IN THE HIGH COURT OF GUJARAT AT AHMEDABAD CRIMINAL MISC.APPLICATION No. 13589 of 2011 To CRIMINAL MISC.APPLICATION No. 13592 of 2011 For Approval and Signature:
HONOURABLE MR.JUSTICE M.R. SHAH =========================================
========================================= NIVA INFRASTRUCTURE PVT.LTD. & 5 Applicant(s) Versus BACKBONE ENTERPRISE LTD. THRO' MAHENDRABHAI DAYABHAI ZALAV & 1 Respondent(s) ========================================= Appearance :
MR. BHADRISH S RAJU for Applicant(s) : 1 6. MR VIMAL M PATEL for Respondent(s) : 1, MR LB DABHI, ADDL. PUBLIC PROSECUTOR for Respondent(s) : 2, ========================================= CORAM : HONOURABLE MR.JUSTICE M.R. SHAH Date : 13/01/2012 CAV JUDGMENT [1.0] As common question of law and facts arise and they are between the same parties, all these applications are disposed of by this common judgment and order.
[1.1] Criminal Miscellaneous Application No.13589/2011 under Section 482 of the Code of Criminal Procedure, 1973 (hereinafter referred to as “CrPC”) has been preferred by the applicants herein – original accused Nos.1 to 6 to quash and set aside the impugned complaint being Criminal Case No.1212/2011 filed by respondent No.1 herein pending in the Court of learned Chief Judicial Magistrate, Rajkot for the offences under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 (hereinafter referred to as “NI Act”) as well as the order of issuance of process in the said complaint and the issuance of warrant against applicant Nos.2 to 4 herein – original accused Nos.2 and 4.
[1.2] Criminal Miscellaneous Application No.13590/2011 under Section 482 of the Code of Criminal Procedure, 1973 (hereinafter referred to as “CrPC”) has been preferred by the applicants herein – original accused Nos.1 to 6 to quash and set aside the impugned complaint being Criminal Case No.1213/2011 filed by respondent No.1 herein pending in the Court of learned Chief Judicial Magistrate, Rajkot for the offences under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 (hereinafter referred to as “NI Act”) as well as the order of issuance of process in the said complaint and the issuance of warrant against applicant Nos.2 to 4 herein – original accused Nos.2 and 4.
[1.3] Criminal Miscellaneous Application No.13591/2011 under Section 482 of the Code of Criminal Procedure, 1973 (hereinafter referred to as “CrPC”) has been preferred by the applicants herein – original accused Nos.1 to 6 to quash and set aside the impugned complaint being Criminal Case No.1214/2011 filed by respondent No.1 herein pending in the Court of learned Chief Judicial Magistrate, Rajkot for the offences under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 (hereinafter referred to as “NI Act”) as well as the order of issuance of process in the said complaint and the issuance of warrant against applicant Nos.2 to 4 herein – original accused Nos.2 and 4.
[1.4] Criminal Miscellaneous Application No.13592/2011 under Section 482 of the Code of Criminal Procedure, 1973 (hereinafter referred to as “CrPC”) has been preferred by the applicants herein – original accused Nos.1 to 6 to quash and set aside the impugned complaint being Criminal Case No.1215/2011 filed by respondent No.1 herein pending in the Court of learned Chief Judicial Magistrate, Rajkot for the offences under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 (hereinafter referred to as “NI Act”) as well as the order of issuance of process in the said complaint and the issuance of warrant against applicant Nos.2 to 4 herein – original accused Nos.2 and 4.
[2.0] That respondent No.1 herein – original complainant has filed impugned complaints being Criminal Case Nos.1212/2011 to 1215/2011 against the applicants herein – original accused Nos.1 to 6 in the Court of learned Chief Judicial Magistrate, Rajkot for the offences punishable under Section 138 of the NI Act read with Sections 420 and 120B of the Indian Penal Code, 1860 (hereinafter referred to as “IPC”), for dishonour of the disputed cheques in question which were issued and given by original accused No.1 which came to be dishonoured on the ground “fund insufficient”. That the said complaints were filed on oath and that the verification of the original complainant was also taken by the learned Chief Judicial Magistrate on oath. That thereafter considering the complaints, verification, documents produced along with the complaints having been prima facie satisfied, the learned Additional Chief Judicial Magistrate, Rajkot has directed to issue summons against the applicants herein – original accused Nos.1 to 6 for the offences under Section 138 of the NI Act. It appears that as applicant No.4 herein – original accused No.4 did not appear before the learned Magistrate despite the service of summons and therefore, by order dated 01.07.2011, learned Magistrate has directed to issue bailable warrant against applicant No.4 herein – original accused No.4. That being aggrieved and dissatisfied with the criminal proceedings / criminal complaints and issuance of the summons against the applicants herein – original accused Nos.1 to 6 for offence under Section 138 of the NI Act, the applicants herein – original accused have preferred the present criminal miscellaneous applications. That the learned Single Judge initially issued notice upon the respondents by order dated 05.10.2011 and while issuing notice, the learned Single Judge also observed that as and when any application for adjournment is made, the trial Court shall consider the same. It appears that despite the above, the learned Chief Judicial Magistrate, Rajkot / trial Court has directed to issue bailable warrant against the applicant Nos.2 and 4 herein – original accused Nos.2 and 4 for recording their plea and therefore, the respective applicants have also prayed to quash and set aside the order dated 21.10.2011 issuing bailable warrant against applicant Nos.2 and 4 herein – original accused Nos.2 and 4.
[3.0] From the respective complaints, it appears that it is the case on behalf of respondent No.1 herein – original complainant that respondent No.1 is a Company registered under the provisions of the Companies Act, 1956 and is the owner of the land bearing City Survey No.1868 admeasuring 35048.48 sq.mtrs of Ward No.9 situated at Rajkot (hereinafter referred to as the “said land”). The said land was purchased by the respondent No.1 by a deed of conveyance dated 24.09.2006 registered at Sr. No.2573 before the Sub Registrar at Rajkot executed between National Textile Corporation (Gujarat) Ltd. and the respondent No.1. Thereafter, collaboration cum development agreement dated 02.01.2008 was entered into between the applicant – Company and the respondent No.1 for the development of the said land on the terms and conditions as stated in the said agreement.
[3.1] It is further case on behalf of respondent No.1 that under the said agreement, the applicant – Company was required to pay an amount of Rs.81 crores in the following manner.
(a) On expiry of 18 months of agreement i.e. 02.07.2009 amount to be paid is Rs.45 crores (which includes Rs.20 crores as per Article 3 para 5 of the agreement)
(b) On expiry of 24 months of agreement i.e. 02.01.2010 amount to be paid is Rs.61 crores (which includes Rs.45 crores)
(c) On expiry of 30 months of agreement i.e. 02.07.2010 amount to be paid is Rs.71 crores (which includes Rs.61 crores)
(d) On expiry of 36 months of agreement i.e. on 02.01.2011 amount to be paid is Rs.81 crores (which includes Rs.71 crores) [3.2] It is the further case on behalf of the original complainant that the applicant Nos.2 to 6 herein – original accused Nos.2 to 6 are the Directors/Authorized Signatory who are managing the day to day affairs of applicant No.1 herein and are responsible for their conduct to applicant No.1. The development agreement is signed by applicant No.2 as a Director of applicant No.1 – Company. The applicants were unable to make the payment as per the periodical commitments made under the development agreement. Despite various reminders, no payment was received. Ultimately, in a review committee held in the month of April 2010 between the applicants and the original complainant, the applicants handed over four separate cheques each of Rs.2.50 crores, all dated 10.06.2010 aggregating to Rs.10 crores. Further, vide letter dated 09.06.2010 the applicants assured the original complainant to complete the procedure and clear all the cheques on or before 15.06.2010. As suggested, the cheques were deposited and the cheques which are the subject matter of the present petitions were dishonored on 16.11.2010 because of insufficient funds in the account of applicant No.1.
[3.3] It is the further case on behalf of the original complainant that thereafter on instructions of the applicants, the cheques were again deposited for clearing which are again dishonored on 07.12.2010 because of insufficient funds in the account of petitioner No.1. In view of the fact that the cheques are signed by applicant No.2 and applicant No.6 herein and the fact that applicant Nos.3 to 5 are also managing the day to day affairs and are responsible for their conduct to the original complainant. Therefore, statutory notice for offence under Section 138 of the NI Act on 03.01.2011 were issued. The said notice was served on the applicants and they failed to give reply to the said notice or to make good the payment in respect of the cheque dishonored.
[3.4] It is also the case on behalf of the original complainant that the aforesaid development agreement is signed by applicant No.2 and even the cheques which are dishonored are also signed by applicant Nos.2 and 6. It is further case on behalf of the complainant that original accused No.4 was managing the day to day affairs of the Company. It is also the case on behalf of the original complainant that applicant Nos.3 and 5 herein – original accused Nos.3 and 5 are also the Directors of the Company who were also managing day to day affairs of applicant No.1 Company and therefore, responsible for their conduct to original accused No.1. As stated herein above, making above averments and allegations in the complaints, respondent No.1 herein – original complainant has filed the aforesaid complaints which are sought to be quashed and set aside by the applicants herein – original accused Nos.1 to 6 by way of present Criminal Miscellaneous Applications under Section 482 of the CrPC.
[4.0] Shri B.S. Raju, learned advocate appearing on behalf of the applicants herein – original accused Nos.1 to 6 has vehemently submitted that as such the applicants have not committed any offence as alleged under Section 138 read with Section 141 of the NI Act. It is submitted that as such at the time when the cheques in question were deposited, there was no legal debt or liability of the applicants more particularly applicant No.1 – original accused No.1 Company and therefore, the impugned complaints deserve to be quashed and set aside.
[4.1] It is further submitted by Shri B.S. Raju, learned advocate appearing on behalf of the applicants that there was a development agreement with regard to the development of the project under which the escrow account was to be opened in the bank and for the purpose of the amount to be released in the ratio of 70% 30% as agreed between the parties. It is submitted that as such the complainant failed to comply with and/or fulfill its obligations under the development agreement. It is submitted that as such the complainant has malafidely suppressed the material fact that the complainant Company had forcibly taken possession of land in question, which is the basis of the entire dispute, by forcibly dispossessing applicant No.1 after on 05.01.2011 i.e. even before the expiry of 15 days from the date of receipt of the said notice by the applicants. It is submitted that even the complainant Company has also ordered freezing of the escrow account into which the funds payable to the complainant Company were being deposited by applicant No.1 Company. Therefore, it is submitted that the aforesaid act, without giving the applicants even the statutory notice period of 15 days to address the situation clearly shows the malafide intention of the complainant in leaving the applicants with no option for settlement or for repaying the amount of the cheques, which were essentially, payment towards development of the said land.
[4.2] It is further submitted by Shri Raju, learned advocate appearing on behalf of the applicants that even the learned Magistrate has not followed the procedure as required under Section 202 of the CrPC before issuing summonses upon accused persons and has issued the summonses mechanically without holding any further inquiry as required under Section 202 of the CrPC. In support of his above submissions, Shri Raju, learned advocate appearing on behalf of the applicants has relied upon the decision of the Hon'ble Supreme Court in the case of K.T. Joseph vs. State of Kerala reported in (2009)15 SCC 199. It is further submitted by Shri Raju, learned advocate that even otherwise the learned Magistrate has materially erred in directing to issue summons against all the accused persons. It is submitted that considering the averments made in the complaint, they do not make the applicant Nos.2 to 6 vicariously liable under the NI Act, as except bald statement that applicant Nos.2 to 6 are incharge of and responsible for the conduct of the business of the Company, there is not a whisper of role attributed to them. Relying upon the decisions of the Hon'ble Supreme Court in the case of Saroj Kumar Poddar vs. State (NCT of Delhi) reported in (2007) 3 SCC 693 and in the case of N.K. Wahi vs. Shekhar Singh reported in (2007) 4 SCALE 188, it is requested to allow the present applications and to quash and set aside the impugned criminal proceedings.
[4.3] It is further submitted by Shri Raju, learned advocate appearing on behalf of the applicants that even the orders passed by the learned Magistrate directing to issue bailable warrants against applicant Nos.2 and 4 herein – original accused Nos.2 and 4 also deserve to be quashed and set aside. It is submitted that as such the applicants were before this Court and the learned Single Judge directed to issue notice upon the respondents and also observed that it will be open for the applicants to apply for adjournment which shall be considered by the learned trial Court, despite the same the learned Magistrate has directed to issue warrants against applicant Nos.2 and 4 herein – original accused Nos.2 and 4, which is absolutely illegal which deserves to be quashed and set aside.
Making above submissions and relying upon above decisions, it is requested to allow the present applications.
[5.0] All these applications are disposed of by Shri Vimal Patel, learned advocate appearing on behalf of the original complainant and Shri L.B. Dabhi, learned Additional Public Prosecutor appearing on behalf of the State.
[5.1] Shri Patel, learned advocate appearing on behalf of the original complainant has submitted that whatever the contentions are raised by the applicants, require detail investigation and are with respect to interpretation of different clauses in the development agreement which are required to be considered at the time of trial. It is submitted that at present what is required to be considered is whether the cheques have been drawn by the accused, which have been drawn from the bank account maintained by the accused who has issued the cheque and whether the same are returned on the ground of “insufficient funds” or not. It is submitted that if the aforesaid are satisfied it can be said that that a prima facie case has been made out for the offence under Section 138 of the NI Act which requires further trial. It is submitted that in a petition under Section 482 of the CrPC, detailed investigation of the case and/or detailed inquiry is not required to be made as if it is a trial. It is submitted that having satisfied that a prima facie case is made out for the offence under section 138 of the NI Act and when the learned Magistrate has directed to issue summons against the accused persons, the same are not required to be interfered by this Court in exercise of powers under Section 482 of the CrPC.
[5.2] It is submitted that as such the learned Magistrate has followed the procedure as required under Section 202 of the CrPC. It is submitted that considering the order passed by the learned Magistrate directing to issue summons, it appears that the learned Magistrate has applied the mind and therefore, it cannot be said that the learned Magistrate has directed to issue summons mechanically. Shri Patel, learned advocate appearing on behalf of the original complainant has relied upon the decision of the Delhi High Court in the case of Abhishek Agrawalla vs. Boortmalt NV and Anr. reported in 2011 (122) DRJ 421 as well as the Full Bench decision of the Bombay High Court in the case of Rajesh Bhalchandra Chalke vs. State of Maharashtra and Emco Dynatorq Pvt. Ltd. reported in 2011 (1) MhLJ 244 in support of his above submissions.
[5.3] It is further submitted by Shri Patel, learned advocate appearing on behalf of the original complainant that as such as the applicants failed to make the payment under the development agreement, respondent Company terminated the development agreement and took over the legal possession of the land after drawing panchnama.
[5.4] It is further submitted that the cheques have been issued by applicant No.1 herein – original accused No.1 Company under the development agreement which was signed by applicant No.2 herein and the cheques which are dishonored are signed by applicant Nos.2 and 6 and authority to one Deepak Parmar is given by applicant No.4 herein as Director of the Company which itself demonstrate that the applicant No.4 is also managing the day to day affairs of the Company and as applicant Nos.3 and 5 are also the Directors of the Company, who are also managing the day to day affairs of applicant No.1 Company, it can be said that all of them are responsible for their conduct to applicant No.1 original accused No.1 Company and therefore, vicariously liable for the offence alleged to have been committed by original accused No.1 Company.
Making above submissions and relying upon above decisions, it is requested to dismiss the present applications.
[6.0] Heard the learned advocates appearing on behalf of the respective parties at length. At the outset it is required to be noted that the impugned criminal complaints have been filed by respondent No.1 herein against applicant herein – original accused Nos.1 to 6 for the offences punishable under Section 138 of the NI Act read with Section 420 and 120B of the IPC for dishonor of the cheques issued by applicant No.1 herein – original accused No.1 signed by applicant Nos.2 and 4 herein – original accused Nos.2 and 4. It appears that the said cheques have been issued by original accused No.1 under the development agreement which has been signed by applicant No.2 herein – original accused No.2. It is also required to be noted that the present criminal miscellaneous applications have been preferred by the applicants herein – original accused, affirmed by one Deepak Parmar who is alleged to be the authorized representative of original accused No.1 Company and the said authorization is signed by applicant No.4 herein – original accused No.4. Applicant Nos.3 and 5 herein are arraigned as accused as Directors of the original accused No.1 Company. Considering the decisions of the Hon'ble Supreme Court in the case Sarojkumar Poddar (Supra) and N.K. Wahi (Supra) and the recent decision of the Hon'ble Supreme Court in the case of K.T. Joseph (Supra), when there are no specific averments and allegations against applicant Nos.3 and 5 herein – original accused Nos.3 and 5 that they were in day to day affairs and management of the Company at the relevant time when the development agreement was executed and/or they actually participated actively in the transaction and/or even at the time of issuance of the cheques and except the bald and general statement that they are also in administration and management of accused No.1 Company and there are no further averments and allegations, applicant Nos.3 and 5 herein – original accused Nos.3 and 5 cannot be held vicariously liable under Section 141 of the NI Act for the offence alleged to have been committed by original accused No.1 Company for the offence under Section 138 of the NI Act. It is to be noted that so far as the other accused are concerned, it appears that original accused Nos.2 and 6 are the signatories to the cheques and original accused No.1 is the Company who has issued the cheques and applicant No.4 – original accused No.4 is the person / Director who has granted the authorization in favour of one Deepak Parmar to file present applications and to act as authorized representative of original accused No.1, it can be said that they all are in day to day affairs and management of the original accused No.1 Company and therefore, it can be prima facie said that they can be held vicariously liable under Section 141 of the NI Act, for the offences alleged to have been committed by original accused No.1 for offence under Section 138 of the NI Act. It can be said that there is a prima facie case made out against the rest of the applicants i.e. accused Nos.1, 2, 4 and 6 for further trial.
[6.1] Now, so far as the contention on behalf of the applicants to quash and set aside the impugned orders passed by the learned Magistrate directing to issue summons against the applicants – original accused on the ground that the learned Magistrate has not followed the procedure as required under Section 202 of the CrPC is concerned, considering the impugned order passed by the learned Magistrate directing to issue summons against accused persons, it appears that the learned Magistrate has applied the mind and has considered the complaint, verification and the supporting documents and only thereafter the learned Magistrate has directed to issue summons against the applicants – accused persons for the offence under Section 138 of the NI Act. It is required to be noted that as such the complaints have been filed by the original complainant for the offence under Section 138 of the NI Act as well as for the offence under Sections 420 read with Section 120B of the IPC and the learned Magistrate has directed to issue summons upon the accused persons for the offences under Section 138 of the NI Act only. Therefore, the contention on behalf of the applicants that the learned Magistrate has directed to issue summons mechanically has no substance. If the learned Magistrate had issued the summons mechanically, in that case, he would have issued the summons for the offence under Sections 420 and 120B of the IPC also. However, despite the fact that allegations were made for the offence under Section 138 of the NI Act as well as under Section 420 read with Section 120B of the IPC and the learned Magistrate has issued the summons only for offence under Section 138 of the NI Act, it can be said that the learned Magistrate has applied the mind and has directed to issue summons only for the offence under Section 138 of the NI Act. Considering the impugned order, it cannot be said that the learned Magistrate has not followed the procedure as required under Section 202 of the CrPC. It appears that the learned Magistrate has applied the mind before issuing the summons. Under the circumstances, on the aforesaid ground, the impugned complaints are not required to be quashed and set aside.
[6.2] Now, so far as the contention on behalf of the applicants that there was no legal debt or liability and even possession of the disputed land was taken over by the complainant forcibly immediately after issuance of the statutory notice and within 15 days and therefore, once the possession was taken over, there was no debt or liability of the applicants is concerned, it is required to be noted that it is the case on behalf of the complainant that the possession has been taken over as the applicants failed to make the payment under the development agreement and only after the cheques were dishonored on the ground of “insufficient funds”. Learned advocates appearing on behalf of the respective parties have made elaborate submissions on various clauses of the development agreement with respect to their respective liabilities. However, all these aspects are required to be considered at the time of trial on appreciation of evidence and on interpretation of various clauses of the development agreement. At this stage this Court is not required to conduct detail investigation and/or inquiry with respect to the clauses of the development agreements and who was at fault. What is required to be considered is whether the cheque has been issued from the bank account maintained by the accused and the same has been dishonored on the ground “insufficient funds”. All other things are defences which are required to be considered at the time of trial. Under the circumstances, as such no case is made out to quash and set aside the impugned complaints so far as applicant Nos.1, 2, 4 and 6 are concerned in exercise of powers under Section 482 of the CrPC.
[6.3] Now, so far as the grievance made by the learned advocate appearing on behalf of the applicants with respect to the issuance of bailable warrants by the learned Magistrate against accused Nos.2 and 4 is concerned, it is required to be noted that the applicants were before this Court and even the learned Single Judge while issuing the notice also observed that as and when any application for adjournment is made, learned trial Court shall consider the same, the learned Magistrate ought to have waited till the outcome of the present applications as this Court was seized of the matters and ought not to have issued the bailable warrants against applicant Nos.2 and 4. Under the circumstances, impugned order passed by the learned Magistrate directing to issue bailable warrants against applicant Nos.2 and 4 cannot be sustained and the same deserves to be quashed and set aside. However, as the present applications are dismissed so far as applicant Nos.2 and 4 are concerned, they are required to appear before the learned Magistrate on the next date of hearing.
[7.0] In view of the above and for the reasons stated above, all these applications succeed in part. Impugned complaints being Criminal Case Nos.1212/2011 to 1215/2011 filed by respondent No.1 herein pending in the Court of learned Chief Judicial Magistrate, Rajkot are hereby quashed and set aside so far as applicant Nos.3 and 5 herein – original accused Nos.3 and 5 are concerned. However, the same shall be without prejudice to the rights and contentions of the original complainant and prosecution against rest of the accused Nos.1, 2, 4 and 6 and they shall be tried in accordance with law and on merits. Present applications are hereby dismissed so far as applicant Nos.1, 2, 4 and 6 are concerned. The impugned orders passed by the learned Chief Judicial Magistrate, Rajkot directing to issue bailable warrants against applicant Nos.2 and 4 herein – original accused Nos.2 and 4 dated 21.10.2011 are hereby quashed and set aside with an observation that as the present applications are dismissed qua them, they are required to appear before the learned Chief Judicial Magistrate in the aforesaid complaints on the next date of hearing for recording of their plea and for further trial. Rule is made absolute to the aforesaid extent only in each of the applications.
(M.R. Shah, J.) menon