Bombay High Court
Arvind Satpaul Gupta Partner Of ... vs The State Of Maharashtra And Anr on 6 September, 2017
Bench: A.M. Badar
(3)WPNo.13072017
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
WRIT PETITION NO.1307 OF 2017
WITH
CRIMINAL APPLICATION NO.216 OF 2017
IN
WRIT PETITION NO.1307 OF 2017
WITH
WRIT PETITION NO.1308 OF 2017
WITH
CRIMINAL APPLICATION NO.217 OF 2017
IN
WRIT PETITION NO.1308 OF 2017
WITH
WRIT PETITION NO.1309 OF 2017
WITH
CRIMINAL APPLICATION NO.218 OF 2017
IN
WRIT PETITION NO.1309 OF 2017
WITH
WRIT PETITION NO.1310 OF 2017
WITH
CRIMINAL APPLICATION NO.219 OF 2017
IN
WRIT PETITION NO.1310 OF 2017
WITH
WRIT PETITION NO.1311 OF 2017
WITH
WRIT PETITION NO.1312 OF 2017
WITH
WRIT PETITION NO.1313 OF 2017
WITH
WRIT PETITION NO.1417 OF 2017
Arvind Satpaul Gupta Partner of
M/s.Shree Tirupati Greenfield ... Petitioner
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(3)WPNo.13072017
V/s.
The State of Maharashtra & Anr. ... Respondents
.....
Mr.Samrat J. Thakker with Ms.K.H.Rajani, Advocate for the
Petitioner.
Mrs.M.R.Tidke, APP for the Respondent No.1/State.
Mr.S.K.Dubey, Advocate for the Respondent No.2.
....
CORAM : A.M.BADAR J.
DATED : 6th September 2017.
ORAL JUDGMENT :
1 Heard.
2 Rule. Rule made returnable forthwith. Heard finally
by consent of parties.
3 These are petitions filed by original accused No.4 in a
complaints alleging commission of offence punishable under
Section 138 read with Section 141 of the Negotiable Instruments
Act, 1881 (hereinafter referred to as "N.I.Act" for the sake of
brevity) filed by respondent No.2 herein/original complainant and
which are reportedly pending before the learned Metropolitan
Magistrate, 53rd Court at Mulund, Mumbai and in the Court of
learned Metropolitan Magistrate, 73rd Court at Vikroli, Mumbai.
The writ petitioner is accused No.4 in Criminal Cases bearing
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Nos.484/SS/2016, 485/SS/2016, 486/SS/2016 and 487/SS/2016
pending in 53rd Court, Mulund, Mumbai and in Criminal Cases
bearing Nos. 422/SS/2016, 428/SS/2016, 429/SS/2016 and
430/SS/2016 pending in 73rd Court, Vikroli, Mumbai. By these
petitions, the petitioner/accused No.4 is praying for quashing and
setting aside the Order of issuance of process against him passed
by the learned trial Court on taking cognizance of offence alleged
against him by respondent No.2.
4 Heard the learned Advocate appearing for the
petitioner/accused No.4. He vehemently argued that only bald
allegations are made against accused persons by respondent
No.2/complainant. Averments against accused persons are
general in nature with no specific act attributable to them. So far
as the petitioner is concerned, the complaint has not alleged even
mens rea against him and no specific act in the alleged transaction
has averred against him. It is further argued that the
petitioner/accused No.4 was not recipient of cash from respondent
No.2/original complainant. He is neither signatory to the cheque
nor signatory to the bill of exchange allegedly issued. The
petitioner/respondent No.4 was merely a sleeping partner of the
firm having no concern with affairs of the firm. He was not
Managing Partner of accused No.1 partnership firm. The learned
Advocate further argued that the learned trial Court erred in not
conducting inquiry under Section 202 of the Code of Criminal
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Procedure and, as such, the petitioner/respondent No.4 could not
point out all these facts. In a very casual manner, verification
statement is made wherein it was alleged that accused No.3 is the
partner of the firm - a fact which is totally incorrect. Ultimately,
this Court was required to quash proceedings against original
accused No.3. According to the learned Advocate appearing for
the petitioner mens rea can be inferred only when the knowledge
of the transaction is attributed or participation in action is alleged
by the complainant. In the case in hand, there is no evidence to
connect the writ petitioner/accused No.4 with the crime in
question and, as such, the learned trial Court ought not to have
taken cognizance of the alleged offence against the petitioner/
respondent No.4.
5 Mr.Samrat Thakkar, learned Advocate appearing for
the petitioner further argued that basic doctrine test is not fulfilled
in the case in hand and the learned trial Court has ignored the law
laid down in the Judgment of the Honourable Apex Court in the
matter of Gunmala Sales Private Ltd. v. Anu Mehta & Ors.
reported in (2015) 4 Cal. Law Times 310 (HC). The learned
Advocate drew my attention to paragraph Nos.8, 9(c), as well as
paragraph No.33 from the said Judgment and contended that this
Court can quash the complaint because of absence of more
particulars of role of the Director/Partner in the Company or Firm,
as the case may be, and it is not sufficient to take cognizance on
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the basis of bald statement that the accused being a partner in the
firm is in-charge of and responsible to the Company/Firm, as the
case may be. In his submissions, in the case in hand, no detail
averments are made to infer commission of alleged offence by the
petitioner/accused No.4, who is merely a sleeping partner of the
Firm.
6 The learned Advocate further relied on the Judgment
of the Honourable Apex Court in the matter of Standard
Chartered Bank v. State of Maharashtra & Ors. reported in
2016 (5) Mh.L.J. 44 and particularly, paragraph No.16 thereof in
order to demonstrate that the liability arises only when it is
established that the accused was in-charge of and responsible for
the conduct of business of Firm at the time of commission of the
offence. Paragraph 16 of the said Judgment reads thus :
"16. After so stating, the Court adverted to the
complaint fled under Section 138 of the Act and opined
that the complaint should make out a case for issue of
process. As far as the ofcers responsbile for
conducting the afairs of the company are concerned,
the Court referred to various provisions of the
Companies Act, 1956 and analysed Section 141 of the
Act to lay down as follows :-
"What is required is that the persons who are
sought tobe made criminally liable under Sedtion
141 should be, at the time the ofence was
committed, in charge of and responsible to the
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compay for the conduct of the business of the
company. Everny person connected with the
company shall not fall within the abmit of the
provision. It is only those persons who were in
charge of an responsible for the conduct of
business of the company at the time of
commission of an ofence, who willb e liable for
criminal action. It follows from this that if a
director of a company 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 under the provision. The liability
arises from being in charge of an responsible for
the conduct of business of the company at the
relevant time when the ofence was committed
and not on the basis of merely holding a
designation or ofce in a company. Conversely, a
person not holding any ofence or designation in a
company may be liable if he satisfes the maini
reequirement of being in charge of an responsible
for the conduct of business of a company at the
relevant time. Liability depends on the role one
plays in the afairs of a company and not on
designation or status. If being a director or
manager or secretary was enough to cast criminal
liability, the section would have said so. Instead of
"every person" the section would have said "every
director, manager or secretary in a company is
liable"..... etc. The legislature is aware that it is a
case of criminal liability which means serious
consequences so far as the person sought to be
made liable is concerned. Therefore, only persons
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who canb e said to be connected with the
commission of a crime at the relevant time have
been subjected to action."
7 He further relied on the Judgment in the matter of
Monaben Ketanbhai Shah & Anr. v. State of Gujarat & Ors.
reported in (2004) 7 SCC 15. By relying on last paragraph of that
Judgment, the learned Advocate averred that criminal liability
under Section 141 of the N.I.Act cannot be fastened against the
Partner or a Director, who at the time of commission of offence
was a sleeping Partner or ladies as well as others, who may not be
knowing anything about the business of the Firm. There cannot
be any presumption that every partner knows about the
transaction.
8 As against this, the learned Advocate appearing for
respondent No.2/original complainant contended that even the
title of the present petitions demonstrate that the petitioner is
Partner of accused No.1 M/s.Shree Tirupati Greenfield. The
learned Advocate took me through the averments made in the
complaint for the offence punishable under Section 138 of the
N.I.Act and contended that basic averments attributing
commission of offence by the petitioner/accused No.4 are already
made and pleaded in the complaint. The learned Advocate drew
my attention to the reply filed by respondent No.2 and more
particularly to Exhibit 'B' - affidavit annexed to that reply and
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contended that one of accused namely Haresh Gurbux Doulatani
had sworn an affidavit by stating that the present petitioner/
accused No.4 is co-partner in accused No.1 M/s.Tirupati
Greenfield Developers and, therefore, it does not lie in the mouth
of the writ petitioner that he is not concerned with the affairs of
the Partnership Firm.
9 I have carefully considered the rival submissions and
also perused material produced on record including the complaint
for the offence punishable under Section 138 of the N.I.Act. At the
outset, in order to decide the controversy, involved in the instant
case, it is necessary to put on record the provision of Section 141
of the N.I.Act, which read thus :
"S.141 Ofences by companies. --
(1) If the person committing an ofence under
section 138 is a company, every person who, at the
time the ofence 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
ofence 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 ofence was committed without his
knowledge, or that he had exercised all due
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diligence to prevent the commission of such ofence:
Provided further that where a person is nominated
as a Director of a company by virtue of his holding
any ofce or employment in the Central Government
or State Government or a fnancial 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 ofence under this Act has
been committed by a company and it is proved that
the ofence 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 ofcer of the company, such director,
manager, secretary or other ofcer shall also be
deemed to be guilty of that ofence and shall be
liable to be proceeded against and punished
accordingly.
Explanation.-- For the purposes of this section,--
(a) "company" means any body corporate and
includes a frm or other association of individuals;
and
(b) "director", in relation to a frm, means a partner
in the frm."
10 Bare perusal of this Section shows that it is applicable
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to the offences committed by Companies or by Partnership Firm.
Sub-Section (1) of Section 141 of the N.I.Act provides that if a
person commits an offence punishable under Section 138 of the
N.I.Act, is a Company, then every person, who at the time of
commission of alleged offence was in-charge of and was
responsible to the Company for conduct of the business of the
Company shall be deemed to be guilty of the offence. However, if
such person during the trial is successful in proving that the
offence was committed without his knowledge or that he had
exercised due diligence to prevent the commission of such offence,
he may not vicariously liable for commission of such offence.
Explanation to this Section makes it clear that the term 'Company'
used in this Section also covers the 'Partnership Firm'. Keeping in
mind this provision of the N.I.Act, which to some extent create
vicarious liability of a person, who had not even signed the
disputed cheque, let us, examine the case in hand.
11 According to respondent No.2/original complainant,
accused persons and more particularly, accused No.2 Haresh
Gurbux Doulatani induced them to invest in the project of accused
No.1 M/s.Shree Tirupati Greenfield Developers of which
remaining accused including petitioner/accused No.4 is partner.
Respondent No.2/original complainant further pleaded in the
complaint that accordingly, the amount was paid and bill of
exchange came to be executed by accused persons. It is further
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averred that in order to repay the amount which was advanced by
respondent No.2/original complainant, accused persons issued
cheques, which were ultimately dishonoured.
12 It is not in dispute that accused No.1 M/s.Shree
Tirupati Greenfield Developers is a Partnership Firm of which the
present petitioner/accused No.4 is a partner. However, according
to petitioner, he is merely a sleeping partner having no knowledge
about the transaction and that he had not issued the cheque in
question and had not signed any document in respect of the
transaction. On this aspect, let us, therefore, consider what is
averred in the complaint. In paragraph 2 of the complaint,
respondent No.2/original complainant has made following
averment :
"The Complainant states that the Accused No.1 is a
Partnership frm and Accused no.2 to 5 are the
partners of the Accused no.1 frm and all of them are
responsible for day to day conduct of the business
and afairs for the Accused No.1 frm. The Accused
no.2 to 5 are also authorized signatory of Accused
no.1 and they are operating the bank account of the
Accused no.1 as partners thereof."
13 In paragraph 5 of the complaint, relevant averment is
to the following effect :
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"The cheques are issued with the knowledge and
consent of all the accused and all the accused have
taken active part in the transaction. The details of
the said cheques are as under :-
Cheque Nos. Date Amount (Rs.)
008234 01.01.2016 4,00,000/-
008480 01.01.2016 5,00,000/-"
14 In other words, according to complainant/respondent
No.2 herein, accused Nos.2 to 5 (excluding accused No.3) are
Partners of accused No.1 Partnership Firm and as they are
responsible for day to day conduct of the business and affairs of
the accused No.1 Partnership Firm. The complaint depicts
categorical averment that cheques were issued under knowledge
and consent of all accused persons and that they had an active
part in the transaction in question.
15 Veracity of these averments can be judged only during
the course of cross-examination of the complainant. At this stage,
let us examine whether such averment is sufficient to proceed
against accused persons for the offence punishable under Section
138 read with Section 141 of the N.I.Act. As seen from the
provision of this Section, what is required to be contended by the
complainant is that at the time when the offence was committed,
the person concerned, who is sought be arraigned as accused was
in-charge and responsible to the Company/Firm for conducting the
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business of the Company/Firm. Such person, who is arraigned as
accused, can establish that the offence was committed without his
knowledge or that he has exercised due diligence to prevent the
commission of offence. However, this stage comes at the time of
trial and this burden can be discharged even by preponderance of
probability. In order to make out this contingency, the accused
concerned has to stand for the trial.
16 Now, let us examine whether basic doctrine test as
pressed in service by the learned Advocate appearing for the
petitioner/accused No.4 is fulfilled by the complainant/respondent
No.2 by making necessary averments in his complaint. Paragraph
Nos.8(a) and 9(c), pointed out by the learned Advocate, from the
Judgment of Gunmala Sales Private Ltd. (supra) are paragraphs
in which written submissions of parties are reproduced by the
Honourable Apex Court. The ratio of that Judgment can be found
in paragraph No.33 thereof. For the sake of convenience, the
same is reproduced herein and it reads thus :
"33. We may summarize our conclusions as follows:
a) Once in a complaint fled under Section 138 read
with Section 141 of the NI Act the basic averment is
made that the Director was in charge of and
responsible for the conduct of the business of the
company at the relevant time when the ofence was
committed, the Magistrate can issue
process against such Director;
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b) If a petition is fled under Section 482 of the Code
for quashing of such a complaint by the Director, the
High Court may, in the facts of a particular case, on
an overall reading of the complaint, refuse to quash
the complaint because the complaint contains the
basic averment which is sufcient to make out a
case against the Director.
c) In the facts of a given case, on an overall reading
of the complaint, the High Court may, despite the
presence of the basic averment, quash the
complaint because of the absence of more
particulars about role of the Director in the
complaint. It may do so having come across some
unimpeachable, incontrovertible evidence which is
beyond suspicion or doubt or totally acceptable
circumstances which may clearly indicate that the
Director could not have been concerned with the
issuance of cheques and asking him to stand the
trial would be abuse of the process of the court.
Despite the presence of basic averment, it may
come to a conclusion that no case is made out
against the Director. Take for instance a case of a
Director sufering from a terminal illness who was
bedridden at the relevant time or a Director who had
resigned long before issuance of cheques. In such
cases, if the High Court is convinced that
prosecuting such a Director is merely an arm-
twisting tactics, the High Court may quash the
proceedings. It bears repetition to state that to
establish such case unimpeachable, incontrovertible
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evidence which is beyond suspicion or doubt or
some totally acceptable circumstances will have to
be brought to the notice of the High Court. Such
cases may be few and far between but the possibility
of such a case being there cannot be ruled out. In
the absence of such evidence or circumstances,
complaint cannot be quashed;
d) No restriction can be placed on the High Courts
powers under Section 482 of the Code. The High
Court always uses and must use this power sparingly
and with great circumspection to prevent inter alia
the abuse of the process of the Court. There are no
fxed formulae to be followed by the High Court in
this regard and the exercise of this power depends
upon the facts and circumstances of each case. The
High Court at that stage does not conduct a mini trial
or roving inquiry, but, nothing prevents it from
taking unimpeachable evidence or totally
acceptable circumstances into account which may
lead it to conclude that no trial is necessary qua a
particular Director."
17 It is thus crystal clear that in order to rope in a
Director of a Company or a Partner of a Firm for the offence
punishable under Section 138 read with Section 141 of the
N.I.Act, what is necessary is basic averment that the
Director/Partner was in-charge of and responsible in conduct of
the business of the Company at the relevant time. If this criteria is
fulfilled, the Magistrate can issue process against said
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Director/Partner. If such Director/Partner wants process to be
quashed on the ground of bald or vague averments, then he must
either furnish some sterning, incontrovertible or unimpeachable
material in order to demonstrate that he is not at all concerned
with the alleged offence. Such Director or Partner has to make out
a case that the trial would be abuse of process of the Court. He is
required to make out circumstances to substantiate his contention
in this regard.
18 By now, it is well settled that there needs to be
averment in the complaint that Partner of Firm or Director of the
Company was in-charge of and was responsible to the Firm or the
Company, as the case may be for conduct of the business of the
Firm/Company, as the case may be. The basic requirement under
Section 141 of the N.I.Act is to make specific averment in the
complaint that accused Partner or Director who was neither
signatory to the cheque nor the Managing Director or Managing
Partner, as the case may be, at the time of commission of offence
was in-charge of and responsible to the Firm or Company for
conduct of business. No particular form in this regard is
necessary. It is not at all necessary to plead that such a Partner or
Director has any specific role in respect of the transaction leading
to issuance of the cheque. Section 141 of the N.I.Act makes the
Partner or Director in-charge of and responsible for the Firm or the
Company for conducting business of the Firm or Company, liable
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for penal consequences. Valuable reference can be had to this
proposition from the Judgments of the Honourable Apex Court in
the matter of A.K.Singhaniya v. Gujrath State Fertilizers
Company Ltd. reported in AIR 2014 SC 71, Katta Sujatha v.
Fertilizer & Chemicals, Travancore reported in (2002) 7 SCC
655, K.K.Ahuja v. V.K.Vora, reported in (2009) 10 SCC 48 and
National Small Scale Industries Corporation v. Harmeet Singh
reported in (2010) 3 SCC 330.
19 When tested on the touchstone of this position of law,
as stated in foregoing paragraphs, averments in the complaint
made by respondent No.2/original complainant, satisfy all
requirements of Section 141 of N.I.Act. It is categorically averred
by respondent No.2/original complainant in paragraph Nos.2 and
5 of the compliant that petitioner/accused No.4 was in-charge of
and was responsible for the affairs of the Partnership Firm in its
day to day conduct of business. It is further averred that even
cheques were issued with the knowledge and consent of all
accused persons, who had taken active part in the transaction.
These averments are certainly sufficient to put the writ
petitioner/accused for trial. He may, on his part, establish that the
offence was committed without his knowledge or that he had
exercised due diligence to prevent the commission of offence, but
that will be the subject matter of the defence in the trial and such
defence may be established by cross-examining the complainant or
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by adducing defence evidence. He may point out at the trial that
he is just a sleeping partner of the firm. At this stage, what is
required to be considered is whether there is sufficient ground for
prosecuting the writ petitioner/accused No.4 and that ground is
established by averments made in the complaint. Mere averments
in the petition that the writ petitioner/accused No.4 was a
sleeping partner having no knowledge of the transaction in
question is not sufficient to quash process issued against him. This
defence will have to be established during the trial.
20 In the wake of foregoing discussion, writ petitions are
devoid of merit and the same are dismissed. Rule discharged.
21 In view of dismissal of writ petitions, interim
applications, if any, also stand disposed of.
(A.M.BADAR J.)
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