Yusuf Karim Khan vs The State Of Jharkhand
2022 Latest Caselaw 4563 Jhar

                                         1                   Cr.M.P. No. 2338 of 2018

              IN THE HIGH COURT OF JHARKHAND, RANCHI
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Cr.M.P. No. 2338 of 2018

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Yusuf Karim Khan, son of Mehboob Zaman Khan, aged about 56 years, resident of 502, Khaibar Apartment, Prof. Almedia Road, Bandra (West), P.O. Bandra(West), P.S. Bandra(West), District Mumbai-400050 (Maharashtra) ..... Petitioner

-- Versus --

1.The State of Jharkhand

2.M/s Patanjali Enterprises Pvt. Ltd., having registered Office at "Sarda House", P.B.No.34, Madhu Bazar, P.O.Chaibasa, P.S.Chaibasa, Chaibasa-833 3201 Singhbhum (West), Jharkhand, through Mr. Surendra Mohan Sarda (Director), son of not known to the petitioner, having Office at "Sarda House", P.B.No.34, Madhu Bazar, P.O. and P.S.Chaibasa, District Singhbhum (West) ...... Opposite Parties

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CORAM: HON'BLE MR. JUSTICE SANJAY KUMAR DWIVEDI

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For the Petitioner :- Mr. Indrajit Sinha, Advocate Mr. Ajay Kumar Sah, Advocate For the O.P.No.2 :- Mr. Rohitashya Roy, Advocate For the State :- Mr. Bhola Nath Ojha, Advocate

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9/16.11.2022 Heard Mr. Indrajit Sinha, the learned counsel appearing for

the petitioner, Mr. Rohitashya Roy the learned counsel appearing on

behalf of the O.P.No.2 and Mr. Bhola Nath Ojha, the learned counsel

appearing on behalf of the respondent State.

This petition has been filed for quashing of the entire

criminal proceeding including the order taking cognizance dated

23.08.2016 initiated against the petitioner under section 138 read with

section 141 of the Negotiable Instruments Act, 1881, arising out of

Complaint Case No.C1/117/2015, pending before learned Chief Judicial

Magistrate, Singhbhum West, Chaibasa, Jharkhand.

The complaint case has been lodged alleging therein that

the accused No.1 M/s Elder Pharmaceuticals Ltd., which is a public

limited company, duly incorporated under the provisions of Indian

Companies Act, 1956 and nos.2,3 and 6 (petitioners) are the

Directors/authorized signatories of accused no.1, and the remaining 6

accused persons are responsible for the day-to-day affairs of the accused

no.1 and it is on the alleged representations and requests of the accused

no.2 (Alok Saxena), 3 (M.V.Thomas) and 6(petitioner) for and on behalf

of the accused no.1, that the complainant had given Rs.25,00,000/-

(Rupees Twenty Five Lacs) only as inter-corporate deposit (loan) vide

cheque No.083092 dated 05.03.2012 drawn on IDBI Bank for a period of

120 days and accordingly accused no.3 (M.V.Thomas) had executed a

demand promissory note. The complainant has further alleged that on

the due date, M/s Elder Pharmaceuticals (accused no.1) had issued a

cheque no.030233 for Rs.25,00,000/- towards the repayment of the

inter-corporate deposit and cheque no.030232 towards the remittances

of interest on the deposit amounting to Rs.2,08,695 both dated

30.09.2014 drawn on ICICI Bank, Nariman Point Branch, jointly signed by

accused no.2 (Alok Saxena), 3 (M.V.Thomas) respectively totaling to an

amount of Rs.27,08,695/- with a view to clear the legally enforceable

liability towards the complainant. However, when the aforesaid cheques

in question were deposited for payment by the complainant on

20.12.2014, the said cheques were returned with an endorsement of

dishonour by the concerned bank with the remark „account closed‟.

Information to this effect was received by the complainant on 22.12.2014

from their banker ICICI bank with the dishonoured cheque, and return

memo. The complainant further claims to have sent a legal notice

through its Advocate, Shri Pabitra Kumar Ray, on 01.01.2015 to the

petitioner along with the other accused persons, whereby the accused

were requested to make payment of the amount covered by the above

two dishonoured cheques within 15 days from the date of receipt of the

said notice is said to have been received by the accused persons on

05.01.2015 however, it has been averred that inspite of the service of

said notice, the accused did not make payment of the amount covered by

the dishonoured cheques to the complainant and subsequently the

present complaint has been lodged by the O.P.No.2 against the petitioner

and 9 others.

Mr. Indrajit Sinha, the learned counsel appearing on behalf

of the petitioner submits that the petitioner was one of the Director of

the company namely, M/s Elder Pharmaceuticals Ltd. which is accused

no.1. He submits that a cheque no.030233 for Rs.25,00,000/- towards

the repayment of the inter-corporate deposit and cheque no.030232

towards the remittances of interest on the deposit amounting to

Rs.2,08,695 both dated 30.09.2014 drawn on ICICI Bank, Nariman Point

Branch, jointly signed by accused no.2 (Alok Saxena),3 (M.V.Thomas)

respectively totaliing to an amount of Rs.27,08,695/- was issued. The

said cheque was bounced pursuant thereto, the complaint has been filed.

He submits that the cheque was issued on 30.09.2014, this petitioner has

already resigned on 27.10.2014 which has been accepted on 14.11.2014

by annexure-5 series. He submits that the cheque was dishonoured on

20.12.2014 which was returned on 22.12.2014 and legal notice was

issued on 30.12.2014. The legal notice was received on 05.01.2015. The

accused nos.8 and 10 replied to the said notice dated 07.01.2015 and

23.01.2015, respectively and the complaint was filed on 04.02.2015

wherein the learned court has taken cognizance against the company as

well as the other accused persons including this petitioner. He draws the

attention of the Court to the complaint and submits that in the complaint

itself there is averment that accused nos.2,3 and 6 are the Directors of

the company and accused nos.4,5,7,8,9 and 10 are responsible for the

day-to-day affairs of the company-accused no.1. Relying on this

averment, he submits that by way of evidence on affidavit which has

been brought on record by supplementary affidavit, it has been alleged

that the petitioner was looking after the day-to-day affairs of the

company and the learned court has taken cognizance against the

petitioner. He took the Court to section 141 of the Negotiable

Instruments Act, 1881 and submits that vicarious liability cannot be

fastened against the petitioner under section 141 of the Negotiable

Instruments Act. To buttress his argument, he relied in the case of

Ashutosh Ashok Parasrampuriya and Another v. Gharrkul Industries Pvt.

Ltd. and Others, reported in 2021 SCC OnLine SC 915 and relied on

paragraph no.21 of the said judgment which is quoted hereinbelow:

"21. After so stating, the Court analysed Section 141 of the NI Act and after referring to certain other authorities answered a reference which reads as follows:--

19(a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied.

(b) The answer to the question posed in sub-para (b) has to be in the negative. Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of Section 141 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. This has to be averred as a fact as there is no deemed liability of a director in such cases.

(c) The answer to Question (c) has to be in the 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 the 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 and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under subsection (2) of Section 141."

He further submits that there is impeccable document on

record contained in annexure-5 series which suggest that this petitioner

has resigned from the company. He relied on paragraph no.34.3 in the

case of „Gunmala Sales (P) Ltd. v. Anu Mehta‟ & analogous cases ,

reported in (2015) 1 SCC 103., which is quoted hereinbelow:

"34.3. In the facts of a given case, on an overall

reading of the complaint, the High Court may, despite the presence of the basic averment, quash the complaint because of the absence of more particulars about the role of the Director in the complaint. It may do so having come across some unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abuse of process of court. Despite the presence of basic averment, it may come to a conclusion that no case is made out against the Director. Take for instance a case of a Director suffering from a terminal illness who was bedridden at the relevant time or a Director who had resigned long before issuance of cheques. In such cases, if the High Court is convinced that prosecuting such a Director is merely an arm-twisting tactics, the High Court may quash the proceedings. It bears repetition to state that to establish such case unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or some totally acceptable circumstances will have to be brought to the notice of the High Court. Such cases may be few and far between but the possibility of such a case being there cannot be ruled out. In the absence of such evidence or circumstances, complaint cannot be quashed.

He further submits that once the cheque under

section 138 of the Negotiable Instruments Act is returned thereafter only

the offence is committed, however, the petitioner has already left the

company earlier and so far as this petitioner is concerned, the cognizance

order is bad in law.

On the other hand, Mr. Rohitashya Roy, the learned counsel

appearing on behalf of the O.P.No.2 submits that there are documents

annexed with the petition which suggest that the petitioner was

Executive Director of the said company. To buttress his argument, he

draws the attention of the Court to page no.42 and submits that this

document is dated 03.02.2014 to suggest that the petitioner was the

Executive Director as has been informed to the Bank with regard to the

account in question for which the cheque in question was issued. He

submits that the petitioner was noticed and he has received the notice

and the document to that effect is already on the record and he has not

replied to that which has far reaching effect in the entire prosecution as

held by the Hon‟ble Supreme Court in the case of "S.P. Mani And Mohan

Dairy vs Dr. Snehalatha Elangovan", reported in 2022 LiveLaw (SC) 772

and relied on paragraph no.44 of the said judgment which is quoted

hereinbelow:

"44. We may also examine this appeal from a different angle. It is not in dispute, as noted above, that no reply was given by the respondent to the statutory notice served upon her by the appellant. In the proceedings of the present type, it is essential for the person to whom statutory notice is issued under Section 138 of the NI Act to give an appropriate reply. The person concerned is expected to clarify his or her stance. If the person concerned has some unimpeachable and incontrovertible material to establish that he or she has no role to play in the affairs of the company/firm, then such material should be highlighted in the reply to the notice as a foundation. If any such foundation is laid, the picture would be more clear before the eyes of the complainant. The complainant would come to know as to why the person to whom he has issued notice says that he is not responsible for the dishonour of the cheque. Had the respondent herein given appropriate reply highlighting whatever she has sought to highlight before us then probably the complainant would have undertaken further enquiry and would have tried to find out what was the legal status of the firm on the date of the commission of the offence and what was the status of the respondent in the firm. The object of notice before the filing of the complaint is not just to give a chance to the drawer of the cheque to rectify his omission to make his stance clear so far as his liability under Section 138 of the NI Act is concerned."

He further submits that even if the Director is not the

signatory of the cheques, in the attending facts and circumstances he

has to reply the notice under section 138 read with section 141 of the

Negotiable Instruments Act, 1881. To buttress his argument, he relied in

the case of "Ashutosh Ashok Parasrampuriya and Another v. Gharrkul

Industries Pvt. Ltd. and Others"(supra). Paragraph nos. 25 and 27 of the

judgment in case of "Ashutosh Ashok Parasrampuriya and Another v.

Gharrkul Industries Pvt. Ltd. and Others"(supra) are quoted hereinbelow:

"25. We are concerned in this case with Directors who are not signatories to the cheques. So far as Directors who are not the signatories to the cheques or who are not Managing Directors or Joint Managing Directors are concerned, it is clear from the conclusions drawn in the afore-stated judgment that it is necessary to aver in the complaint filed under Section 138 read with Section 141 of the NI Act that at the relevant time when the offence was committed, the Directors were in charge of and were responsible for the conduct of the business of the company.

27. In the case on hand, reading the complaint as a whole, it is clear that the allegations in the complaint are that at the time at which the cheques were issued by the Company and dishonoured by the Bank, the appellants were the Directors of the Company and were responsible for its business and all the appellants were involved in the business of the Company and were responsible for all the affairs of the Company. It may not be proper to split while reading the complaint so as to come to a conclusion that the allegations as a whole are not sufficient to fulfil the requirement of Section 141 of the NI Act. The complaint specifically refers to the point of time when the cheques were issued, their presentment, dishonour and failure to pay in spite of notice of dishonour. In the given circumstances, we have no hesitation in overruling the argument made by the learned counsel for the appellants."

He submits that only on the ground of not being Incharge

at the time of issuance of the cheque is not a ground to quash the

proceeding. He relied in the case of "N. Rangachari v. BSNL", reported in

(2007) 5 SCC 108. He relied on paragraph nos.19, 21, 25 and 26 of the

said judgment, which are quoted herein below:

"19. Therefore, a person in the commercial world having a transaction with a company is entitled to presume that the Directors of the company are in charge of the affairs of the company. If any restrictions on their powers are placed by the memorandum or articles of the company, it is for the Directors to establish it at the trial. It is in that context that Section 141 of the Negotiable Instruments Act provides that when the offender is a company, every person, who at the time when the offence was committed was in charge of and was responsible to the company for the conduct of the business of the company, shall also be

deemed to be guilty of the offence along with the company.

It appears to us that an allegation in the complaint that the named accused are Directors of the company itself would usher in the element of their acting for and on behalf of the company and of their being in charge of the company. In Gower and Davies' Principles of Modern Company Law (17th Edn.), the theory behind the idea of identification is traced as follows:

"It is possible to find in the cases varying formulations of the underlying principle, and the most recent definitions suggest that the courts are prepared today to give the rule of attribution based on identification a somewhat broader scope. In the original formulation in Lennard's Carrying Company case [Lennard's Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd., [1915] AC 705 (HL)] Lord Haldane based identification on a person „who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation‟. Recently, however, such an approach has been castigated by the Privy Council through Lord Hoffmann in Meridian Global case [Meridian Global Funds Management Asia Ltd. v. Securities Commission, (1995) 2 AC 500 (PC)] as a misleading „general metaphysic of companies‟. The true question in each case was who as a matter of construction of the statute in question, or presumably other rule of law, is to be regarded as the controller of the company for the purpose of the identification rule."

21. A person normally having business or commercial dealings with a company, would satisfy himself about its creditworthiness and reliability by looking at its promoters and Board of Directors and the nature and extent of its business and its memorandum or articles of association.

Other than that, he may not be aware of the arrangements within the company in regard to its management, daily routine, etc. Therefore, when a cheque issued to him by the company is dishonoured, he is expected only to be aware generally of who are in charge of the affairs of the company. It is not reasonable to expect him to know whether the person who signed the cheque was instructed to do so or whether he has been deprived of his authority to do so when he actually signed the cheque. Those are matters peculiarly within the knowledge of the company and those in charge of it. So, all that a payee of a cheque that is dishonoured can be expected to allege is that the persons named in the complaint are in charge of its affairs. The Directors are prima facie in that position.

25. In Bilakchand Gyanchand Co. v. A. Chinnaswami

[(1999) 5 SCC 693 : 1999 SCC (Cri) 1034 : AIR 1999 SC 2182] this Court held that a complaint under Section 138 of the Act was not liable to be quashed on the ground that the notice as contemplated by Section 138 of the Act was addressed to the Director of the company at its office address and not to the company itself. The view was reiterated in Rajneesh Aggarwal v. Amit J. Bhalla [(2001) 1 SCC 631 : 2001 SCC (Cri) 229 : AIR 2001 SC 518] . These decisions indicate that too technical an approach on the sufficiency of notice and the contents of the complaint is not warranted in the context of the purpose sought to be achieved by the introduction of Sections 138 and 141 of the Act.

26. In the case on hand, reading the complaint as a whole, it is clear that the allegations in the complaint are that at the time at which the two dishonoured cheques were issued by the Company, the appellant and another were the Directors of the Company and were in charge of the affairs of the Company. It is not proper to split hairs in reading the complaint so as to come to a conclusion that the allegations as a whole are not sufficient to show that at the relevant point of time the appellant and the other are not alleged to be persons in charge of the affairs of the Company. Obviously, the complaint refers to the point of time when the two cheques were issued, their presentment, dishonour and failure to pay in spite of notice of dishonour. We have no hesitation in overruling the argument in that behalf by the learned Senior Counsel for the appellant."

On these grounds, he submits that the petition is

misconceived one, and this Court, at this stage, may not interfere under

section 482 Cr.P.C.

Mr. Ojha, the learned counsel appearing on behalf of the

respondent State submits that the learned court has rightly taken

cognizance.

In view of the above submission of the learned counsels

appearing on behalf of the parties, the Court has gone through the

materials on record and finds that admittedly, the petitioner was the

Executive Director at the time of issuing of the cheque. In paragraph no.3

of the complaint, it has been clearly averred that the accused nos. 2, 3

and 6 are the Directors of the company and accused nos.4,5,7,8,9 and 10

are responsible for the day-to-day affairs of the company. Thus, in the

complaint itself it has been disclosed that this petitioner was not

concerned with the day-to-day affairs of the company. The cheque was

issued on 30.09.2014. This petitioner has resigned on 27.02.2014 which

was accepted on 14.11.2014 as contained in annexure-5 series. The

cheque was presented on 20.12.2014 which was returned on 22.12.2014

and legal notice was issued on 30.12.2014, the reply by the accused on

17.01.2014 and 23.01.2015, respectively and the complaint was filed on

04.02.2015, and the document on record clearly suggest that the

petitioner has resigned on 14.11.2014 and the complaint was filed on

04.02.2015. On perusal of the cheque, which has been brought on record

in the petition, it is transpired that the cheque in question was issued by

the authorized signatory and it has been signed by the accused nos.2 and

3. Admittedly, this petitioner is not the signatory of the cheque in

question. For correct appreciation of section 141 of the Negotiable

Instruments Act, 1881, the same is quoted hereinbelow:

"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 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."

On perusal of this section, it is crystal clear that vicarious

liability under sub section 1 or 2 of section 141 of the Negotiable

Instruments Act can be fastened if the person is having the control over

the day-to-day affairs of the company. Looking to the explanation of the

said section, it is crystal clear that the firm or the company are required to

be made an accused in the complaint and the company has already been

made accused in the case in hand, however, such vicarious liability arises

only when the company or the firm commits offence as primary offence.

In the case in hand, in the complaint it has been stated that this petitioner

was only Director and accused nos.4,5,7,8,9 and 10 are made to look after

day-to-day affairs of the company and other accused persons against

whom also cognizance has been taken. Looking into the pre-condition of

section 141 of the Negotiable Instruments Act, 1881, it is admitted

position that the petitioner is not the drawer of the cheque in question. In

the case of "S.M.S. Pharmaceuticals v. Neeta Bhalla" reported in (2005) 8

SCC 89 wherein at paragraph no.10 of the said judgment, it has been

clearly held that in the complaint it is required to aver that the person

against whom the prosecution against the said section 138 of Negotiable

Instruments Act is instituted must be looking into the day-to-day affairs of

the company. This aspect of the matter has been considered by the

Hon‟ble Supreme Court in the case of "N. Rangachari v. BSNL" (supra) as

relied by Mr. Roy, the learned counsel appearing on behalf of the O.P.No.2

wherein at paragraph no.20 of the said judgment, it has been stated that

no further discussion is warranted on this aspect. In the said judgment, it

is stated that the fact that the person who is having commercial

transaction with a company, he may not be aware of the arrangements

within the company in regard to its management, daily routine, etc. and

for that scenario the Hon‟ble Supreme Court has said that cognizance in

absence of any awareness a prima facie case can be made out. However,

in the case in hand, the O.P.No.2 has disclosed in the complaint itself that

the petitioner was not looking after the day-to-day affairs of the company

and that is why the judgment was on different footing which is not helping

the O.P.No.2. In the judgment relied by Mr. Roy, the learned counsel

appearing on behalf of the O.P.No.2 in the case of "Ashutosh Ashok

Parasrampuriya and Another v. Gharrkul Industries Pvt. Ltd. and

Others(supra), it has been also said in paragraph no.21 of the said

judgment, that it is necessary to specifically aver in a complaint under

Section 141 that at the time the offence was committed, the person

accused was in charge of, and responsible for the conduct of business of

the company. In paragraph no.27 of the said judgment, considering that it

has been averred that the petitioner of that case was the Incharge of the

company that is why the Hon‟ble Supreme Court has said and held that it

is the subject matter of the trial, however, in the case in hand, the

complainant itself has admitted in the complaint petition that the accused

nos.4,5,7,8,9 and 10 are looking after the day-to-day affairs of the

company and the facts of that case is on different footing, and that is why

this judgment is not helping the case of the O.P.No.2. The judgment relied

by Mr. Roy, the learned counsel appearing on behalf of the O.P.No.2 in the

case of "S.P. Mani & Mohan Dairy vs Dr. Snehalatha Elangovan(supra) the

fact of that case was that the firm in question was dissolved and it was

contended that at the relevant point of time the petitioner of that case

who was Incharge and responsible for the conduct and business of the

firm and in that circumstance, the Hon‟ble Supreme Court has said that

the person concerned is expected to clarify his or her stance, and the

facts of that case is also on different footing. In the case in hand, it is an

admitted fact as averred in the paragraph no.3 of the complaint petition,

that the accused nos.4,5,7,8,9 and 10 are looking after the day-to-day

affairs of the company and the petitioner is not the drawer of the cheque

and in the light of the judgment of the Hon‟ble Supreme Court in the case

of "S.M.S. Pharmaceuticals v. Neeta Bhalla"(supra) it has been considered

later on by the Hon‟ble Supreme Court in the case of „S.P.Mani‟(supra)

and that the argument of the learned counsel for the O.P.No.2 in light of

section 141 of the Negotiable Instruments Act, the order taking

cognizance was erroneous and would not sustain under the eye of law.

Accordingly, order taking cognizance dated 23.08.2016

initiated against the petitioner under section 138 read with section 141 of

the Negotiable Instruments Act, 1881, arising out of Complaint Case

No.C1/117/2015, pending before learned Chief Judicial Magistrate,

Singhbhum West, Chaibasa, Jharkhand, so far as this petitioner is

concerned, is set-aside.

It is made clear that this Court has only interfered with the

order taking cognizance so far as this petitioner is concerned.

The trial will proceed against the company as well as the

other accused in accordance with law, and the rest of the order taking

cognizance has been kept intact.

Cr.M.P. No.2338 of 2018 is allowed to the above extent, and

disposed of, accordingly.

I.A., if any, also stands disposed of.

(Sanjay Kumar Dwivedi, J.)

SI/,