M/S. Kamakhya Tea Co. Pvt. Ltd. And ... vs M/S. Chitra Chemicals
2022 Latest Caselaw 4048 Gua

                                                                   Page No.# 1/16

GAHC010166072018




                              THE GAUHATI HIGH COURT
   (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)

                              Case No. : Crl.Rev.P./272/2018

            1. M/S. KAMAKHYA TEA CO. PVT. LTD. AND ANR
            REGD. OFFICE - 4, HASTINGS PARK ROAD, NEW ALIPORE, KOLKATA-
            700027

            2: SHIV KUMAR KANOI
             S/O. LT. JOYDEV PRASAD KANOI
            THE DIRECTOR OF M/S KAMAKHYA TEA CO.(P) LTD.
             4 HASTING PARK ROAD
             NEW ALIPORE
             KOLKATA-70002

            VERSUS

            1. M/S. CHITRA CHEMICALS
            A SOLE PROPRIETORSHIP FIRM OF SRI SAMAR RAKSHIT, S/O. LT.
            CHITTARANJAN RAKSHIT, BASBARI PATHER, HOUSE NO. 320, WARD NO.
            12, P.O. AND P.S. DIBRUGARH, DIST. DIBRUGARH, ASSAM.

Advocate for the Petitioner   : MR. S K GOSWAMI

Advocate for the Respondent : MR. H CHANDA

BEFORE HONOURABLE MR. JUSTICE ROBIN PHUKAN

VERDICT (CAV) Date : 20-10-2022

Heard Mr. S.K. Goswami, learned counsel for the petitioner and also heard Mr. H. Chanda, learned counsel for the respondent.

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2. This revision petition, under Sections 482 read with sections 401/397 of the Code of Criminal Procedure, is directed against the order dated 30.04.2016, passed by the learned Addl. Chief Judicial Magistrate, Dibrugarh in Complaint Case No. 46/2016, under section 138 of N.I. Act and also against the judgment and order, dated 04.04.2018, passed by the learned Sessions Judge, Dibrugarh in Criminal Revision No. 21(2) of 2017. It is to be noted here that vide impugned order, dated 30.04.2016, the learned Addl. Chief Judicial Magistrate, Dibrugarh, in Complaint Case No. 46/2016, had taken cognizance under section 138 of N.I. Act against the petitioners and vide impugned judgment and order dated 04.04.2018, the learned Sessions Judge, Dibrugarh, had dismissed the Criminal Revision No. 21(2) of 2017, preferred by the petitioners against the order dated 20.03.2017, vide which the learned Addl. Chief Judicial Magistrate, Dibrugarh had decided to proceed against the accused No.1 and 2 as the main grievance was against them, only on the submissions made by the complainant side.

3. The factual background, leading to filing of the present petition, is briefly stated as under:

"M/s Chitra Chemicals is a proprietorship Firm represented by its sole

proprietor Shri Samar Rakshit. And M/s Kamakhya Tea Co. (P) Ltd. is a private company having its registered office at 4 Hasting Park Road, New Alipur, Kolkata-700027, and Shri Shiv Kumar Kanoi was the Director of M/S Kamakhya Tea Co. (P) Ltd. and one Satya Narayan Singh and Subhash Parekh were the Manager and Field Officer of Monohari Tea Estate, owned by M/s Kamakhya Tea Co. (P) Ltd. and they were the persons responsible for the affairs of the company, at the relevant time. M/s Kamakhya Tea Co. (P) Ltd., while acting through Satya Narayan Singh and Subhash Parekh, the Page No.# 3/16

Manager and Field Officer of Monohari Tea Estate, respectively, had issued eleven cheques of different sum (all total Rs. 6,79,400/) of United Bank of India, Dibrugarh Branch, in favour of M/s Chitra Chemicals, against the existing debt and liabilities payable to it. But, when presented the aforesaid cheques for encashment all the cheques returned dishonored with the endorsement of 'Insufficient Fund', on different dates. Thereafter, legal notices were issued to the petitioners/accused demanding payment of the cheques amount.

But, even after receiving the notices, no payment was made by the petitioners/accused. Being left with no option available, M/s Chitra Chemicals, had filed a complaint under section 138 of the N.I. Act against M/s Kamakhya Tea Co. (P) Ltd. and Shri Shiv Kumar Kanoi, Director of M/S Kamakhya Tea Co. (P) Ltd. and Satya Narayan Singh

- Manager and Subhash Parekh - Field Officer, respectively, of Monohari Tea Estate, owned by M/s Kamakhya Tea Co. (P) Ltd., arraigning them as accused No.1, 2, 3 and 4 respectively, before the court of learned Chief Judicial Magistrate, Dibrugarh. Then on being made over the case to him, the learned Addl. Chief Judicial Magistrate, Dibrugarh had taken cognizance upon the same and issued process to the aforementioned accused, vide order dated, 30.04.2016. Thereafter, on the submissions made by the complainant side, the learned Addl. Chief Judicial Magistrate, Dibrugarh had decided to proceed against the accused No.1 and 2 as the main grievance is against them only vide order dated 20.03.2017. Thereafter, being aggrieved, accused No. 1 and 2 had preferred a revision petition, being Criminal Revision Petition Page No.# 4/16

No.21(2)/2017, before the court of learned Sessions Judge, Dibrugarh and after hearing both side the learned Sessions Judge, Dibrugarh, vide impugned judgment and order, dated 04.04.2018, had dismissed the petition."

4. Being highly aggrieved, the petitioners have preferred this petition and contended to set aside the impugned judgments and orders on the following grounds:-

(i) That, the learned Addl. Chief Judicial Magistrate, Dibrugarh had failed to apply judicial mind while taking cognizance against the petitioners under section 138 N.I. Act;

(ii) That, there is no averments in the complaint regarding the role played by the petitioner in issuing the cheques for which complaint petition under section 138 N.I. Act has been filed, but the same has been overlooked by the learned Addl. CJM, Dibrugarh while taking cognizance;

(iii) That, the Company of which the petitioner No.2 was Director had already been sold out vide e-auction, dated 16.03.2015;

(iv) That, even if the averments made in the complaint is taken at its face value the same do not constitute any offence against the petitioner in terms of section 141 of the N.I. Act;

(v) That, there is no averment in the complaint as how and in what manner the petitioners were responsible for the conduct of the business of the company or otherwise responsible to its functioning as well as in issuance of the cheques, and as such they cannot be held responsible for dishonor of the cheques;

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(vii) That, without looking into the aspect of requirement of section 141 of the N.I. Act the learned Addl. C.J.M, Dibrugarh had taken cognizance against the petitioners and also ignored the guidelines laid down by Hon'ble Supreme Court in the case of S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla and others reported in (2005) 8 SCC 89;

5. Mr. S.K. Goswami, the learned counsel for the petitioners, besides reiterating the points mentioned herein above, also submits that the petitioner No.2 was the Managing Director of the petitioner No.1 Company and he had not issued the cheques in question. Mr. Goswami has further pointed out that the Company had already been sold out and therefore, the case cannot proceed against the petitioner No.1 and 2, and as such the impugned judgments and orders of the learned courts below suffers from manifest illegalities and therefore it is contended to allow this petition. Mr. Goswami also referred following case laws in support of his submission:- (i) S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla and others reported in (2005) 8 SCC 89; (ii) Sabitha Rammurthy and Another vs. R.B.S. Channabasavaradhya, reported in (2006) 10 SCC 581 and (iii) Saroj Kumar Podder vs. State NCT of Delhi and Another, reported in (2007) 3 SCC 693.

6. On the other hand, Mr. H. Chanda, the learned counsel for the respondent submits that the Director looks after everything of the company, and the cheques in question were issued in favour of the Chitra Chemicals after auction process and issuance of sale certificate in favour of the Santak Tea Company. Mr. Chanda further submits that the petitioner No.1 and 2 are still trading in the name of Manohari Tea Estate. Mr. Chanda further submits that the impugned orders suffer from no infirmity or illegality and there is no merit in this petition, Page No.# 6/16

and therefore, it is contended to dismiss the same.

7. Having heard the submissions of learned Advocates of both sides, I have carefully gone through the petition and the documents placed on record. Also I have carefully gone through the impugned judgments and orders of the learned court below and the case laws referred by Mr. Goswami, the learned Advocates for the petitioner.

8. From the contentions, so advanced at the bar, and from the petition and the documents placed on record, it appears that the questions to be answered by this court are:-

(i) Whether the present case proceeds against a company which has already been sold out;

(ii) Whether the petitioner No.2, being the Managing Director of the company is responsible as per provision of section 141 N.I. Act, while he had not issued the cheques in question;

9. A careful perusal of the complaint petition reveals that accused No.2 Shri Shiv Kumar Kanoi is the Director of accused No.1-M/s Kamakhya Tea Co.(P.) Ltd. and accused No.3 and 4 are the Manager and Field Officer of Manohari Tea Estate, owned by the accused No.1 and they are the persons responsible for the affairs of the company. Further it appears that the complainant had filed the case against the M/s Kamakhya Tea Co. Private Ltd. (proprietor of Manohari Tea Co. Pvt. Ltd.) the Manager and Senior Field Manager (both are of Manohari Tea Estate) and accused No.1, while acting through the accused No.3 and 4, have issued eleven cheques of United Bank of India, Dibrugarh Branch, Dibrugarh for a sum of Rs.6,79,400/ only on different dates in favour of his Firm against the existing debt and liabilities payable to him. A careful perusal of the of the eleven Page No.# 7/16

cheques, which were exhibited as Ext, 1 to Ext. 11, reveals that the same were issued in the name of Chitra Chemical, the Firm of the complainant and issued by Sree Kamakhya Tea Co. (P) Ltd. A/c Manohari T.E., and signed by Manager and Senior Field Asstt., Manohari Tea Estate on different dates. Further, it appears that on presentation of the same for encashment by the complainant with its banker, the same returned dishonored with the endorsement 'Fund Insufficient'.

10. It is not in dispute that in order to discharge the liability toward the complainant/respondent, the petitioner company/accused No.1, 3 and 4 had issued the cheques in questions which returned dishonoured with the endorsement of 'Fund Insufficient'. It is also not in dispute that the respondent had issued legal notice demanding the cheque amounts to the accused persons, but no payment was made within the stipulated period. An offence under section 138 of the N.I. Act can be said to have committed upon confluence of certain facts. In the given facts and circumstances, it can certainly be said that an offence under section 138 N.I. Act was committed by the accused persons.

11. There is no quarrel at the Bar that before issuing cheques in question, the company has been sold out. Despite the cheques were issued by the accused, which returned unpaid on presentation to the banker due to not availability of the fund in the account of the accused. There is nothing on the record to show that the company was legally forbidden from making payment of the cheque amounts on account of the same being sold out. This being the position the accused persons cannot be allowed to escape from the penal liability and to seek the shield that the company being sold out. In holding so, this court derived authority from a decision of Hon'ble Supreme Court in Pankaj Mehra and Another vs. State of Maharastra and Others reported in (2000) 2 Page No.# 8/16

SCC 756. In the said case it has been held that

"25] There is no provision in the Companies Act which prohibits enforcement of the debt due from a company. When a company goes into liquidation, enforcement of debt due from the company is only made subject to the conditions prescribed therein. But that does not mean that the debt has become unenforceable altogether. Perhaps due to want of sufficient assets for the company the realisation of a debt would be difficult. But that is no premise to hold that the debt is legally unenforceable. Enforceability of a debt is not to be tested on the touchstone of the modality or the procedure provided for its realisation or recovery. Hence the contention that the special provision incorporated in the Companies Act regarding the debts and liabilities due from the company will render the debt unenforceable, cannot be accepted.

26] The alternative approach is this : Even assuming that any disposition of the property made by a company after commencement of the winding up proceedings is null and void, how that is an escape ground from the offence under Section 138 of the NI Act? That section created a statutory offence which on the confluence of the various factors enumerated therein, commencing with the drawing of the cheque and ending with the failure of the drawer of the cheque to pay the amount covered by it within the time stipulated, ripens into a penal liability.

27] The last factor for constituting the offence under Section 138 of the NI Act is formulated in clause c of the proviso to the Section which reads thus :

"the drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice."

28] The words "the drawer of such cheque fails to make the payment" are ostensibly different from saying "the drawer refuses to make payment". Failure to make payment can be due to the reasons beyond the control of the drawer. An illustrative case is, if the drawer is not a company but individual who has become so pauper or so sick as he cannot raise the money to pay the Page No.# 9/16

demanded sum. Can he contend that since failure to make payment was on account of such conditions he is entitled to be acquitted? The answer cannot be in the affirmative though the aforesaid conditions can be put forth while considering the question of sentence.

29] We therefore feel that legislature has thoughtfully used the word "fails" instead of other expressions as failure can be due to variety of reasons including his disability to pay. But, the offence would be complete when the drawer "fails" to make payment within the stipulated time, whatever be the cause for such failure.

30] The drawer of the cheque can have different explanations for the failure to pay the amount covered by the cheque. But no such explanations would be sufficient to extricate him from the tentacles of the offence contemplated in the Section. Perhaps same kind of explanations would be sufficient to alleviate the rigor of the offence which may be useful to mitigate the quantum of sentence to be imposed. But that is no ground for consideration at this stage."

(emphasis supplied)

12. Of course, the facts of the case in hand is quite distinguishable from the facts of the aforementioned case to the extent that there, winding up proceeding was pending, but, here the company was sold out. But, the principle of law, so enunciated in the said case, to the considered opinion of this court, is squarely applicable in the case in hand also. Therefore, in the considered opinion of this court the submission of Mr. Goswami, the learned counsel for the petitioner cannot be acceded to. In terms of above the first question is answered accordingly.

13. Now, coming to the second question, it appears that from the Affidavit-in- chief of the complainant, which is on the record of the learned Addl. Chief Judicial Magistrate, Dibrugarh, that one Joydev Kumar Kanoi is arraigned as the accused No.2, and he is the Director of M/s Kamakhya Tea Co. Pvt. Ltd. It is Page No.# 10/16

averred therein that the accused No.1, while acting through the accused No.3 and 4 have issued 11 cheques against the existing debt and liabilities to the complainant. Nothing was averred in the said Affidavit against the present petitioner No.2 - Shri Shiv Kumar Kanoi, let alone any averment that he was the person responsible for day to day conduct of the affairs of the company. It is to be mentioned here that in the case of Sabita Ramamurthy (supra), Hon'ble Supreme Court has held that in terms of section 200 Cr.P.C., the complainant is bound to make statement on oath as to how the offence has been committed and how the accused persons are responsible there for. In the instant case there is no such statement. More interestingly the complainant had made averment therein against one Joydev Kumar Kanoi as Director the company.

14. Further, it appears that though it is averred that the petitioner No.2, 3 and 4 are the persons responsible for the affairs of the company, yet, such an averment is not supported by the Affidavit-in-chief of the complainant. There is no such averment in the said Affidavit. Rather, it appears that no role of the accused No.2 is assigned in the Affidavit. Instead, it is being averred in the Affidavit that the accused No.1 while acting through the accused No.3 and 4 have issued eleven cheques of United Bank of India, Dibrugarh Branch, Dibrugarh for a sum of Rs.6,79,400/, only on different dates in favour of the Firm of the complainant against the existing debt and liabilities. Now, the question arises as to whether in absence of any averments against the Affidavit, only a bald assertion in the complaint, is sufficient to take cognizance against the accused No.2.

15. According to Mr. S. K. Goswami, the learned counsel for the petitioner, it is not sufficient to take cognizance and there must be specific plea against the Director of a company before arraigning him as an accused under section Page No.# 11/16

138/141 N.I. Act, in view of the ratio laid down by Hon'ble Supreme Court in the case of S.M.S. Pharmaceuticals Ltd. (supra). There appears to be substance in the submissions of Mr. Goswami. It is worth mentioning in this context that in the aforementioned case Hon'ble Supreme Court has held as under:-

"What is required is that the persons who are sought to be made criminally liable under Section 141 should be at the time the offence was committed, in charge of and responsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the provision. It is only those persons who were in charge of and responsible for conduct of business of the company at the time of commission of an offence, who will be 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 and responsible for conduct of business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. Conversely, a person not holding any office or designation in a Company may be liable if he satisfies the main requirement of being in charge of and responsible for conduct of business of a Company at the relevant time. Liability depends on the role one plays in the affairs of a Company and not on designation or status."

It has been further held that :-

"The conclusion is inevitable that the liability arises on account of conduct, act or omission on the part of a person and not merely on account of holding an office or a position in a company. Therefore, in order to bring a case within Section 141 of the Act the complaint must disclose the necessary facts which make a person liable."

16. In the case of Sabitha Rammurthy (supra) it has been held that -

Section 141 raises a legal fiction. By reason of the said provision, a person although is not personally liable for commission of such an offence would be vicariously liable there for. Such vicarious liability Page No.# 12/16

can be inferred so far as a company registered or incorporated under the Companies Act, 1956 is concerned only if the requisite statements, which are required to be averred in the complaint petition, are made so as to make the accused therein vicariously liable for the offence committed by the company. Before a person can be made vicariously liable, strict compliance of the statutory requirements would be insisted."

17. In the case of Saroj Kumar Podder (supra) Hon'ble Supreme Court has held that:-

"Allegations to satisfy the requirements of Section 138 of the Act might have been made in the complaint petition but the same principally relate to the purported offence made by the Company. With a view to make a Director of a Company vicariously liable for the acts of the Company, it was obligatory on the part of the complainant to make specific allegations as are required in law."

18. In National Small Industries Corporation Limited v. Harmeet Singh Paintal and Another reported in (2010) 3 SCC 330: the summarization of law on Section 141 N.I. Act is made as under:-

"39. From the above discussion, the following principles emerge:

(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 the accused therein vicariously liable for offence committed by the company along with Page No.# 13/16

averments in the petition containing that the 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.

xx xx xx

(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.

19. In the case in hand the petitioner No.2 had not issued any cheque. There is no averment in the complaint petitions as to how and in what manner the petitioner No.2 was responsible for the conduct of the business of the Company or otherwise responsible to it in regard to its functioning, though an omnibus statement is made in paragraph No.2 of the complaint that he and the accused No.3 and 4 are the person responsible for conduct of the business of the company. How he is responsible for dishonour of the cheque has also not been stated. Nothing is averred in the said Affidavit against the petitioner No. 2 - Shri Shiv Kumar Kanoi, let alone any averment that he was the person responsible for day to day conduct of the affairs of the company. As stated herin above, the complainant had made averment against one Joydev Kumar Kanoi as Director the company in the Affidavit. Thus, the bald assertion made in paragraph 2 of the complaint, to my considered opinion; do not satisfy the requirements of Section 141 of the Act.

20. In Pooja Ravinder Devidasani Vs. State of Maharashtra and another, reported in 2015 (88) ACC 613, Hon'ble Supreme Court held that putting criminal law into motion is not a matter of course. A Magistrate taking cognizance of an offence under Section 138/141 of the N.I. Act, making a Page No.# 14/16

person vicariously liable has to ensure strict compliance of the statutory requirements.

21. In Ashoke Bafna Vs. Upper India Steel Manufacturing and Engineering Company Limited, reported in (2018) 14 SCC 202 the Hon'ble Supreme Court held that before summoning an accused under Section 138 N.I. Act, the Magistrate is expected to examine the nature of the allegations made in the complaint and the evidence, both oral and documentary, in support thereof, and then to proceed further with proper application of mind to the legal principles on the issue.

22. In the light of the discussion and finding made herein above it cannot be said that the impugned order of learned Addl. Chief Judicial Magistrate dated 30.04.2016, taking cognizance against the petitioner No.2, withstands the test of legality, propriety and correctness. As the accused No.1, acting through the accused No. 3 and 4 had issued the cheques in question against the existing debt and liabilities payable to the complainant, and as there is specific averment in the complaint and also in the Affidavit -in- chief, being appended with the complaint petition, against them i.e. accused No.1, 3 and 4, dismissing the Criminal Revision Petition No. 21(2) 2017, by the learned Sessions Judge, Dibrugarh, vide judgment and order dated 04.04.2018, and thereby upholding the impugned order of learned Addl. Chief Judicial Magistrate, dated 20.03.2017, whereby it is decided to proceed against accused No.1 and 2, without accused No.3 and 4, cannot stand the test of legality.

23. In the case of Pooja Ravinder (supra) the Hon'ble Suprme Court has held inn paragraph No.30 that the Superior Court should maintain purity in the administration of justice and should not allow the abuse of the process of the Court. Paragraph 30 reads as under:

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"Putting the criminal law into motion is not a matter of course. To settle the scores between the parties which are more in the nature of a civil dispute, the parties cannot be permitted to put the criminal law into motion and Courts cannot be a mere spectator to it. Before a Magistrate taking cognizance of an offence under Section 138/141 of the N.I. Act, making a person vicariously liable has to ensure strict compliance of the statutory requirements. The Superior Courts should maintain purity in the administration of Justice and should not allow abuse of the process of the Court. The High Court ought to have quashed the complaint against the appellant which is nothing but a pure abuse of process of law."

24. This being the position this court is inclined to invoke the jurisdiction under section 482 of the Code of Criminal procedure to quash the impugned order dated 30.04.2016, of the learned Addl. Chief Judicial Magistrate, Dibrugarh, so far it relates to taking cognizance against the petitioner No.2, and also the impugned judgment and order dated 04.04.2018, passed by the learned Sessions Judge, Dibrugarh, in Criminal Revision Petition No. 21(2) 2017, and thereby upholding the impugned order of learned Addl. Chief Judicial Magistrate, dated 20.03.2017.

25. In the result, I find sufficient merit in the present Criminal Revision Petition, so far it relates to petitioner No.2 is concerned. And accordingly, the same stands partly allowed. The impugned order of taking cognizance against the petitioner No.2 by the learned Addl. Chief Judicial Magistrate, Dibrugarh, under section 138 N.I. Act, dated 30.04.2016, stands set aside and quashed. The impugned judgment and order of the learned Sessions Judge, Dibrugarh, dated 04.04.2018, in Criminal Revision No. 21(2) of 2017 upholding the impugned order of learned Addl. Chief Judicial Magistrate, Dibrugarh, dated 20.03.2017, stands set aside and quashed. It is, however, being clarified that barring petitioner No.2, the proceeding shall continue against the petitioner No.1 and Page No.# 16/16

other accused. It is also being clarified that observations made herein above is only for the purpose of disposing of this revision petition only. The learned court below shall proceed to dispose of the matter without being influenced by any of the observation made here in above. The registry shall forward a copy of this judgment and order to the learned court below forthwith. The parties are directed appear before the learned Court below within 15 days from today. Stay, if any, granted earlier, stands vacated. The parties have to bear their own costs.

JUDGE

Comparing Assistant