- 1 - judgment in 910gr. rng IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL APPLICATION NO.910 OF 2011 with CRIMINAL APPLICATION NO.911 OF 2011 with CRIMINAL APPLICATION NO.912 OF 2011 1.Mr.Arun Babulal Shah } aged 54 yrs, residing at Pranam Ghar, Malviya Road, Opp:Nehru } Rd Post Office, Vile Parle (E) Mumbai-400 057 } (Orig.Accd no.4) } 2. Shri Govind Guno Desai aged 72 yrs,residing at } 203, Kedar Apts, Bhandar Lane, Off Lady Jamshedji Rd, } Mahim (W) Mumbai-400 016. (Orig.Accd no.7) } 3.Mr.Haresh Gunavantrai Desai } aged 57 yrs, residing at F-5-0,Venus Apts,13th Fl, } Dr.R./G.Khadani Marg,Worli, Mumbai-400 018 } (Orig.Accd no.8) .. Applicants vs 1. Global Trade Finance Ltd } through Mr.Aniruddha Singh G.Thakur, DGM-Legal & Company } Secretary registered office situated at Metropolitan } Bldg, 6th Floor, Bandra-Kurla Complex, Bandra (E) Mumbai-400 051 2. The State of Maharashtra } .. Respondents - 2 - judgment in 910gr. with CRIMINAL APPLICATION NO.914 OF 2011 1. Mr.Arun Babulal Shah } age 54 yrs, residing at Pranam Ghar, Malviya Rd, Opp Nehru Post Office } Vile Parle (E)P Mumbai-400057. (Orig.Accd no.7) } 2. Mr.Govind Guno Desai aged 72 yrs, residing at } 203,Kedar Apts, Bhandar lane, Off Lady Jamshedji Rd, Mahim (W) Mumbai-400 016. } 2. Mr.Haresh Gunavantrai Desai aged 57 yrs, residing at } F-50,Venus Apts. 13th fl, Dr.R.G.Khadani Marg,Worli, } Mumbai-400 018 (Orig.Accd no.8) } vs 1. SBI Global Factors Ltd } (Previously known as Global Grade Finance Ltd) having its registered office at } Metropolitan Bldg, 6th Fl, Bandra Kurla complex, Bandra (E)Mumbai-400 051 } (through Authorised Representative Mr.Vimukh G.Nayak Sr.Officer-Legal) } .. Respondents Mr.M.K.Kocharekar for Petitioner Mr.Yashpal Thakur i.b M/s Paras Kuhad & Asso.for Respt no.1 Mr.R.M.More AP for State in APL NO.910/11 Mr.S.A.Shaikh APP for State in APL NO.911/11 Mr.A.S.Shitole APP for State in APL NO.912/11 Ms.S.S.Deshmukh APP for State in APL No.914/11 - 3 - judgment in 910gr. CORAM: K.U.CHANDIWAL, J DATE: 8 th September, 2011 P.C. 1. The Petitioners question issuing process dated 11.1.2009 by the learned Metropolitan Magistrate 12th Court, Bandra, Mumbai in C.C.No.4761/SS/2009 for the offence under section 138 and 141 of the Negotiable Instruments Act. 2. Financial facilities were availed from the respondent no.1-Global Trade Finance Ltd by Champagne Indage Ltd. The Respondent no.1 in its legally enforceable liability on behalf of M/s Champagne Indigo Ltd issued cheques. Such 20 cheques were dishonoured and consequently followed by statutory compliance and the above referred complaint. 3. The petitioners are original accused nos. 4,7, and 9 respectively in the said case. The petitioners claim that there is no specific averment in the Complaint complying with the - 4 - judgment in 910gr. requirements of section 141 of the Negotiable Instruments Act which is imperative. There is no specific role in the complaint in respect of the Petitioners. 4. Learned counsel for the Petitioners submit that the learned Judge erred in issuing process against the Petitioners as there is no legally enforceable liability to the petitioners as directors with day to transactions of aforesaid company as they are simply directors. 5. In order to stress his point, learned counsel relied on the judgments in (i) S.M.S. PHARMACEUTICALS VS NEETA BHALLA 2007 All MR (Cri) 870,(S.C.), (ii) NATIONAL SMALL INDUSTRIES CORP.LTD VS HARMEET SINGH PAINTAL 2010 All MR (Cri) 921 (SC), (iii) PEPSICO INDIA HOLDINGS PVT.LTD VS FOOD INSPECTOR 2011 (1) SCC 176, (iv) RAMRAJ SINGH VS STATE OF M.P. (2009) 6 Supreme Court Cases 729. (three Judge Judgment), (iv) the judgment of this Court in PRAG BHIKHALAL - 5 - judgment in 910gr. TEJANI VS STATE OF MAHARASHTRA DT 17.6.2011. 6. Learned counsel for the Respondent no.1 financier submits that averments in the complaint as a whole including verification was sufficient at prima facie stage to show involvement of the Petitioners as directors in the day-to-day affairs of the company (Original accused no.1). Learned counsel also submits that Petitioners had dealings and negotiations all throughout with financier (Respondent no. 1). The photostat copies of the resolution passed by the executive committee of the Board of Directors at its meeting held on Tuesday 5th December, 2006 was tendered which incorporates an amount of Rs. 84 crores was to be received from Global Trade Finance Ltd (Financier) and resolution authorises the Managing Director Arun Shah,Gajanan Mule including user of common seal of the company. It was resolved that the company confirm and ratify all the documents already executed by the company in favour of Global - 6 - judgment in 910gr. Trade Finance Ltd and all the agreements and documents to be executed shall continue to remain valid and in force and effect until all the liabilities/dues of the company to the financier are fully discharged/paid. Learned counsel submits that in the averments the Complaint Petition cannot be said to be divorced from the mandate indicated in the three Judge judgment of SMS Pharmaceuticals and subsequent judgments of the Supreme Court. Learned counsel further submits that the matter of PRAG TEJANI was carried to the Supreme Court by the present Respondent no.1 and the Hon'ble Supreme Court directed further proceedings before the trial court shall go on but the judgment shall not be pronounced. It was also directed that pending further orders, trial court shall not insist upon personal appearance of PRAG TEJANI. Learned counsel submits that in the light of this position judgment the orders in PRAG TEJANI's case would not be accelerating the contentions of the Petitioners. It does not lay - 7 - judgment in 910gr. down law. Learned counsel has also placed reliance to the judgment of the Supreme Court in the matter of RALLIS INDIA LTD VS PODURU VIDYA BHUSAN decided on 13.4.2011, 2011 ALL MR (Cri) 1645 (S.C.). He submits that the Supreme Court in the said case has informed that averments like the one made in the complaint were sufficient enough to proceed against Petitioners of the Company in view of section 141 of the Negotiable Instruments Act. Learned counsel submits that the Judgment of RALLIS INDIA LTD needs to be given due consideration. 7. On reading the Complaint Petition, and correspondence I find that the Petitioners have personally interacted with the complainant for financial facilities. The Resolution entered into by the company illustrates to this effect. Statutory notice issued to the Petitioners have gone un-controverted. Cheques were indeed signed by the petitioner-Arun Shah, Gajanan Mule, Girish, D.S.Pradhan.This is unequivocally stated - 8 - judgment in 910gr. in the complaint petition. Para 2 of the complaint conceive that in discharge of the said liability towards repayment of the aforesaid, financial facility due and payable to us, the accused had issued us following cheques: Sr.No. Che.No. Che.dt. Amt in Rs 1. 013841 8.12.08 2,99,694/ 2. 013559 12.2.08 3,36,976/ 3. 013536 26.12.08 1,08,420/ 4. 013398 19.12.08 1,22,252/ 5. 013871 26.12.08 3,39,189/ 6. 013655 31.12.08 3,00,000/ 7. 013846 29.12.08 2,97,120/ 8. 013910 22,12,08 3,10,544/- 9. 013950 9.1.09 1,15,315/- 10. 013909 9.1.09 1,67,779/- - 9 - judgment in 910gr. It further incorporates all drawn on ICICI Bank Ltd, Dadar Branch Mumbai-400 014 as a part payment of their outstanding dues with our company in favour of the complainant duly signed by the Accused no.4,5,6 and 11 on behalf of Accused no.1. I say that being the DGM-L3egal and Company Secretary of the complainant company who has duly authorised me to file this present complaint and as such I am familiar and conversant with the facts of the case. The Board resolution passed by Executive Committee of Board of Directors dt.22.12.2008 is annexed herewith. Paragraph 4 of the Complaint petition is as under : 4. I say that Accused no.1 is a limited company of which accused no. 4,5,6 and 11 are the Directors, V.P.Finance Company Secretary Legal Head, Head Procurement Officer and Authorised signatories respectively and Accused no.2,3,7 and 8, 9 and 10 are the Chairman, Managing Directors and Directors respectively of Champagne Indage Ltd. At all material time relevant and relating to the company Accused no.2 to 11 were and are in charge of and responsible for the conduct of business of accused no.1 and - 10 - judgment in 910gr. are also looking after the day to day affairs of the accused no.1. It is further submitted that accused no.2 to 11 with accused no.1 are liable to be prosecuted and/or connived in the commission of the present offence, in their capacity as Chairman, Managing Director,V.P.Finance, Company Secretary Legal Head, Head Procurement Officer, Directors and Authorised signatories respectively of the said Limited company. 8. The Hon'ble Supreme Court in the matter of S.M.S.PHARMACEUTICALS made following observations in para 19 and 20. 19. In terms of Section 138 of the Act, a complaint Petition alleging an offence thereto must demonstrate that the following ingredients exist that : i)a cheque was issued ii) the same was presented iii) but it was dishonoured (iv) a notice in terms of the said provision was served on the person sought to be made liable; and (v) despite service of notice, neither any payment was made nor other obligations, if any were complied with within fifteen days from the date of receipt of the notice. - 11 - judgment in 910gr. 20. The liability of a Director must be determined on the date of which the offence is committed. Only because Respondent no.1 herein was a party to a purported resolution dated 15.2.1995 by itself does not lead to an inference that she was actively associated with the management of the affairs of the company. This Court in this case has categorically held that there may be a large number of Directors but some of them may not associate themselves in the management of the day to day affairs of the company and thus are not responsible for conduct of the business of the company. The averments must state that the person who is vicariously liable for commission of the offence of the company both was incharge of and was responsible for the conduct of the business of the company. Requirement laid down therein must be read conjointly and not disjunctively. When a legal fiction is raised, the ingredients therefor must be satisfied. 9. There cannot be a question of controversy that the Supreme Court has distinguished cases of Joint Managing Director and other Directors. By virtue of their designation of their office, Managing Director or Chairman are in charge and responsible for the conduct of business of the company. It has been observed that in order to - 12 - judgment in 910gr. escape the liability, such persons will have to prove when the offence was committed, that they had no knowledge of such offences as Directors. In such eventuality it is apparent as to indicate so as defence. At the threshold, assertion in the Complaint Petition whether fits in the bracket of the requirement of section 141 of the Negotiable Instruments Act is the essential element. 10. RALLIS INDIA LTD though was dealing with case of partnership firm, however, the purport of section 141 of the Negotiable Instruments Act so far as director in relation to a company and a partner in the firm, is the same. Hence, observations of the Supreme court in RALLIS INDIA LTD supra would have to be considered, they cannot be discarded calling it to be in a case revolving partnership controversy. 11. In RALLIS INDIA LTD Supreme Court in para 11 Supreme Court indicated ....................This - 13 - judgment in 910gr. averment has been specifically mentioned by the Appellant in the complaint even though denied by the Respondents but the burden of proof at the relevant time of time they were not the partners, lies specifically on them. This onus is required to be discharged by them by leading evidence and unless it is so proved in accordance with law, in our opinion they cannot be discharged of their liability 12. In para 15, the Supreme Court observed as under : at a subsequent stage, seek protection from prosecution on the ground that they were not directly indicted in the complaint such a proposition strikes against one of the very basic tenets of the law of natural justice which is, that none shall be allowed to take advantage of his own default. On account of foregoing discussion, we are of the considered opinion that the impugned judgment and order passed by learned Single Judge exercising the jurisdiction conferred on him under Section 482 of the Cr.P.C. cannot be sustained in law. The same are hereby set aside and quashed. The trial Court is directed to dispose of the Criminal complaints filed by Appellant - 14 - judgment in 910gr. at an early date, after giving opportunity of hearing to both sides in accordance with law. However, the Trial Court would not be influenced by any of the observations made herein above and would decide the matters in accordance with law. The appeals are allowed. Parties to bear their respective costs. Appeals allowed. 13. The averments in the Complaint Petition and more particularly illustrated herein before primarily reveal that the involvement or liability of the petitioners to be vicariously liable is specifically made, the Petitioners were signatories and even negotiated with the financier all throughout. It was by virtue of their position, they were liable to be prosecuted. The connivance ignited by the petitioners and other directors is also spelt out. There is no denial to the statutory notice as indicated herein above, referred in the petition. - 15 - judgment in 910gr. 14. Process is issued on 11.9.2009. The Petitioners could exhaust remedies by a Revision before Sessions Court, in prescribed period of limitation. But failed. To overcome delay, present exercise is coined. 15. An overall survey of above facts, illustrates that issuance of process against the Petitioners does not call for interference. Applications dismissed. K.U.Chandiwal, J