters and guide the course of business of a company. It may be that a Board of Directors may appoint sub-committees consisting of one or two directors out of the Board of the Company who may be made responsible for day-to- day functions of the Company. These are matters which form part of resolutions of Board of Directors of a Company. Nothing is oral. What emerges from this is that the role of a director in a company is a question of fact depending on the peculiar facts in each case. There is no universal rule that a director of a company is in charge of its everyday affairs. We have discussed about the position of a Director in a company in order to illustrate the point that there is no magic as such in a particular word, be it Director, Manager or Secretary. It all depends upon respective roles assigned to the officers in a company.....".
12. Apt to note that there is no universal rule that Director of the company is deemed to be in-charge of its everyday affairs of company. Necessary averment as to how Director of the Company was in-charge of day to day affairs of the company or responsible to the affairs of the company is prime requirement. Although position of Director or Joint Director of the company may be different.
13. In the case on hand, accused no.2 - Dhirajlal Hirpara, Director of accused no.1 - company offered settlement and offered cheque of Rs.50 Crores towards part payment of over due. Settlement amount to be paid by accused no.1 Company can be visible from Annexure I at Page no.37. This letter has been written by Dhirajlal Hirpara, Director, who has signed the letter as Director of Champion Agro Ltd. Cheque in question is Page 6 of 13 Uploaded by SATISH C. VEMULLA(HC00206) on Tue Jul 08 2025 Downloaded on : Tue Jul 08 22:59:46 IST 2025 NEUTRAL CITATION R/SCR.A/2975/2017 ORDER DATED: 02/07/2025 undefined produced at Page No.38 signed by Dhirajlal Hirpara as authorized signatory of Champion Agro Ltd.
14. Let examine averments made in the complaint as to find out whether complainant Axis Bank has made sufficient averments to bring accusation against the petitioner who is not signatory to the cheque nor he has written letter accepting part payment of loan. Para 2 of the complaint reads as under :-
"2. That the accused Nos.2,3 and 4 are directors of the company carrying on its business under the name and style of Champion Agro. Ltd., at Veraval (Shapar), Ta :
Kotda SAngani of Rajkot District (hereinafter referred to as "Company" for sake of brevity). Also accused no.2 is authorized signatory of company."
15. Responsibility of petitioner is averred in para 11 of the complaint, which reads as under :-
"11. The aforesaid cheque has been signed by accused no.2 of the accused company, being the authoirzed signatory of the company. Also accused no.2,3 and 4 are incharge of and responsible for conduct of the company and hence the accused no.2 who has signed the aforesaid cheque and accused no.3 and 4 are equally liable and should be punished under section 138 and 141 of Negotiable Instrument Act. "
16. Baring aforesaid averments there is no other averments in the complaint which satisfy twin condition set in section 141 of the Negotiable Instrument Act. Averments made in para 11 of the complaint is reproduction of section 141 of NI Act without explaining exact role of the petitioner in capacity of Director to Page 7 of 13 Uploaded by SATISH C. VEMULLA(HC00206) on Tue Jul 08 2025 Downloaded on : Tue Jul 08 22:59:46 IST 2025 NEUTRAL CITATION R/SCR.A/2975/2017 ORDER DATED: 02/07/2025 undefined hold him liable for dishonor of cheque.
17. In the case of State of NCT of Delhi through Prosecuting Officer, Insecticides, Government of NCT, Delhi v/s. Rajiv Khurana [(2010) 11 SCC 469], the Hon'ble Apex Court states position of law as under :-
"17. The ratio of all these cases is that the complainant is required to state in the complaint how a Director who is sought to be made an accused, was in charge of the business of the company or responsible for the conduct of company's business. Every Director need not be and is not in charge of the business of the company. If that is the position with regard to a Director, it is needless to emphasise that in the case of non-Director officers, there is all the more necessary to state what were his duties and responsibilities in the conduct of business of the company and how and in what manner he is responsible or liable."
18. In the case of Pooja Ravinder Devidasani vs. State of Maharashtra [(2014) 16 SCC 1], the Hon'ble Apex Court observed thus:
"17. ...... Every person connected with the Company will not fall into the ambit of the provision. Time and again, it has been asserted by this Court that only those persons who were in charge of and responsible for the conduct of the business of the Company at the time of commission of an offence will be liable for criminal action. A Director, who was not in charge of and was not responsible for the conduct of the business of the Company at the relevant time, will not be liable for an offence under Section 141 of the NI Act. In National Small Industries Corpn. [National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330 : (2010) 1 SCC (Civ) 677 : (2010) 2 SCC (Cri) 1113] this Court observed:
"13. Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly Page 8 of 13 Uploaded by SATISH C. VEMULLA(HC00206) on Tue Jul 08 2025 Downloaded on : Tue Jul 08 22:59:46 IST 2025 NEUTRAL CITATION R/SCR.A/2975/2017 ORDER DATED: 02/07/2025 undefined construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and (2014) 16 SCC 1 responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent 1 was in charge of or was responsible to the accused Company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability.
14. A company may have a number of Directors and to make any or all the Directors as accused in a complaint merely on the basis of a statement that they are in charge of and responsible for the conduct of the business of the company without anything more is not a sufficient or adequate fulfilment of the requirements under Section
141." (emphasis in original)
18. In Girdhari Lal Gupta v. D.H. Mehta [Girdhari Lal Gupta v. D.H. Mehta, (1971) 3 SCC 189 : 1971 SCC (Cri) 279 : AIR 1971 SC 2162] , this Court observed that a person "in charge of a business" means that the person should be in overall control of the day-to-day business of the Company.
19. A Director of a company is liable to be convicted for an offence committed by the company if he/she was in charge of and was responsible to the company for the conduct of its business or if it is proved that the offence was committed with the consent or connivance of, or was attributable to any negligence on the part of the Director concerned (see State of Karnataka v. Pratap Chand [State of Karnataka v. Pratap Chand, (1981) 2 SCC 335 : 1981 SCC (Cri) 453] ).
20. In other words, the law laid down by this Court is that for making a Director of a company liable for the offences committed by the company under Section 141 of the NI Act, there must be specific averments against the Director showing as to how and in what manner the Director was responsible for the conduct of the business of the company.
21. In Sabitha Ramamurthy v. R.B.S. Page 9 of 13 Uploaded by SATISH C. VEMULLA(HC00206) on Tue Jul 08 2025 Downloaded on : Tue Jul 08 22:59:46 IST 2025 NEUTRAL CITATION R/SCR.A/2975/2017 ORDER DATED: 02/07/2025 undefined Channabasavaradhya [Sabitha Ramamurthy v. R.B.S. Channabasavaradhya, (2006) 10 SCC 581 : (2007) 1 SCC (Cri) 621] , it was held by this Court that: (SCC pp. 584-85, para7) "7. ... it is not necessary for the complainant to specifically reproduce the wordings of the section but what is required is a clear statement of fact so as to enable the court to arrive at a prima facie opinion that the accused is vicariously liable. Section 141 raises a legal fiction. By reason of the said provision, a person although is not personally liable for commission of such an offence would be vicariously liable therefor. Such vicarious liability can be inferred so far as a company registered or incorporated under the Companies Act, 1956 is concerned 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 the offence committed by the company."
(emphasis supplied) By verbatim reproducing the words of the section without a clear statement of fact supported by proper evidence, so as to make the accused vicariously liable, is a ground for quashing proceedings initiated against such person under Section 141 of the NI Act."
19. The Hon'ble Apex Court held that merely reproducing the words of the section without clear statement of fact as to how and in what manner a director of the company was responsible for the conduct of the business, would not make Director vicariously liable.
20. In the case of Ashoke Mal Bafna v/s. Upper India Steel Manufacturing and Engineering Company Ltd. [(2018) 14 SCC 202], the Hon'ble Apex Court has held as under :-
"9. To fasten vicarious liability under Section 141 of the Act on a person, the law is well settled by this Court in a Page 10 of 13 Uploaded by SATISH C. VEMULLA(HC00206) on Tue Jul 08 2025 Downloaded on : Tue Jul 08 22:59:46 IST 2025 NEUTRAL CITATION R/SCR.A/2975/2017 ORDER DATED: 02/07/2025 undefined catena of cases that the complainant should specifically show as to how and in what manner the accused was responsible. Simply because a person is a Director of a defaulter Company, does not make him liable under the Act. Time and again, it has been asserted by this Court that only the person who was at the helm of affairs of the Company and in charge of and responsible for the conduct of the business at the time of commission of an offence will be liable for criminal action. (See Pooja Ravinder Devidasani v. State of Maharashtra [Pooja Ravinder Devidasani v. State of Maharashtra, (2014) 16 SCC 1 :
(2015) 3 SCC (Civ) 384 : (2015) 3 SCC (Cri) 378 : AIR 2015 SC 675] .)
10. In other words, the law laid down by this Court is that for making a Director of a Company liable for the offences committed by the Company under Section 141 of the Act, there must be specific averments against the Director showing as to how and in what manner the Director was responsible for the conduct of the business of the Company."
21. Similar view has been taken by the Hon'ble Apex Court in the case of Lalankumar Singh v/s. State of Maharashtra [2022 SCC Online SC 1383].
22. In light of aforesaid observations and finding of Hon'ble Apex Court, if we examine averments made in the complaint reproduced herein above, except making averment that the petitioner was incharge and responsible for conduct of the company and equally responsible, no other averments are made to satisfy requirement of section 141 of the Negotiable Instrument Act. There is no averments indicating that how and in which way the petitioner is responsible in day to day conduct of business which could attract vicarious liability of the petitioner being Director of company.
Page 11 of 13 Uploaded by SATISH C. VEMULLA(HC00206) on Tue Jul 08 2025 Downloaded on : Tue Jul 08 22:59:46 IST 2025NEUTRAL CITATION R/SCR.A/2975/2017 ORDER DATED: 02/07/2025 undefined
23. Law on the subject matter is well settled and repeatedly reiterated. In the case of Susela Amma (supra), the Hon'ble Apex Court in para 20 and 21 has held as under :-
"20. It can thus be clearly seen that there is no averment to the effect that the present appellant is in-charge of and responsible for the day-to-day affairs of the Company. It is also not the case of the respondent that the appellant is either the Managing Director or the Joint Managing Director of the Company.
21. It can thus clearly be seen that the averments made are not sufficient to invoke the provisions of Section 141 of the N.I. Act qua the appellant."
24. In the result, this Court find that there is sufficient force in the argument of learned advocate Mr.Shah for the petitioner that since there is insufficient averments to prosecute the petitioner being Director of company and to bring him within accusation of section 141 of the Negotiable Instrument Act to held him liable, present petition deserves consideration and requires to be allowed.
25. In wake of above, the petition is allowed. Proceedings of Criminal Case No.5606 of 2016 pending before the Ld. Chief Judicial Magistrate, Rajkot as well as all consequential proceedings initiated in pursuance thereof are hereby quashed and set aside qua the petitioner herein - Dharmesh Prafulchandra Trivedi. Rule made absolute to the aforesaid extent. Direct service is permitted.
26. Findings herein-above is limited to decide the present petition. Since trial against other accused for the offence under Page 12 of 13 Uploaded by SATISH C. VEMULLA(HC00206) on Tue Jul 08 2025 Downloaded on : Tue Jul 08 22:59:46 IST 2025 NEUTRAL CITATION R/SCR.A/2975/2017 ORDER DATED: 02/07/2025 undefined section 138 of Negotiable Instrument Act is pending since 2016, this Court directs learned Trial Court to decide the case as early as possible expeditiously.
(J. C. DOSHI,J) SATISH Page 13 of 13 Uploaded by SATISH C. VEMULLA(HC00206) on Tue Jul 08 2025 Downloaded on : Tue Jul 08 22:59:46 IST 2025