1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE Criminal Writ Petition No.1194 of 2008 AND Criminal Writ Petition No.2331 of 2006 Suhas Bhand .. .. .. Petitioner (In both the Petitions) v/s. State of Maharashtra & anr. .. .. Respondents (In both the Petitions) W I T H Criminal Writ Petition No.608 of 2008 AND Criminal Writ Petition No.2330 of 2006 Amul Urdhwareshe .. .. Petitioner (In both the Petitions) v/s. State of Maharashtra & anr. .. .. Respondents (In both the Petitions) Mr.Anand Kumar with Mr.Deepesh Joshi for Petitioners in all Petitions. Mrs.M.M. Deshmukh, APP for State in all Petitions. Mr.Tanvir Shaikh for Respondent No.2 in all Petitions. ----- 2 CORAM : B.H. MARLAPALLE & SMT.ROSHAN DALVI, JJ. Date of reserving the order : 6th August, 2009 Date of pronouncing the order : 18th August, 2009 ORDER : (Per Roshan Dalvi, J.) 1. These matters arise out of the Reference made by the learned Single Judge of this Court dated 24th September 2008 upon the question of law relating to the resignation of a Director of a Limited Company or a private Limited Company registered under the Companies Act, 1956 in a criminal proceeding initiated against such Director of such Company under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 (the Act). 2. The Petitioners in each of these Petitions are one of the Directors of the Company by name Enbee Infrastructure Limited (the Company) which availed of and obtained a loan from Respondent No.2 herein. The loan agreement was entered into on 29.12.1999 between the Company and Respondent No.2. The loan agreement has been signed by one of the Petitioners in these Petitions who has been arraigned as accused No.9 in the criminal complaint. Pursuant to the execution of the loan agreement and obtaining the 3 loan from Respondent No.2, the Company through its Director/authorized signatory issued several post dated cheques (PDCs). Some of the cheques came to be dishonoured. Hence, a complaint under Section 138/141 of the Act came to be filed in the relevant Magistrate s Court upon following the procedure prescribed by law in that behalf by Respondent No.2. Several Directors of the Company have been made accused in the complaint along with the Company itself. The Petitioners in these Petitions are two of those Directors arraigned as accused Nos.6 and 9 therein. 3. Both the Petitioners claim to have resigned as Directors of the aforesaid Company before the relevant PDCs previously signed on behalf of the Company, came to be dishonoured. It is the case of the Petitioners that the cause of action accrued upon the dishonour of the cheques. On the date of the dishonour of the cheques, they were not Directors of the Company. They had already resigned prior to that date. They were, therefore, not the persons in control and management of the Company or in-charge of the day to day affairs of the Company. They cannot, therefore, be held liable under Section 138 read with Section 141 of the Act, consequent upon their resignation as Directors of the Company. 4 4. The Petitioners have produced certified copy of Form No.32 issued by the Registrar of Companies (ROC) in support of their case that they have resigned as Directors. It is their case that the said certified copy of Form No.32 is the proof of their resignation and no further inquiry can be made by the Court about the factum of the resignation. They have applied for quashing the criminal complaint against them consequent upon the said document having been issued by the ROC. 5. Though we are concerned only with the Reference, which is a question of law to be considered, a few dates and events of the transaction between the parties would be material to appreciate the liability of the Directors, as agents of the Company who acted on behalf of the Company and incurred liability as such. Sr. Nos . Dates Particulars 1 20.7.99 Resignation of accused No.6 as Director. 2 3.8.99 Loan agreement executed between the Company and Respondent No.2 signed by 5 accused No.9 on behalf of the Company. 3 15.2.2000 Charge registered by the Company under Section 130-138 of the Companies Act with the ROC signed by accused No.9 on behalf of the Company. 4 24.8.2000 Progress report of the Company submitted by the Company signed by accused No.9 as its Director. 5 31.8.2000 Resignation of accused No.9 as Director. 6 18.9.2000 Certified copy of Form No.32 issued by the ROC. 7 30.12.2000 A n d 30.6.2001 Company s cheques dishonoured. 8 2.9.2001 Letter signed by accused No.6 as Director addressed to Respondent No.2. 6. It can be seen that whereas accused No.6 is shown to 6 have resigned from 20.7.1999, a year prior to the execution of the agreement of loan, accused No.9 is shown to have resigned a week after the aforesaid progress report was submitted by him and within a year of entering into the agreement for loan as well as registering the charge. Accused No.9 has acted as Director of the Company in getting the loan sanctioned, in registering the charge of the immovable property of the Company as well as in submitting the progress report required by Respondent No.2. The PDCs are stated not to have been signed by accused No.9, but by another person as authorised signatory for issue of cheques. The PDCs duly signed were given by the Company to Respondent No.2 when the loan transaction was entered into. The liability on the PDCs did not commence from that date. It would commence each month on separate cheques which were post-dated. 7. A Limited Company acts through its Directors since it is only a legal person. The Directors are the agents and trustees of the Company. They act on behalf of the Company. They transact business on behalf of the Company. They, therefore, incur liabilities on behalf of the Company. This liability would continue until they resign. Upon their resignation, their liability as such Director 7 would cease. It need hardly be stated that for cessation of the liability the resignation is required to be bona fide and genuine. 8. The resignation of a Director is also a part of his contract with the Company. A Director, like any other person, can resign by submitting his resignation to the Company evidencing an intention of terminating his tenure as a Director of the Company. The resignation must, therefore, be sent to the Company and be received by the Company. Since the Company is only a legal person, it will have to be sent to the Board of Directors of the Company who acts on behalf of the Company. It must, therefore, to be received by the Board of Directors. Such resignation would come into effect so soon as it is received by the Board, except of course, if there is a specific provision in the Articles of Association of the Company requiring the resignation to be accepted by the Board in which case it would come into effect only upon its acceptance by the Board. When the resignation has come into effect can be seen from the Memorandum and Articles of Association of the Company which are required to be registered with the ROC and which, upon registration, become public documents liable to be inspected by the public. 8 9. Under Section 303(1) of the Companies Act, a register of the Directors is required to be maintained by the Company. The particulars of Director, including his tenure are required to be stated. Under Section 303(2) of the Companies Act, any change, inter alia, among its Directors is required to be sent to the ROC, specifying the date of the change. The resignation of a Director brings about a change in the directorship of the Director resigning. That change has to be notified to the registrar under the aforesaid provision. This has to be notified in accordance with the procedure prescribed thereunder. The procedure so prescribed is by filing Form No.32 of General Rules and Forms under the Companies Act. Upon the resignation coming into effect the change among Directors would take place. Hence, only after the resignation is sent by the Director and received by the Company, can the change be notified to the ROC. Under Section 303(2) of the Companies Act, the said change is required to be filed within 30 days of the change. This being a secretarial practice, it would be required to be filed with the ROC by the Secretary of the Company. Upon such filing, the ROC would issue a certified copy thereof. Since it is a legal requirement under Section 303(2) of the Companies Act, the factum of 9 registration mandatorily required to be notified can be evidenced only by filing Form No.32 with the ROC. 10. The office of the ROC is a public office. The documents of that office or filed in that office are public documents as set out in Section 74 of the Indian Evidence Act, 1872 (the IE Act). Section 74 runs thus:- 74. Public documents.- The following documents are public documents.- (1)documents forming the acts or records of the acts- (i) . . . . . (ii). . . . . (iii) . . . . (2) public records kept in any State of private documents. 11.The ROC, as the public officer having custody of such public document, would be bound to allow inspection of such document and to issue a certified copy of such documents to any person who applies for it under Section 76 of the IE Act. Such document can be proved by such certified copy under Section 77 of the IE Act. Section 77 runs thus:- 10 77. Proof of documents by production of certified copies. - Such certified copies may be produced in proof of the contents of the public documents or parts of the public documents of which they purport to be copies. 12.There is a presumption as to genuineness of such certified copies under Section 79 of the IE Act. Section 79 runs thus:- 79. Presumption as to genuineness of certified copies.- The Court shall presume (to be genuine) every document purporting to be a certificate, certified copy or other document, which is by law declared to be admissible as evidence of any particular fact and which purports to be duly certified by any office of the Central Government or of a State Government, or ...... Provided that such document is substantially in the form and purports to be executed in the manner directed by law in that behalf. The Court shall also presume that any officer by whom any such document purports to be signed or 11 certified held, when he signed it, the official character which he claims in such paper. It is based upon such a presumption of genuineness of the document that the Petitioners herein, who are accused Nos.6 and 9 in the complaint filed by Respondent No.2, claim to have resigned as Directors of the Company and hence, claim that their liability, if any, ceases upon such resignation. 13.The presumption of genuineness of certified copy extends to the fact that such a private document was filed in a public office. It extends no further than that. Consequently, the certified copy of Form No. 32 of Respondent Nos.6 and 9 shows that Respondent Nos.6 and 9 had executed Form No.32 showing a change in their directorship on the date the form was executed and signed. The fact that the form was indeed filed with the ROC as reflected in the form is presumed upon the ROC issuing a certified copy of Form No.32 under its seal/stamp. 14.The certified copy does not show a presumption about the truth of the contents of the said form. The truth of the contents of the form would have to be separately shown. It would be required to be shown by the party who alleges the truth of its 12 contents  in this case accused Nos.6 and 9  i.e. the relevant Directors who claim to have resigned as reflected in Form No.32 showing that fact. 15.This position is made clear in the case of Om Prakash Berlia & anr. vs. Unit Trust of India & ors., AIR 1983 Bombay 1. In that case proof by secondary evidence of the execution of a document, which was a certified copy of public records, came to be considered. It was held that whereas the certified copy would show the contents of the document, it would not prove the truth of those contents which would have to be separately proved. 16.If, therefore, the contents of the document being a certified copy of public records - and in this case Form No.32-are admitted by the complainant, it need not be separately proved. The presumption as to the genuineness of the certified copy, if accepted, would show the factum of resignation. If, however, the contents of the documents are denied, their truth would have to be separately established, since the presumption as to correctness does not extend to the truth of the contents of the document. 17.Further the presumption under Section 79 of the IE Act is rebuttable. Therefore, once a certified 13 copy of a public document is produced, showing the genuineness of its contents  in this case the factum of accused Nos.6 and 9 having executed Form No.32 to show the change of their directorship  the other party, the complainant, may seek to rebut the presumption as to its genuineness by producing any evidence which would show the untruthfulness of its contents. Once the truth of the contents is denied, it would be for the party who seeks to rely upon that document to prove it. In such case if the complainant denies or seeks to rebut the presumption of genuineness of the certified copy by any evidence, it would be for the director, who claims to have resigned from the directorship of the Company, to prove his resignation. 18.Respondent No.2 has produced a letter dated 3.9.2001 signed by accused No.6 (Petitioner in Writ Petition Nos.1194 of 2008 and 2331 of 2006) as Director of the Company addressed to Respondent No.2 setting out a comprehensive proposal for revival of the loan and approval for change in management of the Company. The letter is in respect of and in continuation of the same transaction entered into by the Company through its Director, accused No.9 with Respondent No.2. It deals with the act of management of the Company. Aside from it having been signed by 14 accused No.6 as a Director, it shows the extent of control Accused No.6 wields over the affairs of the Company on the date of the letter. This letter is issued well after accused No.6 claims to have resigned from the Company. Consequently, the resignation claimed by accused No.6, simplicitor upon production of the certified copy of Form No.32 from the records of the ROC, is seen prima facie not to be genuine. The truth of the contents of the certified copy of Form No.32 is, therefore, called in question. The presumption as to the genuineness of that certified copy is rebutted. It would be for accused No.6 to show how and when he resigned and how and under what circumstances Form No.32 came to be filed by the Company on his behalf showing the change of its directorship as a public record of that private document. It would only be upon accused No.6 proving the truth of the contents of the certified copy of Form No.32, showing his change in directorship that he would be taken to have resigned in view of the rebuttal shown by Respondent No.2. 19.It may be mentioned that even if Respondent No.2 did not produce the letter dated 3.9.2001 sought to be relied upon by Respondent No.2, but simplicitor denied the fact of the resignation of accused No.6 15 as Director upon production of a certified copy of Form No.32 relating to accused No.6, the legal position would not be any different. The presumption under Section 79 of the IE Act extends only to the contents of the document and goes no further and hence, the truth of the contents would have to be proved by Respondent No.6 or any such Director who claims to have resigned. 20.We may mention that a Director may prove the fact of his resignation by producing the copy of his resignation letter received by the Company and further by the Company having accepted the resignation (if under its Articles of Association the resignation letter is required to be accepted by the Company). 21.Only if the production of certified copy of Form No.32 by a Director of the Company is accepted by the complainant as correct, the presumption as to genuineness of such certified copy would be complete even as to the truth of its contents. Upon such acceptance or admission of the document, the contents would not have to be separately proved. 22.Respondent No.2 has denied and challenged the factum of resignation of accused No.9 also. 16 (Petitioner in Criminal Writ Petition Nos.608 and 2008 and 2330 of 2006). It is argued on behalf of Respondent No.2 that accused No.9 is the main Director in-charge of and in control of the aforesaid Company and accordingly responsible for the conduct of the business of the Company. He is in day to day management of the Company. He has signed the agreement of loan on behalf of the Company. He, therefore, availed of the entire loan facility on behalf of the Company. He also registered the charge of immovable properties on behalf of the Company. He sent the progress report on behalf of the Company. He is shown to have acted on behalf of the Company all throughout the transaction between the parties from 3.8.1999 to 24.8.2000. He claims to have resigned only a week thereafter and hence, has refuted the liability under the dishonoured cheque which came to be dishonoured several months later. It is argued that the execution of the PDCs, in fact, took place prior to his resignation and on the very date he acted as Director on behalf of the Company to incur the liability under the same transaction on behalf of the Company. 23.It is true that the Directors of the Company do change from time to time though the Company goes on 17 as a separate independent legal entity. Consequently, if a person is no longer a Director at the time the transaction is entered into or is not the Director at the time the actual liability is incurred, he personally may not be liable to be prosecuted as a Director of the Company in a complaint filed under Section 138 read with Section 141 of the Act. However, each case is required to be seen on its own merit. A Director who enters into a transaction with a financial institution on behalf of his Company which takes a loan from the financial institution incurs the liability for repayment of the loan on the date of the transaction itself. The very act of availing a loan facility is shown an implied promise to repay the loan. Even if a loan is taken as a friendly loan from a friend or a relative, there is an implied promise to repay the loan. The repayment may not be reflected in any written document. It may be a transaction in the nature of a quasi contract showing the liability of the receiver of the loan under Section 70 of the Indian Contract Act. This is the case of an official transaction with a financial institution upon execution of several documents executed as security for the financial institution for discharging the liability under the loan. The liability is incurred when the transaction is entered into. The discharge 18 of that liability may be postponed to a future date. Hence, under the PDCs, the discharge of the liability may arise from time to time each month depending upon the contract between the parties. Hence, though the liability may not arise until the date mentioned in the cheques, the act and the intention accompanying the act of incurring the liability by availing of the loan facility would take place on the date of the transaction itself. That liability is shown by his signature on the Agreement of loan itself. Therefore, when a Director who incurs such liability, such as accused No.9, seeks to show that he has resigned as Director of the Company barely a week after submitting the progress report to the financial institution and within a year of the execution of the agreement itself and well before the entire liability is discharged and when the financial institution refutes the factum of he having resigned, it is for the Director claiming to have resigned to prove the truth of the fact of his resignation by leading evidence in that behalf, upon the complainant denying the fact of his resignation as in this case. 24.The judgment in the case of Amit Mohan Inder Sharma vs. M/s.Mamta Agency & ors., 2007 ALL MR (Cri) 1246, which is relied upon on behalf of 19 accused Nos.6 and 9 and which has been shown to the learned Single Judge making the Reference before us itself specifically shows under what circumstances the certified copy of Form No.32 produced by an accused in a criminal proceeding under Section 138 read with Section 141 of the Act can be accepted by the Court to discharge that accused from the proceeding. Paragraphs 20 to 24 of the said judgment make this aspect clear. In paragraph 20, the case of Dushyant D. Anjira vs. Wall Street Finance Ltd. & anr., AIR 2001 Bombay 655 has been considered. It has been held in that case that when there was no reason to disbelieve Form No.32, it would be accepted for the purpose of showing the resignation of the Director. In that case Form No.32 was accepted by the ROC. It was not challenged by the complainant. In such cases by mere production of certified copy of Form No.32, the Director would be required to be discharged from the proceedings. It may be mentioned that there are number of Directors of a Company who may remain Directors for only a certain period. They may be Solicitors, Attorneys, nominees of the Central Government, etc. All these Directors are not in-charge of and in management of the Company. Any of these Directors may resign at 20 any time. The complainant may fairly accept the resignation of such a Director. Hence, for such Directors a mere production of certified copy of Form No.32 showing the factum of his resignation duly made as per the procedure established by law under Section 303(2) of the Companies Act would suffice. Such Director would be taken to have vacated his office from the date his resignation comes into effect. His office would fall vacant as under Section 283 of the Companies Act. 25.Consequently, in paragraph 20 of the judgment in the case of Amit Mohan Inder Sharma (supra), it is held that when there is no sufficient material to show that the accused was working as a Director of the Company at the time of the issuance of the cheque, he would not be held liable. This is on the premise that there is no material to show that such accused was in-charge and control of the Company or was in day to day management of the Company. Consequently, it is observed that when the accused is not shown to have played any active part and has produced Form No.32 and there is no material in the complaint or otherwise to show that that accused can be proceeded with under Section 138 of the Act, he would be discharged. It, therefore, follows that if there is something in the complaint or otherwise to 21 show that the accused can be proceeded with, he may be proceeded with, his