Madhya Pradesh High Court

Gaurav Dewangan vs Gunjan Rastogi on 3 May, 2024

Author: Vishal Mishra

Bench: Vishal Mishra

IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPU R
BEFORE
HON'BLE SHRI JUSTICE VISHAL MISHRA

ON THE 3rd OF MAY, 2024
MISC. CRIMINAL CASE No. 37438 of 2018

BETWEEN:-

GAURAV DEWANGAN S/O SHRI SUNIL KUMAR
DEWANGAN, AGED ABOUT 34 YEARS,
OCCUPATION: DIRECTOR, SHREE RAM
VENTURES PRIVATE LTD. QUARTER NO.3-B
STREET 41, SECTOR 7, SECTOR BHILAI
(CHHATTISGARH)
.... PETITIONER

(BY SHRI PRIYANK AGRAWAL - ADVOCATE)

AND

ARUNA SHRIVASTAVA W/O SHRI M.K.
SHRIVASTAVA, R/O A-8 CHANAKYAPURI CHUNA
BHATTI KOLAR ROAD BHOPA DISTRICT
BHOPAL (MADHYA PRADESH)
.... RESPONDENT

(BY SHRI GIRISH KURARIYA - ADVOCATE)

MISC. CRIMINAL CASE No. 14561 of 2019

BETWEEN:-

GAURAV DEWANGAN S/O SHRI SUNIL KUMAR
DEWANGAN, AGED ABOUT 34 YEARS,
OCCUPATION: DIRECTOR, SHREE RAM
VENTURES PRIVATE LTD. QUARTER NO.3-B
STREET 41, SECTOR 7, SECTOR BHILAI

Signature Not Verified
Signed by: VINOD
VISHWAKARMA
Signing time: 5/8/2024
11:27:48 AM
2

(CHHATTISGARH)
.... PETITIONER

(BY SHRI PRIYANK AGRAWAL - ADVOCATE)

AND

UMASHANKAR RASTOGI, S/O LATE SHRI RAMJI
RASTOGI, R/O E-7, SURENDRA GARDEN,
BAGSEWANIA DISTRICT BHOPAL (M.P.)
.... RESPONDENT

(BY SHRI DHRUV VARMA - ADVOCATE)

MISC. CRIMINAL CASE No. 14562 of 2019

BETWEEN:-

(BY SHRI PRIYANK AGRAWAL - ADVOCATE)

AND

UMASHANKAR RASTOGI, S/O LATE SHRI RAMJI
RASTOGI, R/O E-7, SURENDRA GARDEN,
BAGSEWANIA DISTRICT BHOPAL (M.P.)
.... RESPONDENT

(BY SHRI DHRUV VARMA - ADVOCATE)

MISC. CRIMINAL CASE No. 14563 of 2019

BETWEEN:-

Signature Not Verified
Signed by: VINOD
VISHWAKARMA
Signing time: 5/8/2024
11:27:48 AM
3

(BY SHRI PRIYANK AGRAWAL - ADVOCATE)

AND

GUNJAN RASTOGI, D/O SHRI U.S. RASTOGI, R/O
E-7, SURENDRA GARDEN, BAGSEWANIA
DISTRICT BHOPAL (M.P.)
.... RESPONDENT

(BY SHRI DHRUV VARMA - ADVOCATE)

MISC. CRIMINAL CASE No. 14564 of 2019

BETWEEN:-

(BY SHRI PRIYANK AGRAWAL - ADVOCATE)

AND

GEETA RASTOGI, D/O SHRI UMA SHANKAR
RASTOGI, R/O E-7, SURENDRA GARDEN,
BAGSEWANIA DISTRICT BHOPAL (M.P.)
.... RESPONDENT

(BY SHRI DHRUV VARMA - ADVOCATE)

Signature Not Verified
Signed by: VINOD
VISHWAKARMA
Signing time: 5/8/2024
11:27:48 AM
4

MISC. CRIMINAL CASE No. 14565 of 2019

BETWEEN:-

(BY SHRI PRIYANK AGRAWAL - ADVOCATE)

AND

GUNJAN RASTOGI, D/O SHRI R.S. RASTOGI, R/O
E-7, SURENDRA GARDEN, BAGSEWANIA
DISTRICT BHOPAL (M.P.)
.... RESPONDENT

(BY SHRI DHRUV VARMA - ADVOCATE)

MISC. CRIMINAL CASE No. 14566 of 2019

BETWEEN:-

(BY SHRI PRIYANK AGRAWAL - ADVOCATE)

AND

GEETA RASTOGI, D/O SHRI UMASHANKAR
RASTOGI, R/O E-7, SURENDRA GARDEN,

Signature Not Verified
Signed by: VINOD
VISHWAKARMA
Signing time: 5/8/2024
11:27:48 AM
5

BAGSEWANIA DISTRICT BHOPAL (M.P.)
.... RESPONDENT

(BY SHRI DHRUV VARMA - ADVOCATE)

MISC. CRIMINAL CASE No. 14568 of 2019

BETWEEN:-

(BY SHRI PRIYANK AGRAWAL - ADVOCATE)

AND

JYOTI RASTOGI, D/O SHRI RAHUL RASTOGI, R/O
E-7, SURENDRA GARDEN, BAGSEWANIA
DISTRICT BHOPAL (M.P.)
.... RESPONDENT

(BY SHRI DHRUV VARMA - ADVOCATE)

MISC. CRIMINAL CASE No. 14569 of 2019

BETWEEN:-

(BY SHRI PRIYANK AGRAWAL - ADVOCATE)

Signature Not Verified
Signed by: VINOD
VISHWAKARMA
Signing time: 5/8/2024
11:27:48 AM
6

AND

DR. O.P. SHRIVASTAVA, S/O SHRI VIJAI BAHADUR
SHRIVASTAVA, R/O EX.6, WINDSOR ESTATE - II,
CHUNA BHATTI, KOLAR ROAD, BHOPAL (M.P.)
.... RESPONDENT

MISC. CRIMINAL CASE No. 14570 of 2019

BETWEEN:-

(BY SHRI PRIYANK AGRAWAL - ADVOCATE)

AND

RANJANA TIWARI, W/O SHRI D.P. TIWARI, R/O 16-
A, JANKI NAGAR, CHUNA BHATTI, KOLAR
ROAD, BHOPAL (M.P.)
.... RESPONDENT

(BY SHRI GIRISH KURARIYA - ADVOCATE)

MISC. CRIMINAL CASE No. 14590 of 2019

BETWEEN:-

GAURAV DEWANGAN S/O SHRI SUNIL KUMAR
DEWANGAN, AGED ABOUT 34 YEARS,
OCCUPATION: DIRECTOR, SHREE RAM
VENTURES PRIVATE LTD. QUARTER NO.3-B
STREET 41, SECTOR 7, SECTOR BHILAI
(CHHATTISGARH)

Signature Not Verified
Signed by: VINOD
VISHWAKARMA
Signing time: 5/8/2024
11:27:48 AM
7

.... PETITIONER

(BY SHRI PRIYANK AGRAWAL - ADVOCATE)

AND

BIJENDRA SINGH PUNDHIR, S/O SHRI N.P.
SINGH, R/O C-72 SHRI KRISHNA HOUSING
SOCIETY, CHUNA BHATTI, KOLAR ROAD,
BHOPAL (M.P.)
.... RESPONDENT

(BY SHRI GIRISH KURARIYA - ADVOCATE)
.................................................................................................................................................................................

These petitions coming on for admission this day, the Court
passed the following:
ORDER

1. This common order shall govern disposal of all the petitions preferred, under Section 482 of the Criminal Procedure Code, 1973, for quashing of the complaints and all the consequential proceedings pending against the petitioner, details of which may be summarized as under -

                                                       Complaint qua                 For an
                                     Complaint Case                    Details of
                         MCrC No.                       dishonour of                amount of
                                         No.                           Cheque
                                                        cheque dated                  Rs.
                                                                        '000384'
                          37438 of   RCT/30008968/
                                                        11.08.2016      issued on   55,350/-
                            2018         2016
                                                                       31.05.2016
                                                                        '000370'
                          14561 of
                                     RCT/1526/2017      05.12.2016      issued on   6,15,000/-

                                                                       30.09.2016
                                                                        '000371'
                          14562 of                                      issued on
                                      RT/8967/2016      10.08.2016                  55,350/-
                            2019                                       31.05.2016













                                                                         '000373'
                          14563 of
                                        RT/8969/2016     10.08.2016      issued on   1,66,050/-

                                                                        31.05.2016
                                                                         '000375'
                          14564 of
                                        RT/1527/2017     05.12.2016      issued on   6,15,000/-

                                                                        30.09.2016
                                                                         '000374'
                          14565 of
                                     RCT/12561/2016      10.08.2016      issued on   13,45,000/-

                                                                        31.05.2016
                                                                         '000376'
                          14566 of
                                        RT/8964/2016     10.08.2016      issued on    55,350/-

                                                                        31.05.2016
                                                                         '000380'
                          14568 of
                                        RT/8966/2016     10.08.2016      issued on    32,850/-

                                                                        31.05.2016
                                                                         '000390'
                          14569 of
                                         RT/409/2017     15.09.2016      issued on    55,350/-

                                                                        31.05.2016
                                                                         '000381'
                          14570 of
                                        RT/10132/2016    31.08.2016      issued on    55,350/-

                                                                        31.05.2016
                                                                         '000387'
                          14590 of
                                        RT/1068/2017     01.02.2017      issued on   3,62,500/-

                                                                        30.09.2016

2. In these cases, cognizance of the offence punishable under Section 138 read with 141 of the Negotiable Instruments Act, 1881 (for short 'NI Act') has been taken against the petitioner, the then Director of Shree Ram Ventures Private Limited, a company registered under the Companies Act, 1956 upon the complaints made on behalf of the respondents.

3. The facts and question of law involved herein are similar, however, in order to effectively address the issues involved in the said

petitions, the facts relevant for adjudication are being culled out and taken from MCrC No.37438 of 2018.

4. It is the case of the petitioner that a complaint has been filed by the respondent under Section 138 read with 141 of the NI Act in the court of JMFC Bhopal mentioning therein that the petitioner being a Director of Shree Ram Ventures Private Limited gave membership to the respondent as E-jobber under the E-trading Academy in Madhya Pradesh with franchisee at Bhopal. It is stated therein that the company completed all the formalities regarding opening of a Demat Account, trading with M.P. Stock Exchange norms etc. The allegation in the complaint that Shree Ram Ventures Private Limited collected the deposit money in the name of Gunjan Dewangan's client account and he was getting regular payouts as per the terms and conditions, however, the same were stalled and the complainant is said to have demanded refund of capital as per the terms and conditions. The dispute was finally settled by giving cheques to the complainant for revenue sharing and under the head of the principal amount with interest as per the terms and conditions. In the present case, a cheque bearing No.000384 dated 31.05.2016 drawn on ICICI Bank, Station Road, Durg amounting to Rs.55,350/- was issued from the Account No.062305000183 which is said to have been held in the name of petitioner's company. The details of other cheques along with their amounts are provided in the table in para 1 above. It was pointed out in the complaint that the said cheque has been issued in discharge of a lawful deal. On presentation thereof at State Bank Bikaner and Jaipur, Kolar Road Branch, Bhopal, the cheque was dishonoured with the

remark of "Funds Insufficient" vide return memo dated 16.06.2016. Thereafter, the legal notice was issued on 27.06.2016 which was served on 01.07.2016 and when the amount was not paid to the complainant, a complaint under Section 138 r/w 141 of the NI Act was filed against the petitioner.

5. It is the case of the petitioner that the entire proceedings of complaint are not maintainable in view of the fact that the complainant has not issued any notice to the company or made the company as a party to the proceedings. The cheque in question has been signed by the Director of the said company. Section 141 of the NI Act deals with 'offences by companies' wherein it is provided that 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 liable and can be held guilty for the same.

6. The counsel appearing for the petitioner has drawn attention of this Court to the complaint filed by the respondent. The complaint has been filed against Mr. Gaurav Dewangan (petitioner) showing himself to be the Director of Shree Ram Ventures Private Limited. The cheques in question stated to have been issued towards the full and final settlement of the bids of the company and for the discharge in lieu of final settlement on behalf of the company.

7. It is argued that once the company is not made a party to the proceedings then the complaint itself is not maintainable in view of the judgment passed by the Hon'ble Supreme Court in the case of Aneeta Hada vs Godfather Travels & Tours Pvt. Ltd. reported in (2012) 5 SCC

661 which was subsequently considered by the Hon'ble Supreme Court in the case of Himanshu vs B. Shivamurthy and another reported in (2019) 3 SCC 797. He has prayed for quashment of the criminal complaint as well as the entire proceedings drawn up against the petitioner. It is argued that after filing of the complaint, the company cannot be added as party to the proceedings by way of a subsequent amendment application.

8. Per contra, the counsel appearing for the respondent has filed the written objections to the petition deying the contentions of the petitioner. It is contended that the entire case of the petitioner is based on technical objection of not mentioning the name of the company in the cause title. It is argued that the similar controversy came up for consideration before a co-ordinate Bench of this Court in the case of Manish Kalani vs Housing and Urban Development Corporation (HUDCO) in MCrC No.16285 of 2016 decided on 30.01.2018 wherein the coordinate Bench after considering several judgments has arrived at a conclusion that it is only a technical error which can always be rectified by filing an amendment application. Name of the company can always be inserted in the cause title by filing an amendment application.

9. It is pointed out that the aforesaid order is put to challenge before the Hon'ble Supreme Court in SLP (Crl) No.3020 of 2018 and the issue is pending consideration before the Hon'ble Supreme Court. It is further contended that until and unless the issue before the Supreme Court is finally decided, the hearing of present case be deferred.

10. Heard the counsels of the parties and perused the record.

11. The only point for consideration before this Court is as to whether the complaint proceedings under the NI Act for an instrument issued on behalf of a company is maintainable in absence of notice being issued to the company or the company being made a party to the proceedings.

12. The aforesaid aspect is no more res integra and has been finally decided by a three-Judge of Hon'ble Supreme Court in the case of Aneeta Hada (supra) and the said decision was subsequently followed in the case of Charanjit Pal Jindal vs L.N. Metalics reported in (2015) 15 SCC 768. And, recently Hon'ble Supreme Court has again considered the similar issue in the case of Himanshu vs B. Shivamurthy (supra) and held as under :

4. The appellant submitted that the cheque was issued by a Director of Lakshmi Cement and Ceramics Industries Ltd., a public limited company. In other words, the cheque was not issued by the signatory in his personal capacity. Hence, it was urged that the complaint ought to have been instituted against the company and its Directors and not against the appellant.

5. The High Court by its order dated 24-1-2006 [Himanshu v. B. Shivamurthy, 2006 SCC OnLine Kar 880] dismissed the petition. The High Court rejected the submissions urged on behalf of the appellant on the ground that the complainant had pleaded ignorance about the existence of the company.

Moreover, in the view of the High Court, it would not be difficult for the complainant to take steps to proceed against the company as well as against other persons who are responsible for the affairs of the company.

6. The judgment of the High Court has been questioned on two grounds. The learned counsel appearing on behalf of the appellant submits that firstly, the appellant could not be prosecuted without the company being named as an accused.

The cheque was issued by the company and was signed by the appellant as its Director. Secondly, it was urged that the observation of the High Court that the company can now be proceeded against in the complaint is misconceived. The learned counsel submitted that the offence under Section 138 is complete only upon the issuance of a notice of demand and the failure of payment within the prescribed period. In absence of compliance with the requirements of Section 138, it is asserted, the direction of the High Court that the company could be impleaded/arraigned at this stage is erroneous.

7. The first submission on behalf of the appellant is no longer res integra. A decision of a three-Judge Bench of this Court in Aneeta Hada v. Godfather Travels & Tours (P) Ltd. [Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 : (2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241] governs the area of dispute. The issue which fell for consideration was whether an authorised signatory of a company would be liable for prosecution under Section 138 of the Negotiable Instruments Act, 1881 without the company being arraigned as an accused. The three-Judge Bench held thus : (SCC p. 688, para 58) "58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words "as well as the company"

appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted."

In similar terms, the Court further held : (SCC p. 688, para 59)

59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself."

8. The judgment of the three-Judge Bench has since been followed by a two-Judge Bench of this Court in Charanjit Pal Jindal v. L.N. Metalics. There is merit in the second submission which has been urged on behalf of the appellant as well. The proviso to Section 138 contains the preconditions which must be fulfilled before an offence under the provision is made out. These conditions are : (i) presentation of the cheque to the bank within six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (ii) a demand being made in writing by the payee or holder in due course by the issuance of a notice in writing to the drawer of the cheque within thirty days of the receipt of information from the bank of the return of the cheques; and (iii) the failure of the drawer to make payment of the amount of money to the payee or the holder in due course within fifteen days of the receipt of the notice.

9. In MSR Leathers v. S. Palaniappan, this Court held thus :

"12. The proviso to Section 138, however, is all important and stipulates three distinct conditions precedent, which must be satisfied before the dishonour of a cheque can constitute an offence and become punishable. The first condition is that the cheque ought to have been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier. The second condition is that the payee or the holder in due course of the cheque, as the case may be, ought to make a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. The third condition is that the

drawer of such a cheque should have failed to make 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. It is only upon the satisfaction of all the three conditions mentioned above and enumerated under the proviso to Section 138 as clauses (a), (b) and (c) thereof that an offence under Section 138 can be said to have been committed by the person issuing the cheque."

(emphasis supplied)

10. The importance of fulfilling these conditions has been adverted to in a recent judgment of a two-Judge Bench of this Court in N. Harihara Krishnan v. J. Thomas. Adverting to the ingredients of Section 138, the Court observed as follows:

"26. ... Obviously such complaints must contain the factual allegations constituting each of the ingredients of the offence under Section 138. Those ingredients are : (1) that a person drew a cheque on an account maintained by him with the banker; (2) that such a cheque when presented to the bank is returned by the bank unpaid; (3) that such a cheque was presented to the bank within a period of six months from the date it was drawn or within the period of its validity whichever is earlier; (4) that the payee demanded in writing from the drawer of the cheque the payment of the amount of money due under the cheque to payee; and (5) such a notice of payment is made within a period of 30 days from the date of the receipt of the information by the payee from the bank regarding the return of the cheque as unpaid."

11. In the present case, the record before the Court indicates that the cheque was drawn by the appellant for Lakshmi Cement and Ceramics Industries Ltd., as its Director. A notice of demand was served only on the appellant. The complaint was lodged only against the appellant without arraigning the company as an accused.

12. The provisions of Section 141 postulate that if the person committing an offence under Section 138 is a company, every person, who at the time when the offence was committed was in

charge of or 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.

13. In the absence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. The appellant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notice of demand being served on the company and without compliance with the proviso to Section 138, the High Court was in error in holding that the company could now be arraigned as an accused.

13. From a perusal thereof, it is apparently clear that if the cheque has been issued on behalf of a company by its Director then the Company is required to be made a party to the proceedings, failing which the complaint itself will not be maintainable.

14. In the present case, the cheque has been issued by the petitioner in the capacity of a Director of the company which can very well be seen from the cause title of the complaint itself and the instrument. The petitioner has been shown as an accused as a Director of Shree Ram Ventures Private Limited. Paragraph 2 of the complaint clearly mentions the accused is serving as a Director of the company. When the payments were stopped by the company, the complainant demanded refund of capital as per the terms and conditions and the issue was finally settled and it was agreed that the complainant's money be returned back for which the cheque in question was issued in the capacity of a Director of the company. The same was returned unpaid with the remarks of "Funds Insufficient", against which the complaint

under Section 138 r/w 141 of the NI Act was filed against the petitioner. The company was never issued notice asking for refund of money in lieu of cheque and the proposed action to be taken against the company.

15. It is further pointed out that the counsel for the petitioner that the order dated 30.01.2018 passed in Manish Kalani (supra) has been put to challenge before the Hon'ble Supreme Court wherein vide order dated 04.05.2013 in SLP (Crl) No.3020 of 2018, the Hon'ble Supreme Court was pleaded to stay the order dated 30.01.2018 passed in Manish Kalani's case. Therefore, pendency of SLP before the Hon'ble Supreme Court will not be of any help to the respondents herein.

16. The law on the subject is settled by the Hon'ble Supreme Court in the case of Aneeta Hada (supra) which was recently followed in the Himanshu (supra). In absence of any controversy of the aforesaid and once the legal issue has been put to rest by the Hon'ble Supreme Court in aforesaid cases, the complaint filed against the petitioner could not be permitted to be continued. There is no provision which contemplates adding of a company as a party to the proceedings subsequently by way of an amendment application. No such provision can be pointed out by the counsel for the respondent.

17. Under these circumstances, all the petitions deserve to be and are hereby allowed. The complaints filed under Section 138 r/w 141 of the NI Act against the petitioner and the consequential proceedings in the aforesaid complaint cases as mentioned in para 1 above are hereby quashed.

18. The petitions stand allowed and disposed off accordingly. No order as to costs.

(VISHAL MISHRA) JUDGE