Nileshkumar Vitthalbhai ... vs State Of Gujarat
2021 Latest Caselaw 18552 Guj

     R/CR.MA/6838/2019                           JUDGMENT DATED: 20/12/2021




        IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

       R/CRIMINAL MISC.APPLICATION NO. 6838 of 2019
                          With
    CRIMINAL MISC.APPLICATION (FOR STAY) NO. 1 of 2021
                            In
       R/CRIMINAL MISC.APPLICATION NO. 6838 of 2019

FOR APPROVAL AND SIGNATURE:


HONOURABLE MS. JUSTICE GITA GOPI

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1      Whether Reporters of Local Papers may be
       allowed to see the judgment ?

2      To be referred to the Reporter or not ?

3      Whether their Lordships wish to see the fair copy
       of the judgment ?

4      Whether this case involves a substantial question
       of law as to the interpretation of the Constitution
       of India or any order made thereunder ?

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                  NILESHKUMAR VITTHALBHAI PRAJAPATI
                               Versus
                          STATE OF GUJARAT
=============================================
Appearance:
MR ROHAN MAJMUDAR ADVOCATE FOR MR NK
MAJMUDAR(430) for the Applicant(s) No. 1
KULDEEP K ADESARA(9222) for the Respondent(s) No. 2
MR KM PARIKH(575) for the Respondent(s) No. 2
NOTICE SERVED BY DS(5) for the Respondent(s) No. 3,4
MR PRANAV TRIVEDI APP for the Respondent(s) No. 1
=============================================

CORAM:HONOURABLE MS. JUSTICE GITA GOPI

                           Date : 20/12/2021

                           ORAL JUDGMENT

1. Rule. Mr. Pranav Trivedi, learned Additional

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Public Prosecutor and Mr. K.M. Parikh, learned advocate waive service of notice of rule on behalf of respondent nos.1 and 2 respectively.

2. The petitioner has filed this petition under Article 226 of the Constitution of India and under Section 482 of the Code of Criminal Procedure, 1973, (for short "the Cr.P.C.") for quashing and setting aside the Criminal Case No.22509/2018 filed before the Court of Chief Judicial Magistrate, Vadodara.

3. The petitioner states that in and around February/March 2018, he was serving in a private organization and had never ventured into any business nor had become Director of any of the Companies, nor he was any authorized signatory or partner in any partnership firm.

3.1 The petitioner states that Criminal Complaint No.22509 of 2018 came to be registered and he was served with summons. The petitioner states that mother of the petitioner is the occupier of Plot No. 2/46, Muktalaya, Post Office Road, Near Janakpuri Society, Kim. He has no connection whatsoever with the said land as he was serving in Bharuch and other town in private section and organizations. However, as the cheques came to be dishonoured, the complainant had mentioned the address of M/s. Hoventa Pharma - respondent no.3 firm and the summons was served upon the petitioner in

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respect of the criminal complaint.

3.2 The petitioner states that neither he has any connection with M/s. Hoventa Pharma nor has any participation in the affairs or business of the firm, nor has any join account with any of the said firm, and had never any kind of transaction with any partner of the firm. The petitioner also contends that he had not invested any money in the said firm and the partnership deed reveals that he was not partner of the M/s. Hoventa Pharma.

3.3 The petitioner states that wife of the petitioner, Snehal Prajapati was the sleeping partner, but she too has not participated in day-to-day affairs of the firm, nor she has taken any decision of placing orders of the goods from the respondent no.2. The petitioner states that she neither has signed any invoices, bills or challans nor she has singed any cheques including the cheques, which is stated to be dishonoured.

3.4 The petitioner contends that though he has no connection with the partnership firm nor in the alleged transaction, received and purchased of the goods, he has been wrongly joined in the complaint; thus states that the complaint qua him is required to be quashed and set aside.

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4. Advocate Mr. Rohan Majmudar for Mr. N.K. Majmudar, learned advocate for the petitioner has relied on the judgment of Madhusudan Mohanlal Somani Vs. State of Gujarat, reported in 2017 (0) AIJEL-HC 237542 to contend that there should be specific averments against the Directors, showing as to how and in what manner the Directors are responsible for the conduct of the business of the Company. Mr. Majmudar has also relied on the case of Patel Nitaben Chetanbhai Vs. State of Gujarat, reported in 2017 (0) AIJEL-HC 237429, to submit that husband and wife are different entity and therefore there cannot be any prosecution against the husband, if the wife has dealing in her individual capacity.

4.1 Mr. Majmudar relied on Form-G of Register Of Firms and the copy of partnership deed to substantiate that the present petitioner is not the partner of M/s. Hoventa Pharma. He submits that the Certificate of Register of Firms give the details of date of joining as a partner to the firm and the same has been approved. Mr. Majmudar contend that from 27.03.2017 till 09.11.2021, the partners of M/s. Hoventa Pharma, Snehal Nilesh Prajapati and Mr. Chirag Bhojani had 50% share each, which corroborate the partnership documents on record. He contended that complaint was filed on 16.05.2018 and thus this fact was clearly on public domain for the complainant to verify the fact whether the petitioner is

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the partner of the firm or not?

5. Mr. K.M. Parikh, learned advocate for the respondent no.2, referring to the e-mail conversions by M/s. Hoventa Pharma, submitted that the petitioner has been shown as representative of M/s. Hoventa Pharma and Mr. Chirag Bhojani and the petitioner had presented themselves as partners of M/s. Hoventa Pharma and thus Mr. Parikh submitted that inference can be drawn of the very fact that the petitioner has represented himself as partner of the firm and as per the communication he was incharge of the business of the firm.

5.1 Countering the said submission, Mr. Majmudar submitted that, such e-mail documents would have no value in the eyes of law unless and until it has been certified to be true and being proved under Section 65B of the Evidence Act, 1872. He further submitted that these documents have been placed before this Court for the very first time and have not been part of the criminal proceedings before the trial Court and thus stated that no value can be attached to such documents, which do not prima facie seems to be authentic.

6. Perusal of the complaint filed before the Court of Chief Judicial Magistrate, Vadodara, reflects that M/s. Centuary Pharmaceuticals Ltd. through its authorized signatory has filed the complaint against M/s. Hoventa Pharma arraigned Dr. Chirag Bhojani and Dr. Nilesh

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Prajapati as accused nos.2 and 3 with the status of being partners and authorized signatories of M/s. Hoventa Pharma.

6.1 The allegation is to the effect that, accused no.1 is the partnership firm and accused nos.2 and 3 are the partners, authorized representatives and signatories of the firm, who are acting, representing, managing and looking after the affairs of administration and business of accused no.1 firm on day-to-day basis and therefore the inaction and defaults, as per complaint, are attributable to accused nos.2 and 3 in whose knowledge, consent and on account of deliberate and willful default, the wrong has occurred which has constituted a right in favour of the complainant to take recourse of law against all the accused in light of the facts and circumstances.

6.2 It is further stated in the complaint that accused were required to purchase / procure Azithromycin Dihydrate USP and Erythromycin Stearate USP (goods) and the accused had contacted the complainant and under negotiations and discussions for the procurement of the goods, purchase orders dated 08.06.2017 and 23.06.2017 bearing Ref. No.HP/170806/20 and HP/172306/25 were made for supply of goods upon the purchase order sent by the accused. The complainant manufactured, sold and delivered the goods in terms of specifications and

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technical details, as has been stated in the purchase order sent by the accused.

6.3 It is alleged in the complaint that upon receiving the goods, the accused had utilized the same as a part of business activity undertaken by them and on the sale, delivery and acceptance being caused, the complainant had issued invoices in respect of the transaction of the sale of goods bearing Invoice No.T/076 dated 14.06.2017 to the tune of Rs.15,29,719.00 and another Invoice No.T/083 dated 24.06.2017 to the tune of Rs.15,41,531.00.

6.4 It is stated by the complainant before the Chief Judicial Magistrate, First Class, in the complaint that in discharge of the liability, out of the transaction of the sale of goods, the accused had made part payment and remitted Rs.1,60,000.00 and for the discharge of rest of the amount of Rs.29,11,250.00, the accused no.2 as a partner and authorized signatory of accused no.1 in knowledge, participation and consent of accused no.3 have signed and issued two cheques in favour of the complainant as a payment/discharge of total amount of invoices raised for the transaction of sale of goods in furtherance of the purchase orders issued by the accused.

6.5 It is further stated by the complainant in the complaint that upon receipt of the cheques, the

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complainant presented the same before Bank of Baroda, International Business Branch, Sayajigunj, Vadodara, wherein the complainant hold his account, which were returned by the Bank indicating 'Funds Insufficient" and therefore the complainant issued a Demand Notice dated 30.03.2018 against accused nos.1 to 3, which were returned on 05.04.2018 with reason 'left party' and thus the complainant filed the impugned complaint before the Court of Chief Judicial Magistrate, Vadodara.

7. Section 141 of the N.I. Act reads as under:

"141. Offences by companies. -- (1) If the person committing an offence under section 138 is a company, 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, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence:

[Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State

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Government, as the case may be, he shall not be liable for prosecution under this Chapter.]

(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Explanation.-- For the purposes of this section,--

(a) "company" means any body corporate and includes a firm or other association of individuals; and

(b) "director", in relation to a firm, means a partner in the firm."

7.1 Mr. K.M. Parikh, learned advocate for the respondent no.2 drew the attention of this Court on the definition of "person" in Section 3(42) of the General Clauses Act, 1897 and submitted that in view of the various circumstances mentioned in the complaint before the Chief Judicial Magistrate, First Class, the petitioner herein as the husband is liable for criminal prosecution. He also submitted that in view of explanation of the N.I. Act, the husband is prosecuted as being an association of individual.

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8. The concept of vicarious liability in context of 'company', 'partnership firm' or 'an association of persons', has been described in the judgment of Raghu Lakshminarayanan Vs. Fine Tubes, reported in (2007) 5 Supreme Court Cases 103. The Supreme Court in the said judgment in paragraph nos.8 to 10 held as under:

"8. The concept of vicarious liability was introduced in penal statutes like Negotiable Instruments Act to make the Directors, partners or other persons, in charge of and control of the business of the Company or otherwise responsible for its affairs; the Company itself being a juristic person.

9. The description of the accused in the complaint petition is absolutely vague. A juristic person can be a Company within the meaning of the provisions of the Companies Act, 1956 or a partnership within the meaning of the provisions of the Indian Partnership Act, 1932 or an association of persons which ordinarily would mean a body of persons which is not incorporated under any statute. A proprietary concern, however, stands absolutely on a different footing. A person may carry on business in the name of a business concern, but he being proprietor thereof, would be solely responsible for conduct of its affairs. A proprietary concern is not a Company. Company in terms of the explanation appended to Section 141 the Negotiable Instruments Act, means any body- corporate and includes a firm or other association of individuals. Director has been defined to mean in relation to a firm, a partner in the firm. Thus, whereas in relation to a Company, incorporated and registered

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under the Companies Act, 1956 or any other statute, a person as a Director must come within the purview of the said description, so far as a firm is concerned, the same would carry the same meaning as contained in the Indian Partnership Act.

10. It is interesting to note that the term "Director" has been defined. It is of some significance to note that in view of the said description of "Director", other than a person who comes within the purview thereof, nobody else can be prosecuted by way of his vicarious liability in such a capacity. If the offence has not been committed by a Company, the question of there being a Director or his being vicariously liable, therefore, would not arise."

9. In case of S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89, it has been held that merely being a Director of the Company is not sufficient to make a person liable under Section 141 of the NI Act and that the requirement of Section 141 of the NI Act is that 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 and specific averment to that regard should have been made in the complaint.

10. It is by now well settled that liability under the NI Act arises from being in charge of and responsible for conduct of business of the Company at the time when the offence was committed and not on the basis of holding a

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designation or office in a Company. In other words, liability depends on the role played and not on the designation or status in a Company. Simply because a person is the Director of a Company, it does not necessarily mean that he was in charge of and responsible to the Company for the conduct of its business. What is essential is that the allegations in the complaint should, in express words or with reference to the allegations contained therein, make out a case that at the time of commission of the offence, the accused was in charge of and responsible to the Company for conduct of its business. Liability shall also be attracted if it is found that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of any Director, Manager, Secretary or any other Officer of the Company.

10.1 The petitioner herein has been arraigned as accused in the capacity of being the partner of original accused No.1 - Firm. Section 141 of the NI Act operates in cases where an offence under Section 138 is committed by a Company/Firm. A liability under Section 141 can be fastened vicariously on a person connected with the Company/Firm, the principal accused being the Company/ Firm itself. A clear case should be spelt out in the complaint against the person sought to be made liable. Section 141 contains the requirements for making a person liable under the said provision. It has to be

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specified in the complaint as to how the accused falls within the parameters of Section 141. Merely being described as a partner in a Firm is not sufficient to satisfy the requirement of Section 141.

11. In the instant case, the wife of the petitioner is a partner along with Chiragbhai Bhojani. The admitted fact is that the impugned cheque is signed by Chirag Bhojani. In this case, petitioner has been pleaded as partner in M/s. Hoventa Pharma and the record reflects that the partners are Snehal Prajapati and Chirag Bhojani, which fact is corroborated by the Certificate of Register of Firms. The petitioner has been arraigned as partner of M/s. Hoventa Pharma and that does not get fortify by the public document of Register of Firms which is supported by the partnership deed.

11.1 The petitioner being husband of the partner of the firm, would not attract his act under the concept of deemed liability. At the time of the complaint and at the time when the impugned cheque was issued, the present petitioner was not partner of the firm. It appears that the petitioner may have worked on behalf of his wife and the present petitioner has been joined in the complaint as a partner of M/s. Hoventa Pharma.

12. In case of K.Srikanth Singh Vs. North East Securities Ltd. And Another, reported in (2007) 12

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SCC 788, the Supreme Court held that, for vicarious liability of director of the Company, it must be pleaded and shown that the director was responsible for the conduct of business of the company at the time of commission of the offence. Only being a director is not not enough to cast a criminal liability. Vicarious liability must be pleaded and proved and cannot be merely inferred. The allegation containing in complaint that all directors of the complaint petition participated in negotiations for obtaining financial assistance for the Company and after executing comprehensive loan documentation, they took the loan from the complainant firm. It is held that negotiation for obtaining financial assistance on behalf of the Company by its directors is not an ingredient for the purpose of constituting offence under Section 138 of N.I. Act. No allegation made in the complaint petition that the appellant director was responsible to the company for conduct of business of the company. Mere allegation regarding the director's participation and the negotiation for financial help would not give rise to an interference that appellant was responsible for the day-to-day affairs of the company.

12.1 Merely negotiating on behalf of wife or for the firm for any orders or for financial transactions or business would not give rise to any inference that the petitioner was responsible for day-to-day affairs of the firm. Vicarious liability under sub-section(1) of Section 141 would get attracted if a "person" should fulfill the

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"legal requirement" of the person in law responsible for the conduct of the business of the firm.

13. In view of the facts and circumstances of the case and the provisions of Section 141 of the N.I. Act, this Court is of the opinion that the prosecution initiated against the present petitioner herein could not sustain in the eyes of law and deserves to be quashed and set aside in exercise of the inherent powers under Section 482 of the Code of Criminal Procedure.

14. For the foregoing reasons, the petition is allowed. The impugned complaint being Criminal Case No.22509/2018 pending before the Court of Chief Judicial Magistrate, Vadodara and all consequential proceedings initiated in pursuance thereof are quashed and set aside qua the petitioner herein. Rule is made absolute.

15. In view of the above, connected Criminal Misc. Application No.1 of 2021 stands disposed of.

(GITA GOPI, J.) Pankaj