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TMI Blog2022 (4) TMI 1245X X X X Extracts X X X X X X X X Extracts X X X X ..... of convenience, the facts of M.Cr.C.55265/2021 are taken note of. 3. The facts encapsulated are that for providing financial assistance in the form of Inter Corporate Deposit ('ICD'), the respondent sanctioned and disbursed a sum of Rs. 1 Crore to the petitioners (for brevity "SDBL") by fixing a due date for repayment as 21.03.2001. Again, an amount of Rs. 2 Crore was sanctioned and disbursed to SDBL by way of ICD fixing the due date of repayment as 06.02.2002. Thereafter, by way of third ICD, a sum of Rs. 1 Crore was sanctioned and disbursed in favour of SDBL fixing a date of repayment as 13.08.2002 and finally by way of fourth ICD, a sum of Rs. 3 Crore was sanctioned and disbursed by the respondent in favour of SDBL by fixing the date of its repayment as 30.10.2004. On 28.03.2003, facing financially depleted circumstances, SDBl implored before respondent for not pursuing with the recovery proceeding. On 16.06.2003, the respondent issued a legal notice calling upon SDBL to make payments under the ICDs. On 24.04.2005, SDBL submitted a proposal for One Time Settlement ('OTS'). According to respondent, since the proposal was not in terms of the policy/guidelines of the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compliance report shall be filed by the OL before the next date of hearing." Thereafter the SDBL filed a Special Leave Petition before the Supreme Court against the order dated 29.05.2013 and in the said SLP, it was informed that the offer was made by the respondent to the SDBL for settlement of dues to the tune of Rs. 7,52,66,667/- and an amount of Rs. 7.60 Crore by way of two demand drafts had been handed over to the respondent. Thereafter, the Supreme Court in its order dated 19.06.2013 came to observe as under:- "In view of the said payment of Rs. 7,60,00,000/- by the petitioner to the respondent, the order of the learned Company Judge directing the Official Liquidator to take charge of the petitioner Company including all the assets and the publication of the winding up order is affirmed in the Company Appeal, shall remain stayed. Respondent is granted six weeks' time to file reply." The SLP was again come-up for hearing on 14.11.2014, where the respondent made a statement that the deposit ordered by the Court already made by the SDBL was kept in an 'Escrow account earning interest'. The SLP was finally dismissed by order dated 26.09.2016 with the following observations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Industries case (supra). Relief of quashment of criminal complaints filed under section 138 NI Act cannot be granted under inherent powers of this Court, rather it is expected of the trial court that all such pending criminal cases should be disposed of expeditiously without any further delay as per law. Petitions stand dismissed." 4. The instant petitions have been filed by the SDBL for seeking quashment of the proceedings of complaint cases mainly on two counts. Firstly, the essential ingredients of Section 141 of N.I. Act are missing as there was no description given alleging as to how petitioners No.2 and 3 were responsible for day-to-day business of the SDBL inasmuch as in the memo of complaint, the allegation made against petitioners No.2 and 3 assigning their role, does not fulfill the requirement to make them responsible for the act committed by the SDBL and as such the material ingredient for holding these petitioners responsible as per Section 141 is missing and therefore complaint against petitioners No.2 and 3 deserves to be dismissed. Secondly, during the course of argument, the learned counsel for SDBL has made alternative submission that indubitably the amount i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r settlement, this Court can remit the matter to the Court below where the petitioners can make their request and if that is not accepted by the Court below, then only petition can be filed challenging the order of the Court below. As per Shri Sanjay K. Agrawal, petition under Section 482 filed before this Court directly is not maintainable and it would also not be proper on the part of this Court to entertain these petitions without giving any opportunity to the trial Court for considering the proposal made by the petitioners because ultimately it is the trial Court which has to consider the proposal, if any, is made for quashing the proceeding in view of the offer made by the petitioners for settling the dispute. To reinforce his contentions, learned counsel for the respondent has placed reliance on various decisions in re (2007) 5 SCC 108 n. Rangachari v. Bharat Sanchar Nigam Ltd.; (2009) 10 SCC 48 K.K. Ahuja v. V.K. Vora and another; (2015)1 SCC 103 Gunmala Sales Private Limited v. Anu Mehta and Others and ILR (2019) MP 1914 Santosh v. State of M.P. & Others. 6. Shri Sanjay Agrawal, learned counsel for the petitioners submits that they have moved an application (I.A.No.22024/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated to some other transaction. Thus, it is clear that the cheques which have given rise to the proceedings of Section 138 of N.I.Act were issued in lieu of loan amount disbursed in favour of SDBL by the respondent. Indeed, an attempt was made by the parties to get the account settled under the Scheme 'One Time Settlement', but that attempt ended in fiasco as was not in consonance with the guidelines of the Government. Even in the proceeding of winding up of the SDBL, the Supreme Court has clearly ordered for refund of amount already lying with the respondent to SDBL, but admittedly that amount has not been refunded so far. As per the available documents on record procured by the petitioners under the RTI Act, bespeak that amount deposited by SDBL to the respondent carried interest up to 30.04.2017 came to Rs. 2,16,39,378/- and by way of additional submissions it is brought on record that the total amount with interest accumulated was Rs. 10,97,71,319/- . The incipient petitions filed under Section 482 of CrPC by the SDBL for quashing the proceeding of complaint cases taking note of the Scheme 'OTS', but the High Court brushed aside that prayer by observing that the Corporation ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be oblivious nor can it shut its eyes to see that the amount disbursed by the respondent in favour of the SDBL as a loan, is a pubic money and if they are not serious to recover the same and litigating the matter as per their own choice by not initiating any recovery proceeding, the amount which is being offered by the borrower cannot be denied to accept. The proceeding of N.I.Act cannot be kept pending only because the respondent is not willing to settle the dispute despite the fact, as has been discussed above, amount is still lying with the respondent. 11. Further, this Court cannot give a stamp of approval to the submission of counsel for the respondent that the matter should be relegated to the trial court and offer could be placed there and if that is unaccepted, then only this court attains jurisdiction to entertain the petition under 482 of CrPC. Since the issue is being unjustifiably elasticated for two decades as the complaint cases are pending since 2001 and so on, therefore, as this Court is vouchsafed with inherent power under Section 482 of CrPC to resolve the dispute rather to relegate the matter to the trial Court. Thus, this submission of the respondent is un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly." 13. In re Ashoke Mal Bafna (supra), placed reliance by learned counsel for the petitioners, the Supreme Court in paragraphs 8, 9 and 10 interpreting the provisions of Section 141, has observed as under:- "8. Interpreting the provisions of Section 141 this Court in National Small Industries Corporation v. Harmeet Singh Paintal & Anr. (2010) 3 SCC 330 observed that Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald curs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity under Section 141 of the Act on a person, at the material time that person shall have been at the helm of affairs of the Company, one who actively looks after the day-to-day activities of the Company and particularly responsible for the conduct of its business. Simply because a person is a Director of a Company, does not make him liable under the N.I. Act. Every person connected with the Company will not fall into the ambit of the provision. Time and again, it has been asserted by this Court that only those persons who were in charge of and responsible for the conduct of the business of the Company at the time of commission of an offence will be liable for criminal action. A Director, who was not in charge of and was not responsible for the conduct of the business of the Company at the relevant time, will not be liable for an offence under Section 141 of the N.I. Act. In National Small Industries Corporation (supra) this Court observed: "Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accuse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or incorporated under the Companies Act, 1956 is concerned 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 the offence committed by the company. By verbatim reproducing the wording of the Section without a clear statement of fact supported by proper evidence, so as to make the accused vicariously liable, is a ground for quashing proceedings initiated against such person under Section 141 of the N.I. Act. 22. As held by this Court in Pepsi Foods Ltd. & Anr. Vs. Special Judicial Magistrate & Ors. (1998) 5 SCC 343, summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. The order of the Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. He has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof and would that be sufficient for the complainant to succeed in bringing charge home to the accused. It is not that the Magistrate is a silent spectator at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the memorandum or articles of the company, it is for the directors to establish it at the trial. It is in that context that Section 141 of the Negotiable Instruments Act provides that when the offender is a company, every person, who at the time when the offence was committed was incharge of and was responsible to the company for the conduct of the business of the company, shall also be deemed to be guilty of the offence along with the company. It appears to us that an allegation in the complaint that the named accused are directors of the company itself would usher in the element of their acting for and on behalf of the company and of their being incharge of the company. In Gower and Davies' Principles of Modern Company Law (Seventh Edition), the theory behind the idea of identification is traced as follows: "It is possible to find in the cases varying formulations of the under-lying principle, and the most recent definitions suggest that the courts are prepared today to give the rule of attribution based on identification a somewhat broader scope. In the original formulation in the Lennard's Carrying Company case Lord Haldane based identification on a person "who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf by the learned Senior Counsel for the appellant. 17. Then, in re K.K. Ahuja (supra), placed reliance by learned counsel for the respondent, the Supreme Court has observed in paragraphs 26 and 27 as under:- "26. Another aspect that requires to be noticed is that only a Director, Manager, Secretary or other officer can be made liable under sub-section (2) of section 141. But under sub-section (1) of section 141, it is theoretically possible to make even a person who is not a director or officer, liable, as for example, a person falling under category (e) and (f) of section 5 of Companies Act, 1956. When in SMS Pharma (I), this Court observed that 'conversely, a person not holding any office or designation in a company may be liable if he satisfies the requirement of being in charge of and responsible for conduct of the business of the company', this Court obviously had in mind, persons described in clauses (e) and (f) of section 5 of Companies Act. Be that as it may. 27. The position under section 141 of the Act can be summarized thus : (i) If the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the compla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny at the relevant time when the offence was committed, the Magistrate can issue process against such Director; 34.2 If a petition is filed under Section 482 of the Code for quashing of such a complaint by the Director, the High Court may, in the facts of a particular case, on an overall reading of the complaint, refuse to quash the complaint because the complaint contains the basic averment which is sufficient to make out a case against the Director. 34.3 In the facts of a given case, on an overall reading of the complaint, the High Court may, despite the presence of the basic averment, quash the complaint because of the absence of more particulars about role of the Director in the complaint. It may do so having come across some unimpeachable, un-controvertible evidence which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abuse of the process of the court. Despite the presence of basic averment, it may come to a conclusion that no case is made out against the Director. Take for instance a case of a Director sufferi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on who was at the helm of affairs of the Company and in charge of and responsible for the conduct of the business at the time of commission of an offence will be liable for criminal action." and further observed that "By verbatim reproducing the words of the section without a clear statement of fact supported by proper evidence, so as to make the accused vicariously liable, is a ground for quashing proceedings initiated against such person under Section 141 of the NI Act.". 21. The overall circumstances and the averments made in the complaint and the excellent ratiocination prima facie made the argument of learned counsel for the petitioners more impressionable, but this Court is uninterested being disinterested to step into that question for the reason that the offer made by the petitioners for adjustment of amount appears reasonable and impregnable. Ergo, to break the chain of elongated litigation pursued unnecessarily for more than two decades and to bring the discord to its logical end, I am of the considered view that the complaint cases should be quashed by adequately compensating the respondent. 22. In view of the above discourse, these petitions are allowed. The proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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