spb/- 1 15-10-3585-3587.sxw IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL APPLICATION NO. 3585 OF 2010 WITH CRIMINAL APPLICATION NO. 3586 OF 2010 Mr. Sunil N. Gupta & Ors. ... Applicants. Vs. Global Trade Finance Ltd., & Anr. ... Respondents. --- WITH CRIMINAL APPLICATION NO. 3587 OF 2010 Kaushik G. Rajendra ... Applicant V/s. Global Trade Finance Ltd., & Ors. ... Respondents. --- WITH CRIMINAL APPLICATION NO. 3853 OF 2010 Shyamsundar N. Gupta & Ors. ... Applicants. Vs. Global Trade Finance Ltd., & Anr. ... Respondents. --- WITH CRIMINAL APPLICATION NO. 3854 OF 2010 M/s. Adil Texturisrs & Ors. ... Applicants. V/s. Global Trade Finance Ltd., & Ors. ... Respondents. --- Mr. Shrisish Gupte, Sr. Counsel with Mr.P.D. Desai, Ms. Pratibha Mehta and Ms. Ruchid Wani i/by Little & Co. for the Applicants in all the Applications. Mr. Yashpal Thakur i/by Paras Kuhad & Associates for Respondent No.1 in all the Applications. Mrs. S.D. Shinde, APP for the State. spb/- 2 15-10-3585-3587.sxw CORAM : V. M. KANADE, J. DATE : 15TH OCTOBER, 2010. P.C. 1 Heard the learned counsel appearing on behalf of the applicants, the respondents and the learned APP for the State in all these Applications. 2 By filing these applications, the applicants have challenged the orders of issuance of process by the learned Metropolitan Magistrate on the complaints filed by the Respondent No.1 under section 138 of the Negotiable Instruments Act. The brief facts are that : A company viz. M/s. Shiv Shakti Synthetics Pvt. Ltd., had approached the Respondent No.1 Company for availing paid finance facility which was granted as per their request. The applicants are Directors of the said company. The cheques were given by the company towards the discharge of the liability which had arisen towards the re-payment of the trade finance facility. The said cheques were dishonoured and therefore, complaints were filed by the respondent no.1 in the court of Metropolitan Magistrate,58th Court at Bandra, Mumbai under section 138 of the Negotiable Instruments Act, (for short, hereinafter referred as ‘the Act’ ). The process was issued by spb/- 3 15-10-3585-3587.sxw the learned Magistrate after perusing the complaints and the verification. Being aggrieved by the said orders of issuance of process, the applicants have filed these criminal applications. 3 Mr.Gupte, learned senior counsel appearing on behalf of the applicants, firstly submitted the applicants had resigned from the company in the year 2007, i.e. prior to the issuance of the court process on 10.09.2008. He submitted that Form 32 were filed and submitted by the company with the Registrar of Companies. He submitted that the said Form 32 clearly showed that the Directors have resigned from 05.12.2007. He submitted that, therefore, the applicants were not liable to be prosecuted for the offence under section 138 of the Act since they were no longer Directors of the company. 4 The learned counsel appearing on behalf of the respondent no.1, on the other hand submitted that they are disputing the resignation of the applicants as directors. He relied on the Division Bench Judgment of this court in the case of Suhas Bhand Vs. State of Maharashtra & Anr. reported in 2009 ALL MR (Cri.) 2614 and submitted that the ratio laid down in the said judgment clearly applies to the facts of the present case. He submitted that the Division Bench of this court have held that spb/- 4 15-10-3585-3587.sxw in case the complainant disputes resignation of the directors, the said disputed fact is required to be decided during trial. 5 In my view submissions made by the learned counsel for the applicants cannot be accepted in view of the ratio of the judgment in Suhas Bhand’s case. Since the fact of resignation is disputed, the said issue will have to be decided at the trial. 6 Mr. Gupte, learned senior counsel appearing on behalf of the applicants then submitted that no specific averments are made in the complaints for the purpose of prosecuting the applicants, who were directors and as such ingredients of the offence under section 138 read with section 141 of the Negotiable Instruments Act were not made out. He invited my attention to the complaints and the averments made therein. In support of the said submission he relied upon the judgment of the Apex Court in the case of National Small Industries Corporation Ltd., vs. Harmeet Singh Paintal & Anr. reported in (2010) 3 Supreme Court Cases 330 and also another judgment of the Apex Court in the case of State of NCT of Delhi-through Prosecuting Officer, Insecticides, Govt. of NCT, Delhi Vs. Rajiv Khurana in a Criminal Appeal No.1380 of 2010, arisen out of SLP (Cri.) No. 7739 of 2008. He submitted that the specific averments regarding role played by the applicants were not mentioned. He invited my attention to para 25 of the judgment in the case of National Small Industries Corporation Ltd., (supra), in support of the said issue. Insofar the judgment in the case of State of NCT of Delhi (supra) is concerned, he invited my attention to the spb/- 5 15-10-3585-3587.sxw observations made by the Apex Court in para nos. 20 and 21 of the said judgment. 7 On the other hand, the learned counsel appearing on behalf of the respondent no.1,original complainant, submitted that in the complaints, the role of the Directors is specifically mentioned and the necessary averments were made by the complainant in the complaint. He submitted that right from the judgment in the case of S.M.S. Pharmaceuticals Ltd., vs. Neeta Bhalla & Anr. (2005) 8 SCC -89 upto the judgment in the case of the State of NCT of Delhi (supra), the Apex Court had consistently held that the nature of averments are required to be made in the complaints against Directors for making them vicariously liable under section 141 of the Negotiable Instruments Act. 8 There cannot be any dispute regarding ratio of the judgments on which reliance is placed by the learned counsel for the applicants. What is to be seen is whether necessary averments are made for the purpose of attracting the provisions of section 138 read with section 141 of the Negotiable Instruments Act or not. It is, therefore, necessary to peruse the averments which are made in the said complaint. In the complaint following averments have been made in para nos. 1,4,5, & 6 : spb/- 6 15-10-3585-3587.sxw “1. I say that the trade finance facility has been granted to M/s. Gupta Synthetics Ltd., as per their request and requirement and as agreed by accused, accused have to repay all their invoices directly to the complainant Company and to that effect accused have accepted the above mentioned condition vide Letter issued by M/s. Gupta Synthetics Ltd., to accused which is duly accepted and signed by accused No.4. Based on aforesaid letter of Gupta Synthetics Ltd., duly accepted by the accused, the Complainant Company has agreed to advance and had in fact advanced money, under trade finance facility (s), to Gupta Synthetics Ltd., 4. I say that Accused No.1 is Private Limited Company of which accused No.2, 3, 5 & 6 are the directors and accused No.4 is the Director and authorized signatory. At all material time relevant and relating to the complaint Accused No.2 to 6 were and are in charge of and responsible for the conduct of business of the Accused No.1 and are also looking after the day today business affairs of the Accused No.1. It is further submitted that Accused No. 2 to 6 with the Accused No.1 are liable to be prosecuted and / or connived in the commission of the present offence, in their capacity as directors and authorized signatory of the said Private Limited Company. 5. I say that as narrated in para 4 accused No.2 to 6 being responsible for the affairs of Accused No.1 i.e. Private Limited Company are liable to be prosecuted for having committed a criminal offence in the event of failure on their part to comply with the requisitions contained in the statutory notice dated 12/10/08, which has been posted to them both under R.P.A.D. & U.P.C. on 14/10/08. I say that notice was duly received by all the accused on 16/10/08 & 17/10/08 respectively. However inspite of receipt of notice, the accused have failed and neglected to make our payment under the above said dishonoured cheque. 6. I say that the above accused have thus committed spb/- 7 15-10-3585-3587.sxw an offence punishable u/s. 138 r/w of 141 of Negotiable Instruments Act (as amended)”. 9 From the aforesaid averments, in my view, the averments which are necessary for the purpose of attracting provisions of Section 141 of the N.I.Act have been made. The role of the Directors is also specifically mentioned. The submission made by the learned counsel for the applicants, therefore, cannot be accepted. 10 It was then submitted that the verification statement which was recorded by the learned Magistrate was improperly recorded, contrary to the guidelines given by the learned single Judge of this court in the case of Amarnath Baijnath Gupta vs. M/s. Mohini Organics Pvt. Ltd., reported in 2009 ALL MR (Cri) 184. He submitted that particularly in the case where offence of 138 read with 141 was alleged, the learned single Judge had given guidelines as to how the verification statement should also contain necessary averments. 11 On the other hand, the learned counsel appearing on behalf of the complainant submitted that the verification statement contain necessary averments, on the basis of which the learned Magistrate had prima facie spb/- 8 15-10-3585-3587.sxw come to the conclusion that offence under section 138 r/w. section 141 is made out. 12 Insofar as the verification statement is concerned, even assuming that in the given case verification is improperly recorded by the learned Magistrate that would not to be a material irregularity within the meaning of section 462 of the Cr.P.C. and therefore, the said irregularity would not vitiate the order of issuance of process. The purpose of recording verification statement is to test the veracity of the complainant’s case to the satisfaction of the learned Magistrate. The said irregularity is also not a material irregularity under section 465 (2) of the Cr.P.C. Apart from that, in a complaint which is filed under section 138 of the Negotiable Instruments Act, there is presumption raised under sections 118 and 139 of the Negotiable Instruments Act, which presumption has to be refuted by the accused during trial. Apart from that, in order to attract provisions of section 134 r/w. 141 of the NI Act, the learned Magistrate under the circumstances, has to consider the documents which are brought on record by the complainant, namely, the amount of cheque which is dishonoured; the bank slips and the bank memo about which also there is presumption raised in view of the provisions of section 146 of the N.I. Act. Apart from the cheques, the spb/- 9 15-10-3585-3587.sxw learned Magistrate has to consider the issuance of statutory demand notice to the company Directors and the service of the notices by R.P.A.D. and U.P.C. and the non-payment of the amount by the accused after 15 days from the date of service of notice. Sofar as the provisions of section 141 are concerned, whether in the complaint sufficient averments are made to attract the provisions under section 141 have been made out or not also has to be seen by the learned Magistrate. Apart from these 4 to 5 things, therefore, under a summary trial in a complaint under section 138, the Magistrate is not expected to hold a detailed enquiry by asking questions to the complainant and his witnesses. Section 143 of the Negotiable Instruments Act lays down that notwithstanding anything contained in the Code of Criminal Procedure, the criminal trial will be of summary nature. Under these circumstances, therefore, it is not expected by the Magistrate to ask separate questions to the complainant unless he feels otherwise. The submission made by the learned counsel for the applicants on this aspect cannot be accepted. 13 It is lastly submitted by the learned counsel for the applicants that it was the internal correspondence between the complainant and the accused and the complainant had agreed to keep its liability under abeyance. He submitted that if it was the correspondence between the spb/- 10 15-10-3585-3587.sxw parties, the reliance be placed on that correspondence. He invited my attention to the letter written by the accused no.1–Gupta Synthetics Ltd. to the Complainant dated 30th July, 2008 in which accused no.1 had stated that the company was facing financial problems on account of various factors and that a request was made for fresh funding. A request was also made not to deposit further post-dated cheques. He then invited my attention to the reply given by the respondent no.1, wherein they had agreed to accept the offer of the accused subject to a counter offer which was given by them. It was submitted that there was novation of the contract on account of acceptance of the offer by the complainant and as a result, there was no cause of action as such to file a complaint under section 138 of the Act. 14 On the other hand, the learned counsel appearing on behalf of the respondents submitted that they are disputing the said letters and it was submitted that these letters will have to be proved by the accused during trial. 15 In my view, the submissions made by the learned counsel for the applicants cannot be accepted. It is well settled position in law that the presumption raised under section 139 of the Act, about the acceptance spb/- 11 15-10-3585-3587.sxw of the legal liability and this presumption has to be rebutted by the accused during trial and as such this question cannot be decided by the High Court while exercising its inherent jurisdiction under section 482 of the Cr.P.C.. Apart from that, the complainant had disputed the said document and as such the accused will have to prove these documents during trial. 16 Even otherwise, if the reply given by the respondent no.1 company dated 15th September, 2009, which is annexed as F-1 to the application is read, it can be seen that the offer given by the accused was accepted subject to the terms and conditions which were given by the complainant in paragraph 4 of the said letter. It was made clear that if the accused does not adhere to the terms and conditions, the concession given in the rate of interest would be withdrawn with retrospective effect. At this stage, therefore, it cannot be said that there was no cause of action to file the complaint. 17 Sofaras the Criminal Application No. 3853 of 2010 is concerned, a further submission is made that in a reply dated 3rd October, 2009 to the demand notice, it was pointed out by the accused -applicants that the applicants had resigned in the year 2006 i.e. prior to the transaction and spb/- 12 15-10-3585-3587.sxw the other the applicants had resigned prior to the issuance of cheques. This fact was not acknowledge in the verification statement. The learned senior counsel for the applicants invited my attention to the verification statement and clause 7 thereof and submitted that in the said column, pertaining to replies, if any, given by the accused and in front of the said column, the complainant had stated-Nil and he submitted that therefore, this fact of reply been given was suppressed. In my view, the aforesaid submission will not be of any assistance to the accused at this stage. Reply given to the statutory demand notice is not one of the ingredients for attracting the offence under section 138 r/w 141 of the Act and therefore, merely because this fact has not been disclosed in the verification statement, it would not affect the decision of the Magistrate to issue process. Sofaras the resignation of the accused is concerned, as pointed out hereinabove, since it is disputed, this fact will have to be established at the time of the trial. 18 So far as the Criminal Application no. 3854 of 2010 is concerned, it was again pointed out that in reply to the statutory notice, the accused, the applicants herein, had stated that they had paid part of the amount to the complainant. The learned senior counsel for the applicants invited my attention to the verification statement and column 8 of the said spb/- 13 15-10-3585-3587.sxw statement, pertains to amount if any paid by the accused. He submitted that the complainant had mentioned that -Nil amount was received. He therefore, submitted that the incorrect statement was made. This submission also cannot be accepted since as stated hereinabove, the answer to the said question would not affect the decision of the learned Magistrate to issue process. In any event, at this stage, it will not be possible to go into the said questions since the accused will have to prove that part of the amount if in fact paid by him before filing of the complaint; apart from the fact that the accused no.2 herein is the signatory to the said cheque and therefore, in view of the judgment in the case of S.M.S. Pharmaceuticals (supra), the applicant is liable to be prosecuted under section 138 of the Negotiable Instruments Act. 19 For the aforesaid reasons it is not possible to entertain any of the applications filed by the applicants for quashing of the complaint. 20 In these circumstances, it will not be possible to interfere with the orders of the learned Magistrate, issuing process. All these criminal applications are, therefore, dismissed. Interim order if any, stands vacated. Hearing of the trial is expedited. spb/- 14 15-10-3585-3587.sxw 21 The applicants are, however, exempted from appearing in the trial court. The statement of the applicants, if so advised, would be recorded through their Advocate. Statement of the applicants under section 313 of the Cr.P.C. shall also be recorded through the Advocate, provided an undertaking is given that they shall not dispute the identity and answers which are given in the statement under section 313. The trial court shall follow procedure laid down under section 313(5). It is clarified further that if the Advocate of the applicants does not co-operate with the Magistrate or remains absent for more than two dates, the order of exemption of the applicants shall stand vacated without further reference to this court and an order may be passed by the the learned Magistrate accordingly. 22 With the above direction, all these Applications stand disposed off. [V.M. KANADE, J.]