Bombay High Court
John Mathew And Ors vs State Of Maharashtra And Anr on 9 January, 2024
Author: N.J.Jamadar
Bench: N.J.Jamadar
2024:BHC-AS:2663
apl 350 of 2023.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPLICATION NO.350 OF 2023
John Mathew and Ors. ... Applicants
versus
State of Maharashtra and Anr. ... Respondents
Mr. Subodh Desai, with Ms. Dipti Das, Mr. Sunil Vyas, Ms. S. Punamiya i/by Fox
Mandal and Associates LLP for Applicant.
Mrs. Geeta P. Mulekar, ,APP for State.
Mr. Surin Usgaonkar, for Respondent No.2.
CORAM: N.J.JAMADAR, J.
DATE : 9 JANUARY 2024
P.C.
1. This application under Section 482 of the Code of Criminal Procedure,
1973 calls in question the legality, propriety and correctness of the order of issue of
process against the applicants - original Accused Nos.6 to 9 for an offence punishable
under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881.
2. Shorn of superfluities, the background facts can be stated as under :
2.1 Bombay Rayon Fashions Ltd. - Accused No.1 is a Limited Company
incorporated under the provisions of the Companies Act, 1956. On 22 May 2015, the
applicant No.1 was appointed as an additional director of the said Company under the
category of independent director and was a non-executive director of the company.
Applicant No.2 was appointed as an independent and non-executive director on 31
March 2009. The applicant Nos.3 and 4 were appointed as independent and non-
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executive directors on 21 December 2019.
2.2 Meera Cotton & Synthetic Mills Pvt. Ltd. - Respondent No.2 -
complainant - lodged a complaint before the learned Magistrate with the allegations
that it had sold and delivered fabrics and material under several invoices to Bombay
Rayon Fashions Ltd. and the total principal amount of Rs.4,68,87,567/- was
outstanding. Towards the discharge of the said liability, accused No.1 had drawn 21
subject cheques aggregating to Rs.4,68,87,567/-. Upon presentment, all those
cheques were returned unencashed ascribing various reasons, on 4 November 2020.
Despite service of the statutory notice, Bombay Rayon Fashions Ltd. and the
applicants who were in-charge of and responsible to the affairs of the business of
Bombay Rayon Fashions Ltd. failed and neglected to pay the amount covered by the
dishonoured cheques. Hence, the complaint.
3. The applicants assert that the applicants were not involved in the
management of day to day affairs of accused No.1. The learned Magistrate, thus,
committed an error in summoning the applicants by invoking the principle of vicarious
liability under Section 141 of the Act, 1881.
4. When the application was initially listed before the Court on 11 October
2023, this Court granted ad-interim relief to Applicant Nos.1 to 3 and dismissed the
application qua applicant No.4 as there are prima facie averments in the complaint to
make out a case against applicant No.4.
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5. I have heard Mr. Subodh Desai, learned Counsel for the Applicants,
Mrs. Geeta Mulekar, learned APP for State and Mr. Usgaonkar, learned Counsel for
Respondent No.2. Perused the material on record.
6. Mr. Desai, learned Counsel for the Applicants submitted that it is well
recognized that the independent directors cannot be roped in by invoking the
provisions contained in Section 141 of the Act, 1881 as it cannot be said that
independent and non-executive directors are involved in day to day affairs of the
company or in-charge of and responsible for the conduct of the business of the
company. In the case at hand, according to Mr. Desai, there is adequate material to
show that the applicant Nos.1 to 3 were appointed as independent and non-executive
directors.
7. Attention of the court was invited to Form DIR-12 (Exhibit C), which
indicates that Applicant No.1 John Mathew was an independent and non-executive
director. Likewise, Applicant No.2 Suresh Vishwasrao joined the board as independent
and non-executive director on 31 March 2009 (Exh. D), and Applicant No.3
Jasmeetsingh Bashim joined the the board of the company as an independent and non-
executive Director on 21 December 2019 (Exh. F). As the aforesaid material has not
been controverted, the applicants cannot be prosecuted for the offence punishable
under Section 138 read with Section 141 of the Act, urged Mr. Desai.
8. To lend support to this submission, Mr. Desai placed heavy reliance on
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the judgment of this Court in the case of Satvinder Jeet Singh Sodhi and Anr. V/s.
State of Maharashtra1 wherein this Court after analysis of the provisions of law and
the precedents of the Supreme Court quashed the proceedings in exercise of the
inherent powers as the applicant appeared to be independent and non-executive
director of the company.
9. In the case of Chintalapati Srinivasa Raju V/s. Securities and
Exchange Board of India2 the Supreme Court enunciated that the non-executive
directors are persons who are not involved in the day to day affairs of the running of
the company and are not in charge of and responsible for the conduct of the business
of the company.
10. Learned Counsel for Respondent No.2 fairly submitted that as of now
there does not seem to be any controversy over the fact that the applicant Nos.1 to 3
were independent and non-executive directors of Bombay Rayon Fashions Ltd.
11. Evidently, Applicant Nos.1 to 3 are the independent and non-executive
directors of the accused No.1 Company. It is not the case that there are averments in
the complaint which indicate that, despite being independent and non-executive
directors, the applicants were managing the day to day affairs of the accused No.1
company and were in-charge of and responsible to the said company in its day to day
business. Reliance placed by Mr. Desai on the decision in the case of Satvinder Jeet
1 2022 SCC Online Bom 2298
2 (2018) 7 SCC 443
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Singh Sodhi (supra), appears to be well-founded.
12. I am, therefore, inclined to hold that in view of rather uncontroverted
fact that applicant Nos.1 to 3 were not involved in the day to day management of the
company and were also not in charge of and responsible to the business of the accused
No.1 company, continuation of the prosecution against Applicant Nos.1 to 3 would be
an abuse of the process of law. Thus, I am inclined to allow the application.
13. Hence, the following order :
ORDER
(i) The Application stands allowed.
(ii) Criminal Proceedings in SCC No.91 of 2021 and the order of issue of
process dated 29 January 2021 passed by the Judicial Magistrate, First Class, Dadra
and Nagar Haveli, Silvassa, for the offence punishable under Section 138 read with
Section 141 of the Act, stand quashed and set aside qua applicant Nos.1 to 3 - original
accused Nos.6 to 8.
(iii) No costs.
( N.J.JAMADAR, J. )
Signed by: S.S.Phadke
Designation: PS To Honourable Judge
Date: 19/01/2024 19:22:52
