Vijay Kumar Agarwal vs United Phosphorus Ltd. Ors.
2011 Latest Caselaw 3798 Del

*IN THE HIGH COURT OF DELHI AT NEW DELHI

+                Crl.M.C.1085/2007
     %
                          Judgment reserved on: 6th July, 2011
                          Judgment delivered on: 8th August, 2011


     VIJAY KUMAR AGARWAL                ..... Petitioner.
                        Through: Mr. Vagesh Sharma and
                        Mr. K.K. Sharma, Advocates.

                      Versus

     UNITED PHOSPHORUS LTD. ORS.              ..... Respondents

                            Through: None.

CORAM:
HON'BLE MR. JUSTICE SURESH KAIT

     1. Whether the Reporters of local papers may be allowed to
         see the judgment?                       YES
     2. To be referred to Reporter or not?        YES
     3. Whether the judgment should be reported YES
        in the Digest?

SURESH KAIT, J.

Crl. M.A. 3603/2011 (Restoration) For the reasons mentioned in the application the order dated 18.03.2011 is recalled. The petition is restored to its original number and position.

The application stands disposed of.

Crl.M.C.1085/2007

1. By filing the instant petition, the petitioner has challenged

the summoning order dated 07.02.2000 issued by learned

Metropolitan Magistrate and order dated 21.02.2007, whereby,

the proceedings were initiated against the petitioner under

Section 82/83 Cr.P.C.

2. The facts of the case in brief are that, respondent No.1 had

filed a complaint dated 26.09.1997, under Section 138 of the

Negotiable Instrument Act, 1881 (as amended) read with Section

420 of the Indian Penal Code, against Vijay Remedies Limited

through its Director Sh.Kamal Goel. vide order dated 25.07.1998,

summons were issued after recording pre-summoning evidence

of the complainant and notice under Section 251 of Code of

Criminal Procedure was framed vide order dated 07.02.2000.

3. On 07.02.2000, an application under Section 319 of Code of

Criminal Procedure was moved by the respondent No.1 to issue

summons against the petitioner and two other persons namely

Satish Garg and Aushotosh Gupta and the matter was fixed for

30.03.2000 for further proceedings.

4. Vide order dated 07.07.2000, notice under Section 251 of

Code of Criminal Procedure was framed against the petitioner

M/s.Vijay Remedies Limited through Sh. Kamal Goel, Director.

5. On 21.02.2007, the alleged co-accused Kamal and

Aushotosh appeared in person, whereas, the alleged accused

Satish was exempted for that date on an application being filed,

further, proceedings under Sections 82/83 of Code of Criminal

Procedure was issued against the petitioners.

6. Being aggrieved by the aforesaid orders and proceeding,

two petitions were filed, the details of which are as follows:-

"(I) Filed by Sh. Satish Garg and Sh. Aushotosh Gupta

being Criminal M.C. No. 1860/2007

(II) The instant petition filed by the petitioner being

Criminal M.C. No. 1805/2007"

7. I make it clear that the aforesaid Criminal M.C.

No.1860/2007 was allowed as the respondent conceded that he

has no objection if order dated 07.02.2000 is set aside qua

Sh.Satish Garg and Sh. Aushotosh Gupta, as they were not the

active Directors of the Company.

8. Keeping in view the aforesaid statement of the learned

counsel for the respondent, the order dated 07.02.2000 passed

by learned Metropolitan Magistrate was set aside qua Sh. Satish

Garg and Sh. Aushotosh Gupta only, accordingly Criminal M.C.

No. 1860/2007 was allowed by this Court.

9. In the instant petition, the petitioner has raised the issues

as mentioned in the grounds of the petition that the learned

Metropolitan Magistrate gravely erred in passing the impugned

orders dated 07.02.2000 and 21.02.2007.

10. Further submits, the learned Metropolitan Magistrate ought

to had consider that the offence under Section 138 of the

Negotiable Instrument Act is a technical offence and sending a

demand notice to the accused is a condition precedent, before

launching prosecution under Section 138 of the Negotiable

Instrument Act.

11. It is submitted, in the instant case, no demand notice was

being sent to the petitioner. The other ground, which, he has

taken is that the learned Metropolitan Magistrate ought to had

taken into consideration that Section 319 of Code of Criminal

Procedure could be resorted to only during the trial.

12. As submitted, in the instant case, only a notice under

Section 251 Code of Criminal Procedure was served upon the

accused, whereas, evidence was to be recorded first, and if

evidence is on record, only thereafter the Trial Court ought to

had issued summoning orders against the petitioner.

13. Learned counsel for the petitioner further submits that

since, there was nothing against the petitioner, even in the pre-

summoning evidence, therefore, the impugned orders are fualty.

14. To support his arguments, he has relied upon a case of

Rajesh Bagga V. State of Andhra Pradesh [2005 (3) JCC (NI) 226],

wherein, it was held that if the necessary ingredients to set the

criminal proceeding in motion is missing, the other Directors

cannot be made an accused.

15. The learned counsel for the petitioner has also relied upon

another case of SMS Pharamaceuticals Limited V. Neeta Bhalla

and Anr. [2005(3) JCC(NI) 2003], wherein, it was held that

grounds should be made out in the complaint for proceedings

against the accused.

16. Further, he has relied upon a case of Bala Krishanan United

Durgs Centre and Another V. Jaison P.V. and Another [2005 (1)

JCC(NI) 2] decided by Kerala High Court, that if there is not

sufficient averments as to how the petitioners were stated to be

the Directors of the company are made liable for the offence

committed by the Company, the proceeding initiated against

them liable to be quashed.

17. The learned counsel for the petitioner fairly conceded that

the petitioner was the Managing Director of the Company at that

time, however there is no iota of the allegations against the

petitioner, therefore, the impugned order passed are bad in law.

18. On the other hand, learned counsel for the respondent

submits that in the complaint sufficient allegations are against

the company, and he being the Managing Director of the

Company is responsible of all the affairs or misdemeanour being

committed by the company

19. It is further submitted by the learned counsel for the

petitioner that the petitioner was not even made the alleged

accused in the complaint under Section 138 of the Negotiable

Instrument Act and he was summoned only on the application

moved by the respondent under Section 319 of the Code of

Criminal Procedure.

20. Further submits that the respondent company, while

instructing for the issuance of the statutory notice under Section

138 of the Negotiable Instruments Act had instructed its lawyer

to issue the same to the accused company being a juristic

company acting though its Managing Director and other

Directors. The notice was sent to the accused company through

one of its Director Sh.Kamal Goel, who also was the signatory of

the impugned cheque and the notice was sent to the registered

office of the company.

21. It is stated, the malafide intention of the petitioner in the

instant petition on the face of the record in as much as, the

petitioner has very cleverly chosen not to disclose in the entire

petition the designation or position which he enjoys in the

accused company. To the knowledge of the respondent

company, petitioner Sh. Vijay Kumar Agarwal was and is the

Managing Director of the accused company. This fact was

disclosed by the accused Kamal Kumar Goel only, who is the

signatory of the impugned cheque and the same prompted the

respondent company to move an application under Section 319

of the Code of Criminal Procedure. Accordingly, petitioner, being

a person responsible for the day to day functioning of the

accused company, was summoned by the learned Trial court.

22. Further submits that the Managing Director of the accused

company is legally responsible for the conduct of its business and

when that is so, by holding such a position in the accused

company, the petitioner automatically becomes liable under

Section 141 of the Negotiable Instruments Act.

23. As submitted by the learned counsel, there is no infirmity in

the impugned order, as challenged by the petitioner in the

instant petition and as such the petition deserves to be

dismissed with exemplary costs. To support his above submitted

arguments, he has relied upon a judgment of Supreme Court in

the case of SMS Pharmaceutical limited v. Neeta Bhalla 2005 (7)

SCALE 397, wherein, there were three issues before the full

Bench of the Supreme Court for determination of the following

questions as under :-

"10. A ... ...

B ... ....

C Therefore, mere use of a particular designation of an

officer without more may not be enough by way of an averment

in a complaint. When the requirement in Section 141 which

extends the liability to officers of a company, is that such a

person should be in charge of an responsible to the company for

conduct of business of the company how can a person be

subjected to liability of criminal prosecution without it being

averred in the complaint that he satisfied those requirements?

Not every person connected with a Company is made liable

under Section 141. Liability is cast on persons who may have

something to do with the transaction complained of. A person

who is in charge of and responsible for conduct of business of a

Company would naturally know why the cheque in question was

issued and why it got dishonoured. (Para 10)."

24. The answer to the above question was given in para 20 of

judgment which is reproduced as under:-

"........(c) The answer to question (c) has to be in

affirmative. The question notes that the managing Director

or Joint Managing Director would be admittedly in charge of

the company and responsible to the company for conduct

of its business. When that is so, holders of such positions in

a company become liable under Section 141 of the Act. By

virtue of the office they hold as Managing Director or Joint

Managing Director, these persons are in charge of an

responsible for the conduct of business of the company.

Therefore, they get covered under Section 141. So far as

signatory of a cheque which is dishonoured is concerned

he is clearly responsible for the incriminating act and will

be covered under sub-section (2) of Section 141".

25. In my opinion, power under Section 319 of the Code can be

exercised by the Court suo motto or on an application by

someone including accused already before it. If the Court is

satisfied that any person other than the accused has committed

an offence, he is to be tried together with the accused. The

power is discretionary and such discretion must be exercised

judiciously having regards to the facts and circumstances of the

case. Indisputably, it is an extra ordinary power, which is

conferred on the Court, and should be used very sparingly and

only if compelling reasons exists for taking actions against the

persons, against whom the action has not been taken earlier.

26. Though, the petitioner was not made party specifically in

the complaint filed under Section 138 of the Negotiable

Instruments Act, but keeping the aforesaid Full Bench judgment

of Supreme Court, the Managing Director is responsible for the

day to day affairs of the company.

27. Therefore, as discussed above, I am of the opinion that

there is no infirmity in the impugned order passed by the learned

Trial court, therefore, I am not inclined to interfere with the

same.

28. Criminal M.C. 1085/2007 is dismissed on the above terms.

29. No order as to costs.

SURESH KAIT, J

AUGUST 08, 2011 j/RS