1 (Cri appln 2405 of 2010) IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL APPLICATION NO.2403 OF 2010 WITH CRIMINAL APPLICATION NO.2404 OF 2010 WITH CRIMINAL APPLICATION NO.2405 OF 2010 WITH CRIMINAL APPLICATION NO.2406 OF 2010 WITH CRIMINAL APPLICATION NO.2407 OF 2010 Rajiv Ramchandra Malhotra ...Applicant Vs. Global Trade Finance Ltd. and Anr. ...Respondents WITH CRIMINAL APPLICATION NO.2120 OF 2010 WITH CRIMINAL APPLICATION NO.2121 OF 2010 WITH CRIMINAL APPLICATION NO.2122 OF 2010 WITH CRIMINAL APPLICATION NO. 2123 OF 2010 WITH CRIMINAL APPLICATION NO.2124 OF 2010 Mrs.Kacoon Sethi ...Applicant Vs. Global Trade Finance Ltd. and Anr. ...Respondents 2 (Cri appln 2405 of 2010) WITH CRIMINAL APPLICATION NO.2130 OF 2010 WITH CRIMINAL APPLICATION NO.2131 OF 2010 Rajesh Pavitharan ...Applicant Vs. Global Trade Finance Ltd. and Anr. ...Respondents WITH CRIMINAL APPLICATION NO.2210 OF 2010 WITH CRIMINAL APPLICATION NO.2211 OF 2010 WITH CRIMINAL APPLICATION NO. 2212 OF 2010 WITH CRIMINAL APPLICATION NO.2213 OF 2010 WITH CRIMINAL APPLICATION NO.2214 OF 2010 Amar Mavirasingh Panghal ...Applicant Vs. Global Trade Finance Ltd. & Anr. …Respondents WITH CRIMINAL APPLICATION NO.2297 OF 2010 WITH CRIMINAL APPLICATION NO.2298 OF 2010 WITH CRIMINAL APPLICATION NO.2299 OF 2010 WITH CRIMINAL APPLICATION NO.2300 OF 2010 WITH 3 (Cri appln 2405 of 2010) CRIMINAL APPLICATION NO.2301 OF 2010 Komesh P. Rohira ...Applicant Vs. Global Trade Finance Ltd. & Anr. ...Respondents ****** Mr.Ashok Bhatia for Applicants Mr.Yashod Thakur i/b. Mr.Paras Kuhad & Associates for Respondent No.1 Mr.A.S.Shitole -APP for the State ****** CORAM: V.M. KANADE J. DATED: 29TH OCTOBER, 2010 P.C. 1. Heard the learned counsel appearing on behalf of the Applicants, learned counsel for the Respondent No.1 and the learned APP for the State. 2. All these applications can be disposed of by a common order since the Complainant is common and they are arising out of a complaint filed under section 138 of the Negotiable Instruments Act against the Applicants, who according to the Complainant are 4 (Cri appln 2405 of 2010) directors of the accused company, whose cheques were dishonoured. In all, there are 22 applications. Five applications are filed by the following directors viz. Mr. Amar Panghal, Mr.Rajiv R.Malhotra, Mrs. Kaccon Sethi, Mr. Komesh P. Rohira and Mr. Rajesh Pavitharan has filed two applications viz. Criminal Application No.2130 of 2010 and Criminal Application No.2131 of 2010. 3. Shri Bhatia, the learned counsel appearing on behalf of the Accused firstly submitted that all the Applicants had resigned as directors in 2006 much before the presentation and dishonour of the cheques i.e. in the year 2008. He invited my attention to Form 32 Application. He also invited my attention to the Annual Reports of the company for the years 2006-2007, 2007-2008 and 2008-2009. He submitted that in these reports, it is clearly mentioned that the Applicants had resigned as directors in the year 2006 itself. It was then submitted that the Complainant was immediately informed of all these facts by the company when the statutory demand notice was served on the company. It was further submitted that the Complainant had suppressed this fact in the reply which was given by the 5 (Cri appln 2405 of 2010) Applicants. He invited my attention to the verification statement. He submitted that before the column, “Reply if any by accused”, word 'Reply' is mentioned, denoting thereby that reply was given by the Applicants. It was submitted that if this fact had been brought to the notice of the Magistrate, he would not have issued the process against the Applicants. He then submitted that the averments made in the complaint were not sufficient for vicariously making the Applicants liable for the offence punishable under section 138 r/w. 141 of the Negotiable Instruments Act. He submitted that the Apex Court from the case of S.M.S. Pharmaceuticals vs. Neeta Bhalla and Anr., [2005 (5) ALL MR (S.C.) 1118] to the latest judgment in the case of Central Bank of India vs. M/s. Asian Global Ltd. & Ors. [2010 ALL MR (Cri) 2599 (S.C.)], has consistently taken a view that specific role of the directors has to be stated in the complaint for the purpose of initiating proceedings against them under section 138 r/w. 141 of the Negotiable Instruments Act. It was then submitted that the only averment made in the complaint in respect of the liability was to the effect that the accused had approached the complainant with a request of granting trade finance facility, which facility had been granted by 6 (Cri appln 2405 of 2010) the Complainant. He submitted that no details have been mentioned regarding the said transaction. It was submitted that no documents were shown to the Magistrate when the complaint was filed and more particularly, before the issuance of process. In support of the said submissions, reliance was placed on the Division Bench Judgment in the case of Saumil Dilip Mehta vs. The State of Maharashtra and Ors. [2002 (3) ALL MR 489]. Reliance was also placed on the judgment of the Learned Single Judge of this Court in the case of Kusum A. Bardeskar & Ors. Vs. Babulal Tarachand Shah & Anr. [1998 (4) LJ 654]. Reliance was placed on the judgment of the Learned Single Judge of this Court (Bench at Aurangabad) in the case of Om Gayatri & Company & Others vs. State of Maharashtra & Another [2006 (1) Bom. C.R. (Cri.) 756]. It was submitted that in the said judgment after relying on the judgment of the Apex Court in the case of Om Gayatri & Company & Others (supra), the Learned Single Judge of this Court has held that if earlier decisions of the same Court are not considered even after they are brought to the notice of the Court, the decision so rendered does not constitute a binding precedent. It was submitted that in the Division Bench 7 (Cri appln 2405 of 2010) Judgment in the case of Suhas Bhand vs. State of Maharashtra [2009 ALL MR (Cri) 2614], the Division Bench Judgment in the case of Saumil Dilip Mehta (supra) was not brought to the notice of the Division Bench and, therefore, the Division Bench Judgment in the case of Suhas Bhand (supra) could not be considered as legally binding precedent. On the aspect of averments, reliance was placed on the judgment in the case of National Small Industries Corp. Ltd. Vs. Harmeet Singh Paintal & Anr. [ 2010 ALL MR (Cri) 921(S.C.). It was further submitted that merely because the plea is recorded, that would not be a ground for not entertaining an application for quashing the petition which is filed under Article 227 of the Constitution of India or under section 482 of Cr.P.C. Reliance was placed on the judgment of the Apex Court in the case of Dhariwal Tobaco Products Ltd. & Ors. Vs. State of Maharashtra & Anr [2009 ALL MR (Cri) 234 (S.C.). 4. On the other hand, the learned counsel appearing on behalf of the Respondent No.1- Complainant submitted that, in the present case, the plea was recorded on 1st December, 2009. The complainant had filed an application for admission or denial of documents 8 (Cri appln 2405 of 2010) under section 294 of the Cr.P.C. in March, 2010 and, therefore, the trial had begun and the complainant was to file the affidavit in lieu of evidence. At that stage, these applications had been filed in this Court. He, therefore, submitted that on this ground alone, the applications were liable to be dismissed. Reliance was placed on judgment of the Apex Court in the case of Subramanium Sethuraman vs. State of Maharashtra and Anr. reported in (2004) Cri. Law Journal 4609. So far as the submissions made by the learned counsel for the Applicants on verification is concerned, it was submitted that firstly, this point was not raised in the applications and that it is argued for the first time before this Court. No averment in this respect is made in the applications. Secondly, it was submitted that along with the complaint and before the order of issuance of process, all the relevant documents were tendered which includes copy of the reply which was filed by the accused and, therefore, it could not be said that the Complainant had suppressed any facts from the Court. He then submitted that though in the verification there is no reference regarding reply given by the accused to the statutory demand notice, it was submitted that since it was not one of the necessary ingredients for taking 9 (Cri appln 2405 of 2010) cognizance of the offence, merely not mentioning the said fact, would not cause any prejudice to the accused. It was then submitted that even otherwise, any defect in recording the verification was not an illegality and at the best, an irregularity which could be cured under the provisions of section 460 and section 465(2) of the Cr.P.C. 5. So far as submission on the point of averments is concerned, the learned counsel for the Applicants invited my attention to the complaint and submitted that the relevant averments were mentioned in the complaint which were sufficient for the purpose of admitting vicarious liability. So far as the question of resignation is concerned, it was submitted that the complainant has disputed the resignation of the directors. He relied on a judgment of the Division Bench in the case of Suhas Bhand (supra). It was submitted that in paragraph 33A of the said judgment, the Division Bench of this Court, after taking into consideration all the judgments, came to the conclusion that in the event of the resignation forms being disputed, the burden was on the accused to prove that he was no longer director at the time when the transaction had taken place. So far as the judgment of 10 (Cri appln 2405 of 2010) the Division Bench in the case of Saumil Dilip Mehta (supra) is concerned, he submitted that the issue before the Division Bench of this Court was not the same issue which is raised in this case and, therefore, the ratio of the said judgment will not be applicable. It was further submitted that the learned Single Judge of this Court while referring the judgment in the case of Vijay Maliya vs. State of Maharashtra and Anr. in Criminal Application Nos. 4827, 4828, 4829 and 4830 of 2004 had held that the Division Bench in the case of Saumil Mehta had no occasion to consider the proposition as to whether the factum of resignation has to be established at the trial when disputed, as was the situation in the case before the said Court. So far as the judgment of this Court in the case of Kusum A. Bardeskar & Ors. (supra) is concerned, it is submitted that the said judgment was overruled as a result of the judgment of the Division Bench of this Court in the case of Suhas Bhand (supra) . He submitted that two other co- accused had filed criminal applications for quashing this complaint on the same grounds and this Court, by order dated 18th August, 2010 had rejected the said applications. 11 (Cri appln 2405 of 2010) 6. After having heard both the counsel at length, in my view, submission made by the learned counsel on behalf of the Applicants cannot be accepted. Apart from the fact that the plea of the accused is already recorded and that the trial has commenced, the application was filed under section 294 of Cr.P.C. Even otherwise, submission made by the learned counsel for the Applicants cannot be accepted. 7. So far as the question of verification is concerned, improper recording of verification cannot be said to be an illegality which would vitiate the order of issuance of process in view of the provisions of section 460 and section 465 (2). In the present case, perusal of the verification discloses that the relevant material which is important for the purpose of disclosing commission of offence under section 138 has been mentioned in the verification statement. Along with the verification, the relevant documents also were tendered. In a complaint under section 138 of the Negotiable Instruments Act, the Magistrate before issuance of process has to take into consideration firstly, whether the cheque has been issued by the Accused No.2; whether it is dishonoured; whether a statutory demand notice was served and after 12 (Cri appln 2405 of 2010) service of the said demand notice, payment has not been made by the accused. Secondly, whether the averments are made for the purpose of prima facie disclosing vicarious liability of directors and other officers of the company. Thirdly, there is a presumption raised under section 139 of the Negotiable Instruments Act regarding the existence of a debt or legal liability. Even there is a presumption in respect of a bank slip and the cheque which is issued. This being the position, at this stage, it is not necessary for the Magistrate to hold a detailed enquiry. It is also not necessary for the complainant to give the details of the transaction in the complaint in view of the presumption which is raised under section 139 of the N.I. Act. Therefore, there is no substance in the submission made by the learned counsel for the Applicants. 8. So far as the question of resignation is concerned, the resignation of the Applicants has been disputed by the Complainant and, therefore, the accused will have to prove this fact during the trial. The Division Bench of this Court in the case of Suhas Bhand (supra), in paragraph 33, has observed as under: 13 (Cri appln 2405 of 2010) “33. A reading of these judgments makes for the following legal propositions with regard to the resignation of a Director of a registered Company:- (i) If the accused in a criminal prosecution under Section 138 of the Negotiable Instruments Act produces a certified copy of Form No.32 certified by the ROC and there is no dispute of the factum of his resignation, the accused is entitled to be discharged from the prosecution. (ii) If his resignation is not accepted or admitted by the complainant upon production of the certified copy of Form No.32, the accused would have to prove the truth of the contents of the said certified copy i.e. the factum of his resignation. Such accused cannot be discharged simplicitor upon production of a certified copy of Form No.32. (iii) If the complainant produces any evidence showing the continuance of the accused as Director of the Company after the date of the resignation claimed by him as per 14 (Cri appln 2405 of 2010) the certified copy of Form No.32 produced by him, such accused cannot be discharged simplicitor upon production of such certified copy of Form No.32. He would have to lead evidence to prove the factum of his resignation. Similarly the complainant would be entitled to prove the factum of his continuing as Director. The trial under Section 138 read with Section 141 of the Negotiable Instruments Act would, therefore, proceed.” The ratio of the judgment in the case of Suhas Bhand (supra) would squarely apply to the facts of the present case and, therefore, the factum of resignation will have to be established by the accused during the trial. As rightly submitted by the learned counsel for the Respondent No.1-Complainant, the ratio of the judgment in the case of Saumil Mehta (supra) will not apply to the facts of the present case. The Learned Single Judge of this Court in the case of Vijay Maliya (supra) has rightly observed that the proposition which is being canvassed here was not an issue in the said case. On the other hand, the Division Bench Judgment in the 15 (Cri appln 2405 of 2010) case of Suhas Bhand (supra) being directly on the point, the said judgment is binding on this Court. 9. Lastly, so far as the question of averments is concerned, in my view, the averments made in the complaint are prima facie sufficient to attract the vicarious liability under section 138 r/w. 141 of the Negotiable Instruments Act. The following averments are made in the complaint :- “(1) I say that the accused No.2 to 15, on behalf of accused No.1, have approached us with a request for trade finance facility and accordingly the said facility has been granted by us to the accused as per their request for requirement. (4) I say that Accused No.1 is Limited Company of which accused No.7 & No. 13 are the Directors and Authorised Signatories and accused No.2 is the Managing Director & Promoter Director and accused No.3,4,5,6,8,9,10,11 & 12 are directors and accused No.14 & 15 16 (Cri appln 2405 of 2010) being CFO and CEO are looking after the day to day business of accused No.1. At all material time relevant and relating to the complaint Accused No.2 to 15 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 to day affairs of the Accused No.1. It is further submitted that Accused No.2 to 15 with 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 signatories, Managing Directors and Promoter Director, Chief Financial Officer and Chief Executive Officer of the said Limited Company. (5) I say that as narrated in para 4 accused No.2 to 15 being responsible for the affairs of Accused No.1 i.e. Limited Company are liable to be prosecuted for having committed a criminal offence of the event of failure on their part to comply with the requisitions contained 17 (Cri appln 2405 of 2010) in the statutory notice dtd. 01/09/08, which has been posted to them both under R.P.A.D. & U.P.C. on 02/09/08. I say that notice was duly received by the accused No.1,2,4,5 and 8 to 15 on 04/09/08 and notice sent to accused No.3,6 & 7 came back from postal authorities with remarks “Intimation Posted” dtd. 05/09/08, “Intimation Posted dtd. 04/09/08” & “Not Known” respectively. However, notices were sent on last known addresses of the accused. However, inspite of receipt of notice, the accused have failed and neglected to make our payment under the above said dishonoured cheques. I say that after receipt of notice the accused No.2 to 12,14 and 15 replied to our notice by their letters.” These averments clearly specify the role played by the Applicants and, therefore, the Learned Magistrate was justified in issuing process against the present 18 (Cri appln 2405 of 2010) Applicants. There cannot be any dispute regarding judgments on which reliance was placed by the learned counsel for the Applicants, however the ratio of these judgments is not applicable to the facts of the present case. As a result, there is no substance in the submissions made by the learned counsel for the Applicants. The applications are, therefore, dismissed. 10. The Applicants, however, are exempted from appearing in the Trial Court. Their statements under section 313 of Cr.P.C. may be recorded through the advocate as per the procedure laid down under section 313(5) of Cr.P.C., provided that they shall give an undertaking in the Trial Court that they will not dispute their identity and the correctness of the answers recorded in the statements under section 313 of Cr.P.C. Hearing of the trial is expedited. 11. All the applications are, accordingly, disposed of in the aforesaid terms. (V.M. KANADE J.)