IN THE HIGH COURT OF JUDICATURE AT PATNA Cr.Misc. No.9651 of 2008 1. M/s. Sadhika Sugandh Limited, B-1/628-Read, 3rd Floor, Janakpuri, Najafgarh Road, PS Janakpuri, New Delhi through its Managing Director Ranjeet Awadhesh Tiwary, 2. Ranjeet Awadhesh Tiwary, Managing Director, B-1/628-Rear, 3rd Floor, Janakpuri, Najafgarh Road, PS Janakpuri, New Delhi 3. Ajeet Kumar Das, son of Late Marandey Lal Das, General Manager of M/s. Sadhika Sugandh Limited, resident of WZ-1079 C, 3rd Floor, Nangal Rayal, Near D Block, Janakpuri, PS Janakpuri, New Delhi – petitioners. Vs. 1) The State of Bihar, 2) Mr. Rakesh Kumar Singh, son of Sri ram Binod Singh, Managing Director, through M/s. Window Pharmaceuticals Private Limited, Near Bhagwati Asthan, Old Byepass Road, Kankarbagh, PS Kankarbagh, Patna – opp. parties. … For the petitioners : Mr. Chitaranjan Sinha, Senior Advocate, Mr. Amaresh Kumar Sinha and Mr. Dayanand Singh, Advocates. For the State : Mr. Chandra Sen Prasad Singh, A.P.P. 3 3.5.2010 Heard learned counsel for the parties. This case arises out of a complaint filed by the Managing Director of M/s. Window Pharmaceuticals Private Limited, a C.N.F. agent of petitioner no.1, M/s. Sadhika Sugandh Limited. The allegation made in the complaint petition is that the parties had entered into an agreement with accused company for becoming a C.N.F. agent and had given Rs.3 lakhs as security and later when security money was demanded by opposite party no.2, petitioner no.1 refused to return the security amount. Petitioner no.2 is the Managing Director of petitioner no.1 whereas petitioner no.3 is its General Manager. This application has been filed for quashing the order, dated 19.12.2007 passed by the Judicial Magistrate, Ist Class, Patna in Complaint Case No. 1948(C)/2004 whereby the application of 2 discharge has been rejected.. The petitioners had moved this court earlier, and this court by order, dated 27.2.2007 had observed that the complaint petition relates to a contractual matter between the parties and the petitioners may move the court below at the stage of framing of charge to determine whether the dispute is of civil nature or not. This court issued notice to opposite party no.2 and in fact the matter is pending for the last two days in order to enable counsel for opposite party no.2 to appear in this case. However, no body has appeared to pursue the matter. Counsel for the petitioners submits firstly that the matter is of civil nature as it relates to settlement of accounts between two parties who had entered into an agreement which is contractual in nature. Secondly, it is submitted that petitioners 2 and 3 cannot be prosecuted for the offences alleged. Referring to the agreement, learned counsel for the petitioners submits that clause 4 of the agreement indicates that opposite party no.2 had to deposit a sum of Rs. 3 lakhs as security. It also provides that on termination of the agreement due to violation of contract or any other reason either side will give notice of three months and after having clearance of all accounts, settlements will be made after one month. From the complaint petition it is clear that opposite party no.2 deposited the demand draft of Rs. 3 lakhs in favour of the company. It is alleged that the company is not returning the money 3 although demand has been made and thereby has misappropriated the amount. On behalf of the petitioners it is admitted that Rs. 3 lakhs was deposited in the name of the company by demand draft. However, it is submitted that goods were supplied to the opposite party and opposite party no.2 may settle the accounts with the company. The agreement has admittedly not been terminated as yet. The petitioners have also filed notice for settlement of account in accordance with the terms of the agreement which is evident from the order of the court below. The lower Court while considering the matter has come to the conclusion that the matter relates to a business transaction and once the business transaction comes to an end, then question of settlement of account arises. The court has also recorded that the dispute is of civil nature and it cannot be said that there was any intention on the part of the petitioners to cheat opposite party no.2. After having held that no offence is made out under section 420 of the Penal Code, the court proceeded on the basis that since a demand draft was admittedly issued in the name of petitioner no.1, an offence is made out under section 406 of the Penal Code. This court while considering whether petitioners would be liable under sections 406/34 of the Penal Code will consider the plea of the petitioners that they are not responsible for returning the demand draft sent by opposite party no.2 by way of security. It is 4 submitted that it is well settled that the company would be liable for making the payment and not petitioners 2 and 3 who are the Managing Director and the General Manager of the company. Relying on a decision in the case of S.K. Alagh vs. State of U.P. in Appeal (Criminal) No. 318 of 2008 and the judgment in the case of Sabitha Ramamurthy & Another vs. R.B.S. Chandnabasavaradhya, (2006) 10 SCC 581, it is contended that the Managing Director and the General Manager cannot be held responsible for the offence under section 406 of the Penal Code, rather, it would be the company which would be responsible for the offences alleged. In the present case the bank draft was issued in the name of the company and the complaint petition reveals that the complainant approached petitioner no.1 and petitioner no.2were approached on several occasions for payment of the draft amount. It has been specifically asserted that petitioners 2 and 3 were directly involved in the business dealings on behalf of the company and as such it cannot be said that they would not be vicariously liable on behalf of the Company. In the case of Salutha Ramamurthy the company was not made party and the agreement was between the company and the complainant and as such the proceedings were quashed. Therefore, the ratio of the case may not be strictly applicable. The question which arises in this case is whether any offences would be made out constituting an offence of criminal breach 5 of contract. It is not disputed that Rs. 3 lakhs was paid by way of security to the company, as part of business transaction, the dispute is with respect to settlement of accounts, and once it is recognized that the case is of civil nature by the court below and this court, it cannot be alleged that there was a dishonest intention from the very beginning to misappropriate or convert to his own use the property (cheque) in question. The complainant would have the right to file a suit for recovery of amount and unless a competent court considers that the amount of security is due or is to be wholly or partly forfeited on account of transactions made during the course of conduct of business, it cannot be concluded that there was a dishonest intention to misappropriate the security amount. In the result, this application is allowed and the order, dated 19.12.2007 is quashed. haque (Sheema Ali Khan, J.)