Telangana High Court

B. Sunitha Rani vs The State Of Telangana on 20 June, 2024

      THE HONOURABLE SMT JUSTICE K. SUJANA

          CRIMINAL PETITION No.10988 of 2023


ORDER:

This Criminal Petition is filed under Section 482 of

the Code of Criminal Procedure, 1973 (for short 'Cr.P.C.')

by the petitioner/accused No.3 seeking to quash the

proceedings against her in CC.NI.No.5623 of 2022 on the

file of the VIII Metropolitan Magistrate, Hyderabad, for the

alleged offences punishable under Section 138 of the

Negotiable Instruments Act, 1881 (for short 'NI Act') read

with Section 420 of Indian Penal Code, 1860 (for short

'IPC').

2. The brief facts of the case are that the respondent

No.2/de facto complainant, along with others has entered

into a registered Development Agreement cum GPA dated

11.09.2014 vide document No.4646/2014 with accused

No.1 - Company (hereinafter referred to as 'accused - Company')

which is represented by accused No.2/Managing Director

and accused No.3/petitioner/Director, for the purpose of

development of their respective properties. Under the said

Development Agreement, the accused - Company agreed to

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deliver 50% of plotted area to respondent No.2 and to

construct luxury independent villas over the said plots and

to deliver the same within 36 months from the date of

obtaining sanction permission from HMDA. Subsequently,

the accused - Company obtained permission from HMDA

under permit No.17/LO/HMDA/2014 dated 30.05.2014

and formed a layout and divided the land into plots but

failed to commence the construction of villas and utterly

failed to abide by the terms and conditions, as agreed upon

in the Development Agreement. Thereafter, the

accused - Company expressed its inability to construct

villas on the ground that the market conditions are not

good. After elaborate discussions, the respondent No.2

along with others agreed to enter into a Supplementary

Agreement with the accused - Company, under which the

accused - Company agreed to allot additional net plotted

area admeasuring 852 square yards to the respondent

No.2 and others, in lieu of non-construction of villas.

3. In the said Supplementary Agreement dated

26.05.2017 the accused - Company stated that since it has

already alienated all the plots that were allotted, the

Company would pay a sum of Rs.35,000/- per square yard

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in respect of 852 square yards of plot to respondent No.2

and others, which comes to an amount of Rs.2,98,20,000/-

payable in six monthly installments commencing from July

2017 and ending in December 2017. In addition, the

accused - Company also agreed that in the event of failure

to pay the total amount as stated above by December

2017, a sum of Rs.40,000/- per square yard for the

balance installment amounts would be paid along with

24% per annum on the defaulted installment amounts. It

is alleged that in spite of the said specific undertaking

given under the Supplementary Agreement, the

accused - Company failed to pay any of the installments.

4. After repeated requests and demands made by

respondent No.2, the accused - Company issued cheque

bearing No.000400 dated 15.04.2020 for an amount of

Rs.83,00,000/- drawn on HDFC Bank, Lakdikapul Branch,

Hyderabad, duly signed by accused No.2 and assured to

pay the balance amount within a short period of time.

Further, the accused - Company impressed the respondent

No.2 that the required funds are available in their account

and requested to present the cheque for realization of

amount. However, when the respondent No.2 presented the

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said cheque, to his utter surprise, the said cheque was

returned on 11.06.2020 with an endorsement "Account

Blocked". Later, the respondent No.2 learnt that the said

cheque was given without keeping sufficient available

funds. Therefore, it is alleged that the accused No.3 being

Director of accused - Company is liable for offence

punishable under Section 138 of NI Act read with Section

420 of IPC for issuing cheque from blocked account

without keeping sufficient available funds. Aggrieved

thereby, the accused No.3/petitioner filed this petition.

5. Heard Sri G.Ashok Reddy, learned counsel for

petitioner, and Sri T.Pranav Rao, learned counsel

appearing for respondent No.2.

6. Learned counsel for petitioner submitted that

except making a vague allegation that petitioner is liable

for alleged offences by virtue of factum of holding the post

of Director in the accused - Company, there are no specific

allegations leveled against the petitioner. He contended

that the petitioner is neither a signatory, nor a party to

neither the Development Agreement, nor to the

Supplementary Agreement, and that the said Agreements

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were entered into only between the accused - Company

and respondent NO.2. He asserted that basing on mere

mention that the petitioner, being Director of the

accused - Company, is responsible for day to day affairs of

the business, cannot be a ground to implicate the

petitioner in criminal case.

7. Learned counsel for petitioner specifically

contended that as per the complaint averments, though

the date of offence is the date of presentation of the cheque

i.e., 10.06.2020; the date of dishonor of cheque is

11.06.2020 and the date of issuance of notice is

19.06.2020; it is important to look into the fact that the

petitioner resigned from accused - Company with effect

from 10.03.2020, as such, none of the allegations can be

attributed against her by any stretch of imagination. He

further contended that the material averments that are

required to be incorporated in terms of sub-section (1) of

Section 141 of NI Act, are nowhere found in the complaint

averments. He reiterated that the petitioner has resigned

from the post of Director of accused - Company., much

prior to the issuance of cheque and the proceedings

against her are liable to be quashed in accordance with the

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law laid down by the Hon'ble Supreme Court in Anita

Malhotra Vs. Apparel Export Promotion Council 1.

8. In support of the said contentions, learned

counsel for the petitioner relied on the judgment of the

Hon'ble Supreme Court in the case of Ashok

Shewakramani Vs. State of Andhra Pradesh 2

whereunder, it was categorically held that 'every person

who is sought to be roped in by virtue of sub-section (1) of

Section 141 of the Negotiable Instruments Act, 1881 must be

a person who at the time the offence was committed, was in

charge of and was responsible to the Company for the

conduct of business of the company'. He further relied upon

the judgment of the Hon'ble Supreme Court in the case of

S.P. Mani & Mohan Dairy Vs. Dr.Snehalatha

Elangovan 3, whereunder, it was observed that the primary

responsibility is on the complainant to make the basic and

specific averments in the complaint so as to make the

accused vicariously liable. He lamented that even as per

the case of respondent No.2, the petitioner is said to be

allegedly liable only for the sole reason that he held the

(2012) 1 SCC 520

(2023) 8 SCC 473

(2022) SCC OnLine 1238

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post of Director in the accused - Company, but the basic

requirement of there being specific allegations against the

petitioner being absent, he prayed this Court to allow the

Criminal Petition by quashing the proceedings against the

petitioner.

9. On the other hand, learned counsel appearing for

respondent No.2, submitted that the allegations against

the accused - Company are serious in nature as the said

Company has cheated respondent No.2 and many other

people on the pretext of developing and handing over plots

to them. He asserted that the matter requires full-fledged

trial as the petitioner/accused No.3, has been the Director

of the accused - Company during the execution of

Development Agreement and the Supplementary

Agreement, as well. He reiterated that though the dates of

issuance of cheque and its presentation are different, as

the cheque was issued during the period of petitioner itself,

she is liable for the offence. Therefore, prayed this Court to

dismiss the Criminal Petition.

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10. Having regard to the rival submissions made and

on going through the material placed on record, it is to be

noted that the primary contention of the learned counsel

for the petitioner is that the petitioner/accused No.3 is not

the Director of the accused - Company as he resigned from

the said post and is no way concerned with the day to day

affairs of the business of accused - Company, as such, she

is not responsible for any of the acts of the

accused - Company and that being so, no case can be

made out against the petitioner for the alleged offences

punishable under Section 138 of NI Act and Section 420 of

IPC.

11. As seen from the record, though the name of

petitioner/accused No.3 is mentioned in the legal notice

dated 19.06.2020 it is noted that the petitioner/accused

No.3 is not aware of any day to day affairs of the business

of accused - Company in view of her resignation vide

resignation letter dated 01.03.2020. Perusal of the material

placed on record reveals that the petitioner/accused No.3

submitted resignation letter on 01.03.2020 the same was

approved vide letter dated 09.03.2020 accepting the

resignation of petitioner/accused No.3 with effect from

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10.03.2020. However, though learned counsel for

respondent No.2 contended that the cheque issued to

respondent No.2 was issued prior to the said resignation, it

is pertinent to note that the same was presented on

11.06.2020 and thereafter, the same was dishonored on

11.06.2020. Therefore, keeping in view the fact that the

resignation of petitioner/accused No.3 was approved with

effect from 10.03.2020 and the same was also intimated to

the Registrar of Companies vide Form No.DIR-12.

12. At this stage, it is pertinent to note the observation

made by the Hon'ble Supreme Court in the case of Ashok

Shewakramani (supra 2) wherein, in paragraph No.22 it is

held as under:

"22. In the light of sub-section (1) of Section 141,

we have perused the averments made in the

complaints subject-matter of these three appeals.

The allegation in Para 1 of the complaints is that

the appellants are managing the Company and

are busy with day-to-day affairs of the Company.

It is further averred that they are also in charge of

the Company and are jointly and severally liable

for the acts of Accused 1 Company. The

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requirement of sub-section (1) of Section 141 of

the NI Act is something different and higher. Every

person who is sought to be roped in by virtue of

sub-section (1) of Section 141 of the NI Act must

be a 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. Merely because somebody is

managing the affairs of the Company, per se, he

does not become in charge of the conduct of the

business of the Company or the person

responsible for the Company for the conduct of

the business of the Company. For example, in a

given case, a manager of a Company may be

managing the business of the Company. Only on

the ground that he is managing the business of

the Company, he cannot be roped in based on

sub-section (1) of Section 141 of the NI Act."

13. Having regard to the above extracted portion, it is

noted that every person who is sought to be roped in by

virtue of sub-section (1) of Section 141 of NI Act, must be a

person who at the time the offence was committed, was in

charge of and was responsible to the Company for the

conduct of business of the company. Reverting back to the

facts of the case on hand, it is to be noted that the

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resignation of petitioner/accused No.3 was approved with

effect from 10.03.2020 whereas, the date of dishonor of

cheque is 11.06.2020 and the same clearly shows that the

petitioner/accused No.3 was not in charge of the affairs of

accused - Company as on the date of incident.

14. That apart, it is imperative to note the observation

made by the Hon'ble Supreme Court in S.P. Mani

(supra 3). The relevant paragraph No.47 reads as under:

"47. At this stage, we should look into the

decision of this Court in K.K. Ahuja v. V.K.

Vora [K.K. Ahuja v. V.K. Vora, (2009) 10 SCC 48 :

(2009) 4 SCC (Civ) 1 : (2010) 2 SCC (Cri) 1181] ,

wherein this Court discussed the principles of

vicarious liability of the officers of a company in

respect of dishonour of a cheque and held : (SCC

pp. 61-62, para 27)

"27. The position under Section 141 of the Act can

be summarised thus:

(i) If the accused is the Managing Director or a

Joint Managing Director, it is not necessary to

make an averment in the complaint that he is in

charge of, and is responsible to the company, for

the conduct of the business of the company. It is

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sufficient if an averment is made that the accused

was the Managing Director or Joint Managing

Director at the relevant time. This is because the

prefix "Managing" to the word "Director" makes it

clear that they were in-charge of and are

responsible to the company, for the conduct of the

business of the company.

(ii) In the case of a Director or an officer of the

company who signed the cheque on behalf of the

company, there is no need to make a specific

averment that he was in charge of and was

responsible to the company, for the conduct of the

business of the company or make any specific

allegation about consent, connivance or

negligence. The very fact that the dishonoured

cheque was signed by him on behalf of the

company, would give rise to responsibility under

sub-section (2) of Section 141.

(iii) In the case of a Director, Secretary or Manager

[as defined in Section 2(24) of the Companies Act]

or a person referred to in clauses (e) and (f) of

Section 5 of the Companies Act, an averment in the

complaint that he was in charge of, and was

responsible to the company, for the conduct of the

business of the company is necessary to bring the

case under Section 141(1) of the Act. No further

averment would be necessary in the complaint,

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though some particulars will be desirable. They can

also be made liable under Section 141(2) by

making necessary averments relating to consent

and connivance or negligence, in the complaint, to

bring the matter under that sub-section.

(iv) Other Officers of a company cannot be made

liable under sub-section (1) of Section 141. Other

officers of a company can be made liable only

under sub-section (2) of Section 141, by averring

in the complaint their position and duties in the

company and their role in regard to the issue and

dishonour of the cheque, disclosing consent,

connivance or negligence."

(emphasis supplied)

15. Taking into account the above extracted portion, it

is to be noted that in the case on hand, as well, the

respondent No.2 has to make specific allegations against

the petitioner/accused No.3 to make her vicariously liable,

whereas, it is needless to mention that she resigned from

the post of Director of accused - Company and as such,

she had nothing to do with the day to day affairs of the

accused - Company.

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16. At this juncture, it is important to note the

observation made by the Hon'ble Supreme Court in Anita

Malhotra (supra 1). The relevant paragraph No.23 reads as

under:

"23. In the light of the above discussion and of

the fact that the appellant has established that

she had resigned from the Company as a Director

in 1998, well before the relevant date, namely, in

the year 2004, when the cheques were issued, the

High Court, in the light of the acceptable

materials such as the certified copy of the annual

return dated 30-9-1999 and Form 32 ought to

have exercised its jurisdiction under Section 482

and quashed the criminal proceedings. We are

unable to accept the reasoning of the High Court

and we are satisfied that the appellant has made

out a case for quashing the criminal proceedings.

Consequently, Criminal Complaint No. 993/1 of

2005 on the file of ACMM, New Delhi, insofar as

the appellant herein (A-3) is concerned, is

quashed and the appeal is allowed."