IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 6TH DAY OF JUNE 2019 BEFORE THE HON’BLE MR. JUSTICE ALOK ARADHE CRIMINAL PETITION NO.5404 OF 2017 C/w CRIMINAL PETITION NOs. 4509/2018 4510/2018, 4511/2018 AND 8672/2017 CRL.P. NO.5404 OF 2017 BETWEEN:
MR. KIRAN VITTAL POOJARY S/O MR. VITTAL C POOJARY AGED ABOUT 38 YEARS, R/AT C/207, DHUP CHAON, OFF FOUR BUNGLOWS ROAD, NAV-KIRAN MARG, ANDHERI (W) MUMBAI - 400 053 MAHARASHTRA.
(BY MR. C K NANDAKUMAR, ADV.) AND:
M/S PRISMATIC ENGINEERING PRIVATE LIMITED HAVING THEIR REGISTERED OFFICE AT PLOT NO.308, LINK ROAD, JIGANI INDUSTRIAL AREA, JIGANI BANGALORE - 560 105 REPRESENTED BY ITS GENERAL MANAGER, FINANCE MR. MANOHAR. R.
(BY MR. UDAY SHANKAR R M, ADV.) - - -
… PETITIONER … RESPONDENT THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 CR.P.C. PRAYING TO QUASH THE COMPLAINT AND ENTIRE PROCEEDINGS IN C.C.NO.7122/2017 ON THE FILE OF XLII A.C.M.M., BENGALURU AS AGAINST THE PETITIONER AND ETC.
CRL.P.NO.4509/2018 BETWEEN:
MR KIRAN VITTAL POOJAR Y S/O. MR. VITTAL C. POOJARY, AGED ABOUT 38 YEARS, RESIDING AT: C/207, DHUP CHAON, OFF FOUR BUNGLOWS ROAD, NAV-KIRAN MARG, ANDHERI (W), MUMBAI – 400 053.
MAHARASHTRA.
ALSO AT:
ANDRA PRADESH INDUSTRIAL INFRASTRUCTURE CORPORATION, INDUSTRIAL AREA LOCALITY, PLOT NO. B2-3, TIRUPATI CUDDAPAH, TELAGANA-517520 AND REGIONAL OFFICE AT NO.19/3, 7TH MILE, SRINIVASA INDUSTRIAL ESTATE, KANAKLAPURA MAIN ROAD, KONANAKUNTE (POST) BENGALURU-560062. … PETITIONER (BY MR. C K NANDAKUMAR, ADV.) AND:
HICOTRONICS DEVICES PRIVATE LIMITED A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956, HAVING ITS REGISTERED OFFICE AT NO.39/1, 1ST MAIN ROAD, NEW TIMBER YARD LAYOUT, MYSORE ROAD CROSS, BENGALURU - 560026.
R/ B ITS MARKETING MANAGER, SRI. S. JAGANNATH ROA.
(BY SMT. APARNA MADHUKAR KULKARNI, ADV.) - - -
… RESPONDENT THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 CR.P.C PRAYING TO QUASH THE ENTIRE COMPLAINT AND ENTIRE PROCEEDINGS IN C.C.NO.24570/2016 ON THE FILE OF XXV ADDL.C.M.M., BENGALURU AS AGAINST THE PETITIONER AND ETC.
CRL.P.NO.4510/2018 BETWEEN:
MR KIRAN VITTAL POOJAR Y S/O. MR. VITTAL C. POOJARY, AGED ABOUT 38 YEARS, RESIDING AT: C/207, DHUP CHAON, OFF FOUR BUNGLOWS ROAD, NAV-KIRAN MARG, ANDHERI (W), MUMBAI – 400 053.
MAHARASHTRA.
ALSO AT:
ANDRA PRADESH INDUSTRIAL INFRASTRUCTURE CORPORATION, INDUSTRIAL AREA LOCALITY, PLOT NO. B2-3, TIRUPATI CUDDAPAH, TELAGANA-517520 AND REGIONAL OFFICE AT NO.19/3, 7TH MILE, SRINIVASA INDUSTRIAL ESTATE, KANAKLAPURA MAIN ROAD, KONANAKUNTE (POST) BENGALURU-560062. … PETITIONER (BY MR. C K NANDAKUMAR, ADV.) AND:
HICOTRONICS DEVICES PRIVATE LIMITED A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956, HAVING ITS REGISTERED OFFICE AT NO.39/1, 1ST MAIN ROAD, NEW TIMBER YARD LAYOUT, MYSORE ROAD CROSS, BENGALURU - 560026.
R/ B ITS MARKETING MANAGER, SRI. S. JAGANNATH ROA.
(BY SMT. APARNA MADHUKAR KULKARNI, ADV.) - - -
… RESPONDENT THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 CR.P.C PRAYING TO QUASH THE ENTIRE COMPLAINT AND ENTIRE PROCEEDINGS IN C.C.NO.24573/2016 ON THE FILE OF XXV A.C.M.M., BENGALURU AS AGAINST THE PETITIONER AND ETC.
CRL.P.NO.4511/2018 BETWEEN:
MR KIRAN VITTAL POOJAR Y S/O. MR. VITTAL C. POOJARY, AGED ABOUT 38 YEARS, RESIDING AT: C/207, DHUP CHAON, OFF FOUR BUNGLOWS ROAD, NAV-KIRAN MARG, ANDHERI (W), MUMBAI – 400 053.
MAHARASHTRA.
ALSO AT:
ANDRA PRADESH INDUSTRIAL INFRASTRUCTURE CORPORATION, INDUSTRIAL AREA LOCALITY, PLOT NO. B2-3, TIRUPATI CUDDAPAH, TELAGANA-517520 AND REGIONAL OFFICE AT NO.19/3, 7TH MILE, SRINIVASA INDUSTRIAL ESTATE, KANAKLAPURA MAIN ROAD, KONANAKUNTE (POST) BENGALURU-560062. … PETITIONER (BY MR. C K NANDAKUMAR, ADV.) AND:
HICOTRONICS DEVICES PRIVATE LIMITED A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956, HAVING ITS REGISTERED OFFICE AT NO.39/1, 1ST MAIN ROAD, NEW TIMBER YARD LAYOUT, MYSORE ROAD CROSS, BENGALURU - 560026.
R/ B ITS MARKETING MANAGER, SRI. S. JAGANNATH ROA.
… RESPONDENT (BY SMT. APARNA MADHUKAR KULKARNI, ADV.) - - -
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 CR.P.C PRAYING TO QUASH THE ENTIRE COMPLAINT AND ENTIRE PROCEEDINGS IN C.C.NO.24578/2016 ON THE FILE OF XXV A.C.M.M., BENGALURU AS AGAINST THE PETITIONER AND ETC.
CRL.P.NO.8672/2017 BETWEEN:
MR KIRAN VITTAL POOJARY, DIRECTOR S/O. MR. VITTAL C. POOJARY, AGED ABOUT 38 YEARS, RESIDING AT: C/207, DHUP CHAON, OFF FOUR BUNGLOWS ROAD, NAV-KIRAN MARG, ANDHERI (W), MUMBAI – 400 053.
MAHARASHTRA.
(BY MR. C K NANDAKUMAR, ADV. FOR MR.KUMAR RAM C.M., ADV.) AND:
M/S SMART MANAGEMENT CONSULTANTS NO.21, 3RD MAIN ROAD, … PETITIONER CHAMRAJPET, BENGALURU – 560018 REPRESENTED BY IT’S PARTNER, SMT. RAJANI T.R.
(BY MR. ASHOK G.V, ADV.) … RESPONDENT THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 CR.P.C PRAYING TO QUASH THE ENTIRE COMPLAINT AND ENTIRE PROCEEDINGS IN C.C.NO.6273/2017 ON THE FILE OF XLII ADDITIONAL CHIEF METROPOLITAN MAGISTRATE, BENGALURU AS AGAINST THE PETITIONER AND ETC.
THESE CRIMINAL PETITIONS COMING ON FOR ADMISSION THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER In these petitions under Section 482 of the Code of Criminal Procedure, 1973 the petitioner who is the nominal Director of Avni Energy Solutions Private Limited seeks quashment of entire proceedings in C.C.No.7122/2017 pending before XLII Additional Chief Metropolitan Magistrate, Bengaluru.
2. Facts giving rise to filing of the petitions briefly stated are that the petitioner is a employee of SIDBI Venture Capital Limited, which appointed the petitioner as a nominee Director of the Avni Energy Solutions Private Limited. As nominee Director, the petitioner has no role in day to day affairs of the company. The petitioner had also resigned from the Board of Directors on 09.09.2016 as Nominee Director and was appointed as Observer on the Board of Directors on the same day. The complainant is a company registered under the Companies Act, 1956. In the course of transaction, towards part payment of the dues, an invoice was issued along with a cheque dated 24.05.2016 for an amount of Rs.1,97,174/-. The complainant submitted the cheque. However, the cheque was dishonored with the endorsement that ‘the payment was stopped by the Drawer’. The complainant thereupon sent a legal notice dated 28.06.2016 and thereafter the complaint was filed. The Magistrate by an order dated 18.11.2016, has taken cognizance of the offence and directed issuance of summons to the petitioner. In the aforesaid factual background, the petitioner has approached this court.
3. Learned counsel for the petitioner submitted that Trial Court ought to have appreciated that the petitioner was merely an investor nominee Director and was not considered as an officer who is in default for any purpose either under Section 2(31) read with Section 5 of the Companies Act, 1956 or under Section 2(60) of the Companies Act, 2013. It is also pointed out that there is no specific averment made in the complaint made against the petitioner other than the general statement. In support of his submissions, learned counsel for the petitioner has placed reliance on the decision of the Supreme Court in ‘S.M.S PHARMACEUTICALS LTD. VS. NEETA BHALLA AND ANOTHER’, (2005) 8 SCC 89. On the other hand, learned counsel for the respondent has supported the order and has submitted that once the requirement under Section 141 of the Negotiable Instruments Act, 1881 (hereinafter referred to as ‘the Act’ for short) is satisfied, the Magistrate can issue process against such Director. It is further submitted that the complaint contains the basic averment, which is sufficient to make out a case against the Director.
4. I have considered the submissions made by learned counsel for the parties and have perused the record. A Liability under Section 141 of the Act is fastened vicariously on a person connected with the company. Therefore, the persons who are sought to be criminally made liable should be at the time of commission of offence, in charge of and responsible to the company for conduct of the company. It is well settled that every person connected with affairs of the company would not fall within the ambit of Section 141 of the Act and only those persons who were in charge of and responsible for the conduct of business of the company at the time of commission of offence will be liable for criminal action. The Supreme Court in the case of ‘K.K.AHUJA VS. V.K.VORA AND ANOTHER’, (2009) 10 SCC 48 after considering the provisions of Section 141 of the Act has summarized the legal position as follows:
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 Section 2(24) of the Companies Act] or a person referred to in clauses (e) and (f) of Section 5 of the 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) of the Act. 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 cannot 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, by 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.
Similar view has been taken in the cases of ‘HOSHIAR SINGH VS. STATE’, 2000 SCC ONLINE DEL 89 ‘SOORAJ DEVI VS. PYARE LAL’, 1981(1) SCC 500 ‘RAJINDER PRASAD VS. BASHIR AND ORS.’, 2001(8) SCC 522 ‘MONABEN KETANBHAI SHAH AND ANR. VS. STATE OF GUJRAT AND ORS.’, 2004 (7) SCC 15, ‘‘K.P.G.NAIR VS. JINDAL MENTHOL INDIA LTD.’, 2001 (10) SCC 218, ‘ U.J.S.CHOPRA VS. STATE OF BOMBAY’, AIR 1955 SCC 633.
5. In S.M.S PHARMACEUTICALS LTD. supra It has further been held that mere reproduction of the wording of Section 141(1) of the complaint is not sufficient to make a person liable to face prosecution.
6. In the backdrop of aforesaid legal position, facts of the case may be examined. In the instant case, following averments in para 9 of the complaint have been made.
“That the accused Nos.2 to 5 are in charge of the operations, management and administration of accused No.1. Hence, they are arrayed as accused in the complaint.”
7. Thus, it is evident that no specific role has been attributed to the petitioner and there has been a reproduction of the language of the provision used in Section 141 of the Act. Admittedly, the petitioner was a nominee Director who had resigned on 09.09.2016. Section 2(60) of the Companies Act, 2013 defines the expression ‘officers who is in default’ to mean the officers of a company mentioned therein viz., whole time director, key managerial personnel, where there is no key managerial personnel such director or directors as specified by the board in this behalf, any person who under the immediate authority of the board or any key managerial person is charged with any responsibility as well as any person in accordance with whose advise directions or instructions the board of directors of the company is accustomed to act. In the instant case, from the averments made in the complaint, the petitioner also does not fall within the meaning of the expression ‘officers who is in default’. Thus, even if the averments made in the complaint are taken to be correct in its entirety, then also no offence is made out against the petitioner. So far as decision of the Supreme Court relied upon by learned counsel for the respondent in case of ‘GUNMALA SALES PRIVATE LIMITED VS. ANU MEHTA AND OTHERS’, (2015) 1 SCC 103 is concerned, the same is not of any assistance to the petitioner as it is an authority for the proposition that if a Director was in charge and responsible for conduct of the business at the relevant time, the Magistrate can issue summons to him. The continuance of the proceedings against the petitioner in the fact situation of the case amounts to abuse of process of law. In view of preceding analysis, the entire proceedings in C.C.No.7122/2017 pending before XLII Additional Chief Metropolitan Magistrate, Bengaluru are hereby quashed.
In the result, the petitions are allowed.
Sd/- JUDGE SS AAJ: Crl.P. No.5404/2017 c/w.Crl.P. Nos.4509/2018, 4510/2018, 07.08.2019 4511/2018 and 8672/2017 ORDERS ON ‘BEING SPOKEN TO’ After hearing learned Counsel for the parties, at page No.15 of the operative portion of the order dated 6.6.2019 passed in Criminal petition Nos.5404/2017, 8672/2017, 4509/2018, 4510/2018 and 4511/2018 shall be deleted and substituted as under:
“ In view of preceding analysis, the entire proceedings in C.C. Nos.7122/2017, 6273/2017, 24570/2016, 24573/2016 and 24578/2016 pending before the XLII and XXV Additional Chief Metropolitan Magistrate, Bengaluru are hereby quashed.”
This order shall be read in conjunction with the order dated 06.06.2019 passed in the aforesaid petitions.
Sd/- JUDGE Cs/-