Telangana High Court

Chandra Sekhar Pattapurathi vs M/S Surya Infra on 13 August, 2025

Author: N.Tukaramji

Bench: N.Tukaramji

          THE HONOURABLE SRI JUSTICE N.TUKARAMJI

                  Criminal Petition No.5424 of 2024

ORDER

This Criminal Petition is filed under Section 482 of Code of

Criminal Procedure, 1973 (for short, 'the CrPC') seeking quashment

of proceedings in C.C.No.4577 of 2019 on the file of the XI

Metropolitan Magistrate, Kukatpally.

2. I have heard Mr. Syed Tousif Basha, learned counsel for the

petitioner, Mr.B.Naresh Kumar, learned counsel for the respondent

No.1 and Mr.Jithender Rao Veeramalla, learned Additional Public

Prosecutor, representing the respondent No.2-State.

3. The petitioner is arrayed as accused No.3 in C.C.No.4577 of

2019 filed under Section 142 of the Negotiable Instruments Act,

1881 (for short, 'the NI Act').

4. Factual matrix :

The case of respondent No. 1/complainant, in brief, is that on

02.03.2018, Bilwa Infrastructure Ltd./accused No. 1 company,

entered into an agreement with the complainant for the

establishment of a batching plant. A financial dispute subsequently 2 NTR,J Crlp_5424_2024

arose regarding an alleged outstanding balance of Rs.38,43,768/-,

which was later settled for Rs.24,64,300/-. In pursuance of the

settlement, four post-dated cheques were issued by the Executive

Director/accused No. 2, allegedly on behalf of the petitioner/accused

No. 3 and accused No. 1 company. Upon presentation, all four

cheques were dishonoured with the bank's endorsement "payment

stopped by drawer." Following this, the complainant issued a

statutory notice, and thereafter filed a private complaint against the

company and its directors. The petitioner has been shown as

Managing Director.

5. Submissions on Behalf of the Petitioner

Learned counsel for the petitioner submits that the

petitioner/accused No. 3 has been falsely implicated in the matter by

being described as the Managing Director of accused No. 1

company. It is contended that the petitioner was neither the

Managing Director nor in charge of the day-to-day affairs of accused

No. 1 company. Merely holding the designation of 'Director,' it is

argued, does not render a person liable for prosecution under the NI

Act unless there are specific allegations detailing his role in the

commission of the offence. In the present complaint, apart from a

bald assertion that the petitioner was the Managing 3 NTR,J Crlp_5424_2024

Director/Director, no specific averments have been made to show

his involvement in the alleged offence.

It is further submitted that the petitioner was neither a party to

the commercial agreement nor the drawer of the cheques, and had

no role in the underlying transaction. At the relevant time, he was

serving as the Chief Financial Officer of M/s Orchasp Limited, which,

according to counsel, made it functionally incompatible for him to be

involved in the affairs of accused No. 1 company. Continuance of

the criminal proceedings against him would therefore amount to an

abuse of process.

Reliance is placed on the judgment of the Hon'ble Supreme

Court in K.S. Mehta v. M/s Morgan Securities and Credits Private

Limited, 2025 SCC OnLine SC 492, wherein it was held that non-

executive and independent directors cannot be held liable for

offences under Section 138 read with Section 141 of the Negotiable

Instruments Act unless specific allegations are made demonstrating

their active participation in the company's affairs at the relevant

point in time.

Learned counsel for respondent No. 1, on the other hand,

contends that the petitioner is the Managing Director of M/s Orchasp 4 NTR,J Crlp_5424_2024

Limited and that, since the company-issued cheques were

dishonoured, the petitioner is liable to be prosecuted along with the

other accused. The contention that the petitioner had no

involvement in the transaction, it is argued, is a matter to be

determined by the trial court after appreciation of evidence, and not

at the present stage.

It is further pointed out that although the petitioner claims to

have no connection with accused No. 1 company, he has

prosecuted a writ petitions in the company's name. Counsel also

submits that Bilwa Infrastructure Limited was formerly known as

Kanthi Rekha Power Limited, and that the petitioner was the

Managing Director at the relevant time. This is supported by Form

No. I/Certificate of Incorporation issued by the Registrar of

Companies, which records the petitioner's appointment as

Managing Director on 14.03.2011. A subsequent Certificate of

Incorporation, issued upon change of the company's name to Bilwa

Infrastructure Limited with effect from 24.08.2017, further

establishes this continuity.

In view of these facts, it is submitted that the petitioner's role

in the operational, financial, and day-to-day affairs of the company

cannot be ruled out. Therefore, the continuance of proceedings 5 NTR,J Crlp_5424_2024

against him is necessary to secure justice and ensure accountability

for the financial loss allegedly suffered by respondent No. 1.

7. I have perused the materials on record.

8. Analysis:

The averments in the complaint indicate that accused No. 1 is

a limited company, accused No. 2 is its Executive Director, and

accused No. 3/the petitioner is described as the Managing Director

of accused No. 1 company. It is alleged that the complainant and

accused No. 1 company entered into an agreement on 02.03.2018

for the establishment of a batching plant and the supply of ready-mix

concrete. While the complainant duly performed its obligations

under the agreement, the accused failed to make timely payment for

the services rendered. As of 12.03.2019, there remained an

outstanding balance. After negotiations, on 29.03.2019, accused

No. 2, acting on behalf of accused Nos. 1 and 3, entered into a

settlement agreement, which was signed by the complainant,

accused No. 2, and one Mr. A.S.N. Prasad, General Manager

(Projects) of accused No. 1. Pursuant to this settlement, accused

No. 2, on behalf of accused Nos. 1 and 3, issued four post-dated 6 NTR,J Crlp_5424_2024

cheques, all of which were dishonoured upon presentation with the

bank's endorsement 'payment stopped by the drawer.'

The complaint further avers that the agreement in question

was executed after Kanthi Rekha Power Limited had changed its

name to Bilwa Infrastructure Limited on 02.08.2017. The petitioner

relies on Form No. 32 of Kanthi Rekha Power Limited, filed in 2011,

showing him (Chandra Sekhar Pattapurathi) as Managing Director,

and Form No. I, records him as a promoter. In Form No. 32, one

Chenchaiah Pantulu Pattapurathi is also shown as Managing

Director, with the petitioner similarly designated. However, there is

no specific document placed on record demonstrating the

petitioner's continuance as a Director after 2017. It is undisputed

from the pleadings that the agreement was executed, and the

cheques were issued, by accused No. 2. Nevertheless, no specific

document has been produced establishing that the petitioner was

the Managing Director of Bilwa Infrastructure Limited at the relevant

time.

Pertinently, the petitioner, as Director, filed W.P. No. 9462 of

2024 taking exception to the order issued by the Deputy

Commissioner for the tax period 2017-18 under the extended

period of limitation in Section 168A of the CGST Act, 2017. The 7 NTR,J Crlp_5424_2024

filing of this writ petition on behalf of Bilwa Infrastructure Limited in

respect of tax matters prima facie indicates that the

petitioner/accused No. 3 was involved in the affairs of the company.

This is further supported by the fact that respondent No. 2 in the

complaint specifically alleged that the agreement was entered into

by accused No. 1 on behalf of accused Nos. 2 and 3 in their

respective capacities.

Accordingly, the act of filing a writ petition on behalf of Bilwa

Infrastructure Limited concerning its tax liability is, on the face of it,

indicative of the petitioner's involvement in the financial affairs of the

company. As noted above, the petitioner has been arrayed in the

complaint as the Managing Director. A role of Managing Director or

active director in settled law, is distinct from that of other directors

who are not concerned with the day-to-day affairs of the company.

9. In National Small Industries Corporation Limited v. Harmeet

Singh Paintal and Another, (2010) 3 SCC 330, the Hon'ble Supreme

Court observed as under:

"39. From the above discussion, the following principles emerge: (i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction. (ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time 8 NTR,J Crlp_5424_2024

of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company. (iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with. (iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred. (v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with. (vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint. (vii) 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." (v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.

10. Thus, the precise role of the petitioner and the extent of his

liability are matters that can only be determined upon appreciation of

evidence during trial. In light of the preliminary finding that the

petitioner is the Director, who has a role in the financial affairs of the

company, it would be premature and inappropriate, at this stage, to

equate his position with that of a non-executive director. His status

within the company and the nature of his involvement in its affairs

must be adjudicated in the course of trial for the purpose of fixing

any financial liability.

9 NTR,J Crlp_5424_2024

11. In this view of the matter, a prima facie case for proceeding to

trial has been made out. Consequently, keeping open the