Case: Harshendra Kumar D Vs. Rebatilata Koley Etc

The brief facts are these. The complainants were interested in business relationship with Rifa Healthcare (India) Pvt. Ltd. (for short, `the Company) for the sale of bio-ceramic products. The complainants, for the orders they had placed, issued demand drafts in favour of the Company. It appears that the Company had not delivered the products ordered by the complainants and accordingly they asked the Company for return of their money. On April 30, 2004, the Company issued 18 cheques bearing Nos. (i) 000843 for Rs. 30,000/-; (ii) 00870 for Rs. 40,000/-; (iii) 000845 for Rs. 30,000/-; (iv) 000852 for Rs. 3,00,000/-; (v) 00842 for Rs. 60,000/-; (vi) 000862 for Rs. 40,000/-; (vii) 000834 for Rs. 60,000/-; (viii) 000572 for Rs. 40,000/-; (ix) 000827 for Rs. 30,350/-; (x) 000854 for Rs. 3,00,000/-; (xi) 000826 for Rs. 60,000/-; (xii) 000855 for Rs. 3,00,000/-; (xiii) 000857 for Rs. 3,00,000/-; (xiv) 000858 for Rs. 3,00,000/-; (xv) 000841 for Rs. 60,000/-; (xvi) 000871 for Rs. 40,000/-; (xvii) 000568 for Rs. 40,000/- and (xviii) for Rs. 60,130/- drawn on UTI Bank Ltd., Jayanagar, Bangalore in favour of the complainants. These 18 cheques were dishonoured by the Bank/s on presentation.In the month of December, 2004, the complainants filed 18 complaints under Section 138 read with Section 141 of the NI Act. For the sake of brevity and convenience, we shall refer to the complaint no. 14512 of 2004. In the complaint, besides the Company, the appellant was arraigned as accused No. 3. It was alleged in the complaint that the Managing Director and the two Directors (including the appellant) were responsible for day-to-day affairs of the Company and that it was on their assurance that the complainant issued demand draft in favour of the Company and when the products of the Company were not received by the complainant, she contacted the accused persons and told them that she could not continue business with them and asked for return of her money. Accordingly, for and on behalf of the Company, in discharge of the existing liability, an account payee cheque was issued but the cheque was returned by the complainants banker on presentation with the endorsement `insufficient fund. The complainant then sent legal notice asking the accused persons to pay the amount of cheque within 15 days from the date of the receipt of the notice but despite service of notice, no payment has been made.The concerned Metropolitan Magistrate issued summons to all the accused persons including the appellant.The appellant challenged the proceedings initiated by the complainants against him by filing 18 revision applications under Section 397 read with Section 401 of the Criminal Procedure Code, 1973 (for short, `Code) before the Calcutta High Court. In these revision applications, notices were issued to the complainants. On behalf of the appellant, the principal contention canvassed was that the appellant was appointed as Director of the Company on August 27, 2003. He resigned from the directorship on March 2, 2004 which was accepted by the Board of Directors on that day itself with immediate effect. The factum of his resignation is also recorded in Form No. 32 filed by the Company with the Registrar of Companies on March 4, 2004. The 18 cheques which were issued on behalf of the Company to the complainants were issued after his resignation. The dishonour of these cheques through the complainants bankers was also subsequent to his resignation. In other words, it was submitted by the counsel for the appellant before High Court that at the time when the cheques were issued or when the cheques were dishonoured, the appellant had no concern or connection with the Company.The High Court, however, relying upon a decision of Single Judge of that Court in Fateh Chand Bhansali v. M/s. Hindustan Development Corporation Ltd.1, held that resignation by the petitioner as Director of the Company is a defence of the accused and the defence is a matter for consideration at the trial on the basis of evidence which cannot be decided by the Court in revisional jurisdiction. The High Court considered the matter thus: "The question of the learned Advocate for the petitioner is that the petitioner was not director of a company at the material point of time because there is form 32 which shows the date when the petitioner was appointed a director and when there came to be a change of directorship of the company. According to Mr. Trivedi learned Advocate for the petitioner, a Honble Judge of this Court in Saroj Kumar Jhunjhunwala Vs. State of West Bengal and Anr. (2007) 1 C Cr.LR (Cal) 793 was pleased to hold that if before the issuance of cheques, the accused-petitioner had resigned from the directorship, then he cannot be held liable for the offence. This decision which favours the petitioner has been pitted against the decision in Fateh Chand Bhansali Vs. M/s. Hindustan Development Corporation Ltd., (2005) 1 C Cr. LR (Cal) 581 wherein another Honble Single Judge of this court with reference to a good number of decisions including the decision in State of M.P. Vs. Awadh Kishore Gupta & Ors., 2004 SCC (Cr.) 352 held that the High Court while considering the revisional application cannot look into the papers and documents annexed to such application as those were neither verified nor tested. In that decision also the point was raised with reference to form 32 and His Lordship held that the decision of State of M.P. Vs. Awadh Kishore Gupta and Ors. (Supra) is an authority regarding permissibility of the High Court to look into the papers and documents annexed to the revisional application and the story of the petitioner that they resigned from the company by submitting Form 32 and are, in no way, responsible for the alleged offence is a defence of the accused person and the defence is a matter for consideration at the trial on the basis of evidence which cannot be decided by the court. It is worth mentioning that this decision in Fateh Chand Bhansali was rendered on 23.3.2005 while the decision in Saroj Kumar Jhunjhunwala was rendered on 05.04.2007 and in this decision Fateh Chand Bhansali was not placed before his Lordship for consideration and judicial discipline demands that I should go by the earlier decision, namely, Fateh Chand Bhansali (Supra)."

Court's reasoning:
Every company is required to keep at its registered office a register of its directors, managing director, manager and secretary containing the particulars with respect to each of them as set out in clauses (a) to (e) of sub-section (1) of Section 303 of the Companies Act, 1956. Sub-section (2) of Section 303 mandates every company to send to the Registrar a return in duplicate containing the particulars specified in the register. Any change among its directors, managing directors, managers or secretaries specifying the date of change is also required to be furnished to the Registrar of Companies in the prescribed form within 30 days of such change. There is, thus, statutory requirement of informing the Registrar of Companies about change among directors of the company. In this view of the matter, in our opinion, it must be held that a director - whose resignation has been accepted by the company and that has been duly notified to the Registrar of Companies - cannot be made accountable and fastened with liability for anything done by the company after the acceptance of his resignation. The words `every person who, at the time the offence was committed, occurring in Section 141 (1) of the NI Act are not without significance and these words indicate that criminal liability of a director must be determined on the date the offence is alleged to have been committed.In our judgment, the above observations cannot be read to mean that in a criminal case where trial is yet to take place and the matter is at the stage of issuance of summons or taking cognizance, materials relied upon by the accused which are in the nature of public documents or the materials which are beyond suspicion or doubt, in no circumstance, can be looked into by the High Court in exercise of its jurisdiction under Section 482 or for that matter in exercise of revisional jurisdiction under Section 397 of the Code. It is fairly settled now that while exercising inherent jurisdiction under Section 482 or revisional jurisdiction under Section 397 of the Code in a case where complaint is sought to be quashed, it is not proper for the High Court to consider the defence of the accused or embark upon an enquiry in respect of merits of the accusations. However, in an appropriate case, if on the face of the documents - which are beyond suspicion or doubt - placed by accused, the accusations against him cannot stand, it would be travesty of justice if accused is relegated to trial and he is asked to prove his defence before the trial court. In such a matter, for promotion of justice or to prevent injustice or abuse of process, the High Court may look into the materials which have significant bearing on the matter at prima facie stage.Criminal prosecution is a serious matter; it affects the liberty of a person. No greater damage can be done to the reputation of a person than dragging him in a criminal case. In our opinion, the High Court fell into grave error in not taking into consideration the uncontroverted documents relating to appellants resignation from the post of Director of the Company. Had these documents been considered by the High Court, it would have been apparent that the appellant has resigned much before the cheques were issued by the Company. As noticed above, the appellant resigned from the post of Director on March 2, 2004. The dishonoured cheques were issued by the Company on April 30, 2004, i.e., much after the appellant had resigned from the post of Director of the Company. The acceptance of appellants resignation is duly reflected in the resolution dated March 2, 2004. Then in the prescribed form (Form No. 32), the Company informed to the Registrar of Companies on March 4, 2004 about appellants resignation. It is not even the case of the complainants that the dishonoured cheques were issued by the appellant. These facts leave no manner of doubt that on the date the offence was committed by the Company, the appellant was not the Director; he had nothing to do with the affairs of the Company. In this view of the matter, if the criminal complaints are allowed to proceed against the appellant, it would result in gross injustice to the appellant and tantamount to an abuse of process of the court.