M.L. Gupta & Ors. vs M/S Dcm Financial Services Ltd.
2010 Latest Caselaw 290 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+                          Crl.M.C.1317/2009

                                Date of Order: 20th January 2010

#      M.L. GUPTA & ORS.                       ..... Petitioners
!                    Through: Mr. R.K. Bharti & Mr. Mahipal
                              Khangwal, Advs.

                     versus


$      M/S DCM FINANCIAL SERVICES LTD.     ..... Respondent
^                  Through: Mr. Sachin Chopra, Adv.

+                          Crl.M.C.1318/2009

#      M.L. GUPTA & ORS.                       ..... Petitioners
!                    Through: Mr. R.K. Bharti & Mr. Mahipal
                              Khangwal, Advs.

                     versus


$      M/S DCM FINANCIAL SERVICES LTD.     ..... Respondent
^                  Through: Mr. Sachin Chopra, Adv.

+                          Crl.M.C.1319/2009

#      M.L. GUPTA & ORS.                       ..... Petitioners
!                    Through: Mr. R.K. Bharti & Mr. Mahipal
                              Khangwal, Advs.

                     versus


$      M/S DCM FINANCIAL SERVICES LTD.     ..... Respondent
^                  Through: Mr. Sachin Chopra, Adv.

+                          Crl.M.C.1320/2009

#      M.L. GUPTA & ORS.                          ..... Petitioners
Crl.M.C.Nos.1317-1322/09                             Page 1 of 13
 !                          Through: Mr. R.K. Bharti & Mr. Mahipal
                                    Khangwal, Advs.

                     versus


$      M/S DCM FINANCIAL SERVICES LTD.     ..... Respondent
^                  Through: Mr. Sachin Chopra, Adv.

+                          Crl.M.C.1321/2009

#      M.L. GUPTA & ORS.                       ..... Petitioners
!                    Through: Mr. R.K. Bharti & Mr. Mahipal
                              Khangwal, Advs.

                     versus


$      M/S DCM FINANCIAL SERVICES LTD.     ..... Respondent
^                  Through: Mr. Sachin Chopra, Adv.

+                          Crl.M.C.1322/2009

#      M.L. GUPTA & ORS.                       ..... Petitioners
!                    Through: Mr. R.K. Bharti & Mr. Mahipal
                              Khangwal, Advs.

                     versus


$      M/S DCM FINANCIAL SERVICES LTD.     ..... Respondent
^                  Through: Mr. Sachin Chopra, Adv.


*      CORAM:
       HON'BLE MR. JUSTICE V.K. JAIN

       1.     Whether the Reporters of local papers
              may be allowed to see the judgment?        Yes

       2.     To be referred to the Reporter or not?     Yes


Crl.M.C.Nos.1317-1322/09                               Page 2 of 13
        3.     Whether the judgment should be
              reported in the Digest?                   Yes


: V.K. JAIN, J. (Oral)

1. By this common judgment, I shall dispose of all the six

petitions referred above. Criminal complaints under Section 138

of Negotiable Instrument Act were filed by the respondent

against M/s.Sakura Seimitsu India Limited and seven others

including the petitioners M.L. Gupta, Rajiv Gupta and Sanjeev

Gupta. The allegation against the petitioners was that they were

the Chairman, Managing Director and Director respectively of

the company and were the persons in charge of and responsible

to the company for conduct of its business at the time of

commission of the offence.

2. The petitioners were summoned by the learned

Metropolitan Magistrate under Section 138 of the Negotiable

Instrument Act r/w Section 141 thereof. The petitioners are

seeking quashing of the complaint on the ground that they had

resigned from the Directorship of the company much prior to the

date(s) on which cheques in question were presented to the bank

for encashment. The petitioners have placed on record certified

copies of Form 32 issued by Registrar of Companies, which

would show that the petitioner M.L. Gupta had resigned from

Directorship on 4th September, 1997, whereas the petitioner

Rajiv Gupta resigned on 5th June, 1998.

3. Sanjeev Gupta, who is petitioner in Criminal M.C.

No.1317/2009, Criminal M.C. No.1318/2009, Criminal M.C.

No.1320/2009 and Criminal M.C. No.1321/2009, has not filed

certified copy of Form 32 though he has placed its photocopy on

record. He, however, has placed on record copies of the

judgments of this Court in Crl.M.(M).242 of 1999 titled as

"Sanjeev Gupta Vs. The State of Delhi & Another", decided

by Hon'ble Mr. Justice Dalveer Bhandari, on 11th of July, 20000

and Crl.M.C.1056/2003 to 1058/2003, titled as "Sanjeev Gupta

Vs. The State of Delhi & Another", decided by Hon'ble

Mr.Justice A.K.Sikri on 23rd of August, 2006. The case of the

petitioner Sanjeev Gupta is that he had resigned as a Director of

the Company on 25th of September, 1995. This factual position

was accepted by this Court in Crl.M.(M).242/1999, as is evident

from paragraph 2 of the order, though the order does not

indicate the name of the Company from directorship of which he

resigned with effect from 25th of September, 1995. However, a

perusal of the order of this Court in Crl.M.C.1056/2003 to

1058/2003 dated 23.8.2006, would show that DCM Financial

Services Limited, which is the respondent in the present

petition, was respondent No.2 in those cases as well. It further

shows that the petitioner Sanjeev Gupta claimed in those

petitions that he was a Director of M/s.Sakur Seimitsu India

Limited up to 25th September, 1995 when he left India for

overseas assignments. He placed on record copy of Form No.32

issued by the Registrar of Companies. Accepting his claim, this

Court quashed the complaints filed against him under Sections

138 of the Negotiable Instruments Act. Thus, in another

proceedings between Sanjeev Gupta and the respondent DCM

Financial Services Limited, this Court accepted his claim of

having resigned from the Directorship of M/s.Sakura Seimitsu

India Limited with effect from 25th of September, 1995.

4. There are five essential ingredients of offence under

Section 138 of the Negotiable Instruments Act, (i) drawing of the

cheque, (ii) presentation of the cheque to the bank of the payee,

(iii) return of the cheque unpaid by the drawee bank, (iv) giving

of notice to the drawer of the cheque demanding payment of the

cheque amount and (v) failure of the drawer to make payment

within 15 days of the receipt of the notice.

5. The learned counsel for the respondent DCM Financial

Services Limited fairly concedes that the cheques subject matter

of all these complaints were presented to the Bank much after

the petitioners M.L.Gupta, Rajiv Gupta and Sanjeev Gupta claim

to have resigned from the directorship of the Company

M/s.Sakur Seimitsu India Limited. Since they had already

resigned from the directorship of Company before even before

these cheques were presented for encashment, there is no way

they could have ensured that these cheques were encashed

when presented to the Bank of the Company. They were not the

Directors of the Company when demand notice under Section

138(b) of the Act was issued by the complainant/respondent.

Therefore, they were not in a position to comply with the

demand made in the notice by making payment of the amount of

the cheques as payment was to be made by the Company and

not by them in their personal capacity.

6. The learned counsel for the petitioner has relied to the

decision of the Hon'ble Supreme Court in " DCM Financial

Services Limited Vs. J.N.Sareen & Another", 2008 (3) RCR

(Criminal) 152. In the case before the Hon'ble Supreme Court

post-dated cheques were issued by the Company known as M/s.

International Agro Allied Products Limited. The first respondent

before the Hon'ble Supreme Court resigned from the

Directorship of the Company on 25th of May, 1996. One of the

post-dated cheques, which was issued in April, 1995, i.e., before

he resigned from the Directorship of the Company, was dated

28.1.1998. The cheque when presented in the Bank for

encashment was dishonoured. The payment to the complainant

was not made despite issue of Notice of Demand by it. The

complaint against the first respondent before the Hon'ble

Supreme Court was based on the allegation that he was the

person in charge and responsible to the Company at the time

when the offence was committed. It was also alleged that the

offence had been committed by the Company with the consent

and connivance of accused Nos.2 to 10, which included

respondent No.1 before the Hon'ble Supreme Court. He filed an

application seeking discharge, relying upon Form No.32 issued

by Registrar of Companies in support of his contention that he

had resigned as a Director of the Company much prior to

dishonour of the cheque in question. The learned Additional

Sessions Judge took note of Form No.32 and also noted that the

complainant had not filed any affidavit to the effect that it had

verified from the Registrar of Companies and Form No.32 filed

by the accused was not genuine. A Criminal Revision Petition

filed against the order of the learned Additional Sessions Judge

was dismissed by the High Court. Relying upon its earlier

decisions in the case of "K.Srikanth Singh Vs. M/s.North East

Securities Limited & Another", 2007(3) RCR (Criminal) 934 :

207 (4) RAJ 226 : JT 2007 (9) SC 449, the Hon'ble Supreme

Court observed as under:

"Section 141 of the Act provides for a constructive liability. A legal fiction has been created thereby. The statute being a penal one, should receive strict construction. It requires strict compliance of the provision. Specific averments in the complaint petition so as to satisfy the requirements of Section 141 of the Act are imperative. Mere fact that at one point of time some role has been played by the accused may not by itself be sufficient to attract the constructive liability under Section 141 of the Act."

7. In the case before the Hon'ble Supreme Court, the

respondent No.1 had resigned from the Directorship of the

Company under intimation to the complainant and, in these

circumstances, the Hon'ble Supreme Court was of the view that

a person who had resigned with the knowledge of the

complainant in the year 1996, could not be a person in charge of

the Company in the year 1999 when the cheque was

dishonoured as he had no say in the matter that the cheque is

honoured and he could not have asked the Company to pay the

amount. In my view even if resignation was not given by the

petitioners under intimation to the complainant, that would not

make any difference, once the Court relying upon certified copy

of Form 32 accepts their plea that they were not directors of the

Company, on the date the offence under Section 138 of

Negotiable Instruments Act was committed. They having

resigned from the directorship much prior to even presentation

of the cheque for encashment, they cannot be vicariously liable

for the offence committed by the Company, unless it is alleged

and shown that even after resigning from directorship, they

continued to control the affairs of the company and therefore

continued to be persons in charge of and responsible to the

company for the conduct of its business.

8. This issue was considered at length by this Court in " Shri

Raj Chawla Vs. Securities and Exchange Board of

India(SEBI) & Another", in Crl.M.C.3937/09 decided on 12th of

January, 2010. Referring to an earlier decision of this Court in

"Dr.(Mrs.) Sarla Kumar vs. Srei International Finance

Ltd.", 2007 (2) NIJ 208 (Del) and the recent decision of the

Hon'ble Supreme Court in "K.K. Ahuja vs. V.K. Vora and Anr.,

2009 (3) JCC (NI) 194, this court, inter alia held as under:

"Since the petitioner was not a Director of the company on the date Regulations were framed by SEBI, he cannot be held vicariously liable for violation of those Regulations and the directions, issued to SEBI by M/s Fair Deal Forests Limited. This is not the case of the respondent that the petitioner was Manager,

Secretary or a person in accordance with whose directions or instructions, the Board of Directors of the company was accustomed to act. He is not stated to be one of the persons falling in any of the categories (a) to (g) mentioned in Section 5 of Companies Act at the time offence under SEBI Act was committed by the company. Therefore, he could not have been a person in charge of business of the company on the date the offence was committed.

There is no allegation that the regulations, framed by SEBI, were violated or the direction, issued by it, was ignored by the company with the consent or connivance of the petitioner or it was otherwise attributable to any act on the part of the petitioner. Therefore, he has not covered even by sub Section (2) of Section 27of SEBI Act."

9. The plea taken by the complainant that the information

contained in Form No.32 was a defence available to the accused

which could not be considered at the initial stage was dealt with

by this Court as under:

"Though as a general proposition of law, the defence available to the accused is not to be examined at this stage, there can be no valid objection to considering an authentic Public Document such as certified copy of Form-32, issued by Registrar of Companies, in a petition under Section 482 of the Code of Criminal Procedure, when the genuineness of the documents is not disputed and the matter can be finally disposed of on the basis of such a documents. ......

A criminal trial is a serious matter, having grave implications for an accused, who not

only has to engage a lawyer and incur substantial expenditure on defending him, but, has also to undergo the ordeal of appearing in the Court on every date of hearing, sacrificing all his engagements fixed for that day. If he is in business or profession, he has to do it at the cost of affecting his business or profession, as the case may be. If he is in service, he has to take leave on every date of hearing. Besides inconvenience and expenditure involved, a person facing criminal trial undergoes constant anxiety and mental agony, as the sword of possible conviction keeps hanging on his head throughout the trial. Therefore, when there is a reasonably certainty that the trial is not going to result in conviction, it would be neither fair nor reasonable to allow it to proceed against a person such as the petitioner in this case."

10. In taking a view that certified copy of Form 32 being a

public document, authenticity of which had not been disputed, it

could be considered in proceedings under Section 482 of the

Code of Criminal Procedure, this Court also relied upon the

decision of the Hon'ble Supreme Court in "All Carogo Movers

(I) Pvt. Ltd. Vs. Dhanesh Badarmal Jain & Anr." (2007) 12

SCALE 39, "V.Y. Jose & Anr. Vs. State of Gujarat & Anr."

2009 I AD (Cr.) (S.C.) 567, and "Minakshi Bala v. Sudhir

Kumar", (1994) 4 SCC 142. I must note here that the

authenticity of the certified copies of Form 32 filed by the

petitioners has not been disputed by the respondent. This is not

the case of the respondent that it had got the record of the

Registrar of Companies verified and that these Forms wer not

issued by his office.

11. In the present cases, the petitioners had resigned from the

Directorship of the Company much before cheques in question

were presented for encashment. Therefore, they were not in a

position to compel the Company to ensure that the cheques

when presented to its Bank were honoured. Similarly, they were

not in a position to compel the Company to comply with the

Notice of Demand by making payment of the amount of the

cheques. This is not the case of the respondent that even after

resigning as Directors of the Company, any of these petitioners

occupied any such position on account of which they continued

to be person in charge of and responsible to the Company for

conduct of its business. Vicarious liability to the petitioners has

been imputed solely on account of their being Directors of the

Company. This is also not the case of the complainant that the

cheques were dishonoured and/or the Notice of Demand was not

complied with the consent or connivance of the petitioner or

dishonour of cheques or non-compliance of notice was otherwise

attributable to any negligence on the part of any of them. This is

also not the case of the complainant that even after reassigning

as Directors of the Company these petitioners continue to

control the affairs of the Company and were the persons who

could have given instructions to the Board of Directors of the

Company to ensure that the cheques when presented for

encashment were honoured or that Notice of Demand sent to the

Company was duly complied with by making payments of the

amount of the cheques. Therefore, the petitioners are not

covered even under sub-Section 2 of Section 141 of Negotiable

Instruments Act.

12. For the reasons given in the preceding paragraphs, the

criminal complaints No.4140/1, 4141/1, 2338/1, 4139/1, 4145/1

and 4138/1 filed against the petitioners and pending in the Court

of Shri Naveen Kumar Kashyap, MM, Dwarka Court, Delhi,

cannot be allowed to continue and are hereby quashed to the

extent they pertain to the petitioners. The trial will, however,

continue to proceed against the other accused persons. The

quashing against petitioner Sanjeev Kumar Gupta however is

subject to the condition that a certified copy of the Form No.32

will be filed by him before the Trial Court within six weeks,

failing which the trial would continue against him.

V.K. JAIN (JUDGE) JANUARY 20, 2010 RS/