IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 30TH DAY OF JULY, 2019 BEFORE THE HON'BLE MR. JUSTICE JOHN MICHAEL CUNHA CRIMINAL PETITION No.2738/2016 BETWEEN:
Smt. Yadushaila Ranganathan Aged 39 years, W/o Sri. Srinivasa Desikan, Director, M/S. Hindustan Turbomachinery Ltd., R/o No.4307, 1st Cross, 14th Main, ‘A’ Block, 2nd Stage, Rajajinagar, Bengaluru – 560 010. …Petitioner (By Sri. N. Jagadish Baliga, Advocate) AND:
M/s. Transvahan Technologies India Pvt. Ltd., (A company registered under the Companies Act, 1956) Registered Office at 1st Floor, No.69, 6th Main, 3rd Phase, Peenya Industrial Area, Bengaluru – 560 058.
Represented by its Managing Director, Sri. S.R. Venkatesan, Aged 59 years, S/o Sri. S. Ramakrishnan.
… Respondent (By Sri. K. Jesu Prasad, Advocate – Absent ) This Criminal petition is filed under Section 482 of Cr.P.C. praying to quash the order dated 02.08.2014 issuing the summons to the petitioner and the entire proceedings insofar as the petitioner is concerned in C.C. No.23527/2014 on the file of XVIII A.C.M.M. and XX Additional Small Causes Judge, Bengaluru and allow the petition.
This Criminal petition coming on for Admission, this day, the Court made the following:
O R D E R Heard learned counsel for petitioner. Counsel for respondent is absent. Perused the records.
2. The only contention raised by the learned counsel for the petitioner is that the petitioner (accused No.3) has been prosecuted for the alleged offence under Section 138 of Negotiable Instruments Act (hereinafter referred to as ‘NI Act’, for short), solely on the ground that she was the Director of the accused No.1/Company at the relevant time. The averments made in the complaint would indicate that the cheques in question were issued by accused No.1 towards discharge of the debt and liability due by it. Cheques were signed by accused No.2 as the authorized Managing Director. Under the said circumstances, prosecution of the petitioner/accused No.3 merely on the ground that she was the Director of the accused No.1/Company is not tenable and is contrary to Sections 138 and 142 of the NI Act.
3. A reading of the complaint indicates that pursuant to a Memorandum of Understanding dated 07.05.2012, accused persons took up the responsibility of reimbursing the advance amount of Rs.30,00,000/- along with interest and costs to the complainant and issued Cheque bearing No.145080 dated 14.08.2013 for Rs.32,90,000/- towards full and final settlement. The said cheque when presented for encashment was dishonoured for insufficiency of funds. Later, the accused persons issued fresh cheques bearing No.16004 dated 15.01.2014 for Rs.32,90,000/- and 16005 dated 31.01.2014 for Rs.1,50,000/-. The said cheques were issued by accused No.2 for himself and for and on behalf of other accused persons in due discharge of its debt. The said cheques when presented for encashment were dishonoured for insufficiency of funds.
4. The only averment made in the complaint with regard to the petitioner herein is that the petitioner being one of the Director of accused No.1/Company was in- charge of and responsible for the conduct of the affairs of the accused No.1/Company. Though these words are reproduced to satisfy the requirements of Section 142 of the NI Act, but, reading of the complaint discloses that the cheques in question were signed by accused No.2. They were issued towards discharge of debt and liability incurred by accused No.1/ Company. The very fact that the company was represented by accused No.2 as its Managing Director who was authorized to sign the cheques would render the company and the Managing Director liable for the consequences of the dishonor of the cheques.
5. It is trite law that vicarious liability under Section 142 of NI Act can be fastened on the Directors, who are actually in-charge of the affairs of the Company. Mere reproduction of the expressions used in the section, without there being sufficient material to show that the Directors sought to be prosecuted were in charge of the affairs of the company, cannot lead to the prosecution of each and every Director of the Company. The circumstances discussed above clearly go to show that accused No.2 being the Managing Director was infact in- charge of the affairs of the Company as on the date of the alleged transaction. In that view of the matter, prosecution launched against the petitioner/accused No.3 merely on the ground that he was the Director of the accused No.1/Company, being contrary to Sections 138 and 142 of NI Act cannot be sustained.
Accordingly, petition is allowed. Proceedings in C.C. No.23527/2014 on the file of XVIII A.C.M.M. and XX Additional Small Causes Judge, Bengaluru, are quashed only insofar as the petitioner/accused No.3 is concerned. Proceedings shall proceed against accused Nos.1 and 2 in accordance with law.
Sd/- JUDGE SV