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TMI Blog2019 (8) TMI 1825X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into business transaction with the complainant, as alleged, being a Director, present petitioner is the person who has full knowledge of disputed transaction. The cheques were issued by co-accused Managing Director of the company and on presentation of the same, the cheques were dishonored by the bank with the endorsement "Account Blocked" on 08.05.2014. Thereafter, the complainant has issued a legal notice on 30.06.2014 to the petitioner and other accused persons. In reply, petitioner has stated that he has resigned from the company on 06.11.2013 and the alleged transaction was made after his resignation, therefore, he was not involved in any transaction as alleged by the complainant. 3. Thereafter, the complainant filed a Criminal Complaint under Section 138 of N.I. Act, before Judicial Magistrate First Class, Burhanpur against the present petitioner impleading the company as an accused No. 1 and the learned Judicial Magistrate First Class took cognizance by the impugned order dated 08.09.2015 and has issued process against the petitioner. 4. Learned counsel for the petitioner submits that the cognizance took by the Judicial Magistrate First Class is bad in law and agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in 2013 (4) MPLJ 192. (iii) Rafat Anees Vs. Bano Bi & others reported in 2016(2) MPLJ 266. (iv) Judgment dated 27.12.2012 in C.P. No. 22/12 & 23/12 of Madras High Court. 5. On the other hand, learned counsels for the Respondent No. 2 opposes the submission made by the learned counsel for the petitioner and submits that petitioner is the Director of said company and he is responsible person for every business transaction of company. Further, he submits that petitioner took the defence of his resignation dated 06.11.2013, whereas on 30.04.2014 he has written a letter to respondent No. 2 under the capacity of Director of some other company, even then, if any dispute was there then same shall be decided in trial, therefore, on that ground, the proceedings can not be quashed under Section 482 of the Cr.P.C. He further submits that even if the liquidation and arbitration proceedings for winding up of the company are going on under the provisions of Companies Act, would not curtail the jurisdiction of Criminal Court. He further submits that respondent No. 2 has received the certified copy under Section 399 of the Companies Act and from perusal of the same, it clearly appears that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Court are that:- (i) Whether, in the event of the company being let off and under liquidation, criminal proceedings of Section 138 of N.I. Act can be proceeded continuously against the company and its director/managing director/employees or not? (ii) Whether the petitioner/accused/Director of company can be prosecuted for the offence under Section 138 of N.I. Act. in pursuant to business transaction of company or not? (iii) Whether, once the Director of company has resigned from his post prior to issuance of cheque, can be prosecuted for the offence punishable under section 138 of N.I. Act or not? 9. Now, this court shall decide first issue. The question arises before this Court is that when the company is being let off and under liquidation, in these circumstances proceedings of criminal Court under Section 138 of N.I. Act against the company and its Director/Managing Director/officials shall be continued or not? In this regard, learned counsel for petitioner submits the company is under liquidation and going to wind up. He has drawn attention of this Court towards Annexure C, filed through an I.A. No. 5928/2019, in which the status of the company is showing as under liq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n equitable distribution thereof among those entitled. Once the Court has taken the assets of a company under its control or has passed an order for its being wound up, in the ordinary course, it will not be proper to allow proceedings to be started or continued against the company. Section 446 is intended to avoid multiplicity of proceedings and to safeguard the assets of a company against wasteful or expensive litigation in regard to matters capable of being determined expeditiously and effectively by the winding up court itself. Though the words "legal proceedings" in Section 446 of the Companies Act is wide enough to take in criminal proceedings also, such criminal proceedings must be in relation to the assets of the company. Criminal proceedings which are not in respect of the assets of the company but end in the conviction or acquittal of the accused, cannot be stayed under Section 446 of the Companies Act. The proceedings under Section 138 of the Negotiable Instruments Act can end only in the conviction or acquittal of the accused in the case and no recovery of any amount covered by the dishonoured cheques can be made in the criminal proceedings. As the criminal proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven if the company is under liquidation and merely on the basis of appointment of liquidator, power of criminal Court could not be curtailed. 14. Now this Court deals with the Second and third questions. It is necessary to first read the provisions of N.I. Act which is enacted by the law makers in this regard. Section 138 of N.I Act speaks about the offence for dishonouring of cheques, which provision is quoted as under:- "138 Dishonour of cheque for insufficiency, etc., of funds in the account. - Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for [a term which may be extended to two years], or with fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer 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. Explanation.- For the purposes of this section,- (a) "company" means any body corporate and includes a firm or other association of individuals; and (b) "director", in relation to a firm, means a partner in the firm.]" 16. On reading of the above said provisions, it is apparent that Section 141 of the Negotiable Instruments Act, 1881 deals with the offences committed by the companies and say that if an offence is committed by a company under Section 138 Negotiable Instruments Act, 1881, every person, at the time, the offence was committed, was in-charge and responsible to the company in the conduct of the business of the company, is liable alongwith the company to be proceeded against and punished accordingly. Further, it is provided that no person shall liable to punishment if he proved that an offence was not committed under his knowledge or he has exercised all dues diligence to prevent to commission of such offence. Looking to the trend set up by the complainants to implead all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 Sec. 2(24) of the Companies Act) or a person referred to in clauses (e) and (f) of Section 5 of Companies Act, an averment in the complaint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " 19. Therefore, from the above reading it is clear, the Director of company shall be prosecuted for business transaction of company under Section 138 of N.I. Act subject to the specific averments in the complaint and after arraying the company, as an accused in complaint. At this stage, it is necessary to be noted that the complainant has made the company as respondent No. 1/accused No. 1 in his complaint. 20. But, in similar circumstances, in the case of Gunmala Sales Private Limited and others vs. Anu Mehta and others, reported in (2015) 1 SCC 103, Hon'ble the Apex Court has more described the abovesaid principle and held as under:- "31. When in view of the basic averment process is issued the complaint must proceed against the Directors. But, if any Director wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he is really not concerned with the issuance of the cheque, he must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his contention. He must make out a cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor resigns and his resignation is accepted by the Company, the Company become obliged to file a Form 32 indicating change in status of the Directors. 24. In the present case the petitioner-Santosh has filed the certified copy of Form 32 u/s. 399 of Companies Act, 2013, dated 06.12.2013, date of issuance is 23.06.2016 (Annexure-D). Further on perusal of Form 32, it is reflected that petitioner has submitted his resignation on 06.11.2013. He has also annexed a photo copy of resignation letter dated 06.11.2013. Further, petitioner has filed a judgment of High Court of Bombay in the case of Baba Chandra Shekhar Radha Krishanan Vs. State of Maharashtra (MANU/MH/2716/2018). On perusal of the same, it appears that petitioner-Santosh is also party in the said case as he was made as an accused in original case. It is also to be noted that the dispute in the said case was related to the same company i.e. V.R. Textile Pvt. Ltd. In that case also the petitioner took the same defence of resignation and in para 13, the High Court of Bombay observed that petitioner has resigned from his Directorship w.e.f. 06.11.2013 (as the date mentioned in Form 32). The High Court of Bombay has given the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the resignation was manipulated and was not in operation at the time of issuance of cheques then a Chairman/Director the respondent prima facie was deemed to be incharge of and responsible for the conduct and business of the company. The Revisional Court is not expected to sit as a Court of Appeal and to discuss the evidence on merits at this preliminary stage of the trial." 25. It has held in the case of Anita Malhotra (supra) that if the person has proved his resignation on the relevant date when the offence has occurred, then the proceedings against such a person are liable to be quashed. It has also been held by the Court that the certified copy of annual return coupled with simple copy of Form 32 should have been accepted as a proof of petitioner's resignation and proceedings against him be quashed. As far as documents filed by the respondent are concerned, it appears that Form 32 is showing the status of year 2008 in respect of company of registration no. 181-266, which was subsequently amalgamated with other company w.e.f. 01.04.2010 vide order dated 27.11.2012, passed by High Court of Madras. Further, on perusal of letter dated 30.04.2014, it appears that same ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient which would be sufficient to proceed against such Directors. However, we may add that as no particular form is prescribed, it may not be necessary to reproduce the words of the section. If reading of the complaint shows and substance of accusation discloses necessary averments, that would be sufficient to proceed against such of the Directors and no particular form is necessary. However, it may not be necessary to allege and prove that, in fact, such of the Directors have any specific role in respect of the transaction leading to issuance of cheque. Section 141 of the Act makes the Directors in charge and responsible to Company "for the conduct of the business of the Company" within the mischief of Section 138 of the Act and not particular business for which the cheque was issued. We cannot read more than what has been mandated in Section 141 of the Act. 28. But in para 15 of the above cited judgment the Hon'ble Apex court has reiterated the judgment of SMS Pharmaceuticals Ltd. (supra) and in finding para 18 held as under:- "18. We have found on fact that there is no averment that the two accused herein were in charge of and responsible for the conduct of the business o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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