[CASE NUMBER] IN THE COURT OF SH.[ENTITY] ADDITIONAL SESSIONS JUDGE SHAHDARA DISTRICT, KARKARDOOMA COURTS, DELHI Crl. Revision No. : 33/14 Unique I.D. No. : 02402R0332002013 In the matter of :- Sh. [ENTITY], S/o. Sh. Satinder Sood Biharilal, R/o. B-902, Central Park-1, Golf Course Road. Revisionist VERSUS Sh. [ENTITY] of [ENTITY] (HUF) A-34, Hans Apartments East Arjun Nagar Delhi-110032. Respondent Date of Institution : 10/10/2013 Date of receiving the case in this court : 25/01/2014 Date of reserving order : 03/04/2014 Date of pronouncement : 15/04/2014 Decision : Revision is allowed. ORDER
This is a criminal revision petition challenging the order dated 29.06.2013, passed by Sh. [ENTITY], Ld. Metropolitan Magistrate, Karkardooma Courts, Delhi in a complaint case titled as [ENTITY] vs. M/s Catmoss Retail Pvt. Ltd., bearing CC No. 615/1/2013. Vide impugned order the trial court summoned the revisionist herein, for offence U/[SECTION] of [ACT].
([ENTITY]) Page no. 1 of 8 Addl. Sessions Judge (Shahdara) Karkardooma Courts / Delhi.
[CASE NUMBER]
2) Briefly stated the relevant facts of this case are as follows :-
The respondent herein (complainant) filed a complaint U/[SECTION] of [ACT], alleging that he had entered into an agreement dated 22.09.2010 executed between him and accused no. 1 company through its authorized signatory i.e. accused no. 2, vide which he was appointed as authorized selling agent. This agreement was to expire after a period of 5 years with a locking period of 3 years w.e.f. 01.10.2010. On 02.11.2012, an agreement of termination for full and final settlement was executed between complainant and accused no. 1 to 7 through accused no. 2 and out of this agreement, the security deposit of Rs. 25 lakhs was returned by the accused no. 1 company to the complainant through six cheques. The cheques were issued by accused no. 2 on behalf of accused no. 1 to 7. The cheque in question was one of them, which was presented for encashment, but was returned unpaid with report that payment was stopped by drawer.
Thereafter, complainant sent a legal notice through speed post but despite lapse of statutory period, accused persons did not pay the cheque amount. Hence, the present complaint.
3) Complainant alleged that accused no. 2 was the Managing Director of accused no. 1 company. Accused no. 3 and 4 were whole time Directors, while accused no. 5 was the Additional Director. Accused no. 6 and 7 were also Directors of accused no. 1 company and all accused were wholly responsible for the conduct and business of accused no. 1 company, as they were managing and controlling the affairs of accused no. 1 company. Therefore, accused no. 2 to 7 were liable for acts and deeds committed by accused no. 1. The revisionist herein was arrayed as accused no. 5.
4) The counsel for the revisionist challenged the order of summoning on the following grounds :-
([ENTITY]) Page no. 2 of 8 Addl. Sessions Judge (Shahdara) Karkardooma Courts / Delhi.
[CASE NUMBER] The impugned order is non-speaking order qua the revisionist. The revisionist was neither authorized signatory nor did he sign the cheque in question. The trial court omitted to notice that the ingredients of [SECTION] of [ACT] were not satisfied by the complainant to invoke vicarious liability against the revisionist. The trial court did not record its satisfaction about the prima-facie case against the revisionist, by making reference to his particular role. In the complaint, there is no specific averment regarding the revisionist. When the original agreement dated 22.09.2010 was executed between the complainant and accused no. 1, the revisionist was not a Director of this company.
5) A written argument was also filed on behalf of the revisionist, wherein, the revisionist referred to 11 case laws. I do not intend to reproduce the ratio of each and every case law for the sake of bravity. I would discuss them as and when so required.
6) On the other hand, ld. Counsel for the respondent argued that all the Directors including the revisionist had the veto powers, which shows that they were managing and controlling the affairs of accused no. 1 company. In accused no. 1 company, no decision could be taken without consent of the revisionist and therefore, there is no merit in the plea taken by the revisionist.
7) I have given due attention to the rival contentions and to the case laws cited before me as well as the record of the trial court.
8) The admitted situation involved in this case is that accused no. 2 to 7 were arrayed as accused by the complainant by virtue of [SECTION] of [ACT]. [SECTION] of [ACT] has been dealt with and explained by the Courts time and again.
9) The Hon'ble Supreme Court in a case tiled as National Small Industries Corporation Limited v. Harmeet Singh Paintal and Anr., (2010) ([ENTITY]) Page no. 3 of 8 Addl. Sessions Judge (Shahdara) Karkardooma Courts / Delhi.
[CASE NUMBER], has explained the ingredients of [SECTION] of [ACT] in the following terms :-
"12. It follows from the fact that if a Director of a company who was not in charge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable for a criminal offence under the provisions. "
"15. In a catena of decisions, this Court has held that for making Directors liable for the offences committed by the company under [SECTION] of the Act, there must be specific averments against the Directors, showing as to how and in what manner the Directors were responsible for the conduct of the business of the company."
The Court also referred to judgment of three Judge Bench of the same court passed in [PRECEDENT] and made following observations in the said case:-
" Merely being a Director of a company is not sufficient to make the person liable under [SECTION] of the Act. A Director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of [SECTION] is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time."
10) In the [PRECEDENT]'s case (supra), the complainant had pleaded that all the accused persons approached it for financing of bill integrated market support programme. Complainant also pleaded that the accused persons had issued the cheques which were dishonoured on presentation and that all the accused persons accepted their liability and delivered various cheques, which were the subject matter of the case before the Court. The Hon'ble Supreme Court did not find this much of pleading of the complainant to be sufficient to ([ENTITY]) Page no. 4 of 8 Addl. Sessions Judge (Shahdara) Karkardooma Courts / Delhi.
[CASE NUMBER] implead all the Directors of the accused company as accused. The Court summarized the principles governing the vicarious liability arising out of [SECTION] of [ACT] in the following terms :-
"39. From the above discussion, the following principles emerge -
(i)The primary responsibility is on the complainant to make specific averments as required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction.
(ii)[SECTION] does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were incharge of and were responsible for the conduct of the business of the company.
(iii)Vicarious liability can be inferred against the company registered or incorporated under the [ACT] only if the requisite statements which are required to be averred in the complaint / petition, are made so as to make the accused therein vicariously liable for offence committed by the company, along with averments in the petition containing that the accused were incharge of and responsible for the business of the company and by virtue of their position, they are liable to be proceeded with.
(iv)Vicarious liability on the part of the person must be pleaded and proved and not inferred.
(v)If the accused is the Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position, they are liable to be proceeded with.
(vi)If the accused is the Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint.
(vii)The persons sought to be liable should be incharge ([ENTITY]) Page no. 5 of 8 Addl. Sessions Judge (Shahdara) Karkardooma Courts / Delhi.
[CASE NUMBER] of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases."
11) In [PRECEDENT], the Hon'ble Supreme Court did not find a Director to be vicariously liable in absence of the specific role averred in the complaint despite the fact that he was signatory to the Board Resolution, which authorized the other Director to issue cheques in favour of the complainant as and when required.
12) In the present case, from the contents of the complaint, I find that the complainant has not given description of specific role played by the revisionist. In para 3 of the complaint, he has simply stated that all the accused are wholly responsible for the conduct and business of accused no. 1 and that the affairs of the accused no. 1 are managed and controlled by accused no. 2 to 7. He has further referred to the role of revisionist in para 6, 7, 8, 9 and 10 in the terms that "accused no. 2 on behalf of accused no. 1 to accused no. 7". Such averment shows that a general role was being imputed upon the revisionist by the complainant. Complainant has similarly averred in para 11 that "accused no. 2 along with other accused persons assure the complainant at the time of issue of the said cheque". His averments leave no doubt that the reference to revisionist in the complaint cannot be said to be sufficiently describing his role in the accused no. 1 company. Nor does such averment explain any transaction between complainant and the revisionist.
13) The impugned order reads as under :-
"Present: Counsel for complainant along with the complainant.
I have taken the cognizance of the offence U/[SECTION] [ACT].
CW [ENTITY] has tendered his ([ENTITY]) Page no. 6 of 8 Addl. Sessions Judge (Shahdara) Karkardooma Courts / Delhi.
[CASE NUMBER] evidence by way of affidavit.
CW 1 complainant is examined and discharged and pre summoning evidence is closed.
Arguments on summoning heard.
Complainant has asserted that the cheque in dispute was issued in discharge of admitted liability by accused which on presentation was dishonoured by the bankers of the accused for the reasons stated in the bank memo. It is submitted by Ld. Counsel for the complainant that legal notice under [SECTION] of [ACT] was sent to the accused persons which was duly served upon the accused. The complaint thereafter was filed within the period of limitation.
Prima facie there is sufficient material to summon the accused.
Issue summons to accused on filing of PF/RC for 05.08.13. PF/RC to be filed within 15 days from today."
14) The aforesaid order passed by the trial court shows that the trial court was even not conscious of the fact that there were more than one accused arrayed in the complaint. This order is also silent regarding any material or any allegation found by the trial court against any of the accused 2 to 7 including the revisionist herein. The trial court was supposed to ensure that the complaint in hand disclosed sufficient allegations thereby specifying the role of each accused, before issuing summons to them. However, the impugned order shows that it was not so verified by the trial court from the contents of the complaint. Simplicitor filing of form 32 on the record cannot be sufficient, so as to explain the role of each accused.
15) I have already observed herein above that the complaint did not explain the role of the revisionist in specific terms. The case law cited herein above leave no doubt that any Director cannot be arrayed as accused merely on the basis of his position. In these circumstances, I do find that the ([ENTITY]) Page no. 7 of 8 Addl. Sessions Judge (Shahdara) Karkardooma Courts / Delhi.
[CASE NUMBER] summoning order against the revisionist herein is bad in the eyes of law as neither the complaint sufficiently discloses the basic ingredients of [SECTION] of [ACT] to invoke vicarious liability against the revisionist nor the impugned order refers to any other sustainable grounds to summon the revisionist as accused in this case. Therefore, the summoning order qua the revisionist namely [ENTITY] is hereby set-aside. This revision is accordingly allowed.
16) Trial court record be sent back to the trial court through ld. CMM, Shahdara, Karkardooma Court, Delhi along with copy of this order.
File of revision be consigned to record room, as per rules.
Announced in the open court today i.e. 15.04.2014 ([ENTITY]) Additional Sessions Judge Shahdara, Karkardooma Court, Delhi ([ENTITY]) Page no. 8 of 8 Addl. Sessions Judge (Shahdara) Karkardooma Courts / Delhi.