Bombay High Court
Shri Hasmukh vs Ishwarchand ... on 19 December, 2009
Bench: P. R. Borkar
1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
APPELLATE SIDE, BENCH AT AURANGABAD
CRIMINAL WRIT PETITION NO.850 OF 2009
1. Shri Hasmukh s/o Tarachnd Seth
age 56 years, occup. business,
r/of Plot No.B-6, 10th Road,
Juhu, West, Mumbai.
2. Shri Aswin s/o Tarachand Seth,
Age 53 years, occup. business,
r/of as above.
3. Shri Vinod s/o Tarachand Seth,
age 54 years, occup. business,
r/of as above. ..Petitioners.
versus
1. Ishwarchand Vasisthanarayanchand
Jha, age major, occupation Nil,
r/of Flasco Film Society, Rh-38,
Bajaj Nagar, Aurangabad.
2. Sakharam Sitaram Lad, age major,
occupation Nil, r/o Shri Ganeshay
Namah Hou.Soc. Rh-16, Room No.32,
Bajaj Nagar, Aurangabad.
3. Sanjay Rangnathrao Kolekar,
age major, occupation Nil, r/of
c/o Prasad Collection, A/18,
Cidco Road, Jai Bhawani Nagar,
Aurangabad.
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4. Subhash Shirram Tambole,
age major, occupation Nil,
r/o c/o Prasad Collection, A/18,
Cidco, Road, Jai Bhawani Nagar,
Aurangabad.
5. Eknath Sakharam Jadhav,
age major, occupation Nil,
r/of New Akankshya Hou.Soc.
Rm-69/4, Bajaj Nagar,
Aurangabad.
6. Sayyad Hamid Sayyed Kasim,
age major, occupation Nil,
r/o Galli No. 6, Baijipura,
Aurangabad.
7. Sanjay Nanasaheb Kolhe,
age major, occupation Nil,
r/o Mayuri, Indira Nagar,
Taluka Shrirampur,
District Ahmednagar.
8. Soham Yadavrao Gade,
age major, occup. Nil,
r/o Vitthal Kripa,
Gajanan Nagar, Tulza Bhavani
Temple, Aurangabad.
9. Kashinath Dattatraya Ahirrao,
age major, occupation nil,
r/o Trimurti Nagar, Kamlapur Rd.
Ranjangaon (Sh.) Taluka Gangapur,
District Aurangabad.
10. Kakasaheb Bhausaheb Gorde,
age major, occupation Nil,
r/o at post Balanagar, Taluka
Paithan, District Aurangabad.
11. Shaikh Gani Shaikh Chandu,
age major, occupation Nil,
r/o Prasad Collection,
A-18, Cidco, Road, Jai Bhawani
Nagar, Aurangabad.
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12. Sunil Padmakar Gosawi,
age major, occupation Nil,
r/o Mayur Park Road, Jadhav Wadi,
Aurangabad.
13. Sanjay Dattatraya Lavand,
age major, occupation Nil,
r/o c/o K.S.Pressing, Road No.10,
Swarn Laghu Udyog, Kamgar Chowk,
Waluj M.I.D.C. area, Aurangabad.
14. Mohan Kaniram Rathod,
age major, occupation Nil,
r/o Trimurti Nagar, Kamlapur Road,
Ranjangaon (Ss.) Taluka Gangapur,
District Aurangabad.
15. Subhas Ramdas Tambe,
age major, occupation Nil,
C/O M.K.Rathod,Trimurti Nagar,
Ranjangaon (Sh.) Taluka
Gangapur,Dist. Aurangabad.
16. Balasaheb Bajirao Sobale,
age major, occupation Nil,
ir/of Rh-67/3 Indraprastha
Colony, Bajaj Nagar,
Aurangabad.
17. Ashok Kalyanrao Avahale,
age major, occupation Nil,
r/of New Sarang Housing Society,
Bajaj Nagar, Aurangabad.
18. Kailash Annasaheb Ingle,
age major, occupation Nil,
r/of New Sahyadri Housing
Society, Rx-2, Room No.26,
Bajaj Nagar, Aurangabad.
19. Ramesh Sandu Jadhav,
age major, occupation Nil,
r/of near Tulza Bhawani Temple,
Gajanan Nagar, Aurangabad.
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20. Manik Umaji Kasabe,
age major, occupation Nil,
r/of Hrishiraj Mens Wear,
Pundlik Nagar,Aurangabad.
21. Rajendra Arjunrao Choudhary
age major, occupation Nil,
r/of Tribhuwan Housing Society,
Rh.-41/8, Bajaj Nagar,
Aurangabad.
22. Subhash Laxman Dange,
age major, occupation Nil,
r/of Trimurti Nagar,
Kamalapur Road, Ranjangaon (Sh)
Taluka Gangapur, Dist.Aurangabad.
23. Gorakhnath Baburao Sangale,
age major, occupation Nil,
r/of House No.R-26, Raigad Nagar,
Baliram Patil High School Road,
Aurangabad.
24. Kisan Kashinath Kuntule,
age major, occupation Nil,
r/of Rx-6/16/2, Mahlaxmi Hsg.
Society, Ayodhya Nagar,
Bajaj Nagar, Aurangabad.
25. Vivek Pralhad Vadorkar,
age major, occupation Nil,
r/of Pranjali Electronics,
Maharana Pratap Chowk,
Bajaj Nagar, Aurangabad.
26. Ravindra Narayan Patil,
age major, occupation Nil,
r/of Prasad Collection,
A-18, Cidco Road, Jai Bhawani
Nagar, Aurangabad.
27. Narendra Bhaurao Tribhuvan,
age major, occupation Nil,
r/of at post Wadgaon Ko.
Taluka & Dist.Aurangabad.
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28. Hajari Prasad,
age major, occupation Nil,
r/of Trimurti Nagar, Kamlapur
Road, Ranjangaon (Sh),
Taluka Gangapur, Dist.Aurangabad.
29. Vikram Bhimrao Hulmukhe,
age major, occupation Nil,
r/of Shree Ganeshay Namah Hsg.
Society, Bajaj Nagar,Aurangabad.
30. Ishwar Shivram Choudhary,
age major, occupation Nil,
r/of Rm-303/1,Bajaj Nagar,
Aurangabad.
31.
Walmik Kalyanrao Avhale,
age major, occupation Nil,
r/of Tribhuvan Hsg.Society,
Bajaj Nagar, Aurangabad.
32. Diwakar Madhukar Deshpande,
age major, occupation Nil,
r/of Vyankatai Mata Mandir,
Jai Bhawani Nagar,Aurangabad.
33. Atul Suryakant Kulkarni,
age major, occupation Nil,
r/of c/o Prasad Collection,
A-18, Cidco Road, Jai Bhawani
Nagar, Aurangabad.
34. Vilas Sonaji Kolate,
age major, occupation Nil,
r/of Sarang Housing Society,
Rx-6/10, Bajaj Nagar,
Aurangabad.
35. Sudhakar Vithoba Kakade,
age major, occupation Nil,
r/of Trimurti Nagar,
Kamlapur Rd. Ranjangaon (Sh.)
Taluka Gangapur,Dist.Aurangabad.
36. Prakash Appasaheb Shinde,
age major, occupation Nil,
r/of Rm-303, Bajaj Nagar,
Aurangabad.
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37. Sominath Punjaba Suradkar,
age major, occupation Nil,
r/of Metre Coaching Classes,
Siemens Housing Society,
Bajaj Nagar, Aurangabad.
38. Dilip Kisanrao Bhavekar,
age major, occupation Nil,
r/of Ganeshay Namaha Hsg.Soc.,
Rh-16, Bajaj Nagar,Aurangabad.
39. Vijay Bhanudas Jadhav,
age major, occupation Nil,
r/of Ganeshay Namaha Hsg.Soc.
Rh-16, Bajaj Nagar,Aurangabad.
40.
Gajanan Tulshiram Hiwale,
age major, occupation Nil,
r/of c/o Gadekar, Galli No.__
Sanjay Nagar, Aurangabad.
41. Ranganath Dalpan Pawar,
age major, occupation Nil,
r/of near Tulza Bhavani Temple,
Gajanan Nagar, Aurangabad.
42. Santaram Bhoge,
age major, occupation Nil,
r/of Plot No.54,Chatrapati nagar,
Bajaj Nagar, Aurangabad.
43. Balkrishna Annasaheb Katare,
age major, occupation Nil,
r/of behind Sunil Electricals,
near Shivaji Statue, Cidco,
N-4, Aurangabad.
44. Kishori Chandramohan Mishra,
age major, occupation Nil,
r/of Maitraiya Coaching Classes,
Siemens Housing Society,
Bajaj Nagar, Aurangabad.
45. Bhagwat Sitaram Shelke,
age major, occupation Nil,
r/of new Hanuman Nagar,
Galli No.2, Plot No.267,
Aurangabad.
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46. Dattatraya Uttamrao Deshmukh,
age major, occupation Nil,
r/of NRB Housing Society,
Rm-245/10, Bajaj Nagar,
Aurangabad.
47. Sanjay Hiralal Lohar,
age major, occupation Nil,
r/of Sneha Sahayog Hsg.Soc.
Rm-70/9, Bajaj Nagar,
Aurangabad.
48. Babasaheb Kaduba Misal,
age major, occupation Nil,
r/of behind Sunil Electricals,
Shivaji Statue, N-4,Aurangabad.
49. Shrisundar Genuji Bakne,
age major, occupation Nil,
r/of behind Sunil Electrical,
near Shivaji Statue, N-4,
Aurangabad.
50. Shivram Bandu Jadhav,
age major, occupation Nil,
r/of behind Sunil Electrical,
near Shivaji Statue, N-4,
Aurangabad.
51. Shivaji Dattatraya Jagdale,
age major, occupation Nil,
r/of Ajanta Polymer, Waluj,
I.A., Aurangabad.
52. Suresh Punjaba Khute,
age major, occupation Nil,
r/of Dattakrupa Hsg.Society,
Rx-4/10, Bajaj Nagar,
Aurangabad.
53. Uttam Rabhau Ingale,
age major, occupation Nil,
r/of Omkar Housing Society,
Rx-13/7, Bajaj Nagar,
Aurangabad.
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54. Shyamrao Bansi Rathod,
age major, occupation Nil,
r/of Salampure Plotting,
beside Wadgaon Kol.,
Pandharpur, Aurangabad.
55. Rustum Baburao Deshmukh,
age major, occupation Nil,
r/of Trimurti Nagar,
Kamalapur Road,
Ranjangao (Sh), Tq.Gangapur,
District : Aurangabad.
56. Madhukar Dagdu Mankar,
age major, occupation Nil,
r/of at post Gangapur (Nehri),
District Aurangabad.
57. Bhaskar Bhaurao Shelke,
age major, occupation Nil,
r/of New Hanuman Nagar,
Galli No.2, Plot No. 267,
Aurangabad.
58. Ratilal Prakash Jadhav,
age major, occupation Nil,
r/of Raigad Nagar, Baliram
Patil High School,Aurangabad.
59. Shaikh Mubarak Gaffurbhai,
age major, occupation Nil,
r/of Galli No.5, Baijipura,
Aurangabad.
60. Manoj Madhav Kamble,
age major, occupation Nil,
r/of Sindhiban, near Brandi
Company, Chikhalthana I.A.,
Aurangabad.
61. Ganesh Kakasaheb Thale,
age major, occupation Nil,
r/of beside LIC Agent Danve's
House, Ruvsat Hsg. Society,
Aurangabad.
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62. Sanjay Shivram Kere,
age major, occupation Nil,
r/of plot No.15,Jayshri Colony,
Mukundwadi, Aurangabad.
63. Tukaram Bapurao Borse,
age major, occupation Nil,
r/of H.No.5, Ayodhya Nagar,
Aurangabad.
64. Sudhakar Ravan Shinde,
age major, occupation Nil,
r/of Salampure Plotting,
beside Wadgaon Kolhati,
post Pandharpur,Dist.Aurangabad.
65.
Bhartarinath Vishnu Mahajan,
age major, occupation Nil,
r/of Omkar Housing Society,
Rx-13/7, Bajaj Nagar,
Aurangabad.
---------
Shri R.B. Muley, Advocate for the petitioners.
Shri F.R.Tandale, Advocate for the Respondents.
---------
Coram: P.R.Borkar, J.
Date : December 19, 2009.
ORAL JUDGMENT
01. This is a writ petition by original accused
Nos.2 to 4 in S.C.C. No. 1277 of 2005, being aggrieved
by the order dated 21.7.2007 passed by learned 5th
Judicial Magistrate, First Class, Aurangabad, issuing
process against them under Section 138 of the
Negotiable Instruments Act 1881, which order is
confirmed by the learned Additional Sessions Judge-1,
Aurangabad, in Criminal Revision No.339 of 2007
decided on 11.8.2009.
02. Some of the facts giving rise to this
petition and which are undisputed at this stage are
that present Respondent Nos. 1 to 65 are the original
complainants in S.C.C. No.1277 of 2005 filed under
Section 138 of the Negotiable Instruments Act, 1881
("the Act" for short) as against M/s Vishnu Vijay
Packages Limited, present three petitioners and one
more person. It is alleged that the said M/s Vishnu
Vijay Packagers Ltd. is a company incorporated under
the Companies Act, 1956. (Hereinafter referred to as
"the said Company"). The said company had issued
cheques dated 29.9.2004 drawn on H.D.F.C. Bank Ltd.,
Mumbai in favour of the Respondents-complainants
towards their various legal dues which the said
company owed to the present respondents. When the
respondents presented those cheques to the respective
banks wherein they were having their bank savings bank
accounts, those cheques were dishonoured with
endorsement "Accounts closed". It is further stated
that the cheques were issued by the said company-
accused No.1 in favour of the Respondents-complainants
in discharge of its liability flowing from the
agreement dated 3.10.2003 towards full and final
settlement of the legal dues owed by it to the
Respondents. Cheques having been dishonoured, the
Respondents issued notice dated 17.12.2004 to the said
company, through their Advocate. However, in spite of
notice, payment was not made by the said company and,
therefore, complaint S.C.C. No.1277 of 2005 is filed
by the Respondents. In so far as present petitioners
are concerned, in paragraph 6 of the said criminal
complaint, following pleadings were made.
"6. The Company, Accused-1, and the
Directors, accused-2 to 5 above named, are
jointly and severally responsible for the
debts to the Complainants, and also for
discharging the liability flowing from the
cheques issued to the Complainants. They are
also guilty of the Offence contemplated
under the Negotiable Instruments Act for
(non) satisfaction of the claims arising
therefrom."
03. After the said criminal complaint was filed,
the learned trial judge raised doubt whether a common
complaint of 65 complainants would be tenable and
thereafter he heard Advocate for the complainants-
respondents herein and passed order on 1.11.2006 and
directed the complainants to deposit court fees which
appears to have been paid and thereafter order of
issuance of process was passed on 21.7.2007 which is
under challenge in this writ petition.
04. Heard Shri R.B. Muley, learned Advocate for
the writ petitioners and Shri F.R. Tandale, learned
Advocate for the Respondents.
05. Rule. By consent of the learned Advocates
for the parties, rule made returnable forthwith and
the writ petition is heard finally at the admission
stage.
06. Shri Muley, learned Advocate for the
petitioners canvassed before this court that the order
of issuance of process was illegal and improper
because, unless there are necessary pleadings in the
complaint as required under Section 141 of the said
Act, no process can be issued against the accused.
Secondly, he also submitted that all the three writ
petitioners have given their replies to the notices
issued by the Advocate for the Respondents-
complainants. It is submitted that Petitioner No. 2
had resigned as a director of the said company in the
year 2002 and as such he was no more concerned with
the the business or affairs of company. Other two
Petitioners, namely, Petitioner Nos. 1 and 3 have
replied that the said company was under liquidation
and the Official Liquidator had been appointed as
provisional Liquidator and had taken over charge of
the said company much before issuance of the alleged
cheques and as such petitioner Nos. 1 and 3, for that
reason, were not responsible for dishonour of the
cheques and the complaint is not tenable against them.
It is also submitted on behalf of the Petitioners that
for filing complaint, sanction under Section 446(1) of
the Companies Act, 1956 ought to have been taken which
is not done by the Respondents-complainants and,
therefore, entire proceedings stand vitiated.
Faintly, there was also argument about the joint trial
of all the complaints filed by different complainants.
07. On the other hand, Advocate Shri F.R.Tandale
for Respondents-complainants submitted that paragraph
6 of the complaint contains necessary pleadings. He
also submitted that although the company being under
liquidation is admitted, exact scope of jurisdiction
of the liquidator appointed is not brought on record.
Advocate Shri Tandale also submitted that it is
necessary to record evidence regarding responsibility
and liability of the petitioners before deciding
legality or impropriety of the order issuing process.
He also submitted that Section 446 of the Companies
Act is not applicable to the criminal proceedings
under Section 138 of the Act. Advocate Shri Tandale
supported the finding of the learned Magistrate that
joint trial of complaints filed by different
complainants is permissible since those complaints
arise in the course of same transaction.
08. Separate replies to statutory notice by
Advocate of the Respondents were given by petitioner
No.1 and 3 on 4.1.2005 which are at pages 21 and 24 of
the writ petition. By the replies, it is informed to
the Advocate of the Respondents that the petitioners
were no more directors or employees of the said
Company as per the order of the High Court dated
27.4.2001. It is further stated that by virtue of the
said order, the High Court has superseded the Board of
Directors and management of the said company and
appointed Official Liquidator as provisional
liquidator of the company to take possession/charge of
the company and its assets and, therefore,
petitioner Nos. 1 and 3 are not liable for any
payment due from the company or for any cheques
issued on behalf of the company. The copy of of the
said High Court order was enclosed to the replies.
Petitioner No.2 also on the same day i.e. 4.1.2005
replied to the notice of Advocate of the Respondents,
stating that he was no more director of the said
company as he had resigned from directorship on
31.1.2002 and thus disowned responsibility or
liability for any payment to be made, or cheques
issued by the said company. Along with reply,
petitioner No. 2 enclosed the copies of his
resignation letter, Form-32 filed with the Registrar
of Companies (ROC) and the receipt of the Registrar of
Companies.It is submitted on behalf of the Petitioners
that these documents were not considered by the
revisional court while dismissing revision of the
present petitioners against the order of the learned
Magistrate, issuing process against them. It is also
submitted that the above said replies were not even
remotely referred or contradicted in the complaint
filed on 10.1.2005 though acknowledgments show that
replies were received on 8.1.2005 by the Advocate.
09. The copy of the order of the High Court
dated 27.4.2001 passed in Company Application LD No.
242 of 2001 in Company Petition No.345 of 2001, is
produced in this writ petition at pages 25 to 28. That
was an application by Oman International Bank against
the accused No.1. By the said order, the learned
Single Judge granted leave under Rule 19(3) of the
Companies Court Rules, 1959 to take out an application
in terms of the draft handed in. The learned Judge
observed that having regard to outstanding dues by the
company not merely towards the petitioner, but other
financial institutions and the other circumstances
referred to in earlier part of the said order, a case
for appointment of provisional liquidator in respect
of the said company was made out. It is further noted
in the said order that notice of the said company
application was served upon the Respondent i.e. Vishnu
Vijay Packagers Ltd. but it did not remain present
when the said order was passed. Accordingly, order in
terms of prayer clause (a) of the said company
application was passed and it was directed that until
the Provisional Liquidator takes charge, there shall
be an order of injunction in terms of prayer clause
(b).
10. It is submitted that prayer clauses (a) and
(b) of the said company application which are
referred to in the said order are not before this
court. However, from above referred order, one thing
is clear that there is appointment of the Provisional
Liquidator in respect of the company Vishnu Vijay
Packagers Ltd. At page 51 of the petition, the
petitioners produced the copy of the notice issued by
the Official Liquidator, High Court, Bombay, to M/s
Vishnu Vijay Packagers Ltd. (in provisional
liquidation) which appears to be dated 09.11.2002. The
minutes recorded on 12.11.2002 at the time of taking
possession of the said company by the Official
Liquidator in terms of the order of the High Court
dated 27.4.2001 passed in above referred Company
Application No. 242 of 2001 are produced on record.
By the said notice, the Official Liquidator informed
the said company that he had been appointed as
provisional liquidator and had taken over the
possession thereof. It is further made clear in the
said notice that any one tampering with seal or
interfering with the possession of the said premises
and its assets in any manner will be dealt with in
accordance with law. Thus, it is, therefore, clear
that in November 2002 the Official Liquidator has been
appointed as Provisional Liquidator of the said
company and there is no dispute regarding the same.
11. At page 52 of the petition, there are
minutes recorded on 12.11.2002 at the time of taking
possession of said company M/s Vishnu Vijay Packagers
Limited (in provisional liquidation).The minutes
record that the premises of the said company at
Aurangabad were taken possession of by the officers of
the Official Liquidator in presence of police
officials, so also representatives of Oman
International Bank S.A.O.G., State Bank of India. It
appears that one Mr.Bipin Shah was present and
initially, he had raised some objection to possession
of the company being taken, but subsequently he opened
the gate of the company and allowed taking over
possession of the said company and its assets. The
Minutes produced on record indicates that those are
signed by said Bipin Shah. But, none of the
petitioners were signatories to the same. Thus, it is
argued on behalf of the Petitioners before this court
that after November 2002, the Board of Directors of
said company was not in charge of the management and
affairs of the company and as such the petitioners
cannot be held liable for dishonour of the cheques
which were issued on 29.9.2004.
12. At page 56 of the petition, there is a copy
of agreement arrived at between the management of the
said Company and the union of present Respondents-
complainant, namely, Panther Power Kamgar Sanghatana.
The agreement is a result of discussion between the
management of the company and the representatives of
the Union held on 2.10.2003 and 3.10.2003. By the
agreement, it was agreed that all cheques given on
31.7.2003 to the workers would be returned by them on
or before 15.12.2003 and any proceedings or action
filed under Section 138 of the Act in respect of the
said cheques would be stayed till 15.12.2003. The
agreement states that in all 63 workers would be paid
compensation of Rs.80,00,000/= in three installments.
On behalf of management, though name of petitioner No.
1 is mentioned in the said agreement, it is stated
that he has not signed the said agreement. However,
on behalf of management, three persons Sarvashree
V.H.Shah, A.D.Kulkarni and Sanjay Seth appear to have
signed the agreement, whereas on behalf of the union,
there are signatures of several persons.
13. On behalf of Respondents-complainants
affidavits-in-reply to the writ petition, so also
additional affidavits in reply are filed. Along with
the affidavit dated 17.12.2009, under list of
documents, four documents are produced. Those are,
copies of the notice dated 31.7.2003 and letters dated
7.12.2003, 25.2.2004 and 30.6.3004 at Exhibits R-1,
R-2, R-3 and R-4 respectively. The notice mentions
that from 7.5.2003, as per the order of the High
Court, the Official Liquidator has taken over
possession of the factory and the same is closed. It
is also mentioned therein that although various
attempts have been made, the factory could not be
restarted and yet for the last three months the
workers were paid their salaries without work. By the
said letter, notice was given to all the workers
terminating their services and they were informed that
cheques of compensation, as also for their salaries
for the months of June and July 2003 were sent on the
address of the Union, since personal addresses of the
workers were not available with the said company.
14. Exhibit R-2, is a letter dated 7.12.2003
addressed by authorised representative of the said
company to the Committee Members of the Union i.e.
Panthar Power Kamgar Sanghatana, Aurangabad, stating
that as per the discussion held on 7.12.2003 with
regard to payment of full and final settlement of
claims of 68 members, certain points were mutually
agreed which are as under;
"1. All the members will be given post
dated cheques of an amount unpaid from the
total amount of full and final settlement
i.e. Rs.80 lakhs for 63 members and on
similar basis payment to be made to other 5
members. At the same time all the members
will return earlier cheques issued to them
vide letter dtd.31/07/2003.
2. Starting from 1st December 2003, all
the members will be paid an amount equal to
75% of last drawn wages for three months,
on the date of ceasing of employment on
31/07/2003. Such payment of 75% wages will
be made on 10th of each month. For example
payment of December 2003, will be made on
10th January, 2004 and likewise.
3. At the time of payment of full and
final settlement amount on 25/02/2004, the
payment of that current month has to be made
in cash also.
4. Till the full and final settlement
amount is made to each individual all the
above members are permitted to sit
peacefully in the premises of Akar
Laminators Ltd. (Unit-I), B-73, MIDC,
Waluj."
15. At Exhibits R-3 and R-4, are the letters on
behalf of the said company to the Members of the
Committee of the Union, informing that as per the
settlement, it was not possible for the company to
make payment and, therefore, extension of time was
sought. Admittedly, none of these notice and letters
at Exhibits R-1 to R-4 is signed by any of the present
petitioners.
16. It is submitted on behalf of the petitioners
that for filing complaint against the company,
sanction under Section 446(1) of the Companies Act was
necessary but no such sanction is obtained by the
complainants-Respondents. So far as sanction under
Section 446 (1) of the Companies Act is concerned, the
Section lays down that when a winding up order has
been made or the Official Liquidator has been
appointed as provisional liquidator, no suit or other
legal proceedings shall be commenced, or if pending at
the date of the winding up order, shall be proceeded
with, against the company, except by leave of the
[Tribunal] and subject to such terms as the [Tribunal]
may impose.
17. Both sides have relied upon certain
authorities in support of their submissions. On
behalf of petitioners, reliance was placed on
unreported judgment of learned Single Judge of this
court in Criminal Application No.245 of 1997 [Suresh
K. Jasani vs. Mrinal Dyeing & Manufacturing Co.Ltd.
and ors.] decided on 13.2.2007, the copy of which is
made available by the learned counsel for the
petitioners. It has been observed in the said
judgment that, Respondent No.1-company has been wound
up as per the order of Gujarat High Court and,
therefore, liquidator was appointed. Record revealed
that notice was served on the official liquidator, but
nobody appeared on behalf of the official liquidator
nor for respondent nos. 2 to 8 who were the original
accused. Therefore, after hearing the learned
Advocate for the revision applicant and learned A.P.P.
and referring to Section 446(1) of the Companies Act,
the learned Judge held that "other legal proceedings"
include proceedings under Section 138 of the
Negotiabale Instruments Act and that there leave under
Section 446(1) of the Companies Act was not obtained
before filing those proceedings under Section 138 of
the Act. In the circumstances, the revision
application was dismissed.
18. Single Judge Bench of this Court in Firth
(India) Steel Co. Ltd. (in liquidation AIR 1999 Bombay
75, has discussed various authorities in paragraphs 9
and 10 of the judgment, including the ruling of
Division Bench in the case of Orkay Industries Ltd.
[1998 (2) Mah.L.J.910]. The Court also referred to
earlier case of this Court in Uma Investments [1977
(47) Com.Cas 242] and held that under Section 446(1)
of the Companies Act, the proceedings under Section
138 of the Negotiable Instruments Act are not covered
by the phrase "legal proceedings" or "other legal
proceedings". The Court also considered the case of
S.V.Kondaskar AIR 1972 SC 878 and other cases. There
is a detail discussion and I am more inclined to
follow the ruling of this court in the case of Firth
(India) Steel Co.Ltd. and hold that there is no bar
under Section 446 (1) of the Companies Act in so far
as proceedings under Section 138 of the Negotiable
Instruments Act are concerned.
19. So far as pleadings are concerned, Section
141 of the Negotiable Instruments Act, lays down that
if the person committing an offence under Section 138
is a company, every person who, at the time of 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.
20. Shri F.R.Tandale, learned Counsel for the
Respondents-complainants cited the case of Prafulla
Maheshwari vs. State of Maharashtra, 2008 (1) Mh.L.J.
844. The Court, in paragraphs 5,6,7 and 8 discussed
the facts of that case and the law on the point. In
paragraph 6, reference was made to the judgment of the
Supreme Court in the case of SMS Pharmaceuticals Ltd.
vs. Neeta Bhalla 2005 (4) Mh.LJ (SC) 731 and held that
in that matter, the case of resignation was made out
and form-32 under the Companies Act was brought on
record, but there was nothing on record to show that
the Registrar under the Companies Act had received it.
The demand notice was not replied. So, it was
observed that there was no effective resignation
inasmuch as there was nothing to show that form-32
was actually received by the Registrar of Companies.
It is also observed in paragraph 6 that the
petitioners did not belong to the category of
professionals or experts so as to hold them not
liable. Ultimately, in paragraph 8, it is observed
that the contention of the petitioners are required to
be examined during trial of the complaint filed by
Respondent No.2.
21. Relying upon the case of Prafulla (supra),
it is argued that the documents will have to be
produced and proved before the trial court and the
question whether there was resignation given by
petitioner No. 2 cannot be decided in the present
petition. However, in this case along with reply to
notice and also with this writ petition, letter of
resignation, form-32 and acknowledgment by Registrar
of Companies were sent and are produced.
22. Another case relied upon by Shri
F.R.Tandale, learned counsel for the respondents is
N. Rangachari vs. Bharat Sanchar Nigam Ltd. 2007 (5)
Mh.L.J. 375. In paragraph 14 of judgment in the said
case, it is observed thus;
"14. A person normally having business or
commercial dealings with a company, would
satisfy himself about its creditworthiness
and reliability by looking at its promoters
and Board of Directors and the nature and
extent of its business and its Memorandum or
Articles of Association. Other than that,
he may not be aware of the arrangements
within the company in regard to its
management, daily routine, etc. Therefore,
when a cheque issued to him by the company
is dishonoured, he is expected only to be
aware generally of who are in-charge of the
affairs of the company. It is not reasonable
to expect him to know whether the person who
signed the cheque was instructed to do so or
whether he has been deprived of his
authority to do so when he actually signed
the cheque. Those are matters peculiarly
within the knowledge of the company and
those in-charge of it. So, all that a payee
of a cheque that is dishonoured can be
expected alleged is that the persons named
in the complaint are in-charge of its
affairs. The Directors are prima facie in
that position."
23. On the other hand, Shri R.B.Muley, learned
Counsel for the Petitioners argued that in the case of
N. Rangachari (supra) person initiating the
prosecution was by a stranger and was not expected to
know the internal affairs of the company and as to who
is in actual authority or in-charge of the company or
its affairs, but in the present case, all the
Respondents were the workers/employees of the company
and, therefore, it cannot be said that they were not
knowing as to who were the persons in authority or in-
charge of the management of the company. Even the
resignation by particular Director may be known to the
employees, if such director is in actual charge of the
daily affairs. Moreover, replies to notice were
received by the Advocate of respondents and so it was
necessary to aver and demonstrate that petitioners
were incharge of management and affairs of the
company.
24. Advocate Shri Muley has further argued that
in the present case, there is nothing on record to
show that any of the petitioners was party to the
agreement with the union or they ever wrote/signed any
letter on behalf of the company. None of the documents
at Exhibits R-1 to R-4 produced with additional reply
affidavit, is signed by the petitioners as persons in
authority or in-charge of management of the company.
It is not mentioned in the agreement or in the
affidavit in reply that the petitioners had taken part
in the discussion or negotiations.
25. Shri F.R.Tandale, learned counsel for the
Respondents-complainants has also relied upon the case
of Mrigendra vs. State of Maharashtra, 2008 (5)
Mh.L.J.169. In the said case, this court referred to
the cases of SMS Pharmaceuticals and N. Rangachari
(supra) and in paragraph 10 referred to the
observations of the Supreme Court in the case of SMS
Pharmaceuticals Ltd. to the effect that the burden is
on the Board of Directors or the Officers in-charge of
the affairs of the company to show that they are not
liable to be convicted and any restriction on their
power or 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 such a restriction or to show that at the
relevant time they were not in-charge of the affairs
of the company. Relying on aforesaid judgment,
learned counsel for the Respondents submitted that the
present petition is liable to be and be dismissed and
the petitioners may be required to prove at the trial
of the case that they were not in-charge of the
affairs of the company.
26. On the other hand, Shri Muley, learned
counsel for the Petitioners has referred to the case
of S.M.S. Pharmaceuticals Ltd. vs. Nita Bhalla, 2005
(4) M.L.J. 731. The Apex Court was dealing with the
reference made by a two Judge Bench of the Supreme
Court of the following three questions.
(a). Whether for purposes of section141 of
the Negotiable Instruments Act, 1881, it is
sufficient if the substance of the
allegation read as a whole fulfill the
requirements of the said section and it is
not necessary to specifically state in the
complaint that the persons accused was in
charge of, or responsible for, the conduct
of the business of the company.
(b) Whether a director of a company
would be deemed to be in-charge of, and
responsible to, the company for conduct of
the business of the company and, therefore,
deemed to be guilty of the offence unless he
proves to the contrary.
(c) even if it is held that specific
averments are necessary, whether in the
absence of such averments the signatory of
the cheque and or the Managing Directors or
Joint Managing Director who admittedly would
be in-charge of the company and responsible
to the company for the conduct of its
business could be proceeded against. "
After considering entire law and various provisions,
in paragraph 20, following answers were given to the
questions under reference.
(a) it is necessary to specifically
aver in a complaint under Section 141 that
at the time the offence was committed, the
person accused was incharge of, and
responsible for the conduct of business of
the company. This averment is an essential
requirement of section 141 and has to be
made in a complaint. Without this averment
being made in a complaint, the requirement
of section 141 cannot be said to be
satisfied.
(b) The answer to question posed in
sub-para (b) has to be in negative. Merely
being a director of a company is not
sufficient to make the person liable under
section 141 of the Act. A director in a
company cannot be deemed to be incharge of
and responsible to the company for conduct
of its business. The requirement of section
141 is that the person sought to be made
liable should be incharge 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.
(c) The answer to question (c) has to
be in affirmative. The question notes that
the Managing Director or Joint Managing
Director would be admittedly incharge of the
company and responsible to the company
conduct of its business. When that is so,
holders of such positions in a company
become liable under section 141 of the Act.
By virtue of the office they hold as
Managing Director or Joint Managing
Director, these persons are incharge of and
responsible for the conduct of business of
the company. Therefore, they get covered
under section 141. So far as signatory of a
cheque which is dishonoured is concerned, he
is clearly responsible for incriminating
act and will be covered under sub-section
(2) of section 141.
27. Thus, it is clear from the abovesaid
statement of law that there should be averment in the
complaint that the person accused was incharge and
responsible for conduct of the business of the
company. In the absence of such averment, requirement
of Section 141 of the Negotiable Instruments Act
cannot be said to have been satisfied. Secondly,
every director of the company cannot be deemed to be
incharge and responsible for conduct of business of
the company. Requirement of Section 141 is that the
person incharge should be liable for conduct of
business of the company at the relevant time. Thus,
so far as director is concerned, there is no deemed
liability, but the same has to be averred. Thirdly,
so far as the Manging Director or Joint Managing
Director is concerned, they are deemed to be incharge
and responsible for company conducting its business.
Holders of such position become liable under Section
141 of the Negotiable Instruments Act, by virtue of
office which they hold.
28. In the present case, we have already
reproduced paragraph 6 of the petition wherein it is
mentioned that accused Nos. 2 to 5 were jointly and
severally liable for payment of debt and also for
discharging liability flowing from dishonour of the
cheques and that they are also guilty of the offence
under the Negotiable Instruments Act. It is argued on
behalf of the Petitioners that there is no specific
averment that they were in-charge of affairs,
management or business of the company.
29. The last limb of argument of learned counsel
for the petitioner is that after liquidation, the
directors have no powers to interfere with the
management of the company and, therefore, they cannot
be held liable. Learned counsel drew my attention to
Section 450 of the Companies Act which is regarding
appoint and powers of the provisional liquidator. As
per Section 450 (1), at any time after the
presentation of a winding up petition and before the
making of a winding up order, the [Tribunal] may
appoint the Official Liquidator to be liquidator
provisionally. Sub-section (3) of Section 450 speaks
that where a provisional liquidator is appointed by
the [Tribunal] the [Tribunal] may limit and restrict
his powers by the order appointing him or by a
subsequent order, but otherwise he shall have the same
powers as a liquidator.
30. In the present case, the Respondents-
complainants have not come with a case that the powers
of the liquidator appointed are limited, nor have them
come with any order to that effect nor the order
passed on 27th April 2001 in company application No.
242 of 2001 which is on record of present petition at
page 25, shows that the power of the liquidator
appointed was limited or restricted.
31. Section 457 of the Companies Act lays down
the powers of the liquidator and it speaks that the
liquidator in a winding up by the [Tribunal] shall
have power, with the sanction of the [Tribunal] to;
(a).........................................
(b) to carry on the business of the company
so far as may be necessary for the
beneficial winding up of the company.
(c)
to sell the immovable and movable
property and actionable claims of the
company by pubic auction or private
contract, with power to transfer the whole
thereof to any person or body corporate, or
to sell the same in parcels
32. Section 456 of the Companies Act is also
relevant which speaks about custody of company's
property and lays down that where a winding up order
has been made or where a provisional liquidator has
been appointed, the liquidator [or the provisional
liquidator, as the case may be] shall take into his
custody or under his control,all the property, effects
and actionable claims to which the company is or
appears to be entitled.
33. It is argued before this court by Advocate
Shri Muley on behalf of the petitioners that after
winding up proceedings and appointment of the
provisional Official Liquidator, the directors of the
company have no power to deal with the property or
assets of the company and for this purpose, reliance
is placed by learned Advocate on the case of First
National Bank v. Om Prakash AIR 1962 Punjab 433. In
that case, it is laid down;
"The effect of Section 536(2) of the
Companies Act is that the director or any
other employee who has disposed of the
property of the company becomes liable for
all monies of the company expended by him
since the commencement of winding up. It
is, of course, open to a Court to validate
transactions bona fide entered into by the
company for its benefit. Directors or other
employees who enter into a contract and make
payments on behalf of the company during the
winding-up proceedings do so at their peril,
as, such payments are unauthorised and
amount to a wrongful disposal of the
property of the company."
Referring to Sections 456 and 457 (3), it has been
further observed as follows:
" Under Ss 456 and 457(3) the company's
property, after the appointment of
provisional liquidator, has to be in his
custody, subject to the control of the
Court."
I may reproduce paragraph 30 which is as follows;
"30. The Directors' powers cannot be
exercised once the property and estate of
the company come under the custody of the
Court. So long as the order of the
appointment of the provisional liquidator is
operative, the powers of the Directors must
remain in abeyance. (Shree Tej Protap
Textile Mills v. Granaries Ltd. 65 Cal WN
665). The result, therefore, is that all
dispositions of the property of the company
made between the date of the presentation of
the petition for winding up and the winding
up order, unless of course the Court
otherwise orders, are void. The Courts,
however, allow such dispositions if they
have been made honestly and in the ordinary
course of the business. (see: Sabapathi Rao
v. Sabapathi Press Co.Ltd. AIR 1930 Mad
1012).
34. Shri Muley, learned Advocate for the
petitioner also referred to the case of Shree Tej
Protap Textile Mills v. Granaries Ltd. 1961 Company
Cases, 610. In the said case, it is laid down that
the powers of the directors of a company cannot be
exercised once the company comes under liquidation and
its property and assets come under the custody of the
Court under the Indian Companies Act, 1913 and must,
in any event, be held to remain dormant so long as
order of appointment of the provisional liquidator is
operative. In the said case, case reported in 37
Bom.L.R. 39, so was also Privi Council cases were
referred to. Copy of the judgment in the said case of
Shree Tej Protap Textile Mills is taken on record and
marked "X" for the purpose of identification.
35. Considering the above said position of law,
the documents on record and on appreciating the
submissions advanced on behalf of the parties, in my
opinion, so far as Petitioners in the present petition
are concerned, after appointment of the liquidator,
they cannot be held liable. The documents produced by
the Respondents also show that the persons other than
the present petitioners were liable.
36. In the circumstances, the petition must
succeed and the same is, therefore, allowed. The
order of issuance of process passed on 21.7.2007 in
S.C.C. No. 1277 of 2005, by the learned Judicial
Magistrate, First Class, (5th Court) Aurangabad, as
confirmed by the learned Additional Sessions Judge-1,
Aurangabad, on 11.8.2009 in Criminal Revision No.339
of 2007 is hereby quashed and set aside insofar as the
present petitioners are concerned.
Petition stands disposed of accordingly.
pnd/criwp850.09 (P.R.BORKAR, J.)
