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TMI Blog2024 (4) TMI 953X X X X Extracts X X X X X X X X Extracts X X X X ..... int, it is the case of the petitioner that Right Choice Marketing Solutions JLT/accused no. 1 is an entity with its office in the United Arab Emirates (UAE). It is the sales and marketing wing of Right Choice Builders Private Limited/respondent no. 3 herein, a company incorporated under the Companies Act, 2013, which was arrayed as accused no. 6 in the complaint. It is stated that the respondent no. 3 company has established various branches like Right Choice Properties, Right Choice Investment, etc. It is further contended that the respondent nos. 1 and 2, along with others, who have been arrayed as accused nos. 2 and 3 in the complaint, are the common Directors of the Group, namely, Right Choice Group of Companies, and are responsible for the day-to-day affairs of accused no. 1 and respondent no. 3 herein. 3. It is further contended that respondent nos. 1 and 2, along with accused nos. 2 and 3, are the ones who approached different investors for their business and directly dealt with them regarding all transactions between the Right Choice Group of Companies and such investors. 4. It is further alleged that the respondent nos. 1 and 2, along with accused nos. 2 and 3 in the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued with an undertaking that they shall be honoured as and when presented. 10. It is stated that petitioner presented the said cheques before the bankers, that is, National Bank of Abu Dhabi, and HSBC Bank, Middle East, and to the shock of petitioner, the said cheques were returned dishonoured with the remarks 'insufficient funds'. Upon repeated follow-ups, the accused nos. 1 and 3 again paid an arbitrary and ad hoc amount of AED 42,500/- in bits and pieces against the cheques that had been returned dishonoured. 11. The petitioner asserts that being aggrieved of the aforesaid conduct, he initiated criminal complaints against the accused with the Abu Dhabi Police for the dishonour of the ten cheques. The Abu Dhabi Courts of First Instance, vide its order dated 26.12.2016 passed in Case No. 13267/2016, convicted the accused no. 3 and sentenced him with imprisonment of two years for the first set of five cheques totalling AED 295,089/-. The said Court, vide its order dated 27.03.2017 passed in Case No. 1918/2017, convicted accused no. 3 and awarded a sentence of imprisonment of three years for the second set of five cheques totalling AED 685,625/-. It is stated that the accused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an orchestrated manner and form one economic entity. He submits that it is a fit case where this Court would lift the corporate veil. He places reliance on DHN Food Distributors Ltd. & Ors. v. London Borough of Tower Hamlets, (1976) 1 WLR 852; Delhi Development Authority v. Skipper Construction Co. (P) Ltd., (2002) 9 SCC 387; and Cox and Kings v. SAP India Pvt. Ltd., 2023 SCC Online SC 1634. 17. Placing reliance on the judgment of this Court in Santanu Ray v. Union of India, 1988 SCC OnLine Del 169, and of the High Court of Bombay in Amit H. Jhaveri and Ors. v. Bank of Baroda a Banking Company and Ors., 2010 SCC OnLine Bom 1559, he submits that the court must penetrate the economic actualities beneath the legal exterior, especially in instances of economic offences. He submits that the Brochure floated to attract investments, copy of email communications, and other evidence prove linkage between the respondent no. 3 and the accused no. 1 companies. They prove that the respondent no. 3 is the main beneficiary of the fraud. 18. He submits that there is an underlying principal-agent relationship between the respondent no. 3 and the accused no. 1. Placing reliance on Varsha Engineer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence: Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consent or connivance of or was attributable to the neglect on the part of any Director, manager, secretary or other officer of the company, such person would also be deemed to be guilty for that offence. Obviously, the burden of alleging and proving consent, connivance or neglect on the part of any Director, etc. would rest upon the complainant. The non obstante clause with which sub-section (2) opens indicates that the deeming provision is distinct and different from the deeming provision in sub-section (1) in which the office or designation of the person in charge of and responsible to the company for the conduct of its business is immaterial. 28. While the essential element for implicating a person under sub-section (1) is his or her being in charge of and responsible to the company in the conduct of its business at the time of commission of the offence, the emphasis in sub-section (2) is upon the holding of an office and consent, connivance or negligence of such officer irrespective of his or her being or not being actually in charge of and responsible to the company in the conduct of its business. Thus, the important and distinguishing feature in sub-section (1) is the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has the authority to sign the cheque for and on behalf of the company, regardless of his office or capacity, can, prima facie, be assumed to be in charge of and responsible to the company in the conduct of its business. And, where such person is prosecuted, then, if it be his defence that the offence was committed without his or her knowledge or that he or she has exercised all due diligence to prevent the commission of such offence, the burden to prove that would be on him or her and can only be discharged at the stage of evidence." 27. In S.P. Mani & Mohan Diary (supra), the Supreme Court culled out the principles that govern the liability of persons covered under Section 141 of the NI Act, as under: "42. Thus, the legal principles discernible from the aforesaid decision of this Court may be summarised as under: 42.1. Vicarious liability can be fastened on those who are in-charge of and responsible to the company or firm for the conduct of its business. For the purpose of Section 141, the firm comes within the ambit of a company; 42.2. It is not necessary to reproduce the language of Section 141 verbatim in the complaint since the complaint is required to be read as a w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be, who have the special knowledge about the role they had played in the company or the partners in a firm to show before the court that at the relevant point of time they were not in charge of the affairs of the company. Advertence to Sections 138 and Section 141 respectively of the NI Act shows that on the other elements of an offence under Section 138 being satisfied, the burden is on the Board of Directors or the officers in charge of the affairs of the company/partners of a firm to show that they were not liable to be convicted. The existence of any special circumstance that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial to show that at the relevant time they were not in charge of the affairs of the company or the firm. 58.3. Needless to say, the final judgement and order would depend on the evidence adduced. Criminal liability is attracted only on those, who at the time of commission of the offence, were in charge of and were responsible for the conduct of the business of the firm. But vicarious criminal liability can be inferred against the partners of a firm when it is specifically averred in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Right Choice Group is a group of seven companies, which in law would mean that each of them is a distinct and separate legal entity, though part of a group. 31. In the complaint, the petitioner also states that he has annexed the Master Data of the respondent no. 3 and the accused no. 1, however, what has been annexed with the present petition is only the copy of the Master Data of the respondent no. 3. 32. The learned ASJ, in its Impugned Order, has recorded that there is nothing on record to establish that the respondent no. 3 herein and the accused no. 1 are the same entity. Therefore, apart from a mere bald assertion in the complaint that the accused no. 1 is the sales and marketing wing of respondent no. 3 or is a branch established by respondent no. 3, no material has been placed on record by the petitioner to prove the said assertion. 33. On the other hand, from the material placed on record by the petitioner itself, it is established that the accused no. 1 and the respondent no. 3 are separate legal entities; one registered in Dubai and the other registered in India. The Brochure itself states that they are separate companies though part of the same group. 34. Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommon knowledge that very large business conglomerates spawn and sustain hundreds of companies under them which may be ultimately held by a particular business family or a group of investors, but officers and professionals are appointed to run the day-to-day affairs of such companies. The whole purpose of having a Managing Director and executive directors appointed for a company is to ensure that all executive decisions are resident with that Managing Director and his/her team of executive directors. A number of non-executive Directors or Directors who are not executive Directors are present on the Board of the Companies for their expert independent advice or oversight of the functioning of the company. Even the role of 'Chairman'/'Chairperson' is not typically of an executive nature since the Chairperson presides over the general meetings or of the functioning of the company and guides its business policies and need not interfere in the day-to-day affairs of the company. Chairperson of large business conglomerates are in fact even further removed from the minutiae of everyday operations of the company and distant from the micro-management which is required to be done by the execut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner not to present the cheques. It is further stated that accused nos. 1 and 3 'on express instructions of accused nos. 2, 4, and 5' issued 10 fresh post-dated cheques towards the repayment of interest. It is stated that the cheques in question were presented by the petitioner for encashment on express instructions from, inter alia, respondent nos. 1 and 2 herein. The petitioner, in the complaint, states as follows: "19. That the Accused No. 3 in connivance with accused No. 2, 4, 5 and 6 herein dishonestly and with the mala fide intent of escaping the payment of legitimate dues of the Complainant issued the cheques in question and made the Complainant believe that the said cheques would be honoured upon presentation. That the said cheques were issued by the accused No. 3 on clear and express instructions of Accused No. 2, 4 and 5 knowing well, that the account maintained by it does not have the requisite balance to honour the payment for which the cheques were issued. Thus, the accused persons have cheated the complainant and caused wrongful losses to the Complainant and wrongful gains to itself. Copy of the documents evidencing the link of the accused entities with each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accused no. 3. 44. In Sunrise Oleo Chemicals Ltd. (Supra), the Court was considering a case where the second accused was the Managing Director of M/s Sunrise Oleo Chemicals Ltd., which owed the debt, and was also the signatory of the cheque in question, which had been issued from the account maintained by Sunrise Oils Mills Limited. It was held that the second accused was, therefore, representing both companies and was the Managing Director of both the companies. Even when the notice was issued post the dishonour of the cheque, Sunrise Oleo Chemicals Ltd., in its reply signed by the second accused, raised no objection on the premise that it is not the drawer of the cheque. It was on those peculiar facts that the Court held that the first accused company cannot escape liability on the premise that it is not the maker or drawer of the cheque. 45. In Amit H. Jhaveri & Ors. (Supra), the Court was considering whether a financial assistance obtained by a person through an unlawful transaction and where no documents were executed, proceedings before the DRT was maintainable. The said judgment can have no application to the facts of the present case wherein statutory liability for dishon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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