NONREPORTABLE
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)
J U D G M E N T
Rastogi, J.
1. Leave granted.
2. The present appeals are directed against the common
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
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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 23rd November,
2007 to 12th March, 2009, the details of which are as under:
Date Cheque No. Bank HDFC
Bank
Amount
23/11/07 417895 HDFC Bank 20,00,000/-
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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/-
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12/03/09 333410 S.B.I. 10,00,000/-
6. It is the further case of the respondent no. 1 that on 18th
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 21st June 2012,
the appellants issued a letter admitting the outstanding balance of
respondent no. 1complainant as on 31st 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 2nd 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 4th June, 2012.
After dishonour of cheque, notice was issued to the appellants
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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
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the balance in their accounts by issuing letter dated 21st June,
2012. The cheque involved in the criminal case initiated by
respondent no. 1 against the appellants is dated 2nd 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 2nd
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
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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 23rd November,
2012 and the appellants were granted bail on furnishing security of
Rs.2,000/ by an Order dated 23rd 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 18th 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 precondition 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 1st 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.
2500/2012
3
rd
JMFC,
Amravati
10,00,000/(Ten Lakhs
only) vide Cheque No.
493018 dated 02.06.2012
2. S.C.C. No.
4984/2012
3rd
JMFC,
Amravati
10,00,000/(Ten Lakhs
only) vide Cheque No.
493017 dated 17.07.2012
3. S.C.C No. 7
th 1,15,39,200/(One Crore
11
2600/2014 JMFC,
Amravati
Fifteen Lakhs Thirty Nine
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
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“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
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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 subsection (2) of Section 141.”
22. The same principle has been reiterated in S.K.
Alagh Vs. State of Uttar Pradesh & Others5
; 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
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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
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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 2nd 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 17th 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 22nd 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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