Bombay High Court
Vijay Khairatilal Bhatia vs Ashwin Ramesh Mittal And Anr on 14 August, 2015
Bench: V.L. Achaliya
1 APL333.2014.odt
sgp
IN THE HIGH COURT OF JUDICATURE AT BOMBAY.
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPLICATION (APL) NO. 333 OF 2014
Vijay Khairatilal Bhatia
Aged about 70 years,
22, Sita Mahal, B. D. Petit Road,
Near Parsee General Hospital,
Mumbai - 400 036. ... APPLICANT
VERSUS
1. Ashwin Ramesh Mittal,
Mittal Bhavan, Peddar Road,
Mumbai - 400 026.
2. State of Maharashtra. ... RESPONDENTS
.............
Mr Manoj S. Mohite, Advocate i/b Mr. Amol J. Phoujdar, Advocate for the
applicant
None for respondent No. 1.
Mrs. A. A. Mane, APP for respondent/State
..............
CORAM : V. L. ACHLIYA, J.
RESERVED ON : 20/4/2015
PRONOUNCED ON : 14/08/2015
JUDGMENT:
. Rule. Rule made returnable forthwith. By consent, taken up for
final disposal at the stage of admission.
2. The applicant/accused No. 5 in the complaint has filed this
application u/s 482 of Code of Criminal Procedure (Cr.P.C.) to set aside the
order of issuance of process dt. 17/10/2013 passed in Criminal Complaint
Case No. 603/SS/2013, by Metropolitan Magistrate, 14 th Court at Girgaon,
Mumbai and further to quash the said criminal proceedings to the extent of
applicant.
2 APL333.2014.odt
3. Few facts leading to filing of the present application are as
under :
The complainant (respondent No. 1) herein filed criminal
complaint u/s 138 r/w 141 of the Negotiable Instruments Act, 1881 (in short
"NI Act") as against accused No. 1 - Tricom Indian Limited and five other
persons, which include the present applicant as Director of accused No. 1 -
Company. In the complaint filed, the complainant has alleged that on account
of acquaintance with the accused Nos. 2 and 3, the complainant provided
financial assistance as a friendly loan of Rs. 25.00 Lakhs to accused No. 1-
Company. Accused Nos. 2 and 3 induced the complainant to disburse the said
loan. In acknowledgement of the loan amount received, accused No. 2
executed Bill of Exchange on behalf of accused No. 1 - Company. According
to the complainant, Bill of Exchange has been signed by accused Nos. 2 and
3. Towards the repayment of loan, accused No. 2 with consent, connivance
collusion and knowledge of accused Nos. 3 to 4 for and behalf of accused
No.1 issued one post-dated cheque bearing No. 011278 for an amount of
Rs. 25.00 Lakhs payable on 15/7/2013 and drawn and payable from the
account of accused with the Axis Bank, Vile Parle (E) Branch, Mumbai. The
cheque was issued on behalf of accused No. 1 under the signature of accused
No. 2. The said cheque when presented for realization on 15/7/2013 with
ICICI Bank, Andhri (E) Branch, Mumbai, same was dishonoured by bankers
of accused No. 1 - Company with endorsement "funds insufficient" and was
communicated vide memo dt. 16/7/2013. According to the complainant
though he has given considerable time, the amount was not paid. Therefore
he issued notice on 27/7/2013 to all the accused through his Advocate. The
notice was duly served upon accused No. 1 on 30/7/2013. However, the
notice sent to accused Nos. 2 to 6 returned with remark "left". Vide reply sent
on 3/8/2013, accused No. 1 raised false and frivolous grounds that the other
accused are not the Directors of the Company and they have resigned. Since
3 APL333.2014.odt
the payment towards the cheque dishonoured was not made by the accused,
the complainant has filed complaint. The complaint appears to be filed on
7/9/2013. Learned Metropolitan Magistrate on consideration of the complaint
documents filed on record pleased to issue process u/s 138 r/w 141 of the NI
Act, against the accused persons making it returnable on 4/1/2014. Being
aggrieved by the said order, the applicant/accused No. 5 has filed the present
application u/s 482 of the Code of Criminal Procedure to set aside the order
passed by Ld. Metropolitan Magistrate and further to quash the criminal
proceedings to the extent of the applicant.
4. I have heard the submissions advanced by Mr Manoj S. Mohite,
learned Counsel appearing on behalf of the applicant and Mrs Mane, learned
APP for respondent/State. None appeared on behalf of respondent
No.1/complainant, though served.
5. By referring the contents of the complaint filed by the
complainant, the learned Counsel for the applicant has contended that on the
face of the complaint filed, no prima facie case has been made out for
issuance of process u/s 138 r/w 141 of NI Act, as against the
applicant/accused No. 5. By referring the provisions of Section 141 of NI
Act, the learned Counsel has submitted that, in order to attract the vicarious
liability u/s 141 of NI Act, it is obligatory on the part of the complainant to
specifically plead as to how and in what manner the accused was guilty of
commission of offence u/s 138 r/w 141 of the NI Act. It is pointed out that
the facts pleaded in the complaint nowhere make out any case to attract the
vicarious liability of the applicant for the alleged dishonour of cheque and
commission of offence u/s 138 of NI Act. It is submitted that, in order to
attract offence u/s 138 r/w 141 of NI Act, there must be specific averments. It
is not sufficient to make a bald statement in complaint that the Director i.e.
accused in the complaint is incharge or/and responsible for the conduct of the
business of the Company. In support of the contention that the averments
4 APL333.2014.odt
made in the complaint are not sufficient to attract the offence u/s 138 r/w 141
of NI Act as against the applicant/accused No. 5, the learned Counsel has
relied upon the decision of the Hon'ble Apex Court in the case of National
Small Industries Corp. Ltd. Vs. Harmeet Singh Paintal & Anr. reported in
2010 ALL MR (Cri) 921 (S.C.) and further relied upon the decision of the
Hon'ble Apex Court in the case of Pooja Ravinder Devidasani Vs. State of
Maharashtra reported in 2015 ALL MR (Cri) 419 (S.C.). Learned Counsel
for the applicant has further assailed the order passed by the learned
Metropolitan Magistrate with contention that the order has been passed in a
gross non-application of mind and without any material available on record.
Learned Counsel has submitted that, neither the complaint nor the documents
filed by the complainant remotely disclose that the applicant was concerned
with the day-to-day affairs of the Company or anyway responsible for the
conduct of the business of the Company. In the entire complaint, the
complainant has not attributed any role to the applicant except alleging that
he is one of the Directors. The learned Counsel submitted that the accused
No. 1 - Company has responded to the notice. In the notice sent by
respondent No. 1, it has been specifically informed that the present applicant
is no more Director of the Company, still the process was issued against the
applicant / accused No. 5.
6. In order to appreciate the submissions advanced, I have
thoroughly perused the averments made in the complaint so as to attract the
vicarious liability of the applicant / accused No. 5 in commission of offence
u/s 138 r/w 141 of NI Act. In my view, on the face of the complaint, no case
for issuance of process u/s 138 r/w 141 of NI Act have been made out against
the applicant / accused No. 5. In this context, it is useful to refer to the
averments made in para Nos. 3, 4, 7, 8, 12 and 15.
"3. I say that accused No. 1 is a company incorporated under the
Companies Act 1956. I say that accused No. 2 & 3 are also
Majority Shareholders of Accused No. 1. I say that Accused
No. 6 is the office of Company i.e. Company Secretary of
5 APL333.2014.odt
Accused No. 1.
4. I say that accused No. 2 to 6 are individually / jointly and
severally responsible for the day-to-day
management/administration and smooth running conducting of
the business of the company Accused No. 1. All Accused are
also individually/jointly and severally responsible for
repayments of the loans, debt/liability of the company.
7. I say that accordingly in consideration of the loan, Accused No.
2 & 3 with consent connivance and knowledge of other Accused
gave demand bill of exchange dt. 09.06.2011 of Rs. 25,00,000/-
duly executed by Accused No. 2 for you No. 1, and the same is
accepted for payment by Accused NO.3. I say that the contents
of the Bill of Exchange true and correct. I identify the
signature of Accused No.2 & 3 on the said Bill of Exchange. I
say that the said Bill of Exchange bears the stamp of the
Accused No. 1 Company. Hereto annexed and marked is the
copy of Bill of Exchange as "Exhibit-B".
8.
CHEQUE:
I say that in consideration for repayment of the above financial
assistance friendly loan Accused No. 2 with consent,
connivance, collusion and knowledge of Accused No. 3 to 4 for
and behalf of Accused No. 1 have issued one post-dated cheque
detailed as follows:
Date Cheque No. Amount (Rs.) Bank
15.07.2013 011278 25,00,000/- Axis Bank Vile Parle
(E) Branch
I say that contents of the said cheques are true and correct. I
identify the signature of the accused No. 2 on the said cheques
as the same was signed in my presence.
DISHONOURED CHEQUE & MEMO:
8. I say that as per the instructions, assurance of clearance and
after informing all the accused, the above said cheque was
deposited on 15/07/2013 for realisation through ICICI Bank
Ltd. Andheri (E) Branch Mumbai, but was dishonoured by your
bankers Axis Bank, Service Branch Mumbai vide its memo dt.
16.07.2013 with remarks "FUNDS INSUFFICIENT". I say
that the contents of the said memo are true and correct. I say
that the same is signed by the authoised person of the same and
issued in the normal course of transaction of the business of the
Bank. Hereto annexed and marked are the copies of
dishonoured cheques as "Exhibit-C/Colly and Memo's as
Exhibit-D/Colly".
8. I say that I immediately informed all the accused about the said
dishonoured cheques but in spite of number of personal visits,
6 APL333.2014.odt
reminders and granting reasonable time, all of Accused have
not taken any steps to make the payment.
REPLY OF ACCUSED NO. 1 dt. 03.08.2013 :
12. I say that after the receipt of the demand notice Accused No. 1
has sent a reply to the same. I say that the Accused No. 1 has
raised false and frivolous grounds that other accused are not
the director of the company and have resigned, without any
documentary evidence of the same. The said reply is on Letter
head of Accused No. 1 and also bears the seal of the company.
Hereto annexed and marked is the copy of reply dt. 03.08.2013
as "Exhibit-H".
15. I say that by the subsequent conduct of All accused it appears
that all accused had approached me with malafide intention
and ulterior motives and have fraudulently and dishonestly
induced me to part with his money by making false
representation. By the said act all accused have caused
wrongful loss to my company and wrongful gain to themselves.
Thus all accused have cheated my company.
7. Thus, bare perusal of the aforesaid averments noway satisfy the
ingredients of Section 141 of NI Act, to attract the vicarious liability of the
applicant/accused No. 5. The entire averments made in the complaint if read
in its totality, then at the most the role attributed to the applicant in
commission of offence is that he was one of the Directors of the Company at
the time of alleged transaction. In the instant case, the fact is not in dispute
that the cheque in question as well as the Bill of Exchange have not been
signed by applicant / accused No. 5. So also the applicant / accused No. 5
has not been described as Managing Director or person in-charge of and
responsible for the conduct of business and affairs of accused No. 1-
Company. According to the complainant, the applicant was Non-executive
Director and he has resigned way back in the year 2012 i.e. on 4/9/2012,
much before the cause of action arose for filing of the complaint. Section 141
of NI Act, being a penal provision creating vicarious liability needs to be
strictly construed. In this context, it is useful to refer the decision of the
Hon'ble Apex Court in the case of Pooja Ravinder Devidasani (supra) and in
particular paragraph 17 thereof, wherein it is held as under:
"17. ............ To fasten vicarious liability under Section 141 of the
7 APL333.2014.odt
Act on a person, at the material time that person shall have been
at the helm of affairs of the Company, one who actively looks after
the day-to-day activities of the Company and particularly
responsible for the conduct of its business. Simply because a
person is a Director of a Company, does not make him liable
under the N.I. Act. 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 N.I. Act. In National Small Industries Corporation, [2010
ALL MR (Cri) 921 (S.C.)] (supra) this Court observed:
"Section 141 is a penal provision creating vicarious
liability, and which, as per settled law, must be strictly 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 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. 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 fulfillment of the requirements under Section 141.
8. In paragraph 28 and 30 of the judgment in the case of Pooja
(supra), the Apex Court has held as under :
"28. In the entire complaint, neither the role of the appellant in
the affairs of the Company was explained nor in what manner the
appellant is responsible for the conduct of business of the
Company, was explained. From the record it appears that the
trade finance facility was extended by the Respondent No. 2 to the
default Company during the period from 13th April, 2008 to 14th
October, 2008, against which the Cheque were issued by the
Company which stood dishonoured. Much before that on 17 th
December, 2005 the appellant resigned from the Board of
Directors. Hence, we have no hesitation to hold that continuation
of the criminal proceedings against the appellant under Section
138 read with Section 141 of the N. I. Act is a pure abuse of
process of law and it has to be interdicted at the threshold.
8 APL333.2014.odt
30. Putting the criminal law into motion is not a matter of
course. To settle the scores between the parties which are more in
the nature of a civil dispute, the parties cannot be permitted to
put the criminal law into motion and Courts cannot be a mere
spectator to it. Before a Magistrate taking cognizance of an
offence under Section 138/141 of the N.I. Act, making a person
vicariously liable has to ensure strict compliance of the statutory
requirements. The Superior Courts should maintain purity in the
administration of Justice and should not allow abuse of the
process of the Court. The High Court ought to have quashed the
complaint against the appellant which is nothing but a pure
abuse of process of law."
9. In the light of discussion made in foregoing paras, I am of the
view that the complaint filed by the complainant makes out no case for
issuance of process u/s 138 r/w 141 of N.I. Act, against the applicant/accused
No. 5. Ld. Metropolitan Magistrate appears to have passed the order
mechanically. Learned Metropolitan Magistrate has not taken any pains to
read the complaint and the documents relied on to find out as to whether a
prima facie case has been made out or not to attract the vicarious liability of
the applicant as contemplated u/s 138 r/w 141 of NI Act. No doubt, the
detailed enquiry is not contemplated at the stage of exercise of powers under
Section 204 of Cr.P.C., but, certainly the magistrate is bound to consider as to
whether the facts averred in the complaint and the documents, if any, relied
make out a prima facie case for issuance of process u/s 138 r/w 141 of NI Act.
It is pertinent to note that in the instant case, there are specific averments
made in the complaint itself in paragraph 15 that the accused No. 1 had
replied the notice in which the false and frivolous grounds have been raised
that the Directors of the Company have resigned. The copy of that reply
appears to have been produced along with the complaint as Exh. H. However,
the Magistrate has not taken any pains to go through the contents of the said
notice. It is the say of the applicant that, the notice was duly replied by him
through his Advocate on 16/8/2013. In reply sent to the notice, the applicant
has specifically stated that the applicant was appointed as Non-executive
9 APL333.2014.odt
Director and he had resigned from the Company on 4/9/2012, which was
accepted by the Board of Directors and also intimated in prescribed proforma
i.e. Form No. 32 to the Registrar of the Company. Not only this, the applicant
has also informed about recording of this fact in the 20 th Annual Report of
accused No. 1 - Company for the financial year 2011-12. While filing
complaint, the complainant appears to have suppressed the fact regarding the
reply notice sent on 16/8/2013. However, the complainant has disclosed the
fact regarding the reply sent from respondent No. 1/complainant stating
therein that the Directors of the Company have resigned. In spite of that the
learned magistrate has passed the order of issuance of process as against the
applicant / accused No. 5.
ig The order passed by learned Metropolitan
Magistrate, which is impugned in this petition, reads as under:
"ORDER BELOW EX-1
Perused complaint, documents filed on record. Heard
Learned Counsel appearing on behalf of Complainant. It
appears that there is prima facie case against Accused for
proceeding U/sec. 138 r/w 141 Negotiable Instruments Act.
Hence, issue process against Accused persons under above
mentioned section on payment of process fee. R/o.
04/01/2014.
Sd/-
( K. K. Patil )
Metropolitan Magistrate,
th
14 Court Girgaon, Mumbai.
Date : 17/10/2013."
Thus, the bare perusal of order passed by Metropolitan
Magistrate leads to conclusion that the order has been passed without
perusing the contents of complaint and documents relied in support of
complaint. It is a glaring case of non-application of mind. Hence, in my
view, the order is not sustainable in law.
10. In the light of the discussion made in the foregoing paragraphs, I
have no hesitation to hold that, on the face of the complaint, no case was
made out for issuance of process u/s 138 r/w 141 of the NI Act as against the
10 APL333.2014.odt
applicant/accused No. 5. The order passed by the learned Magistrate appears
to be passed without application of mind and due consideration of averments
made in the complaint. The averments made in the complaint make out no
case to attract the vicarious liability of the applicant / accused No. 5 for
commission of offence u/s 138 r/w 141 of NI Act.
11. The applicant has approached with a case that he was
Non- executive Director of the Company. He has resigned as a Director of the
Company on 4/9/2012. The resignation of the applicant was accepted in the
Board of Directors meeting held on 16/09/2012. The fact in respect of the
resignation of the applicant was duly intimated in a prescribed proforma
i.e. Form No. 32, to the Registrar of the Company on 16/10/2012. This was
also reflected in the 20th Annual Report of the Company for the fiscal year
2011-12 published on 24/11/2012. In support of this submission, the
applicant has produced on record the following documents.
(i) Copy of resignation.
(ii) Copy of Resolution dt. 16/10/2012 passed in the meeting of Board of
Directors.
(iii) Copy of notice given to the Registrar of the Company in a prescribed
proforma i.e. Form No. 32.
(iv) Copy of 20th Annual Report of the Company for the financial year
2011-12.
(v) Copy of reply notice dt. 16/8/2013 sent to complainant through his
Advocate by the applicant.
12. As per the complaint, the cause of action for filing of the
complaint arose on 14/8/2013. There is no dispute as to the fact that the
cheque in question was issued on 15/7/2013. It was dishonoured on
16/7/2013. The notice of demand was issued on 27/7/2013 and cause of
action for filing of complaint arose on 14/8/2013. Thus, the act of issuance of
cheque as well as dishonour of cheque has taken place much after the
resignation tendered by the applicant / accused No. 5. Learned Counsel for
the applicant has placed reliance upon the decision of the Hon'ble Apex Court
in the case of Anita Malhotra Versus Apparel Export Promotion Council
11 APL333.2014.odt
and Another reported in (2012) 1 SCC 520. In a case based upon similar
facts, the Apex Court has held that in exercise of jurisdiction u/s 482 of
Cr.P.C., if on the face of documents relied upon by accused which are beyond
suspicion of doubt, if it is considered that accusation against accused cannot
stand, the High Court can consider such documents in exercise of jurisdiction
u/s 482 of Cr.P.C. In paragraph 20 of the said Judgment, the Hon'ble Apex
Court has observed as under :
"20. As rightly stated so, though it is not proper for the High
Court to consider the defence of the accused or conduct a roving
enquiry in respect of merits of the accusation, but if on the face of
the document which is beyond suspicion or doubt, placed by the
accused and if it is considered that the accusation against her
cannot stand, in such a matter, in order to prevent injustice or abuse
of process, it is incumbent on the High Court to look into those
document/documents which have a bearing on the matter even at the
initial stage and grant relief to the person concerned by exercising
jurisdiction under Section 482 of the Code."
13. Thus, in view of the fact that the document placed on record by
the applicant, the genuineness of which is not in doubt and disputed by
respondent No. 1, clear case has been made out that the applicant has resigned
as a Director of accused No. 1 - Company much prior to dishonour of cheque
and cause of action for filing of the criminal complaint. The defence of the
applicant is duly supported with the documentary evidence. Therefore, the
order of issuance of process u/s 138 r/w 141 of NI Act, deserves to be set
aside and proceeding is liable to be quashed to the extent of applicant.
14. I am, therefore, inclined to allow the application in terms of
prayer clause 'A' to the extent of applicant / accused No. 5 and same is
accordingly allowed.
15. Rule made absolute in above terms with no order as to costs.
[ V. L. ACHLIYA, J. ]
