Bombay High Court
Rajiv Banga vs L And T Finance Company on 3 December, 2010
Bench: V.M. Kanade
1
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL WRIT PETITION NO. 1238 OF 2010
Rajiv Banga ...Petitioner
vs
L and T Finance Company
Limited and Anr. ig ...Respondents
WITH
CRIMINAL APPLICATION NO.1229 OF 2010
WITH
CRIMINAL APPLICATION NO. 1230 OF 2010
WITH
CRIMINAL APPLICATION NO.1231 OF 2010
WITH
CRIMINAL APPLICATION NO. 1232 OF 2010
WITH
CRIMINAL APPLICATION NO. 1233 OF 2010
WITH
CRIMINAL APPLICATION NO.1234 OF 2010
WITH
CRIMINAL APPLICATION NO.1235 OF 2010
WITH
CRIMINAL APPLICATION NO.1236 OF 2010
WITH
CRIMINAL APPLICATION NO.1237 OF 2010
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2
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
WITH
CRIMINAL APPLICATION NO.1238 OF 2010
Sachin Shah and Ors. ...Applicants
Vs.
L and T Finance Limited and
Anr. ig ...Respondents
WITH
CRIMINAL WRIT PETITION NO.1239 OF 2010
Hardeep Singh Bedi and
Ors. ....Petitioners
Vs.
L and T Finance Company
and Anr. ....Respondents
----
Mr. A.P. Mundargi, Sr. Counsel with
Mr. Niranjan Mundargi with Ms. Renuka R. Laxmeshwar
i/b. Prashant Gawali for the Petitioners
Mr.D.R. More -APP for the State
Mr.Anand Poojari i/b. Mrs. S.I. Joshi i/b. Mr. S.I.Joshi &
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
Co. for Respondent No.1
CORAM: V.M. KANADE J.
DATED: 3RD DECEMBER, 2010
P.C.:-
1. Heard.
2. Applicants/petitioners are challenging the order of
issuance of process passed by the learned Metropolitan
Magistrate's 12th Court, Bandra, Mumbai in complaints filed
by Respondent No.1 under section 138 of the Negotiable
Instruments Act. Since the number of cheques were
dishonoured, separate complaints were filed. The subject
matter of complaints and grounds on which the order of
process is challenged being the same, all these applications
along with the two Writ Petitions can be disposed off by a
common judgment.
3. Brief facts are as under:-
4. A loan-cum-hypothecation agreement dated 24/1/2008
was executed between IDEB Projects Pvt. Ltd, which is
arrayed as accused No.1, and L. & T. Finance Limited,
Respondent No.1 herein. In the complaint, it is alleged that
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
the cheques which were issued for repayment of the said
loan were dishonoured after they were presented by the
complainant in their bank and upon non-payment of the said
amount which was due and payable under the agreement,
after service of notice, complaint was filed under section 138
of the Negotiable Instruments Act. Applicants/Petitioners
have challenged the order of issuance of process on the
following grounds.
(i) It was submitted that the 12th Metropolitan
Magistrate's Court, Bandra did not have
jurisdiction to try and decide the said
complaint since the entire cause of action
had arisen at Bangalore, the cheques were
issued at Bangalore and the Bank of the
borrower is situated at Bangalore. Clause
3.2 of the loan-cum-hypothecation
agreement clearly stipulated that the
payment of loan installments and other
charges due under the said agreement were
payable by the borrower to the lender at the
Corporate Office or such other address
specified in the schedule to the agreement.
It was, therefore, submitted that the entire
cause of action had arisen at Bangalore. It
was submitted that merely because the
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
notice dated 30/3/2009 was issued from
Bandra, jurisdiction was sought to be
imparted on the court at Bandra. It was
submitted that in view of the judgment of
the Supreme Court in Harman Electronics
(P) Ltd & Anr. vs. National Panasonic (India)
Ltd.1 merely because notice was issued
from Mumbai
ig that would not confer
jurisdiction on Mumbai Court.
(ii) It was then submitted that the
complainant mechanically reproduced
ingredients of section 141. It was
submitted that specific role of the
applicants/petitioners was not mentioned in
the complaint and, therefore, in view of the
decision of the Apex Court in National Small
Industries Corporation Limited vs. Harmeet
Singh Paintal and another2, no case was
made out against the applicants/petitioners
and on that ground the order of issuance of
process was liable to be set aside qua the
applicants/petitioners. A distinction was
also sought to be made in respect of the
judgment of the Delhi High Court in Anu
1 2009(1) ALL MR 479
2 1(2010) SLT 593 = (2010) 3 SCC 330
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
Ahuwalia & Ors vs. Bennett Coleman
Company Limited & Anr.1 and it was argued
that the Delhi High Court had relied on para
5 of the decision of the Supreme Court in
National Small Industries Corporation
Limited vs. Harmeet Singh Paintal and
another2, as a distinguishing factor for the
purpose ig of ascertaining sufficiency of
averments for the purpose of sustaining a
prosecution under the deeming fiction
arising under section 141 of the Negotiable
Instruments Act.
(iii) It was then submitted that there was
non-compliance of the mandate of the
Criminal Procedure Code. It was submitted
that in view of the provisions of section 202
of the Cr.P.C, since the
applicants/petitioners were residing outside
the jurisdiction of Mumbai Court i.e at
Bangalore, the learned Magistrate ought to
have postponed the issuance of process
and should have held an inquiry under
section 202. It was submitted that the
mandatory provisions of section 202 of the
1 Order of Delhi High Court in CRI. M.C. 1286/2010 dated 23/4/2010.
2 1(2010) SLT 593 = (2010) 3 SCC 330
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
Cr.P.C. not being followed, the order of
issuance of process was vitiated and was
liable to be set aside. It was also submitted
that the applicants/petitioners had
informed the complainant that the
applicants/petitioners were non-executive
Directors of IDEB Projects Pvt. Ltd. and
were not
ig responsible for dishonour of
cheques. It was submitted that in view of
this reply which was given by the
applicants/petitioners-company, the
learned Magistrate was duty bound to hold
an inquiry under section 202.
(iv) It was then submitted that order of
issuance of process was also vitiated since
the verification statement of the
complainant was recorded under section
200 of the Cr.P.C. in a cyclostyled format
and in view of the legislative intent of
section 200 as well as the decision of the
High Court in Amarnath Baijnath Gupta &
Anr. vs. Mohini Organics Pvt. Ltd & Anr.1,
the said order of issuance of process was
liable to be set aside.
1 2009 ALL MR (Cri) 184
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
(v) It was submitted that the applicant No.
4 was appointed as alternate Director to
applicant No.1 and applicant No.5 was
appointed as alternate Director to
applicant No.1. It was submitted that the
alternate Director was appointed during
absence of the original Director and is
required to vacate his office when the
original Director returns and, therefore,
both the original Director and alternate
Director should not be simultaneously
prosecuted.
(vi) Lastly, it was submitted that pursuant
to the investment made by Samsara India
IDEB Investments, applicants/petitioners
were appointed with IDEB Projects Pvt. Ltd.
as non-executive Directors and
subsequently resigned as Directors of the
Company. It was submitted that the
company complied with the procedural
requirements under the Companies Act
and submitted Form No.32 to the Registrar
of Companies and, therefore, they could
not have been prosecuted.
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
5. On the other hand, the learned Counsel appearing on
behalf of Respondent No.1/complainant submitted that
Respondent No.1 has its registered office at L. & T. House,
Ballard Estate, Mumbai and its Corporate Office is situated
at 3B, Laxmi Towers, C-25, G-Block, Bandra-Kurla Complex,
Bandra (East), Mumbai 400 051. It was submitted that the
demand notice dated 30/03/2009 was issued to the accused
through their advocate at their Corporate Office. It was
submitted that in view of clause 3.2 of the loan-cum-
hopothecation agreement, the loan installment and other
charges and monies due under the agreement were payable
to the lender at the Corporate Office. It was submitted that
in view of the specific agreement, the applicants/petitioners
had agreed to make payment at the Corporate Office at
Mumbai. Secondly, it was submitted that the statutory
notice was issued from time to time and, thirdly, it was
submitted that Respondent No.1 had its registered office at
Mumbai and, therefore, Mumbai Court had jurisdiction to try
and entertain the complaint. Reliance was placed on the
judgment of the Division Bench of this Court in Mrs. Preetha
S. Babu Vs. Voltas & Anr. and more particularly paragraphs
4 and 34.
6. So far as the averments in the complaints are
1 2010 ALL MR (Criminal) 1025
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
concerned, it was submitted that specific averments were
made in para 2 and 7 of the complaints in regard to the
applicants/petitioners being in charge and responsible for
the conduct and business of IDEB Projects Pvt. Ltd. It was
submitted that other grounds were pertaining to disputed
questions of fact which could be decided only in the trial
after recording of evidence was over.
7.
After having given the thoughtful consideration to the
submissions made by the learned Counsel for the
applicants/petitioners and the learned Counsel for the
Respondent No.1/complainant, in my view, submissions
made by the learned Counsel for the applicants/petitioners
cannot be accepted for the following reasons.
8. The complainant is a company registered under the
Companies Act and is carrying on business of providing on
lease various vehicles, plants, machinery, providing long
term/short term loans against security and also for providing
loans for the purchase of Tractors etc. In the complaint, it is
alleged by the complainant that the accused No.1
approached the complainant for loan and the complainant
agreed to the said request of the accused. The accused in
their capacity as borrowers had entered into loan-cum-
hypothecation agreement and also executed certain loan
documents with the complainant on various terms and
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
conditions contained in the said documents. It is submitted
that towards partial discharge of aforesaid liability, three
cheques were issued for a total amount of Rs 12,65,883.00.
The said cheques, however, were dishonoured after they
were presented by the complainant in their bank. The
demand notice was issued dated 30/03/2009 through their
advocate from their Corporate Office at Mumbai which was
duly served on the applicants/petitioners. However, on non-
payment of the amount due within 15 days from the date of
service of notice, complaints were filed.
9. So far as the first ground regarding jurisdiction of the
Bandra Court is concerned, it is an admitted position that
the complainant has its registered office at Mumbai and its
Corporate Office at Bandra-Kurla Complex. Clause 3.2 of the
loan-cum-hypothecation agreement reads as under:-
"3.2 All payments of the loan installments
and other charges and moneys due under
this Agreement shall be payable by the
Borrower to the Lender at the Corporate
Office, or at such other addresses as may
be specified in the Schedule shall deemed
to have been paid on the date on which
the amounts thereunder are realized."
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
Both the learned Counsel for the applicants/petitioners as
well as Respondent No.1 - complainant relied on this clause.
10. Mr. Mundargi, the learned Counsel appearing on
behalf of the applicants/petitioners submitted that in view of
the said clause, it was necessary to look at the schedule of
the said loan-cum-hypothecation
ig agreement. It was
submitted that the scheduled being signed at Bangalore, it
was clear that payments could also be made at Bangalore
and, therefore, the Bangalore Court alone had jurisdiction to
decide the case.
11. On the other hand, the learned Counsel appearing on
behalf of the complainant submitted that there was no
specific clause in the said schedule as contemplated under
clause 3.2 "any other address where the amount due was
payable" and, therefore, merely because it was signed at
Bangalore, it could not be presumed that the amounts due
were payable at Bangalore. It was submitted that therefore
the amounts were payable at Corporate Office.
12. There is much substance in the submissions made by
the learned Counsel for Respondent No.1/complainant. The
said clause clearly stipulates that the payments of the
amounts due are to be made at the Corporate Office. There
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
is no specific clause in the schedule referring to any other
place where payment could be made and, therefore, from
the averments made in the said clause, it is clear that the
payments were supposed to be made only at the Corporate
Office which is situated admittedly at Bandra-Kurla Complex.
The Apex Court in K. Bhaskaran vs. Sankaran Vaidhyan
Balan1 has clearly laid down that the complainant can file
complaint at any of the five places where the cause of action
has arisen. Similarly, Division Bench of this Court in Mrs.
Preetha S. Babu Vs. Voltas & Anr. has also, after going
through the judgments of the Apex Court in K. Bhaskaran vs.
Sankaran Vaidhyan Balan3, Harman Electronics (P) Ltd &
Anr. vs. National Panasonic (India) Ltd.4, Ahuja Nandkishore
Dongre vs. State of Maharashtra 5 and in Shamsahd Begum
vs. B. Mohammed 6 has held that the place where the
complainant is carrying on his business or is ordinarily
residing or if it is a company where its registered office is
situated, if a notice demanding payment is issued from such
place the court at such place would have jurisdiction to
entertain the complaint. In the present case, amount due
under the agreement was payable at the Corporate Office at
Bandra-Kurla Complex. The notice was sent from the
Corporate office situated at Bandra-Kurla Complex. The
1 1999(4) ALL MR 452 (SC)
2 2010 ALL MR (Criminal) 1025
3 1999(4) ALL MR 452 (SC)
4 2009(1) ALL MR 479
5 2006 ALL MR (Cri) 3357
6 2008(6) Bom.C.R. 722(S.C.)
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
Company has its registered office in Mumbai. The
complainant is carrying on business in Mumbai and,
therefore, Bandra Court clearly has jurisdiction to try and
decide this case. The submission made by the learned
Counsel for the applicants/petitioners cannot be accepted.
13. So far as the argument regarding averments in the
complaint is concerned,
ig the complainant has made
necessary averments that the applicants/petitioners were in
charge and were responsible for the conduct and business of
IDEB Projects Private Ltd. and the requisite averments were
also made regarding jurisdiction in para 10 of the
complaint. In my view, sufficient averments have been
made in the complaint for the purpose of invoking provisions
of section 141 of the Negotiable Instruments Act. Therefore,
there is no substance in the submissions made by the
learned Counsel appearing on behalf of the
applicants/petitioners.
14. So far as the submission regarding non-compliance of
provisions of section 202 of the Cr.P.C. is concerned, this
Court in Bansilal Kabra vs. Global Trade Finance Ltd & Anr.1
has, after relying on the judgments of the Apex Court, held
that the provisions of section 202 of the Cr.P.C. are directory
and not mandatory and, therefore, non-compliance, if any,
1 Cr.Applicatioon No.1344/2010 order dated 9/7/2010.
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
of the said provisions would not vitiate the order of issuance
of process.
15. So far as the submission regarding improper recording
of verification is concerned, the judgment on which reliance
is placed by the applicants/petitioners in Amarnath Baijnath
Gupta & Anr. vs. Mohini Organics Pvt. Ltd. & Anr.1 has been
overruled by the Full Bench of this Court vide its judgment
dated 07/12/2010 in Mr. Rajesh Bhalchandra Chalke vs
State of Maharashtra 2 In view of the ratio of the said
judgment of the Full Bench of this Court, submission made
by the learned Senior Counsel appearing on behalf of the
applicants/petitioners cannot be accepted.
16. So far as the submission regarding resignation of
certain Directors is concerned and the submissions that
some Directors are non-executive Directors and some are
alternate Directors are concerned, all these submissions
being disputed by the complainant, at this stage this Court
cannot go into the question of correctness or otherwise of
the said submissions of the applicants/petitioners. The
Division Bench of this Court in Suhas Bhand vs. State of
Maharashtra 3 in para 33 has observed as under:-
1 2009 ALL MR (Cri) 184
2 Full Bench Judgment of this Court dated 7/12/2010 in WP No.2523/10 a/w WP No.
3478/2010
3 2009 ALL MR (Cri) 2614
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
"33. A reading of these judgments makes
for the following legal propositions with
regard to the resignation of a Director of a
registered Company:-
(i) If the accused in a criminal prosecution
under section 138 of the Negotiable
Instruments Act produces a certified
copy of Form No.32 certified by the
ROC and there is no dispute of the
factum of his resignation, the accused
is entitled to be discharged from the
prosecution.
(ii) If his resignation is not accepted or
admitted by the complainant upon
production of the certified copy of
Form No.32, the accused would have
to prove the truth of the contents of
the said certified copy i.e the factum of
his resignation. Such accused cannot
be discharged simplicitor upon
production of a certified copy of Form
No.32.
(iii) If the complainant produces any
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
evidence showing the continuance of
the accused as Director of the
Company after the date of the
resignation claimed by him as per the
certified copy of Form No.32, produced
by him, such accused cannot be
discharged simplicitor upon production
of such certified copy of Form No.32.
He would have to lead evidence to
prove the factum of his resignation.
Similarly the complainant would be
entitled to prove the factum of his
continuing as Director. The trial under
Section 138 read with Section 141 of
the Negotiable Instruments Act would,
therefore, proceed."
In view of the ratio of the said judgment, at this stage, it will
not be possible to decide the questions of fact regarding
resignation of the applicants/petitioners or they being
alternate or non-executive Directors. It was also
vehemently urged that great hardship would be caused to
the applicants/petitioners since the applicants/petitioners
are residing at Bangalore and they would be required to
attend the Bandra Court at Mumbai which would cause
harassment to them. In my view, this grievance can be
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
taken care of by granting exemption to the
applicants/petitioners from appearing in the Trial Court.
Hence, there is no substance in the submissions made by
the learned Counsel appearing on behalf of the
applicants/petitioners.
17. The Criminal Writ Petitions and the Criminal
Applications are dismissed.ig Interim order is vacated.
Hearing of the Trial, however, is expedited.
18. Applicants/Petitioners are exempted from appearing in
the Trial Court. Their statement under section 313 of the
Criminal Procedure Code may be recorded through their
advocate as per the procedure laid down under section 313
sub-clause (5) of the Criminal Procedure Code, provided that
they give an undertaking that they will not dispute their
identity and correctness of the answers recorded in their
statement under section 313 of Cr.P.C. The Trial Court shall
follow the procedure laid down under section 313(5) while
recording the statement under section 313 and shall follow
the guidelines laid down by the Apex Court in Keya
Mukherjee vs Magma Leasing Limited and another 1 If the
applicants'/petitioners' counsel remain absent on two dates,
exemption granted by this Court may be cancelled by the
learned Magistrate by passing appropriate order.
1 (2008) 8 SCC 447
(WP 1238 of 2010 with cri.
appln nos.1229, 1230, 1231, 1232, 1233, 1234, 1235,
1236,1237,1238 of 2010, with cri wp. 1239 of 2010)
19. Criminal Writ Petitions and Criminal Applications are
accordingly disposed off.
(V.M. KANADE, J.)
