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TMI Blog2022 (8) TMI 870X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court. In exercise of inherent jurisdiction under section 482 of the Code, the High Court is required to approach the issue in two stages. First, whether there are basic averments in the complaint to demonstrate that the applicant was in-charge of and responsible for the conduct of the business of the company at the time of commission of the offences. If, at this first stage, the High Court is satisfied about the existence of adequate averments to make out the liability under section 141 of the Act, 1881, it would be within its right in refusing to embark upon further inquiry and exercise the discretion. Second, in a given case, the High Court may proceed to probe further and examine whether despite the existence of basic averments, the complaint qua the applicants/Director or other officers of the company deserves to be quashed on account of peculiar circumstances. A profitable reference in this context can be made to the case of ASHUTOSH ASHOK PARASRAMPURIYA ANR. VERSUS M/S. GHARRKUL INDUSTRIES PVT. LTD. ORS. [ 2021 (10) TMI 431 - SUPREME COURT] . In the said case, these were averments in the complaint to the effect that all the Directors of the company were respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Debt Recovery Tribunal, Mumbai (DRT) for recovery certificate. Post merger of the ING Vysya Bank with Kotak Mahindra Bank, the complainant Bank instituted a Company Petition No. 184 of 2016 in this Court for winding up of Gupta Synthetics Limited (accused No.1). c] In Original Application No. 114 of 2012 before the DRT consent terms were executed between the complainant and the defendants including accused Nos. 1 to 3. It was inter alia aknowledged that defendants were jointly and severely liable to pay to the complainant a sum of Rs. 45,01,52,126/-. The defendants No. 1 to 5 therein also agreed to pay a sum of Rs. 15,11,00,000/- to the complainant as per the schedule stipulated in paragraph No. 9 of the consent terms from 31st December, 2016 to 31st March, 2020. In accordance with the terms of settlement, post dated cheques were issued under a covering letter dated 21st December, 2016. DRT disposed of the proceedings in accordance with the aforesaid consent terms. Likewise, the Company Petition No. 184 of 2016 also came to be disposed of by the orders dated 10th January, 2017 and 18th January, 2017. d] The accused No. 1 company committed default in payment of the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sheer abuse of the process of the Court. 5. An affidavit in reply is filed on behalf of the respondent No. 2/ complainant to controvert the assertions in the application. 6. I have heard Mr. Aadil Parsurampuria, learned counsel for the applicants, Mr. Ansh Karnawat, learned counsel for respondent No. 2 and Mr. A.R. Patil, learned APP for the State. With the assistance of the learned counsels for the parties, I have perused the averments in the application, contentions in the affidavit in reply and the material on record including the averments in the complaint. 7. Mr. Parsurampuria, learned counsel for the applicants strenuously urged that the prosecution of the applicants is a classic example of the abuse of the process of the Court. It was urged with a degree of vehemence that the impugned order suffers from the vice of clear non-application of mind bordering on mechanical exercise of the power to issue the process. Mr. Parsurampuria took pains to take the Court through the the complaint, to bolster up the submission that there are no averments to rope in the applicants by invoking the constructive criminality under section 141 of the Act, 1881. The learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y submitted that the instant application is itself an abuse of the process of the Court. It was urged that the applicants have resorted to the device of selective reading of the averments in the complaint and placing reliance on the documents which suit the case of the applicants and, in the process, deliberately suppressed vital facts and documents, which bear upon controversy. Mr. Karnawat would submit that there are more than adequate averments in the complaint which make out the complicity of the applicants. In the face of such averments, in exercise of the extra-ordinary jurisdiction under section 482 of the Code, the High Court may not be justified in embarking upon an inquiry into the factual aspect at this stage, urged Mr. Karnawat. 9. Controverting the submission on behalf of the applicants, Mr. Karnawat submitted that the claim of the applicants that they had resigned in October, 2018 is not substantiated by placing on record documents of unimpeachable character. Therefore, even the case that at the time of the commission of the offences, the applicants were not in-charge of and responsible to the conduct of the business of the applicant No. 1 company is not prima faci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts even remotely. 13. The legal position as regards the nature of the liability of the persons who are sought to be prosecuted by invoking the provisions contained in section 141 of the Act, 1881 is fairly crystallized. Under section 141 of the Act, 1881 when an offence is committed by the company, apart from the company, every person who at the time of the commission of the offence was in-charge of and responsible to the conduct of the business of the company shall also be deemed to be guilty of the offence. There are a plethora of judgments governing the aspect of the liability of the Directors and/ or officers of the company who are impleaded by invoking section 141 of the Act, 1881. It would be superfluous to make a reference to all the judgments relied upon by the learned counsel for the applicants as the field is substantially covered by two pronouncements of Supreme Court. 14. In the case of S.M.S. Pharmaceuticals (supra) a three Judge Bench of the Supreme court considered the following questions :- (a) whether for purposes of Section 141 of the Negotiable Instruments Act, 1881, it is sufficient if the substance of the allegation read as a whole fulfill the requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Managing Director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under subsection (2) of Section 141. 16. While arriving at the aforesaid conclusion the Supreme Court had observed in paragraph 10 as under: 10. The conclusion is inevitable that the liability arises on account of conduct , act or omission on the part of a person and not merely on account of holding an office or a position in a company. Therefore, in order to bring a case within Section 141 of the Act the complaint must disclose the necessary facts which make a person liable. (emphasis supplied) 17. The aforesaid pronouncement was further explained by a two Judge Bench of the Supreme Court in the case of Gunmala Sales Private Limited (supra). After adverting to the aforesaid pronouncement and the judgment preceding and subsequent thereto, the Supreme Court culled out the propositions as under:- 33. We may summarize our conclusions as follows: a) Once in a complaint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard and the exercise of this power depends upon the facts and circumstances of each case. The High Court at that stage does not conduct a mini trial or roving inquiry, but, nothing prevents it from taking unimpeachable evidence or totally acceptable circumstances into account which may lead it to conclude that no trial is necessary qua a particular Director. (emphasis supplied) 18. In the light of the aforesaid exposition of law, in exercise of inherent jurisdiction under section 482 of the Code, the High Court is required to approach the issue in two stages. First, whether there are basic averments in the complaint to demonstrate that the applicant was in-charge of and responsible for the conduct of the business of the company at the time of commission of the offences. If, at this first stage, the High Court is satisfied about the existence of adequate averments to make out the liability under section 141 of the Act, 1881, it would be within its right in refusing to embark upon further inquiry and exercise the discretion. Second, in a given case, the High Court may proceed to probe further and examine whether despite the existence of basic averments, the complaint qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the entire transaction of settlement with the complainant company. 21. In the context of the consent terms, the complainant avers as under:- 14] I say that accused Nos. 1 to 6 were all aware of the said terms and conditions and in fact the accused No. 1 also made payments of part of the installments of the consent terms to the complainant company. The accused No. 1 has also disclosed the fact of the said consent terms in its annual report for the year 2016-17 with the balance sheet and profit and loss account. The said balance sheet and profit and loss account has been signed by the accused Nos. 2, 3 and 6. The complainant company craves leave to refer to and rely upon the annual report for the year 2016- 17 of the accused No. 1 as and when produced. 22. Lastly, in paragraph 34, the complainant avers as under:- 34] I state that the accused Nos. 1 to 6 have knowingly entered into the consent terms dated 22nd December, 2016 and submitted the post dated cheques in compliance of the same. Even though the accused No. 1 had already defaulted earlier, the complainant company accepted by accused No. 1 under the consent terms on the assurance and understanding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for the conduct of the business of the Company and if statutory compliance of Section 141 of the NI Act has been made, it may not open for the High Court to interfere under Section 482 CrPC unless it comes across some unimpeachable, incontrovertible 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 process of Court. Despite the presence of basic averment, it may come to a conclusion that no case is made out against the particular Director for which there could be various reasons. 24. The issue for determination before us is whether the role of the appellants in the capacity of the Director of the defaulter company makes them vicariously liable for the activities of the defaulter Company as defined under Section 141 of the NI Act? In that perception, whether the appellant had committed the offence chargeable under Section 138 of the NI Act ? 25. We are concerned in this case with Directors who are not signatories to the cheques. So far as Directors who are not the signatories to the chequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not sought to be substantiated by documents of unimpeachable character. On the contrary, the Court finds that in the reply dated 25th December, 2018 to the statutory notice addressed on behalf of the applicants as well, the said stand of resignation as of October, 2018 is conspicuous by its absence. In contrast, an effort was made to contest the enforceability of the liability on the merits of the matter. The applicants, it prima facie seems, chose not to raise the ground that they were not in-charge of and responsible to the conduct of the affairs of Gupta Synthetics Limited (accused No.1) though in paragraph Nos. 7 to 9 of the statutory notice, categorical averments to that effect were made by the complainant. 27. For the foregoing reasons, in my view, the applicants have not succeeded in making out a case that despite existence of the basic averments in the complaint, there are peculiar circumstances, supported by material of unimpeachable character to demonstrate that they were not in-charge of or responsible to the conduct of the business of company at the time of the commission of the offences. Thus, the application deserves to be dismissed. Hence, the following or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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