IN THE HIGH COURT OF GUJARAT AT AHMEDABAD CRIMINAL MISC.APPLICATION No 8273 of 2001 For Approval and Signature: Hon'ble MR.JUSTICE A.M.KAPADIA ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO @ APTECH LTD. Versus STATE OF GUJARAT -------------------------------------------------------------- Appearance: 1. Criminal Misc.Application No. 8273 of 2001 MR KB ANANDJIWALA for Petitioner No. 1-4 MR ND GOHIL APP for Respondent No. 1 - State MR MJ BUDDHBHATTI for Respondent No. 2 -------------------------------------------------------------- CORAM : MR.JUSTICE A.M.KAPADIA Date of decision: 19/07/2002 C. A. V. JUDGEMENT 1. In this petition which is filed under Section 482 of the Code of Criminal Procedure, 1973 ('the Code' for short hereinafter), petitioners against whom Criminal Complaint No.918 of 2001 is filed in the Court of learned Chief Metropolitan Magistrate, Ahmedabad in which the process has been issued, have prayed to quash and set aside the said complaint and process issued thereunder on the grounds stated in the petition. 2. A private complaint came to be filed in the Court of learned Chief Metropolitan Magistrate, Ahmedabad by respondent No.2, GDR Securities Limited (hereinafter referred to "GDR" for the sake of brevity and convenience) against petitioner No.1, Aptech Limited (hereinafter referred to as "Aptech" for the sake of brevity and convenience), its Directors and authorized signatory for commission of the alleged offence under Section 138 of the Negotiable Instruments Act ('the Act' for short hereinafter). 2 (i) It is inter alia alleged in the said complaint by the complainant - respondent No.2 herein "GDR" that the complainant had entered into a franchise agreement with Aptech dated 21.9.1996 and in pursuance of the said agreement, GDR had started Asset International Center at B-61, Pariseema Complex, C.G. Road, Near Lal Bungalow, Ahmedabad. As per the terms of the franchise agreement dated 21.9.1996, the entire amount collected by the Asset International Center towards the fees was first sent to Aptech alongwith all necessary details and particulars. Aptech and their auditor, after verifying and checking the details of the accounts submitted by GDR, used to retain 20% of the total amount and issued cheque in the name of GDR for the balance 80% of the amount. 2 (ii) Aptech started indulging into financial irregularities and acting contrary to the terms of franchise agreement dated 21.9.1996 and, therefore, Director of GDR personally visited the Regional Office of Aptech at Vadodara on 24.7.2001 to get the details of the amount due and payable by Aptech to GDR as per the terms of franchise agrement dated 21.9.1996. Aptech supplied the statement of accounts of GDR wherein it was found that an amount of Rs.33,13,634.07 paise was outstanding due and payable by Aptech to GDR as on 24.7.2001. Aptech not only supplied the statements of accounts to GDR but also verified and confirmed the details of the outstanding dues of Rs.33,13,634.07 paise as mentioned in the said statement of accounts. In other words, Aptech admitted and accepted its liability of Rs.33,13,634.07 paise which was outstanding due and payable to GDR. 2 (iii) It is further case of the complainant GDR that Aptech issued a cheque dated 24.7.2001 bearing No.825749 drawn on Dena Bank, Law College Branch, Ahmedabad in favour of the complainant GDR towards the outstanding dues. The said cheque was presented for encashment in the Central Bank of India, Gandhi Road Branch, Ahmedabad on 14.8.2001 and to the utter shock and surprise of GDR the said cheque was returned dishonoured on 17.8.2001 with an endorsement "account closed". It is further averred in the complaint that accused No.2 is the Chairman of Aptech, accused Nos. 3, 4, 5, 6 and 7 are Directors of Aptech, accused Nos.8 and 9 are Executive Directors, accused No.10 is the authorised signatory of accused No.1 Aptech and they are in charge and responsible to Aptech for the conduct of business of Aptech and all the accused are responsible for day-to-day conduct and affairs of Aptech at the time the offence was committed and, therefore, all the accused have committed a criminal offence under section 138 of the Act. 2 (iv) GDR had addressed a statutory notice to each of the accused under section 138 of the Act on 29.8.2001 and the same was sent by Registered Post A.D. Despite service of notice to each of the accused, no amount has been paid to GDR. It is further averred that instead of making the payment of the amount of cheque on receipt of statutory notice by Aptech, some of the accused have sent untrue and vague reply dated 12.9.2001 through their advocate. 2 (v) It is, therefore, the case of GDR that all of them have committed criminal offence under Section 138 of the Act and they are required to be dealt with sternly and adequately punished. GDR has also produced relevant documents with a separate list with the complaint. It is, therefore, prayed by GDR to issue process against the persons figured as the accused in the said complaint and to punish them in accordance with law for having committed an offence under Section 138 of the Act. 3. The learned Chief Metropolitan Magistrate, on receipt of the complaint, examined the complainant on oath and on satisfying, has issued process only against accused Nos.1 to 4 and 10 named in the complaint. It is this order of issuance of process against accused Nos.1 to 4 and 10 only which has given rise to the present petition at the instance of accused Nos.1 to 4 only who are petitioners before this Court. 4. By filing this petition, petitioners have contended that they are innocent and have not committed any offence as alleged. It is further contended that no amount was outstanding to be paid to the complainant GDR. That a cheque had been stolen or surreptitiously obtained by GDR and the same has been misused, though GDR was fully knowing that the account with Dena Bank being No.602 was closed long back for which an intimation was also received by GDR. It is also contended that a franchise agreement was entered into between Aptech and GDR at Mumbai and as per the agreement it covered only Ahmedabad territory at C.G. Road. A bank account for that centre is separately got opened. So far as another centers are concerned, separate agreements for each canters are executed. However, the Regional office of Aptech is at Vadodara. So far as the Directors are concerned, the administration was being looked after by the staff at Vadodara as no office of Aptech is at Ahmedabad. Petitioner No.2 who is the Chairman and petitioners Nos.3 and 4 who are Directors are not in any way concerned with the Management of Ahmedabad Territory as they are permanently residing at Mumbai and are concerned with the Head Office. It is further averred that according to the franchise agreement, Aptech has to appoint internal auditor who is making audit of each centre on weekly basis and after auditing the same the Auditor has to issue the cheque to the franchisee by signing the said cheque as authorized signatory upto the limit of Rs.1.00 lac and in all 5 cheques can be issued. 4 (i) According to the petitioners, certain relevant dates and facts are very material to show their bonafide and to prove their innocence upon which much assertion have been made. They are as under: 07.04.1999 Mr. Darshit R. Joshi was appointed by Aptech as Internal Auditor to do the audit work of GDR. Copy of appointment letter is annexed at Annexure C to the petition. 11.04.1997 Mr. Darshit Joshi confirmed his appointment by giving his consent. A copy of confirmation letter is annexed at Annexure D to the petition. Therefore from 11.4.1997 Mr. Darshit Joshi who is a Chartered Accountant was Authorized Signatory on behalf of Aptech who continued as such upto 28.4.2000. 17.04.2000 The Board of Directors of Aptech passed a resolution to appoint new Auditor Mr. Sanjay V. Shah as Internal Auditor as the Company decided to centralise its internal audit. From that date i.e., 17.04.2000 Mr. Sanjay V. Shah became the Authorized Signatory for operation of the current Account No.602 maintained with Dena Bank, Law Garden ...(College) Branch. 17.04.2000 A resolution was passed fixing the authority of the Auditor who is also appointed as Authorized signatory. By that resolution a limit was fixed to issue a cheque of RS.1.00 lakh only. A copy of said resolution dated 17.4.2000 is annexed at Annexure E to the petition. 05.05.2000 Mr. Sanjay Vastupal Shah was appointed and appointment letter was issued. A copy of appointment letter is annexed at Annexure F to the petition. 10.06.2000 Mr. Sanjay Vastupal Shah took over the charge from Mr. Darshit Joshi and he took in writing from Mr. Darshit Joshi in which he specifically stated that no amount is outstanding/pending till 31.5.2000. On that day Mr. Darshit Joshi handed over the blank cheque book from cheque No.779758. A copy of the letter is annexed at Annexure G to the petition. 26.04.2001 The Board of Directors passed a resolution for closure of the Bank Account No.602 with Dena Bank. A copy of the said resolution dated 26.4.2001 is annexed at Annexure H to the petition. 23.05.2001 A letter/intimation was given to Mr. Sanjay V. Shah, the Auditor to initiate necessary action for closure of Bank A/c. No. 602. A copy of the said letter is annexed at Annexure I to this petition. A copy of the letter intimating GDR about the closure of the Bank A/c. is annexed at Annexure J to the petition. 26.06.2001 Before closing of the said account with Dena Bank, the accounts with GDR were settled and the amount of Rs.5770/- was received by Aptech and pursuant to that a receipt was passed in favour of GDR towards the full and final settlement of accounts. A copy of the said receipt is annexed at Annexure R to the petition. 24.07.2001 As per the complaint, GDR came in possession of the cheque in question. 14.08.2001 The said cheque was presented for encashment by GDR. 17.08.2001 The cheque was received dishonoured with an endorsement "Account closed". 29.08.2001 Statutory Notice under section 138 of the Act to each of the accused of Aptech was issued. 12.09.2001 Aptech and other accused persons jointly replied to the statutory notice under section 138 of the Act. 19.09.2001 On receipt of the notice Mr. Darshit Joshi gave an application/complaint regarding the misuse of the cheque in which he had categorically stated that he had never signed any cheque, more particularly the cheque in dispute. On the same date he filed an affidavit stating the contents as mentioned in the application/complaint. Copies of the said complaint and the affidavit are annexed at Annexures L and M respectively to the petition. Mr. Darshit Joshi also gave another affidavit to Aptech stating the same facts. A copy of the said affidavit is annexed at Annexure N to the petition. 18.9.2001 Mr. Sanjay V. Shah also filed an affidavit, a copy of which is annexed at Annexure O to the petition. 4 (ii) It is further say of the petitioners that in the complaint and affidavit filed by Mr. Darshit Joshi to the effect that he had not issued any cheque and he tried to find out another cheque i.e., cheque bearing No. 825750 but he could not find the same and, therefore, with a view to prevent the misuse of the cheque No. 825750 he requested to take preventive action. Mr. Sanjay Shah has also stated in his affidavit that the cheques bearing No. 825749 and No. 825750 are neither sent by him nor issued by him to anybody. Therefore from these documents it becomes clear that in an old cheque book which was treated as empty, unfortunately two cheques remained unused, out of which one cheque has been misused in the present complaint. The bank account from which this cheque was issued was closed down long back i.e., 23.5.2000 and GDR was also intimated about the same. The accounts with GDR were also settled and the amount of Rs.5770/- which was due to be paid to Aptech was received by Aptech and the receipt was also issued. From the complaint and affidavit filed by Darshit Joshi and Sanjay Shah, it also becomes clear that they have not signed cheque bearing No. 825749. In any case, when the bank account was closed long back and intimation with regard to that was given to GDR, Aptech would not have issued a cheque from the closed account. The use of a cheque of closed account itself is suggestive of the fact that the said cheque has been received fraudulently and a fraud has been played by GDR with some malafide intention. 4 (iii) It is also highlighted in the petition that GDR had their internal disputes and the said disputes were going on since September 2000. Various complaints and suits were filed by the Directors of GDR against each other. Due to their internal disputes they have not made payment of loans obtained from Social Co-operative Bank Limited and, therefore, the Social Cooperative Bank Limited had filed Summary Suit No.1221 of 2000 before the Court No.3 of Board of Nominees, wherein also they themselves have prayed to seal the premises of GDR where the Centre of Aptech was running. It is also stated that one complaint is also filed by the Director which is registered as Inquiry No.54 of 2001 dated 14.5.2001 before Anti Economic Offences Cell. The said department has asked for details of transaction with Aptech vide their letter dated 28.8.2001. It is, therefore, the case of the petitioners that from the aforesaid facts it becomes clear that GDR has malafidely obtained the cheque or dishonestly got the custody of alleged cheque in question and it is very well within the knowledge of GDR that the said cheque would return with an endorsement of 'account closed' as the GDR was knowing that Aptech has closed their account and, therefore, GDR deposited the said cheque by making alterations and putting the name of GDR company and also filling in the figure which it obtained from Regional office of Aptech and as the said cheque is dishonoured the GDR issued notice and only after receipt of the said notice Aptech came to know that GDR had deposited the cheque in question which is not at all issued to GDR by the authorized signatory of Aptech. 4 (iv) The petitioners immediately gave reply through their advocate to the statutory notice issued by GDR dated 29.8.2001. In this reply it is clearly stated that GDR has concocted the story to extract huge sum of money from Aptech and no amount is due and payable to GDR. It is also denied about the issuance of cheque and it is specifically stated that the cheque deposited by GDR is forged one. Despite this fact GDR filed the criminal complaint against the petitioners. 4 (v) It is also the case of the petitioners that petitioner No.2 is Chairman of Aptech and petitioner Nos.3 and 4 are Non-Executive Directors of petitioner No.1 Aptech. At the time of issuance of process the learned Chief Metropolitan Magistrate has not issued process against accused Nos.5 to 9. Therefore there is no material produced before the learned Magistrate through which it can be said that petitioner Nos.3 and 4 are the Working Directors and are incharge of day-to-day affairs of Aptech and, therefore, the process issued against petitioner Nos.3 and 4 is illegal. Therefore if it is presumed that the cheque in question was issued even then the Directors of Aptech cannot be held responsible as it is issued by accused No.10 as the Authorized Signatory of petitioner No.1 Aptech, as the authorized signatory is the internal auditor, who after verifying the documents, issued the cheque and, therefore, the Directors have no knowledge about the settlement of accounts. 4 (vi) It is further submitted that by passing resolution, the authorized signatory has been given authority to issue the cheque upto the limit of Rs.1.00 lac and therefore even the authorized signatory is not entitled to issue cheque for an amount above the limit of RS.1.00 lakh while the cheque in question is of Rs.33,13,634.07 paise and it is signed by the authorized signatory. Therefore if it is presumed that the cheque in question is issued even in that case also the Directors of Aptech cannot be held responsible as Aptech has authorised accused No.10 - authorised signatory to issue a cheque upto Rs.1.00 lakh and therefore only against him the case can be proceeded. 4 (vii) Lastly it is submitted that by virtue of the proviso to section 141 of the Act the petitioners cannot be said to have been committed any offence under section 138 of the Act as no knowledge can be imputed to the petitioners and, therefore, it is prayed to quash and set aside the complaint as well as the process issued thereunder by the learned Chief Metropolitan Magistrate, Ahmedabad. 5. The petition is hotly contested by respondent No.2 GDR by filing affidavit which is sworn by Dhiraj Manilal Thakkar, Director of GDR Securities Limited. 5 (i) It is inter alia stated therein that Mr.Ashish Jain, Regional Manager of Aptech in collusion with (1) Mr. Darshit Joshi, Chartered Accountant, (2) Mr. Sanjay Vastupal, Chartered Accountant, (3) Malay Shirish Pandit, Chartered Accountant and (4) Mr. Bhavik Shirish Pandit has indulged into the act of misappropriation of funds of GDR to the tune of Rs.33,05,672/- On 8.5.2001 GDR has filed a criminal complaint being Inquiry Case No.54/2001 before the Anti-Economic Offences Cell, Crime Branch, Meghaninagar, Ahmedabad against the above referred to 5 persons for offences under sections 403, 406, 420 and 120-B of the IPC and the said complaint is under investigation. In pursuance of the aforesaid criminal complaint, detailed investigation has been carried out by Dy.SP CID Crime, Anti-Economic Offences Cell, Gujarat State, Ahmedabad and the said investigation is still in progress. During the course of the above referred to investigation, Aptech had furnished statement of accounts maintained by it to the Investigating Officer and a copy of the said statement of accounts was also supplied to GDR. On perusal of the said statement, it becomes clear that an amount of RS.33,13,634.07 is legally payable and due to GDR. 5 (ii) It is denied by GDR that it has ever been intimated about the closing of account No.602 with Dena Bank, Law Garden Branch, Ahmedabad as alleged. 5 (iii) It is also asserted that on 18.12.2000 a seal has been applied by Court Commissioner at the instance of Bhavik Shirish Pandit in the proceedings of Lavad Case No.1221 of 2000 filed by the Social Cooperative Bank, Khamasa Branch, Ahmedabad before the Registrar, Board of Nominees Court at Ahmedabad. It is further stated that the petitioners themselves have stated in para 3 (k) of the petition on page 16 that seal has been applied to the premises of GDR where the centre of Aptech was running. Thus, it is within the knowledge of Aptech that the premises of registered office of GDR is closed. 5 (iv) It is also emphasised that on 27.11.2000 GDR had addressed a letter to the Regional office of Aptech Limited at Vadodara and had requested that all correspondence be addressed to GDR Securities Limited at 2235, Mahurat Pole, Manek Chowk, Ahmedabad. 5 (v) It is also high-lighted that the share holders of GDR vide resolution dated 27.1.2001 have removed Mr. Bhavik Shirish Pandit as a Director of GDR. It is further stated that the intimation of the removal of Mr. Bhavik Shirish Pandit as a Director of GDR Securities Limited vide resolution dated 27.1.2001 passed by the share holders of the company was sent to Aptech for information on 22.2.2001. 5 (vi) It is further stated that according to the petitioners, the intimation about closure of the Bank Account No.602 maintained with Dena Bank, Law Garden Branch, Ahmedabad was given vide letter dated 23.5.2001 addressed to Mr. Bhavik Pandit produced by the petitioner at Annexure J on page 100 of the memo of petition and on perusal of the said letter it can be seen that the said letter has been addressed to Mr. Bhavik Pandit who is shown to be a Director of GDR. It is stated that it is well within the knowledge of Aptech that Mr. Bhavik Shirish Pandit has been removed as a Director of GDR vie resolution dated 27.1.2001 and intimation in that regard has also been sent to Aptech vide letter dated 22.2.2001. 5 (vii) It is also denied that the internal auditor who was the authorized signatory was authorized to sign the cheques on behalf of Aptech to a limit of Rs.1 lac per cheque vide resolution dated 17.4.2000. 5 (viii) It is asserted that GDR has filed a criminal complaint being Inquiry No. 54 of 2001 before the Anti Economic Offences Cell, Crime Branch, Meghaninagar, Ahmedabad, on 8.5.2001 against the Regional Manager of Aptech and others for offence under sections 403, 406, 420 and 120-B of IPC. 5 (ix) It is also claimed that a notice regarding dishonour of cheque was sent to the petitioners on 29.8.2001 and the same is duly served upon them. It is also stated that Aptech knowing fully well that GDR filed a criminal complaint against the petitioners for the offence under section 138 read with section 141 of the Act have resorted to strange proceedings of filing Civil Suit No.4352/2001 in the City Civil Court at Ahmedabad inter alia praying that pending hearing and final disposal of the suit, defendants may be restrained from taking any action of whatsoever nature pursuant to cheque No.825749 or any other cheque/s and restraining the defendants from taking any action of whatsoever nature pursuant to the cheque No.825749 or any other cbeque/s, documents, papers in their possession in respect of transaction as a franchisee of Aptech. In the said suit, Aptech has joined Bhavik Pandit as defendant No.5 knowing fully well that Bhavik Pandit has been removed as a Director of GDR vide resolution dated 27.1.2001 passed in the meeting of the share holders of GDR. It is therefore urged that the said civil suit is not tenable in the eyes of law and prayers made therein cannot be granted. Therefore, filing of the suit appears to be chosen with a view to show that the dispute is of a civil nature and civil suit has already been filed by Aptech against GDR. Therefore Aptech has failed to point out prima facie case to exercise powers under section 482 of the Code by this Court for quashing the criminal complaint No. 918 of 2001 pending in the Court of Chief Metropolitan Magistrate, Ahmedabad and hence the present petition deserves to be dismissed with costs. 6. Mr. Anandjiwala, learned advocate for the petitioners, while referring to the pleadings which are exhaustively narrated by this Court in foregoing paragraphs, contended that there is no prima facie case against the petitioners for commission of the alleged offence under section 138 of the Act. It is emphasized by the learned advocate that the averments made in this petition are eloquent and speaks the volumes of non-disclosure of offence. However, the complaint came to be filed and process came to be issued thereunder and, therefore, the same deserves to be quashed and set aside. What is highlighted by the learned advocate is that there is a franchise agreement between the parties and therefore there is a civil dispute which can be tried and decided by civil court. The cheque bearing No.825749 was never signed by the