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TMI Blog2019 (1) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 2. The petitioners in Writ Petition Nos. 972 of 2014 and 834 of 2016 are impleaded as accused No. 4 and 2 respectively in Criminal Case No. 5836/SS/2015 pending before the Court of Metropolitan Magistrate, 23rd Court Esplanade, Mumbai, whereas the petitioners in Writ Petition No. 973 of 2014 and Wrti Petition No. 835 of 2016 are arrayed as accused No. 4 and 2 respectively in Criminal Case No.5835/SS/2015 pending in the same Court. 3. Both the complaints were filed for the offence under Section 138 of the Negotiable Instruments Act. The complainant in Criminal Case No.5836/SS/2015 has alleged that accused No.1 is a Private Limited Company and accused Nos. 2 to 4 are the Directors of accused No.1 Company. They are Incharge of and responsible for the conduct of day to day affairs of the accused No.1 Company. In 2006, accused No.1 approached the complainant to provide its cooperation for promotion of the export of Gold jewellery, which has been ordered by certain prospective overseas companies. The accused No.1 accepted to manufacture, supply and ship gold jewellery to the said prospective overseas companies, subject to terms and conditions as per export order procured to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 are its Directors. The transaction in this complaint also arises out of agreement dated 30th May, 2007. Complainant and accused are same as in aforesaid complaint. Accused Nos. 2 to 4 are the Directors of accused No.1 who were and are Incharge of and are responsible for the conduct of day to day affairs of the accused No.1 Company. The petitioners are impleaded as accused Nos. 2 and 4 in the said complaint. Accused No.1 issued Cheque No.767679 dated 16th December, 2009 for an amount of Rs. 77,33,046/. The said cheque was dishonored on 18th December, 2009 with reasons "opening balance insufficient". The complainant forwarded statutory notice dated 11th January, 2010 calling upon accused Nos. 1 to 4 to make the payment. The notice was served upon the accused. Despite notice, the accused have neglected to make the payment. Accused No.2 replied to the statutory notice and contended that he has resigned from Directorship of accused No.1 Company. Complaint was filed on 23rd February, 2010. Process was issued for the offence under Section 138 of the Negotiable Instruments Act vide order dated 7th October, 2010. 5. The petitioner in Criminal Writ Petition Nos. 834 of 2016 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... June, 2007 and Form32 in that regard was filed. It is submitted that statutory notice was replied by the petitioner stating that he has resigned from accused No.1 Company. The reply was received by the complainant. There is a reference of the said reply in the complaint, however in spite of that the petitioner was impleaded as acused in the complaint. It is submitted that the address of the Company had changed after the petitioner has resigned. The annual returns of the Company which were brought on record by the complainant by filing affidavitinreply do not show involvement of the petitioner. The names of the other Directors are reflected in the annual returns. It is submitted that the complainant in its reply have contended that the petitioner had moved special notice pursuant to Section 284 of the Companies Act as a shareholder of the Company for removal of Director from the Board of Directors on 10th August, 2010. It is submitted that Section 284 of the Companies Act relates to removal of Directors. SubSection 2 of Section 284 contemplates that special notice shall be required of any resolution to remove a Director under this Section or to appoint somebody ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... signatories in the website of Ministry of Corporate Affairs (MCA), even today and contentions that he is not involved in transaction is absolutely incorrect and baseless. The pleadings and documents filed by him proves that he has siphoned of money by opening account in the name of accused No.1 Company. The reliance is placed on the print out of the MCA website showing the name of the said petitioner in the list of various signatories. It is submitted that the averments made in paragraphs 2, 7, 10 and 11 of both the complaints shows that the said petitioner was Incharge and responsible for the conduct of the day to day affairs of respondent No.2 Company. He is involved in the transaction at the material time and continued to be Director of accused No.1 Company. The said petitioner stood as guarantor to the transaction by executing personal guarantee dated 24th July, 2007 thereby guaranteeing the payment of the amount as stated in the agreement for guarantee dated 24th July, 2007. The said petitioner had agreed under the agreement for guarantee to make payment in the event of any default or failure on the part of respondent No.2 Company forthwith on receiving payment raised fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 81000 shares and his wife possessing 9000 equity shares in the Company. There is direct nexus between the Company and petitioner as he has a controlling stake in the Company and controls the transactions and operations of the Company. The petitioner by issuing notice dated 10th August, 2010 has stated that he is shareholder of 45000 shares. The said notice indicates that it is issued under Section 284 of the Companies Act with intention to propose the resolution at the general meeting of the Company to be held on 2nd September, 2010. It was proposed that Rahul Bhomavat be removed from the post of Additional Director who was ultimately removed by resolution dated 11th August, 2010. It is submitted that the Petitioner has mischievously resigned from the accused Company and thereafter transferred his and his wife's shares into the name of other persons. The petitioner had filed Chamber Summons in Suit No.2600 of 2012 whereby he had pleaded that he is not shareholder of Company of which Chamber Summons was rejected. Respondent No.2 had filed reply to the said Chamber Summons annexing relevant documents showing that the petitioner was Incharge and managing day to day affairs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the provisions of the Companies Act and accused Nos. 2 to 4 are Directors of accused No.1 Company who were and are Incharge of and are responsible for the conduct of day to day affairs of accused No.1 Company. The present offence was committed by accused No.1 within the knowledge, consent and in connivance of accused Nos. 2 to 4 who are fully responsible for the offence and are therefore jointly and severally liable to be prosecuted and punished. The petitioners in Criminal Writ Petition No.972 of 2014 and Criminal Writ Petition No. 834 of 2016 were impleaded as accused Nos. 2 and 4 respectively. The contention of accused No.4 is that he is not signatory to the cheque, not concerned with day to day affairs, not Incharge and responsible for business of accused No.1 Company and he was nominal Director appointed on the basis of salary. It was also contended that there are no sufficient averments in the complaint to invoke Section 141 of the Negotiable Instruments Act. The complaint viz., C.C.No.5836/SS/2015 further states that in the year 2006 the accused No.1 Company approached complainant to provide of its cooperation for permitting export of Gold jewellery which has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by accused No.1 along with letter dated 5th November, 2009 in part discharge of liability. The said cheque was dishonored. The statutory notice was issued to the accused, however, the payment was not made although the notice was duly served upon all the accused. In paragraph 11 it is stated that accused Nos. 2 to 4 are the Directors of accused No.1. The accused No.2 has signed the agreement dated 30th May, 2007 on behalf of accused No.1. Accused Nos. 2 to 4 were and are Incharge and are responsible for the conduct of day to day affairs of accused No.1 Company at the relevant time when the transaction took place and the offence was committed by the Company. Therefore, accused Nos. 2 to 4 are liable for the offence committed by accused No.1 under Section 141 of the Negotiable Instruments Act. 15. On perusal of averments in the complaint with regards to the vicarious liability of the accused I find that the complaint complies the requirement of law. The assertions in the complaint as stated above were sufficient to invoke Section 141 of the Negotiable Instruments Act. The factual aspects pointed out by respondents' Counsel shows involvement of petitioners in day to day aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 10th August, 2010 given by accused No.2 under Section 284 of the Companies Act. The Coaccused Rahul Bhomavat (accused No.3) was removed from Directorship of accused No.1 at the instance of accused No.2. This fact shows that accused No.2 has full control over the accused No.1. Thus, necessary averments have been made in complaint to connect accused No.2 with the offence of dishonor of cheques, which is the subject matter of complaints with the aid of Section 141 of Negotiable Instruments Act. The learned Sessions Judge further observed that in view of aforesaid factual aspects the decision in the case of Harshendra Kumar D would not be helpful to accused No.2 to claim discharge from the liability for the cheques in question. The defense of the accused will have to be considered at the stage of trial. The learned Sessions Judge further observed that merely replying the notice by accused No.2 stating that he is no more Director of accused No.1 by itself would not be sufficient to show that he is not concerned with accused No.1 and the cheque transactions. Primafacie, there are sufficient grounds to proceed against accused No.2 for the offence punishable under Section 138 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd at this stage the proceedings cannot be quashed and set aside. 18. The complainant has also tendered affidavitinreply in Criminal Writ Petition No.834 of 2016 and Criminal Writ Petition No. 835 of 2016. The complainant's contention is that there is sufficient material evidence against accused No.2 showing his involvement in the day to day affairs of the accused No.1 Company and to escape the liability he has created the defence of resignation which is to be proved at the time of trial. It is contended that the complainant is a Government Company. The accused is trying to escape his liability. The petitioner (accused No.2) for and on behalf of accused No.1 Company (accused No.1) had approached the complainant vide letter dated 20th December, 2006 and 24th February, 2007 for their cooperation for promotion to export of Gold jewellery business to various Foreign Buyers at Dubai, U.A.E. and for facilitating and promoting volume of business of accused No.1 Company by availing the advantage of International Image of complainant. The petitioneraccused No.1 on behalf of his Company (accused No.1) entered into an agreement dated 30th May, 2007 for a period of five yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accused No.2 had resigned from the Company and transferred his and his wife's shares into some other persons, which was not objected by accused No.1 Company. The Chamber Summons in Suit No.2600 of 2012 was initiated by the petitioneraccused No.2 stating that he is no more shareholder of the Company. The said Chamber Summons was dismissed. The complainant had filed documents showing that the accused No.2 was Incharge and managing day to day affairs of accused No.1 Company. It is also contended that vide order dated 29th February, 2016 passed by this Court in Company Petition No.37 of 2012 it was ordered that the Company be wound up and Official Liquidator was appointed. In the report dated 17th June, 2016 the Official Liquidator has submitted that the registered office premises of the Company has been sold to the wife of petitioneraccused No.2 by the Company. However, the same has not been transferred by the society in its records and still the premises stand in the name of the Company. Report also states that there is giftdeed dated 21st August, 2010 between accused No.1 and his wife relinquishing share in favour of donee. It is therefore submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the Director is Incharge of and responsible to the Company for the conduct of the business of the Company without anything more as to the role of the Director. In recent decision of the Hon'ble Supreme Court in the case of Standard Chartered Bank (supra) the Court has referred to several decisions of the Supreme Court including the decision in the case of S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla (2005) 8 SCC 89. In the said decision the High Court had quashed the proceedings on the ground that there are no allegations against the petitioners connecting them with the affairs of the Company. In paragraph 9 of the said decision it was observed that on a studied scrutiny of Section 138 of the Negotiable Instruments Act, it is quite limpid that to constitute the criminal liability the complainant is required to show that a cheque was issued, that it was presented in the bank in question, that on due presentation, it was dishonored, that as enshrined in the provision, requisite notice was served on the person who was sought to be made liable for criminal liability and that in spite of service of notice, the person who has been arraigned as an accused did not comply wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re and are Incharge and responsible for the conduct of day to day affairs of accused No.1 Company. The offence was committed by accused No.1 within the knowledge, consent and in connivance of accused Nos. 2 to 4 who are fully responsible for the aforesaid offence and are therefore jointly and severally liable to be prosecuted and punished. In paragraph 11 of the complaint it is stated that accused Nos. 2 to 4 are the Directors of accused No.1 Company. Accused No.2 has signed the agreement dated 30th May, 2007 on behalf of accused No.1 Company. The accused Nos. 2 to 4 were and are Incharge of and are responsible for the conduct of day to day affairs of accused No.1 Company at the relevant time when the transaction took place and when the offence was committed by the Company. Therefore, the said accused are liable for the offence committed by accused No.1. 24. In the light of the aforesaid averments and the material pointed out by the complainant as above, it can be seen that the complainant has made out a case for invoking vicarious liability under Section 141 of the Negotiable Instruments Act and the contentions of the accused can be agitated only at the time of trial. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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