Madhya Pradesh High Court
Prateek Agrawal vs Pagaria Marbles And Ceramic Firm on 13 February, 2024
Author: Gurpal Singh Ahluwalia
Bench: Gurpal Singh Ahluwalia
1 M.Cr.C. No.2230/2024
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE GURPAL SINGH AHLUWALIA
ON THE 13th OF FEBRUARY, 2024
MISCELLANEOUS CRIMINAL CASE No.2230 of 2024
BETWEEN:-
1. PRATEEK AGRAWAL S/O SHRI PRAKASH
CHAND AGRAWAL, AGED ABOUT 36 YEARS,
OCCUPATION: BUSINESS R/O 1644/48,
NAPIER TOWN, MODEL ROAD, JABALPUR
(MADHYA PRADESH)
2. ANURAG BADERIA S/O SHRI ANANT
BADERIA, AGED ABOUT 48 YEARS,
OCCUPATION: BUSINESS R/O D-19/20
SUKHSAGAR VALLY, ROSE VILLA,
JABALPUR (MADHYA PRADESH)
.....APPLICANTS
(BY SHRI MANOJ SHARMA - SENIOR ADVOCATE WITH
SHRI QUAZI FAKHRUDDIN - ADVOCATE)
AND
PAGARIA MARBLES AND CERAMIC FIRM,
THROUGH ITS PROPRIETOR CUM MANAGER
CUM DIRECTOR, AKASH SINGH PAGARIA S/O
SHRI RAJESH PAGARIA R/O 26 VASUNDHARA
COLONY, CHERITAL WARD, JABALPUR
(MADHYA PRADESH)
.....RESPONDENT
.........................................................................................................
This application coming on for admission this day, the court passed
the following:
ORDER
This application under Section 482 of Cr.P.C. has been filed
seeking quashment of complaint filed by respondent under Section 138
of Negotiable Instruments Act (in short 'N.I. Act') as well as order dated
18/02/2021 passed by Judicial Magistrate First Class, Jabalpur, by
which cognizance of complaint under Section 138 of N.I. Act has been
taken.
2. It is the case of applicants that a Company in the name Mohit
Builders and Associates Private Limited was formed in which Mr. Mohit
Rai was party of the first part and applicants namely, Anurag Baderia
and Prateek Agrawal were the party of second and third part and Mohit
Builders & Associates Private Limited was party of the fourth part. As
per the Memorandum of Understanding (MoU), amongst the three
Directors, party of the first part i.e. Shri Mohit Rai was the active
Director, whereas party of the second part and party of the third part
namely, applicants were merely Directors and were not indulged in day
to day business activity of the Company. It was also agreed upon
amongst all three Directors that post completion of project Mohit
Township including units of land owner and customers, at least 21
3BHK units will be available at Mohit Township as profit to share
holders. Thus, working out to 7 units to each Directors and accordingly,
Shri Mohit Rai had expressed his desire of managing the Company and
had proposed minimum guarantee of six 3BHK units each to the party
of the second part and party of the third part.
3. By referring to page 32 of the application, it was also submitted
by counsel for applicants that it was also highlighted in the MoU that
party of the first part i.e. Shri Mohit Rai shall be responsible for day to
day running of the business on behalf of the Company and he shall be
responsible for all the activities of the Company etc. It is submitted that
with passage of time, applicants found that Mohit Rai is acting contrary
to the interest of the Company and he was issuing different cheques to
different persons without any Authority and requirement. Accordingly,
on 06/12/2019, an application was given to Branch Manager, IDBI Bank
that Mohit Rai is one of the Directors in Mohit Builders and Associates
Pvt. Ltd having account No.0052102000025489 and therefore, a request
was made to change the operation of account from anyone to jointly
(any two) with signatures given below. The said application was jointly
signed by Mohit Rai, Anurag Baderia and Prateek Agarwal. Thereafter,
an application was also given by applicants to the Bank to stop payment
of chequebook with 50 leaves starting from 503681. When applicants
realized that Mohit Rai is issuing cheques without any necessity
therefore, they made a request to concerning Bank to stop payment of all
the cheques issued by the Bank under the account. They again requested
the Bank that by letter dated 06/12/2019, a request was already made
that at least two signatures should be there on the cheque. It appears that
in spite of all the disputes between Mohit Rai as well as applicants,
Mohit Rai issued seven cheques bearing Nos.426261, 426259, 447560,
478962, 447559, 447558 and 478963 on 02/07/2020. When respondent
presented the same, the same were bounced and accordingly, a statutory
notice under Section 138 of N.I. Act was issued by respondent to M/s
Mohit Builders and Associates Pvt. Ltd., applicant No.1, applicant No.2
and Shri Mohit Rai, alleging that aforementioned cheques were issued
on account of supply of Tiles and material by the respondent, however
they have stood bounced. The said statutory notice was duly replied by
applicants through their counsel on 14/08/2020 and the dispute between
Mohit Rai and applicants was specifically pointed out. It was
specifically mentioned that Mohit Rai may have purchased the articles/
goods from the respondent in his personal capacity and cheques in
question were never issued on behalf of the applicants and necessary
instructions have already been issued to the Bank by the applicants.
4. Thereafter, applicants also lodged an FIR against Mohit Rai which
has been registered as Crime No.3/2021 at Police Station Madhotal,
District Jabalpur for offence under Sections 420, 467, 468, 471, 406 of
IPC. It is submitted that now whereabouts of Mohit Rai are not known.
It is further submitted by counsel for applicants that respondent had also
filed a complaint against applicants as well as M/s Mohit Builders and
Associates Pvt. Ltd. and Mohit Rai for offence under Sections 420, 406,
407, 467, 468, 471, 34 of IPC. However, concerning Magistrate has
rejected the application filed under Section 156(3) of Cr.P.C. and has
decided to proceed under Section 200 of Cr.P.C. It is submitted that the
said complaint is still pending. It is further submitted that the respondent
has also filed a complaint under Sections 138, 142 of N.I. Act against
the applicants as well as M/s Mohit Builders and Associates and Mohit
Rai and by impugned order dated 18/02/2021, Court below has taken
cognizance of the same.
5. Although arguments were advanced in extensive, however crux of
the matter is that the contention of applicants are that they are not the
Directors who were responsible for day to day business of the Company
and there is already a dispute between them and Mohit Rai. Counsel for
applicants has also relied upon the judgment passed by Supreme Court
in the case of Aparna A. Shah Vs. Sheth Developers Private Limited
and Another reported in (2013) 8 SCC 71, Alka Khandu Avhad Vs.
Amar Syamprasad Mishra and Another reported in (2021) 4 SCC
675, K.K. Ahuja Vs. V.K. Vora and Another reported in (2009) 10
SCC 48.
6. Heard learned counsel for the applicants.
7. Before adverting to the averments made in the application as well
as submissions made during the course of arguments, this Court would
like to consider the law governing the field for prosecution of Directors.
8. The Supreme Court in the case of Sunita Palita and Others Vs.
Panchami Stone Quarry reported in (2022) 10 SCC 152 has held that
when a complaint is filed against a Director of the Company, who is not
the signatory of dishonoured cheque, specific averments have to be
made in the pleadings to substantiate the contention in the complaint,
that such Director was in charge of and responsible for conduct of the
business of the Company or the Company, unless such Director is the
designated Managing Director or Joint Managing Director who would
obviously be responsible for the Company and/or its business and
affairs.
9. The Supreme Court in the case of National Small Industries
Corporation Limited Vs. Harmeet Singh Paintal and Another
reported in (2010) 3 SCC 330 has held that the complaint should
specifically spell out how and in what manner the Director was in
charge of or was responsible to the accused company for conduct of its
business.
10. The Supreme Court in the case of Standard Chartered Bank Vs.
State of Maharashtra and Others reported in (2016) 6 SCC 62 has
held as under:-
"26. In Gunmala Sales (P) Ltd. v. Anu Mehta,
(2015) 1 SCC 103 : (2015) 1 SCC (Civ) 433 :
(2015) 1 SCC (Cri) 580 the Court was concerned
with Directors who issued the cheques. This
authority, as we notice, has to be appositely
understood. The two-Judge Bench referred
to S.M.S. Pharma I [S.M.S. Pharmaceuticals
Ltd. v. Neeta Bhalla, (2005) 8 SCC 89 : 2005
SCC (Cri) 1975] and other earlier decisions, and
came to hold that: [Gunmala Sales (P)
Ltd. v. Anu Mehta, (2015) 1 SCC 103 : (2015) 1
SCC (Civ) 433 : (2015) 1 SCC (Cri) 580] , SCC
pp. 124-25, paras 30-31]
"30. When a petition is filed
for quashing the process, in a given
case, on an overall reading of the
complaint, the High Court may find
that the basic averment is sufficient,
that it makes out a case against the
Director; that there is nothing to
suggest that the substratum of the
allegation against the Director is
destroyed rendering the basic
averment insufficient; and that since
offence is made out against him, his
further role can be brought out in
the trial. In another case, the High
Court may quash the complaint
despite the basic averment. It may
come across some unimpeachable
evidence or acceptable
circumstances which may in its
opinion lead to a conclusion that the
Director could never have been in
charge of and responsible for the
conduct of the business of the
company at the relevant time and
therefore making him stand the trial
would be an abuse of process of
court as no offence is made out
against him.
31. When in view of the basic
averment process is issued the
complaint must proceed against the
Directors. But, if any Director wants
the process to be quashed by filing a
petition under Section 482 of the
Code on the ground that only a bald
averment is made in the complaint
and that he is really not concerned
with the issuance of the cheque, he
must in order to persuade the High
Court to quash the process either
furnish some sterling
incontrovertible material or
acceptable circumstances to
substantiate his contention. He must
make out a case that making him
stand the trial would be an abuse of
process of court. He cannot get the
complaint quashed merely on the
ground that apart from the basic
averment no particulars are given in
the complaint about his role,
because ordinarily the basic
averment would be sufficient to send
him to trial and it could be argued
that his further role could be brought
out in the trial. Quashing of a
complaint is a serious matter.
Complaint cannot be quashed for the
asking. For quashing of a complaint
it must be shown that no offence is
made out at all against the Director."
(emphasis supplied)
27. After so stating, the Court proceeded to
summarise its conclusions, appreciated the
averments made in the complaint petition and
opined thus: [Gunmala Sales (P) Ltd.
case [Gunmala Sales (P) Ltd. v. Anu Mehta,
(2015) 1 SCC 103 : (2015) 1 SCC (Civ) 433 :
(2015) 1 SCC (Cri) 580] , SCC p. 128, para 35]
"35. ... Pertinently, in the
application filed by the respondents,
no clear case was made out that at
the material time, the Directors were
not in charge of and were not
responsible for the conduct of the
business of the Company by
referring to or producing any
incontrovertible or unimpeachable
evidence which is beyond suspicion
or doubt or any totally acceptable
circumstances. It is merely stated
that Sidharth Mehta had resigned
from the directorship of the
Company on 30-9-2010 but no
incontrovertible or unimpeachable
evidence was produced before the
High Court as was done in Anita
Malhotra v. Apparel Export
Promotion Council, (2012) 1 SCC
520 to show that he had, in fact,
resigned long before the cheques in
question were issued. Similar is the
case with Kanhaiya Lal Mehta and
Anu Mehta. Nothing was produced
to substantiate the contention that
they were not in charge of and not
responsible for the conduct of the
business of the Company at the
relevant time. In the circumstances,
we are of the opinion that the matter
deserves to be remitted to the High
Court for fresh hearing. However,
we are inclined to confirm the order
[Anu Mehta, In re, 2012 SCC
OnLine Cal 13134] passed by the
High Court quashing the process as
against Shobha Mehta. Shobha
Mehta is stated to be an old lady
who is over 70 years of age.
Considering this fact and on an
overall reading of the complaint in
the peculiar facts and circumstances
of the case, we feel that making her
stand the trial would be an abuse of
process of court. It is however,
necessary for the High Court to
consider the cases of other Directors
in light of the decisions considered
by us and the conclusions drawn by
us in this judgment."
28. We have referred to the aforesaid decision
in Gunmala Sales (P) Ltd. case [Gunmala Sales
(P) Ltd. v. Anu Mehta, (2015) 1 SCC 103 :
(2015) 1 SCC (Civ) 433 : (2015) 1 SCC (Cri)
580] in extenso, as we are of the convinced
opinion that the analysis made therein would
squarely apply to the case at hand and it shall be
clear when we reproduce certain passages from
the complaint.
29. Prior to that, we may profitably refer to a
two-Judge Bench decision in T.N. News Print &
Papers Ltd. v. D. Karunakar, (2016) 6 SCC 78.
In the said case, the Court has referred to the
decision rendered in S.M.S. Pharma I [S.M.S.
Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8
SCC 89 : 2005 SCC (Cri) 1975] and, thereafter,
taken note of the averments made in the
complaint. Be it noted, in the said case it had
been averred in the complaint petition that
Accused 2 to 9 were Directors and were in day-
to-day management of the accused Company and
in that context the Court has opined as follows:
(T.N. News Print case [T.N. News Print &
Papers Ltd. v. D. Karunakar, (2016) 6 SCC 78],
SCC p. 81, para 14)
"14. Upon perusal of the
complaint, we find that an averment
has been made to the effect that
Accused 3 to 10 were, in fact, in
charge of the day-to-day business of
Accused 1 Company."
30. We have referred to these decisions as they
explicitly state the development of law and also
lay down the duty of the High Court while
exercising the power of quashing regard being
had to the averments made in the complaint
petition to attract the vicarious liability of the
persons responsible under Section 141 of the
Act."
11. The Supreme Court in the case of Gunmala Sales Private
Limited Vs. Anu Mehta and Others reported in (2015) 1 SCC 103 has
held as under:-
"31. When in view of the basic averment process
is issued the complaint must proceed against the
Directors. But, if any Director wants the process
to be quashed by filing a petition under Section
482 of the Code on the ground that only a bald
averment is made in the complaint and that he is
really not concerned with the issuance of the
cheque, he must in order to persuade the High
Court to quash the process either furnish some
sterling incontrovertible material or acceptable
circumstances to substantiate his contention. He
must make out a case that making him stand the
trial would be an abuse of process of court. He
cannot get the complaint quashed merely on the
ground that apart from the basic averment no
particulars are given in the complaint about his
role, because ordinarily the basic averment
would be sufficient to send him to trial and it
could be argued that his further role could be
brought out in the trial. Quashing of a complaint
is a serious matter. Complaint cannot be quashed
for the asking. For quashing of a complaint it
must be shown that no offence is made out at all
against the Director.
* * *
34. We may summarise our conclusions as
follows:
34.1. Once in a complaint filed under Section
138 read with Section 141 of the NI Act the basic
averment is made that the Director was in charge
of and responsible for the conduct of the business
of the company at the relevant time when the
offence was committed, the Magistrate can issue
process against such Director.
34.2. If a petition is filed under Section 482 of
the Code for quashing of such a complaint by the
Director, the High Court may, in the facts of a
particular case, on an overall reading of the
complaint, refuse to quash the complaint because
the complaint contains the basic averment which
is sufficient to make out a case against the
Director.
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.
34.4. No restriction can be placed on the High
Court's powers under Section 482 of the Code.
The High Court always uses and must use this
power sparingly and with great circumspection to
prevent inter alia the abuse of the process of the
court. There are no fixed formulae to be followed
by the High Court in this regard and the exercise
of this power depends upon the facts and
circumstances of each case. The High Court at
that stage does not conduct a mini trial or roving
inquiry, but nothing prevents it from taking
unimpeachable evidence or totally acceptable
circumstances into account which may lead it to
conclude that no trial is necessary qua a
particular Director."
12. Accordingly, facts of the present case shall be considered.
13. Paragraphs 4 and 5 of the complaint reads as under:-
"4- ;g fd vukosndx.k eksfgr jk;] vuqjkx
cMsfj;k o izrhd vxzoky mDr vukosnd dz-1
O;olkf;d laLFkk ds Hkkxhnkj@ekfyd gS ,oa
vkil esa ,d nwljs ls fnu&izfrfnu lEidZ esa
jgdj dk;Z lapkyu djrs gS rFkk ykHk&gkfu
,oa equkQk dekrs gSA mDr O;olk; esa
,d&nwljs ls laO;ogkj djrs gS ,oa mDr laLFkk
ds Hkkxhnkj gksrs gq, lHkh vkjksihx.k dk
i`Fkd&i`Fkd fgLlsnkjh@lk>snkjh fo)eku gS]
vr% mijksDr lHkh vkjksihx.k la;qDr :i ls
,oa i`Fkd&i`Fkd fof/kd nkf;Ro ds vk/khu gS
,oa mijksDr irs ls fuokl ,oa dk;Z lapkyu
djrs gSA
5- ;g fd vkjksihx.k dz- 3 o 4 vuqjkx cMsfj;k
o izrhd vxzoky ifjoknh dh vksj ls izsf"kr
fd;s x;s fof/kd uksfVl dk tokc fn;k x;k gS
tks fd feF;k dFkuksa ij vk/kkfjr gS ,oa vius
Lo;a ds nkf;Ro fuokZgu ls cpus gsrq "kM;a=
iwoZd lHkh vkjksihx.k us vkil esa lkaB&xkaB
djds ifjoknh dh jde gMi ysus ds mn~ns';
ls mDr uksfVl izfs "kr djk;k gS ,oa ifjoknh ds
}kjk fodz; dh xbZ lkekxzh dks [kqnZ&cqnZ dj
fn;k gSA tks ,uSDtj&2 layXu gSA"
14. Thus, there is a specific averment in the complaint that the
applicants are Directors and have equal share in the profit and are
running the business by remaining in touch with each of them on daily
basis and are jointly earning profit and loss and it was specifically
mentioned that whatever defence has been taken by the applicants in
their response to the statutory notice, is palpably false.
15. Applicants have filed a copy of MoU allegedly executed at the
time of formation of Mohit Builders and Associates Private Limited, a
company incorporated under Companies Act. Respondent is not a party
to this MoU. MoU is a private document and this Court cannot take
judicial notice of the same. Furthermore, this MoU is only a notarized
document and it was never presented before the Registrar of Companies.
16. Further, a letter dated 06/12/2019 which is alleged to have been
jointly given by Mohit Rai, Anurag Baderia and Prateek Agrawal to the
Branch Manager, IDBI Bank for change of operation of account from
anyone to jointly is concerned, there is no whisper in the entire
application under Section 482 of Cr.P.C. or during arguments that mode
of operation was ever changed by the Bank.
17. The Supreme Court in the case of State of Orissa Vs. Debendra
Nath Padhi reported in (2005) 1 SCC 568 has held that at the time of
framing of charges, the Trial Court has to consider the material
produced by the prosecution and there is no provision in Cr.P.C.
granting any right to the accused to file any material or document at that
stage. Similarly, in a complaint case, the suspect or proposed accused
has no right to participate in the proceedings at pre-cognizance stage.
18. Whether the applicants are sleeping Directors or not, is a disputed
question of fact because applicants have developed their arguments on
the basis of certain applications alleged to have been given by them to
the Bank without any follow-up action as well as MoU which is only a
notarized document. In none of the documents, respondent is a party.
Therefore all the documents which are being relied upon by the
applicants in this application under Section 482 of Cr.P.C. are private in
nature, which are required to be proved in accordance with law by
leading evidence. The documents relied upon by the applicants cannot
be said to be of sterling in nature.
19. If the averments made in the complaint are considered, then it is
clear that respondent has made a specific averment with regard to the
role of applicants in the Company. Thus the respondent has specifically
pointed out that the applicants were responsible for day to day business
of the Company. Even MoU specifically says that the applicants are
entitled for equal share in the profit. Furthermore, there is nothing in the
MoU as to why the applicants were made Directors with equal share in
the profit. In the MoU, it is mentioned that they are investors. If the
applicants were investors and were providing funds then it cannot be
said that they were sleeping partners and were not responsible for day to
day business of Company.
20. Furthermore in the MoU itself, it is specifically mentioned that
party of the second part and party of the third part i.e. applicants shall
not be responsible to provide any further funds to the Company in any
form arising from any requirement whatsoever, then why the applicants
were given equal share in the profit? Further, this condition cannot be
fulfilled unless and until the day to day business of Company is
monitored by the applicants.
21. So far as the question of direction to Bank to stop payment is
concerned, it is sufficient to hold that cheques were bounced not on
account of stop payment.
22. Thus, this Court is of considered opinion that the Court below did
not commit any mistake by taking cognizance of the complaint filed
under Section 138 of N.I. Act.
23. However, before parting with this order, it is pointed out that the
status of applicants has been considered by this Court in the light of
limited scope of interference at this stage. The Trial Court shall decide
as to whether the applicants are sleeping partners or are responsible for
day to day business of the Company on the basis of evidence which will
come on record without getting influenced or prejudiced by any of the
observation made by this Court in this order.
24. With aforesaid observation, application is dismissed.
(G.S. AHLUWALIA)
JUDGE
S.M.
