Rajiv Tibrewal & Ors. vs Dynamic Continental Pvt. Ltd.
2013 Latest Caselaw 2912 Del

        *     IN THE HIGH COURT OF DELHI AT NEW DELHI


+        CRL.M.C. 696/2012
                                      Judgment delivered on: July 11, 2013

         RAJIV TIBREWAL & ORS.                                 ..... Petitioners

                                      Through:    Mr.Gaurav Malhotra, Advocate

                             versus

         DYNAMIC CONTINENTAL PVT. LTD.                   ..... Respondent

                                      Through:    Mr. Pawan Verma, Advocate

         CORAM:
         HON'BLE MR. JUSTICE KAILASH GAMBHIR

KAILASH GAMBHIR, J.

1. By this petition filed under Section 482 of Code of Criminal

Procedure (hereinafter referred to as Cr. P. C.), the petitioners who are

accused nos. 2, 3 and 6 in the Criminal Complaint bearing C.C.No.

4455/2009 seek quashing of the said complaint filed by the complainant

Company under Section 138 of the Negotiable Instruments Act, 1881

(hereinafter referred to as „the Act‟), pending before the Court of the learned

Metropolitan Magistrate, Saket Court, New Delhi.

2. Arguing the present petition, the learned counsel for the petitioners,

Mr. Gaurav Malhotra, submitted that the accused no. 1 in the complaint,

M/s Taurus Confectionery India (P.) Ltd, entered into a leave and license

agreement dated 21.08.2007 with the complainant company for taking a

shop at "Flamez" Mall at Ludhiana on license basis. Learned counsel further

submitted that the said agreement was signed by Ms. Geeta Jain, accused

no. 4 in the complaint who is the Regional Manager (North) of the said

company. Learned counsel further submitted that the said shop taken on

leave and license basis was run by Ms. Geeta Jain who was the sole

proprietor of accused no. 5 in the complaint, M/s Ishan Enterprises.

Learned counsel also submitted that the monthly license fee of the said

premises was being paid by M/s Ishan Enterprises as it was actually running

the said shop and also issued various post-dated cheques in favour of the

complainant. Learned counsel also submitted that the said shop was

licensed in favour of M/s Taurus Confectionery India (P.) Ltd. for a period

of nine years but it was agreed between the parties that there shall be a lock-

in period of three years for which period the licensee would be liable to pay

the license fee even if the licensee chooses to vacate the shop before the

expiry of the lock-in period of three years. Learned counsel for the

petitioners further submitted that the said shop was vacated by M/s Ishan

Enterprises on 17.06.2009, i.e., before the expiry of lock-in period of three

years and three postdated cheques issued by the said M/s Ishan Enterprises

were presented in its bank by the complainant which were returned

dishonoured by the banker of the said accused no.5, M/s Ishan Enterprises

with the remarks "Funds Insufficient"/"Payment stopped by Drawer".

Learned counsel for the petitioners submitted that all the three dishonoured

cheques were signed by Ms.Geeta Jain, the sole proprietor of M/s Ishan

Enterprises and the petitioners were neither the signatory of the said cheques

nor they had any concern with M/s Ishan Enterprises. Learned counsel for

the petitioners submitted that petitioner No. 3 is nowhere related with M/s

Taurus Confectionery India (P.) Ltd. or even M/s Ishan Enterprises as he

only happens to be the husband of Ms. Geeta Jain and therefore cannot be

made liable or responsible for the acts committed by the said companies.

Learned counsel for the petitioners in support of his arguments, placed

reliance on the judgment of the Karnataka High Court in the case of

Uppinangady Grama Panchayat, Puttur v. P.Narayana Prabhu, 2006 (4)

Criminal Court Cases 316 (Karnataka) and on the judgments of this Court

in the case of Arsh Electronics Pvt. Ltd. v. Telematica Star Ltd. & Anr.,

172 (2010) DLT 340 and Rushi International v. State (NCT of Delhi) &

Ors., 174 (2010) DLT 254.

3. Opposing the present petition, the learned counsel for the respondent

company submitted that petitioner Nos.1 and 2 were Directors of M/s

Taurus Confectionery India (P.) Ltd. and they were looking after day to day

affairs of the said company. Learned counsel for the respondent company

submitted that the said company had authorized Ms. Geeta Jain, its Regional

Manager (North) to execute the leave and license agreement dated

21.08.2007 on behalf of the said company. Learned counsel for the

respondent company submitted that in terms of the Para 4.4 of the leave and

license deed, the licensee was prohibited from creating, sub-letting or

otherwise parting with the possession of the licensed premises but in

violation of the said clause 4.4 of the license deed, the accused no. 1

company allowed Ms. Geeta Jain to operate the business under the name

and style of M/s Ishan Enterprises in the said shop and pay the monthly

license fee towards rent for the said shop. Learned counsel for the

respondent company submitted that with a view to maintain business

relationship, the respondent allowed Ms. Geeta Jain to operate M/s Ishan

Enterprises as franchisee of M/s Taurus Confectionery India (P.) Ltd. but

the principal liability to perform the contractual obligation always remained

with M/s Taurus Confectionery India (Pvt.) Ltd. Learned counsel for the

respondent company submitted that as all the postdated cheques issued by

Ms.Geeta Jain as an authorized signatory of M/s Ishan Enterprises were

dishonoured therefore, the petitioner nos. 1 & 2 who were directors of the

principal company, i.e. M/s Taurus Confectionery India (P.) Ltd. along with

Ms. Geeta Jain, the signatory of the dishonoured cheques and petitioner

no.3, the proprietor of M/s Taurus Confectionery India (Pvt.) Ltd are liable

for committing criminal offence under Section 138 of the Act and they

cannot escape the said criminal liability by raising technical pleas. Learned

counsel for the respondent company also submitted that the present petition

has been filed by the petitioners with dishonest intentions to escape from

their criminal liability under Section 138 of the Act and if the present

petition, at the instance of the petitioners is allowed, the same will open

flood gates for such unscrupulous tenants to shift their criminal liability on

the unauthorized Franchisees/Sub-tenants. Based on the aforesaid

submissions, the learned counsel for the respondent company urged that the

present petition warrants outright dismissal.

4. I have heard the learned counsel for the parties and given my anxious

considerations to the arguments advanced by them.

5. Section 141 of the Negotiable Instruments Act fastens vicarious

liability on the directors of the company for an offence under Section 138

committed by the company. It provides that if the person committing an

offence is a company, then every person who, at the time the offence was

committed was in charge of, and was responsible to the company for the

conduct of the business of the company, shall be deemed guilty of the

offence and shall be liable to be proceeded against and punished

accordingly. The Hon‟ble Apex Court in National Small Industries

Corporation Ltd. v. Harmeet Singh Paintal, 2010 (2) SCALE 372, has laid

down the following principles to be kept in mind by the courts for

determining such liability of the directors of the accused company under

Section 141 r/w 138 of the Act.

(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction.

(ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.

(iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make accused therein vicariously liable for offence committed by company along with averments in the petition containing that accused were in-charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.

(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred.

(v) If accused is Managing Director or Joint Managing Director then it is not necessary to make specific averment

in the complaint and by virtue of their position they are liable to be proceeded with.

(vi) If accused is a Director or an Officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint.

(vii) The person sought to be made liable should be in- charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases.

6. The aforesaid being the legal principles to be kept in mind for

determining the criminal liability of the company directors u/s 141 r/w 138

of the Act, it is necessary to peruse the averments that are spelled out in the

complaint filed by the complainant in order to decide whether the present

criminal complaint filed under Section 138 of the Act deserves quashing or

not.

7. The relevant averments made in the complaint are that-

The complainant, M/s. Dynamic Continental (P) Ltd., is a

Private Limited Company registered under The Companies Act,

1956. The complainant is the owner and developer of „Flamez

Mall‟ situated at Ludhiana, Punjab. The accused no. 1, M/s.

Taurus Confectionery India (P) Ltd. is a Private Limited Co.

registered under The Companies Act, 1956 and accused nos. 2 and

3 (petitioner nos. 1 and 2 herein) are the directors of accused no.

1. Accused no. 5, M/s. Ishan Enterprises, is a franchisee of

accused no.1. Accused no. 6 (petitioner no.3 herein) is the

proprietor and responsible for the day to day affairs of accused no.

5. Accused no. 4 is the Regional Manager (North) of accused no.

1, wife of accused no. 6 and also the authorized signatory of the

cheques in question. She is also responsible for the day to day

conduct of business of accused no. 5. Accused no. 4 has been

interacting with the complainant with respect to all the meetings,

correspondences and representations and also signing all the

documents on behalf of accused no. 1 and accused no. 5.

It has been averred in Para 3 of the complaint that the

complainant granted a license to the accused no. 1 to use a shop

i.e. shop no. GF-8 situated in its „Flamez Mall‟ for a period of

nine months vide leave and license deed dated 21.8.07. The

license fee was agreed to be paid by way of postdated cheques. It

was also agreed that there shall be a lock-in period for three years

for which period the licensee shall be liable to pay the interest

even if the licensee chooses to vacate the shop before the expiry of

the said lock-in period of three years. (True copy of the aforesaid

deed is annexed with the complaint). Accused no. 4 signed the

said deed on the strength of the resolution passed by board of

directors of accused no. 1 company. (True copy of the aforesaid

resolution is also annexed with the complaint)

Para no. 4 of the complaint states that accused no. 1 used

the shop jointly with its franchisee i.e. Accused no. 5. The overall

management of the shop was looked after by Accused nos. 2, 3, 4

and 6. The sales were done by Accused nos. 4 and 6. The benefits

of the said license were enjoyed by all the accused jointly.

Para nos. 6 and 7 of the complaint talks about the dishonor

of three postdated cheques issued by accused no. 4 on behalf of

accused no. 5 and gives details regarding the same.

Para no. 8 talks about the sending of the legal notice dated

25.9.09 by the complainant to the accused persons.

Para nos. 9 and 10 aver about the replies sent to such legal

notices and specifically points out to the fact that the accused sent

their respective replies through one and the same advocate. (True

copies of the replies to the legal notices are annexed with the

complaint)

8. After going through the aforesaid averments made in the complaint,

all the documents annexed with the complaint, the pre-summoning evidence

filed by way of affidavit by the complainant and also the contentions raised

by the accused persons in the present application seeking quashing of the

complaint, this Court has no doubt in holding that petitioner Nos. 1 and 2

were Directors of accused no. 1 company and vide leave and license

agreement dated 21.08.2007, the complainant had licensed the shop at

"Flamez" Mall at Ludhiana on leave and license basis in favour of the

accused no. 1 company. It is also clear that the leave and license agreement

was signed by accused no.4, Ms. Geeta Jain, as an authorized representative

of M/s Taurus Confectionery India (P.) Ltd. In terms of the Clause 2.1 of the

leave and license agreement, the licensee was required to pay monthly

license fee by way of postdated cheques. The period of said license was

agreed to be for nine years commencing from 9.8.2007 and the period from

9.8.2007 to 8.8.2010 was agreed to be the lock-in period of the license to the

effect that the licensee shall pay license fee in the form of postdated cheques

for the said lock-in period. It is also not in dispute that accused no. 1

company allowed accused no. 4, Ms. Geeta Jain, to operate business in the

name and style of M/s. Ishan Enterprises (accused no. 5) and the payments

of the monthly license fee were being made by M/s Ishan Enterprises. It is

also an admitted fact that the licensee had vacated the said shop before the

expiry of the lock-in period, i.e. before 8.8.2010. It is also seen that while

Ms. Geeta Jain was the authorized signatory of the dishonoured cheques

issued on behalf of M/s Ishan Enterprises i.e. the alleged Franchisee of M/s

Taurus Confectionery India (P.) Ltd, Mr. Ajay Jain, husband of Ms. Geeta

Jain (accused no. 6 in the complaint, petitioner no. 3 herein) is alleged to be

the proprietor of the said franchisee.

9. From the above it is crystal clear that as far as complaint against

petitioner no. 3 is concerned, being the proprietor of the company issuing

the dishonoured cheques in question, he is liable to be proceeded against

under Section 138 of the Act. The plea raised by the counsel for the

petitioners that Mr. Ajay Jain, by simply being the husband of Ms. Geeta

Jain, cannot be held liable either for the deeds and acts of M/s Taurus

Confectionery India (P.) Ltd. or M/s Ishan Enterprises does not hold any

merit. The complainant has clearly averred in its complaint that accused no.

6 is the proprietor of M/s. Ishan Enterprises and a mere denial of this fact by

the accused in the present application would not result in quashing the

complaint qua accused no. 6.

10. So far as the plea for quashing of complaint qua petitioner Nos. 1 and

2 herein is concerned, the leave and license agreement in respect to the shop

in question was executed by the complainant in favour of accused no. 1

company and the role of the directors of accused no. 1 company while

entering into such agreement with the complainant has been clearly averred

in the complaint. It has been specifically averred in Para no. 3 of the

complaint that the board of directors authorized accused no.4 to enter into

the leave and license agreement with the complainant company through the

resolution dated 9.8.07. The said resolution bears the signatures of one of

the accused, petitioner no. 3 explicitly. It has also been specifically averred

in Para no. 4 of the complaint that the overall management of the licensed

shop was looked after by accused nos. 2, 3, 4 and 6 and the benefits of the

said license was enjoyed by all the accused jointly. No doubt the cheques in

question were issued by Ms. Geeta Jain, the authorized signatory of M/s

Ishan Enterprises, but then there was no privity of contract between the

Complainant Company and M/s Ishan Enterprises and the entire liability to

pay the monthly license fee was always upon the accused no. 1 company.

Also, the presence of petitioner Nos.1 and 2 would be necessary to prove

and establish the existence and enforceability of the monthly license fee

arising out of the leave and licensee deed, more particularly, if for any

reason, M/s Ishan Enterprises succeeds in rebutting the initial presumption

arising in favour of the complainant in terms of the Sections 118 and 139 of

the Act.

11. In the light of the aforesaid discussion, the present petition filed by

the petitioners is hereby dismissed.

12. It is ordered accordingly.

KAILASH GAMBHIR J.

JULY 11, 2013 v