Kapil Choudhary And Others vs Grasim Industries Limited

The petitioner has filed the present petition under Section 482 of the Cr.P.C for quashment of proceedings of complaint case registered under Section 138 of the Negotiable Instruments Act, which is pending before the Judicial Magistrate First Class, Nagda, District Ujjain as Criminal Case No.942/2017 (Grasim Industries Ltd. Vs. Spentex Ltd & Others).

The respondent is a company (hereinafter referred to as "the complainant Company") registered under the provisions of the Companies Act, 2013 having its plant at Nagda, District Ujjain. Shri Mukund Choudhary is the Managing Director of the Spentex Limited (in short hereinafter referred as "Company" and present applicants are Directors of the Company.

The company in transaction of its business has placed the purchase orders for VSF/Viscosestaple fibers. Against the supply of material, complainant company has issued a invoice of Rs.1,01,35,920.23 to the accused. According to the complainant company, against the aforesaid payment, on 24.03.2017, a Cheque No.323747 drawn on Axis Bank, Okhla, New Delhi of Rs.23.00 lac was issued by the Managing Director of the company to the complainant. The said cheque was presented for encashment on 24.03.2017 and same was dishonored because of the insufficient funds in the account of the company. The company has also issued cheques bearing Cheque Nos.677144, 677145, 677146 and 677147 of Rs.26.00 lac each to the complainant. The aforesaid cheques were presented for encashment on 19.05.2017 but same were also dishonored because of the insufficient funds.

The complainant/company issued a notification dated 30.05.2017 under Section 138 of the Negotiable Instruments Act, 1881 which was received on 10.06.2017 and when the amount was not paid within 15 days, a cause of action accrued on 26.06.2013 for filing the complaint. Accordingly the respondent/complainant company filed the complaint on 18.07.2017 before the JMFC, Nagda. Vide order dated 09.08.2017, learned JMFC took cognizance against company, Managing Director Mukund Choudhary and the present applicants and issued summons for their appearance on 11.10.2017.

After receipt of the said summons, the present applicants being Directors of a company have approached this Court under Section 482 of the Cr.P.C for quashment of the proceedings on the ground that under Section 141 of the Negotiable Instruments Act for prosecution of any Director or other Officer of the Company, it has to be established that offence has been committed with the consent or knowledge of such Director, Secretary or Officer of the Company. In the complaint, no such allegations have been made against the present applicants. In the memo of complaint, the complainant company has pleaded that Mr. Mukund Choudhary is a whole time Director and incharge of day to day affair of the Company. The petitioners have also raised the grounds that the respondent/complainant company approached the National Company Law Tribunal, New Delhi for recovery of total debt of Rs.1,09,82,416.42 in respect of the same sale/transaction in which the impugned cheques were issued. Vide judgement dated 14.06.2018, the Tribunal has dismissed the complaints. Thereafter, the respondent preferred an appeal before the National Company Law Appellate Tribunal, New Delhi and vide order dated 24.07.2018 the appeal has also been dismissed.

Shri Ramesh Saboo, learned counsel for the applicants submits that in complaint respondent company has specifically pleaded that Shri Mukund Choudhary being a Managing Director has signed the cheques and he is also incharge of day to day affairs of the company. Shri Saboo has referred the pleadings made in the para 4 and 9 of the complaint. He submits that there is no allegation in entire complaint that the present applicants being accused Nos.3 to 7 are responsible & aware of the day to day affairs of the company, hence, the learned Magistrate has wrongly taken the cognizance against them. Shri Saboo, learned counsel further submits that there is no legally recoverably debt because the Company Law Tribunal has already dismissed the company petition filed for recovery of the same amount, therefore, the complaint under Section 138 is not maintainable. In support of his contention, Shri Saboo has placed reliance over the judgement passed by the Apex Court in case of S.M.S Pharmaceuticals Ltd. Vs. Neeta Bhalla and Another, reported in (2005) 8 SCC 89 & Pepsico India Holdings Private Limited Vs. Food Inspector and Another, reported in (2011) 1 SCC 176.

Shri Piyush Mathur, learned senior counsel appearing on behalf of the respondent/complainant submits that it is a matter of evidence and trial that the present applicants were Directors for the name sake or incharge of day to day affairs of the company. At this stage complaint cannot be dismissed because it fulfills the requirement of Section 141(1) of the Negotiable Instruments Act. He further submits that so far as the question of dismissing of the petition & appeal by the Tribunal and appellate Tribunal are concerned, it can be a defence of the accused which cannot considered at this stage. It is for the learned Magistrate to consider whether the debts are legally recoverable or not. However, the Company Tribunal and appellate Tribunal has dismissed the complaint and appeal on a technical grounds and granted liberty to the present complaint/company to take recourse available under the law.

In support of his contention, Shri Piyusyh Mathur, learned senior counsel has placed reliance over the judgement passed by the Apex Court in case of Sampelly Satyanarayana Rao Vs. Indian Renewable Energy Development Agency Limited, reported in (2016) 10 SCC 458.

I have heard learned counsel for the parties.

That in para 4 of the complaint, it is pleaded that accused Nos.3 & 4 are full time Directors and accused Nos.5 & 6 are the Directors and 7 is nominated Director of the Company. It is also pleaded that accused Nos.3 to 7 Company Director are aware of day to day affairs of the company and they have knowledge of transaction and issuance of the impugned cheques involved in the complaint. Being Directors despite knowledge they did not took any action for presenting the commission of offence under Section 138. Para 4 is reproduced below:

"4. यह कि अभियुक्त क्रमांक 3 व 4, अभियुक्त क्रमांक 1 कम्पनी के पूर्णकालीन डायरेक्टर हैं, अभियुक्त क्रमांक 5 व 6, अभियुक्त क्रमांक 1 कम्पनी के डायरेक्टर हैं, तथा अभियुक्त क्रमांक 7, अभियुक्त क्रमांक 1 कम्पनी का नामनिर्देशित डायरेक्टर हैं। अभियुक्त क्रमांक 3 लगायत 7, अभियुक्त क्रमांक 1 कम्पनी के डायरेक्टर्स होकर अभियुक्त क्रमांक 1 कम्पनी के दिनप्रतिदिन के व्यवहारों से अवगत होकर अभियोगी कम्पनी से अभियुक्त क्रमांक 1 कम्पनी के साथ हुए व्यवहारों एवं अभियुक्त क्रमांक 2 द्वारा अभियोगी कम्पनी के हित में जारी विभिन्न विवादित चैकों का उन्हें डायरेक्टर की हैसियत से व्यक्तिगत ज्ञान हैं। तथा अभियुक्त क्रमांक 3 लगायत 7 ने समस्त तथ्य उनके ज्ञान में होते हुए धारा 138 नि.ई. एक्ट के अपराध को रोकने के संबंध में कोई कार्यवाही नहीं की।"

As per sub section (1) of Section 141 of the Negotiable Instruments Act if the person committing an offence under Section 138 is a company, then every person who, at the time offence was committed, was in charge of, and was responsible to the company for the conduct of the business of 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. As per proviso 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. By virtue of sub Section (1) of Section 141 there is a provision that every person who at the time of commission of offence was in charge and responsible for the company shall be deemed to be guilty of the offence but by virtue of proviso such deeming clause would not apply, if he proves that the offence was committed without his knowledge, hence, Shri Piyush Mathur, learned senior counsel appearing on behalf of the respondent has rightly submitted that its a matter of evidence and trial as to whether the present applicants were responsible or were in charge for the conduct of business of the company.

The Apex Court in case of K.K. Ahuja Vs. V.K. Vora and Others, reported in (2009) 10 SCC 48 has held that if the accused is the Managing Director or Joint Managing Director, it is not necessary to make an averment that he is in charge of, and is responsible for the conduct of the person of the Company. If in case 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 and in case of Director, Secretary or Manager as defined under Section 2(24) of the Companies Act and averment in the complaint that he was in charge to company for the conduct of the business of the company is necessary to bring the case under Section 141 (1) of the Act and no further averment would be necessary in the complaint. Relevant portion of the aforesaid judgement is reporduced below. :

"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 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 that he was in charge of, and was responsible to the company, for the conduct of the business of the company is necessary to bring the case under section 141(1). No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable under section 141(2) by making necessary averments relating to consent and connivance or negligence, in the complaint, to bring the matter under that sub-section.

(iv)Other Officers of a company can not be made liable under sub-section (1) of section 141. Other officers of a company can be made liable only under sub-section (2) of Section 141, be averring in the complaint their position and duties in the company and their role in regard to the issue and dishonour of the cheque, disclosing consent, connivance or negligence.

If a mere reproduction of the wording of section 141(1) in the complaint is sufficient to make a person liable to face prosecution, virtually every officer/employee of a company without exception could be impleaded as accused by merely making an averment that at the time when the offence was committed they were in charge of and were responsible to the company for the conduct and business of the company. This would mean that if a company had 100 branches and the cheque issued from one branch was dishonoured, the officers of all the 100 branches could be made accused by simply making an allegation that they were in charge of and were responsible to the company for the conduct of the business of the company. That would be absurd and not intended under the Act. As the trauma, harassment and hardship of a criminal proceedings in such cases, may be more serious than the ultimate punishment, it is not proper to subject all and sundry to be impleaded as accused in a complaint against a company, even when the requirements of section 138 read and section 141 of the Act are not fulfilled. "

So far as the submission of Shri Saboo that respondent company had approached the National Company Law Tribunal for recovery of debt for the same amount which is involved in this cheque and the complaint has been dismissed is concerned. The Tribunal has dismissed the complaint because there is a dispute regarding quality of the good supplied, discount to be given to the company as well as the pending claim against the credit note. The National Company Appellate Tribunal has also dismissed the appeal as there was a dispute relating to the quality of the product and other questions are required to be determined is that whether the said dispute is settled between the parties or not. The petition filed under Section 9 of I & B Code was not found maintainable before the Tribunal. However, the complainant company has been given liberty to move before the appropriate forum for appropriate decision. However, this cannot be a defence of the company or Directors in the trial.

Even otherwise, the Apex Court in case of Sampelly Satyanarayan Rao (Supra) has held that while dealing with the quashing of compalints, Court ordinarily has to proceed on the basis of complaint averments made in the complaint. The defence of the accused cannot be considered at this st age. Relevant portion of the aforesaid judgement is reproduced below:

"16. As is clear from the above observations of this Court, it is well settled that while dealing with a quashing petition, the Court has ordinarily to proceed on the basis of averments in the complaint. The defence of the accused cannot be considered at this stage. The court considering the prayer for quashing does not adjudicate upon a disputed question of fact. 17. In Rangappa versus Sri Mohan[9], this Court held that once issuance of a cheque and signature thereon are admitted, presumption of a legally enforceable debt in favour of the holder of the cheque arises. It is for the accused to rebut the said presumption, though accused need not adduce his own evidence and can rely upon the material submitted by the complainant. However, mere statement of the accused may not be sufficient to rebut the said presumption. A post dated cheque is a well recognized mode of payment."

In view of the above discussion, I do not find any merit in this petition which is hereby dismissed.

No order as to cost.