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TMI Blog2004 (1) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... ,111/- and other cheques were returned unpaid on the ground of insufficient funds and payments were not made even after legal notice, elaborate complaints, including the complaint dated 13.6.1995, were filed in the Court of the learned Chief Judicial Magistrate, Vadodara and, after recording statement of the Marketing Manager, who had filed the complaints for himself and on behalf of the Company, summons returnable on 26.7.1995 were ordered to be issued to all the accused (Nos.1 to 14) for the offences punishable under section 138 of the Negotiable Instruments Act, 1881 ('NI Act' for short) and sections 420 and 114 of the Indian Penal Code. The order for issuing summons appears to have been challenged in revision, being Criminal Revision Applications Nos.131 to 172 of 1995, which were dismissed on 21.3.1996. That common judgment and order was challenged in two Special Criminal Applications in this Court and those applications were permitted to be withdrawn on 2.8.1996 to enable the petitioners to move an application before the learned Chief Judicial Magistrate. Then, the application dated 17.8.1996 (Exh.25) appears to have been filed with a prayer to drop the proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of ₹ 5,19,31,838/- against supply of 756 MTs. of Caprolactum, the goods sold on credit. That the cheques were dishonoured. It is specifically alleged that all the accused have fraudulently and dishonestly induced the complainant to deliver the goods to them on the pretext of issuing such cheques knowing fully well that, as there was insufficient bank balance, the cheques will not be honoured . It is also alleged in the complaint that the accused have not made payments and not taken any action to pay the sum of the cheques even after service of notice which clearly showed that, from the beginning, the accused had dishonest intention to cheat. The accused persons are arraigned for being directors and officers as being responsible for their acts done on behalf of the accused company. There is no controversy about the averments that goods were supplied by the complainant, that cheques were issued by or on behalf of the accused, that they were dishonoured and that payments were not made even after service of the statutory notice. 4 . Mr. Prakash Thakkar, learned senior counsel for the petitioner in Criminal Misc. Application No. 5239 of 1997, submitted that necessary a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DAL MENTHOL INDIA LTD. [(2001) 10 SCC 218] was relied upon for the following observations:- 8. From a perusal of section 141, it is evident that in a case where a company committed offence under section 138 then not only the company but also every person who at the time when the offence was committed, was in charge of and was responsible to the company for the conduct of the business of the company, shall be deemed to be guilty of the offence and liable to be proceeded against and punished accordingly. It follows that a person other than the company can be proceeded against under those provisions only if that person was in charge of and was responsible to the company for the conduct of its business. 4.3 The following observations of the Supreme Court in KATTA SUJATHA (SMT) v. FERTILIZERS CHEMICALS TRAVANCORE LTD. [(2002) 7 SCC 655] were also relied upon:- 4. .....However, one thing is clear that the appellant was in no way involved in any of the transactions referred to in the complaint and it was not stated that she was in charge of the business and was responsible for the conduct of the business of the firm in terms of section 141 of the Act nor was there any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed No. 12) and a finance manager (accused No. 13) and the signing and delivery of the cheques having been attributed to accused Nos.12 and 13 only, the rest of the directors were implicated only for being directors of the accused company on the assumption that they were responsible for the acts done on behalf of the accused company. As for the allegation of cheating punishable under section 420 of the Indian Penal Code, there are no specific allegations against any particular accused person, according to the submission. Thus, the burden of the arguments of Mr. Thakkar was that, as per the binding ratio of the judgment of the Supreme Court in K.P.G.NAIR (supra), ....a person other than the company can be proceeded against under those provisions only if that person was in charge of and was responsible to the company for the conduct of its business. He emphasized that the Supreme Court has referred to section 141 and held as above and hence it was not open for the complainant to argue that the provisions of sub-section (2) of section 141 were not considered in laying down the law as above. 5. Learned counsel Mr. S.V. Raju, Mr. Atul Mehta and Mr. Anand Bhatt, appearing for the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors also owe a duty of care to the company not to act negligently in the management of its affairs - the standard being that of a reasonable man in looking after his own affairs. A director may be shown to be so placed and to have been so closely and so long associated personally with the management of the company that he will be deemed to be not merely cognizant of but liable for fraud in the conduct of the business of the company even though no specific act of dishonesty is proved against him personally. He cannot shut his eyes to what must be obvious to everyone who examines the affairs of the company even superficially. It is enough if his negligence is of such a character as to enable frauds to be committed and losses thereby incurred by the company. 6.1 He submitted that, in view of the admitted well-known sickness of the accused company to such an extend that its entire networth was wiped out and it was declared sick by the B.I.F.R. in the year 1993, it was not open for the directors to contend that the cheques to the tune of ₹ 5 crores could have been issued against supply of raw materials without the knowledge, consent and connivance of the board of directors. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... according to which, section 258 of the Code of Criminal Procedure deals only with summons cases instituted otherwise than on a complaint. In such circumstances, the present group of cases is just multiplicity of repetitive and dilatory proceedings amounting to abuse of the process of Court, according to the submission. 7.2 As for the allegations for the offences under sections 420 and 114 of the Indian Penal Code, it was submitted, relying on the judgment of this Court in DIPENDRA G. CHOKSI v. DIPAK CHIMANLAL PATEL MANU/GJ/0025/1997 that, if, prima facie, offence of cheating was made out, the magistrate was justified in issuing process also for the offence under section 420 of the I.P.C. and the matter must be allowed to be proceeded further under section 244 of the Cr.P.C. The judgments of this Court in PUNJAB TYRE HOUSE v. STATE OF GUJARAT MANU/GJ/0298/2002 and BALWANTBHAI DHARAMSINGHBHAI VARIA v. RAJNIKANT GORDHANBHAI PAT[E19L 93 (1) GLR 463] were relied upon in that regard. 7.3 With reference to the judgments of the Supreme Court in K.P.G.NAIR and KATTA SUJATHA (supra), it was submitted that those judgments were rendered in the particular facts and contentions in those ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the accused was dishonest or fraudulent. Splitting up of the definition into different components of the offence to make a meticulous scrutiny, whether all the ingredients have been precisely spelled out in the complaint, is not the need at this stage. If factual foundation for the offence has been laid in the complaint, the court should not hasten to quash criminal proceedings during investigation stage merely on the premise that one or two ingredients have not been stated with details. For quashing an FIR (a step which is permitted only in extremely rare cases) the information in the complaint must be bereft of even the basic facts which are absolutely necessary for making out the offence. It may be that the facts narrated in the complaint would as well reveal commercial transaction or money transaction. But that is hardly a reason for holding that the offence of cheating would elude from such a transaction. In fact, many a cheatings were committed in the course of commercial and also money transactions. The crux of the postulate is the intention of the person who induces the victim by his representation and not the nature of the transaction which would become decisive in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he offence. Such being the statutory scheme, the relevant provisions have to be so interpreted and applied as to further the objective and prevent their frustration. 9.1 It is true that, in case of the offence by a company, a person, for being charged with the offence, has to be shown to be in charge of and responsible to the company in the conduct of its business. Such person could as well be a director or officer of the company to be covered by sub-section (1) of section 141. It must be noted that such person in charge of and responsible to the company in the conduct of its business is not required, in order to be implicated in the offence of dishonour of cheque, to be shown also to have actually committed any act. However, under the proviso to sub-section (1), he cannot be punished if he proves that the offence was committed without his knowledge or despite his due diligence to prevent the commission of the offence. Sub-section (2) of section 141, opening with a nonobstante clause, covers a wider spectrum of persons, irrespective of their being in charge of or responsible to the company, if the offence were proved to have been committed with their consent, connivance or negle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing or abetment thereof within which the monetary transaction of issuance of cheques and dishonour thereof will have to be examined on the basis of evidence that may be led at the trial. When it is alleged that the offences were committed by the company as well as the directors collectively, it would not be necessary to separately allege that each director had consented to or connived at the commission of the alleged offences. It is not just a case of bald allegation of the petitioners being responsible as directors of the company whose cheques were dishonoured but, instead, specific statements on oath are made by the complainant to allege that the accused had issued cheques with the intention of cheating. 10.1 As for the territorial jurisdiction of the Court at Vadodara, by the judgments of the Supreme Court in K. BHASKARAN v. SANKARAN VIDHYAN BALAN [ 1JT9 99 (7) SC 558] as followed by this Court in CHEMOX v. GNFC[ 2003 (44) GLR 424], it is settled that complainant can choose any one of those Courts within whose jurisdiction any one of the five acts constituting the offence had taken place; which acts include failure to pay within 15 days of the receipt of notice under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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