Ashutosh Ashok Parasrampuriya vs M/S. Gharrkul Industries Pvt. Ltd.

IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NO(S). 1206 OF 2021 (Arising out of SLP(Criminal) No(s). 7573 of 2014)

ASHUTOSH ASHOK PARASRAMPURIYA & ANR. ….APPELLANT(S)

VERSUS

M/S. GHARRKUL INDUSTRIES PVT. LTD. & ORS …RESPONDENT(S)

WITH CRIMINAL APPEAL NO(S). 1207 OF 2021 (Arising out of SLP(Criminal) No(s). 9520 of 2014)

JUDGMENT

Rastogi, J.

1. Leave granted.

2. Signature Not Verified The present appeals are directed against the common Digitally signed by NEETU KHAJURIA Date: 2021.10.08 17:48:25 IST Reason: judgment and order dated 18th July, 2014 filed at the instance of

1 the appellants under Section 482 of Code of Criminal Procedure,

1973(herein after being referred to as “CrPC”) against the order

dated 10th November, 2012 pursuant to which they were summoned

to answer to a charge of Section 138 of Negotiable Instruments Act,

1881(hereinafter being referred to as the “NI Act”) that came to be

dismissed by the High Court under the order impugned.

3. The seminal facts in brief necessary for the present purpose

are stated as under.

4. The appellant nos. 1 and 2 in Criminal Appeal @ SLP(Criminal)

No. 7573 of 2014 and appellant nos. 2, 3 and 4 in Criminal Appeal

@ SLP(Criminal) No. 9520 of 2014 are the Directors of the appellant

no. 1(Ameya Paper Mills Pvt. Ltd.) in Criminal Appeal @

SLP(Criminal) No. 9520 of 2014, the Private Limited Company

established under the provisions of the Companies Act, 1956. It is

the case of respondent no. 1­complainant that it is a Private Limited

Company dealing in the business of production and selling spices

under the name and style of M/s. Gharkul Industries Private Ltd.

and the appellants being well acquainted with respondent no.1­

complainant and being in need of financial assistance for their

2 business approached respondent no.1­complainant with a request

to provide them financial assistance. Respondent no. 1­

complainant considering the relations and need of the appellants

provided financial assistance and on negotiations, Memorandum of

Understanding was executed which was signed by appellant no. 2­

Dilip Shrikrishna Andhare(Appellant no. 2 in Criminal Appeal @

SLP(Criminal) No. 9520 of 2014) with consent of all the appellants

in the presence of two attesting witnesses.

5. It is also the case of respondent no. 1­complainant that all the

appellants had agreed that the amount so received from respondent

no. 1 would be returned within a specified time as agreed in the

Memorandum of Understanding and accordingly payments were

made by respondent no. 1­complainant as and when demanded by

various cheques details which were furnished in the complaint.

Accordingly, a total amount of Rs. 1,50,19,831/­ was received by

the appellants through cheque during the period 23 rd November,

2007 to 12th March, 2009, the details of which are as under:­

Date Cheque No. Bank HDFC Amount Bank 23/11/07 417895 HDFC Bank 20,00,000/-

3 30/11/07 417896 HDFC Bank 16,00,000/-

18/01/08 417909 HDFC Bank 6,00,000/-

21/01/08 417915 HDFC Bank 5,00,000/-

22/01/08 417916 HDFC Bank 10,00,000/-

23/01/08 417917 HDFC Bank 5,39,831/-

30/01/08 417919 HDFC Bank 7,00,000/-

01/02/08 461840 S.B.I. 3,00,000/-

15/02/08 461840 S.B.I. 5,00,000/-

26/02/08 507485 HDFC Bank 3,00,000/-

01/03/08 507487 HDFC Bank 4,00,000/-

11/03/08 461844 S.B.I. 3,50,000/-

18/03/08 507483 HDFC Bank 80,000/-

24/03/08 507497 HDFC Bank 3,04,000/-

04/04/08 507509 HDFC Bank 3,00,000/-

0/04/08 507500 HDFC Bank 2,70,000/-

28/04/08 507506 HDFC Bank 24,000/-

01/05/08 507507 HDFC Bank 1,27,000/-

06/05/08 507514 HDFC Bank 2,25,000/-

30/05/08 461861 S.B.I. 2,50,000/-

04/06/08 507519 HDFC Bank 4,00,000/-

27/06/08 507426 HDFC Bank 2,50,000/-

12/03/09 333407 S.B.I. 10,00,000/-

12/03/09 333408 S.B.I. 10,00,000/-

12/03/09 333409 S.B.I. 10,00,000/-

4 12/03/09 333410 S.B.I. 10,00,000/-

6. It is the further case of the respondent no. 1 that on 18 th

August 2010, a letter was issued to the appellants demanding

balance­sheet of the Company, which was supplied and accordingly

accounts were confirmed by the appellants and on 21 st June 2012,

the appellants issued a letter admitting the outstanding balance of

respondent no. 1­complainant as on 31 st March, 2012 to the extent

of Rs.1,49,94,831/­. According to respondent no. 1, the appellants

as Directors of their Company are responsible for conduct of their

business and for the affairs of the Company.

7. Appellant No. 1­Company in Criminal Appeal @ SLP(Criminal)

No. 9520 of 2014 issued a cheque on 2 nd June, 2012 in favour of

respondent no. 1­complainant towards part payment of the amount

valued for Rs. 10,00,000/­ drawn on State Bank of India, Finance

Branch at Nagpur, Maharashtra which was deposited by

respondent no. 1­complainant in UCO Bank, Amravati,

Maharashtra for encashment. However, the same was dishonoured

due to “funds insufficient”. The intimation of dishonour of cheque

was received by respondent no. 1­complainant on 4 th June, 2012.

After dishonour of cheque, notice was issued to the appellants 5 demanding the said amount of cheque, which was refused to be

accepted by the appellants in spite of intimation given by the Postal

Authorities and, thus, the notice was returned with remark “not

claimed”.

8. In the background of the above facts, respondent no. 1 filed a

complaint against the appellants under Section 138 of NI Act in

which a specific averment was made that respondent no. 1 by

considering the need of the appellants for financial assistance and

their relations, provided such financial assistance to the appellants

by executing Memorandum of Understanding, which was signed by

Appellant no. 2­Dilip Shrikrishna Andhare. It is specifically

contended that appellant no. 2 signed the said document with

consent of all the remaining appellants in the presence of two

attesting witnesses. It is the case of respondent no. 1­complainant

as revealed from the complaint that all the appellants agreed that

the amount provided by respondent no. 1 would be refunded within

one or two years. The contents of the complaint further reveal that

respondent no. 1 had demanded balance­sheet of appellant no. 1

Company, which was provided and the appellants also confirmed

6 the balance in their accounts by issuing letter dated 21 st June,

2012. The cheque involved in the criminal case initiated by

respondent no. 1 against the appellants is dated 2 nd June, 2012. It

is further averred in para 5 & 7 of the complaint that all Directors

of the appellant Company are responsible for its business and all

the appellants are involved in the business of the Company and are

responsible for all the affairs of the Company.

9. After contending about the fact of issuance of cheque dated 2 nd

June, 2012 by the appellants to respondent no. 1 and dishonour of

cheque for want of sufficient funds, on receipt of intimation

regarding dishonour of cheque on 4th June, 2012, respondent no. 1

issued legal notice to the appellants on the address of appellant no.

1­Company as well as on their residential address by registered

post acknowledgment due on 26th June, 2012 demanding amount

of Rs.10 lakhs which is alleged to have been refused by the

appellants as per endorsement made by the Postal Department.

10. In the light of the above averments in the complaint and

documents filed on record, and so also the specific averment made

in paragraph 5 and 7 of the complaint that all the appellants are

7 equally responsible for the offence committed by them and they

have issued the said cheque to discharge their legal liability towards

respondent no. 1­complainant.

11. The learned trial Court taking cognizance of the complaint by

order dated 10th November, 2012 issued summons to the appellants

herein directing them to appear before the Court on 23 rd November,

2012 and the appellants were granted bail on furnishing security of

Rs.2,000/­ by an Order dated 23 rd November, 2012 by the Court of

Chief Judicial Magistrate.

12. The order passed by the learned trial Judge summoning the

present appellants came to be challenged in two separate criminal

petitions filed under Section 482 CrPC seeking quashing/setting

aside of the criminal complaints/Summary criminal case registered

against them as well as the summons dated 10th November, 2012.

Both the petitions were tagged together and came to be dismissed

by the High Court under the order impugned dated 18 th July, 2014.

13. Ms. Arundhati Katju, learned counsel for the appellants

submits that there is no specific averment made that they have

committed the offence and are responsible for conduct of business 8 of the Company, which is one of the essential

ingredient/requirement and in the absence of such averment,

merely because the appellants are the Directors of the Company,

they are not to be held vicariously liable and cannot be made

accused in the proceedings.

14. It was further the case of the appellants that no notice relating

to dishonour of cheque dated 2nd June, 2012 has been received by

them and there is no averment made in the complaint that on the

date of issuance of cheque, the appellants were either the Managing

Directors or were responsible for day­to­day business of the

Company.

15. Mr. Sidhartha Dave, learned senior counsel for the appellants

in Criminal Appeal @ SLP(Criminal) No. 7573 of 2014 further

submits that they are the non­executive Directors of the Company

and were not responsible for the conduct of the business of the

Company which is the mandatory requirement for initiation of the

proceedings under Section 138 of NI Act and submits that the pre­

condition as referred to under Section 141 of NI Act not being

complied with, the order passed by the learned trial Judge in

9 summoning the present appellants is nothing but a clear abuse of

process of law and the finding which has been recorded by the High

Court in the impugned judgment is not legally sustainable in law

and in support of his submission has placed reliance on the

judgments of this Court in S.M.S. Pharmaceuticals Ltd. Vs.

Neeta Bhalla and Another1 and Pooja Ravinder Devidasani Vs.

State of Maharashtra and Another2.

16. Per contra, Mr. Pallav Shishodia, learned senior counsel for

the respondents, while supporting the order passed by the High

Court in the impugned proceedings, submits that the appellants in

Criminal Appeal @ SLP(Criminal) No. 7573 of 2014 claimed

themselves to be a non­executive Directors but the record indicates

that they are the Directors of the Company and in support thereof,

Form No. 32 which has been obtained from the Registrar of

Companies placed on record clearly indicates that all are the

Directors of the Company as on 1 st April 2007 and responsible to

the Company for the conduct of business actively involved in the

business of the Company and responsible for the affairs of the 1 2005(8) SCC 89 2 2014(16) SCC 1

10 Company and there is nothing to indicate that they were appointed

as non­executive Directors and what is being urged by the learned

counsel for the appellants may be their defence which is a matter of

trial and is not open to be examined at this stage and once the

compliance of the statute has been made as required by law, their

petitions have been rightly rejected by the High Court and needs no

further indulgence of this Court.

17. During the course of submission, learned counsel for the

respondents submits that apart from dishonour of cheque in the

instant matters, there are other cheques issued by the appellants

which were also dishonoured and separate complaints have been

filed by the respondent(s) but because of the pendency of the

present appeals before this Court, no action has been taken by the

trial Judge. The details of the cases including this case are as

under:­

Sl. No. Case No. Court Cheque Amount(In Rupees)

1. S.C.C No. 3rd 10,00,000/­(Ten Lakhs 2500/2012 JMFC, only) vide Cheque No. Amravati 493018 dated 02.06.2012

2. S.C.C. No. 3rd 10,00,000/­(Ten Lakhs 4984/2012 JMFC, only) vide Cheque No. Amravati 493017 dated 17.07.2012

3. S.C.C No. 7th 1,15,39,200/­(One Crore

11 2600/2014 JMFC, Fifteen Lakhs Thirty Nine Amravati Thousand and Two Hundred only) vide Cheque No. 493007 to 493016 Cheque No. 493020 and 493021 All dated 05.04.2014

18. Learned counsel for the respondents have placed reliance on

the judgments of this Court in A.K. Singhania Vs. Gujarat State

Fertilizer Company Limited and Another3 and Gunmala Sales

Private Limited Vs. Anu Mehta and Others4.

19. We have heard learned counsel for the parties and with their

assistance perused the material available on record.

20. In this regard, taking note of the three­Judge Bench decision

of this Court in S.M.S. Pharmaceuticals Ltd.(supra) would be

apposite. While dealing with an offence under Section 138 of the NI

Act, the Court explaining the duty of a Magistrate while issuing

process and his power to dismiss a complaint under Section 203

without even issuing process observed thus:­

3 2013(16) SCC 630 4 2015(1) SCC 103

12 “5. … a complaint must contain material to enable the Magistrate to make up his mind for issuing process. If this were not the requirement, consequences could be far­reaching. If a Magistrate had to issue process in every case, the burden of work before the Magistrate as well as the harassment caused to the respondents to whom process is issued would be tremendous. Even Section 204 of the Code starts with the words ‘if in the opinion of the Magistrate taking cognizance of an offence there is sufficient ground for proceeding’. The words ‘sufficient ground for proceeding’ again suggest that ground should be made out in the complaint for proceeding against the respondent. It is settled law that at the time of issuing of the process the Magistrate is required to see only the allegations in the complaint and where allegations in the complaint or the charge­sheet do not constitute an offence against a person, the complaint is liable to be dismissed.”

21. After so stating, the Court analysed Section 141 of the NI Act

and after referring to certain other authorities answered a reference

which reads as follows:­

19(a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied.

(b) The answer to the question posed in sub­para (b) has to be in the negative. Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred

13 as a fact as there is no deemed liability of a director in such cases.

(c) The answer to Question (c) has to be in the affirmative. The question notes that the managing director or joint managing director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section

141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub­ section (2) of Section 141.”

22. The same principle has been reiterated in S.K.

Alagh Vs. State of Uttar Pradesh & Others 5; Maharashtra State

Electricity Distribution Co. Ltd. & Another Vs. Datar

Switchgear Ltd. and Others6 and GHCL Employees Stock Option

Trust Vs. India Infoline Limited7.

23. In the light of the ratio in S.M.S. Pharmaceuticals Ltd.

(supra) and later judgments of which a reference has been made

what is to be looked into is whether in the complaint, in addition to

5 2008 (5) SCC 662 6 2010 (10) SCC 479 72013 (4) SCC 505

14 asserting that the appellants are the Directors of the Company and

they are incharge of and responsible to the Company for the

conduct of the business of the Company and if statutory

compliance of Section 141 of the NI Act has been made, it may not

open for the High Court to interfere under Section 482 CrPC unless

it comes across some unimpeachable, incontrovertible evidence

which is beyond suspicion or doubt or totally acceptable

circumstances which may clearly indicate that the Director could

not have been concerned with the issuance of cheques and asking

him to stand the trial would be abuse of process of Court. Despite

the presence of basic averment, it may come to a conclusion that no

case is made out against the particular Director for which there

could be various reasons.

24. The issue for determination before us is whether the role of the

appellants in the capacity of the Director of the defaulter company

makes them vicariously liable for the activities of the defaulter

Company as defined under Section 141 of the NI Act? In that

perception, whether the appellant had committed the offence

chargeable under Section 138 of the NI Act?

15

25. We are concerned in this case with Directors who are not

signatories to the cheques. So far as Directors who are not the

signatories to the cheques or who are not Managing Directors or

Joint Managing Directors are concerned, it is clear from the

conclusions drawn in the afore­stated judgment that it is necessary

to aver in the complaint filed under Section 138 read with Section

141 of the NI Act that at the relevant time when the offence was

committed, the Directors were in charge of and were responsible for

the conduct of the business of the company.

26. This averment assumes importance because it is the basic and

essential averment which persuades the Magistrate to issue process

against the Director. That is why this Court in S.M.S.

Pharmaceuticals Ltd.(supra) observed that the question of

requirement of averments in a complaint has to be considered on

the basis of provisions contained in Sections 138 and 141 of the NI

Act read in the light of the powers of a Magistrate referred to in

Sections 200 to 204 CrPC which recognise the Magistrate’s

discretion to take action in accordance with law. Thus, it is

16 imperative that if this basic averment is missing, the Magistrate is

legally justified in not issuing process.

27. In the case on hand, reading the complaint as a whole, it is

clear that the allegations in the complaint are that at the time at

which the cheques were issued by the Company and dishonoured

by the Bank, the appellants were the Directors of the Company and

were responsible for its business and all the appellants were

involved in the business of the Company and were responsible for

all the affairs of the Company. It may not be proper to split while

reading the complaint so as to come to a conclusion that the

allegations as a whole are not sufficient to fulfil the requirement of

Section 141 of the NI Act. The complaint specifically refers to the

point of time when the cheques were issued, their presentment,

dishonour and failure to pay in spite of notice of dishonour. In the

given circumstances, we have no hesitation in overruling the

argument made by the learned counsel for the appellants.

28. Indisputedly, on the presentation of the cheque of

Rs.10,00,000/­(Rupees Ten Lakhs only) dated 2 nd June 2012, the

cheque was dishonoured due to “funds insufficient” in the account

17 and after making due compliance, complaint was filed and after

recording the statement of the complainant, proceedings were

initiated by the learned Magistrate and no error has been

committed by the High Court in dismissing the petition filed under

Section 482 CrPC under the impugned judgment.

29. The submission of learned counsel for the appellants that they

are the non­executive Directors in the light of the documentary

evidence placed on record by Form No. 32 issued by the Registrar of

Companies, both the appellants are shown to be the Directors of the

Company, still open for the appellants to justify during course of

the trial.

30. In our considered view, the High Court has rightly not

interfered in exercise of its jurisdiction under Section 482 CrPC for

quashing of the complaint.

31. Before concluding, we would like to observe that the

proceedings could not be processed further in view of the interim

order passed by this Court dated 17 th October 2014 and because of

the instant appeals, the other cases instituted by the respondent(s)­

complainant have been held up before the trial Court. Since these 18 are the old cases instituted in the year 2012 and could not be

processed further because of the pendency of the appeals in this

Court, we may consider it appropriate to observe that let all the

three cases of which a reference been made in para 17 of this

Judgment be clubbed together and be disposed of expeditiously as

possible on its own merits in accordance with law without being

influenced/inhibited by the observations made by us in the present

judgment not later than six months from the date parties record

their attendance before the trial Court. All the parties shall record

their attendance before the concerned trial Court on 22 nd November,

2021.

32. Consequently, the appeals fail and are accordingly dismissed.

33. Pending application(s), if any, stand disposed of.

………………………..J. (AJAY RASTOGI)

..………………………J. (ABHAY S. OKA) NEW DELHI OCTOBER 08, 2021

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