Saturday, 16 February 2013
Saturday, 9 February 2013
minimum subscription would have to be calculated after taking into account the requests made for withdrawal of share application.
THE HIGH COURT OF DELHI AT NEW DELHI
SUBJECT : COMPANIES ACT
Judgment delivered on: 14.01.2013
WP(C) 1261/2002
THE SECURITIES & EXCHANGE BOARD
OF INDIA ......PETITIONER
Vs
A.P.L. INDUSTRIES LTD. & ORS. .....RESPONDENTS
ADVOCATES WHO APPEARED IN THIS CASE:
For the Petitioner: Ms. Maninder Acharya, Advocate
For the Respondents: None
CORAM :-
HON'BLE MR JUSTICE RAJIV SHAKDHER
RAJIV SHAKDHER, J
1. This writ petition has been filed to assail the order of the Securities
Appellate Tribunal (in short SAT) dated 18.10.2010.
2. It may be pertinent to note that by the said order, SAT has reversed
the order dated 22.05.1998 passed by the Chairman, Security and Exchange
Board of India (in short SEBI).
3. The challenge arises in the background of the following facts, most of
which are not in dispute :-
3.1 Respondent no.1/company had floated a prospectus for a public issue
of 30 Lakhs equity shares of a face value of Rs.10/- each, for cash at par
aggregating to a total sum of Rs.3 Crores. The public issue opened on
26.02.1996. The closing date for the issue was 08.03.1996. 3.2 Against the aforementioned public issue, respondent no.1/company
received 51,37,100 applications by the date of closure i.e., 08.03.1996.
3.3 Evidently, there were certain withdrawals as well as rejection of the
share applications filed with the Registrar to the Share Issue (in short the
Registrar). Undisputedly 23,13,800 share applications were withdrawn,
while 3,25,700 share applications were rejected on one ground or the other
by the Registrar. Two important facts emerged by virtue of the aforesaid
events.
3.4 First, that on the date of closure i.e., 08.03.1996, the public issue of
respondent no.1/company was over-subscribed by almost 1.71 times.
However, if the rejected share applications were taken into account which,
as indicated above, numbered 3,25,700, on the date of closure i.e.,
08.03.1996 the public issue was over-subscribed by 1.60 times as against
1.71 times, if all application forms were taken into account.
3.5 Second, if, however, the share applications in respect of which request
for withdrawal had been received from the applicants were taken into
account the subscription to the public issue of respondent no.1 fell to 94%
of the total public issue. Similarly, if both the rejected share applications
and the request for withdrawal of share applications was taken into account,
the subscription to the public issue fell to 83% of the total public issue made
by respondent no.1/company .
4. It is in the background of these undisputed facts that the issue which
arises for consideration is whether the SEBI was right in directing refund of
the entire share application amount since, according to SEBI, respondent
no.1/company had not been able to achieve the minimum subscription as
provided in its prospectus.
4.1 It may be relevant, therefore to, extract the minimum subscription
clause as contained in the prospectus :-
“..MINIMUM SUBSCRIPTION
IF THE COMPANY DOES NOT RECEIVE THE MINIMUM
SUBSCRIPTION AMOUNT OF 100% OF THE ISSUE AS
APPLICATION MONEY TILL THE CLOSURE OF THE ISSUE, THE
COMPANY SHALL FORTHWITH REFUND THE ENTIRE
SUBSCRIPTIOON AMOUNT REEIVED. IF THERE IS A DELAY IN
REFUND OF THE AMOUNT COLLECTED, THE COMPANY AND THE
DIRECTORS OF THE COMPANY SHALL BE JOINTLY AND
SEVERELY LIABLE TO REPAY THE AMOUNT BY WAY OF
REFUND WITH INTERST AT TEH RATE OF 15% PER ANNUM FOR THE DELAYED PERIOD BEYOND 78 DAYS FROM THE OPENING
OF THE ISSUE...”
4.2 As would be evident respondent no.1/company was thus required to
achieve a minimum subscription of 100% of the issue as the application
money till the closure of the issue, failing which it was required to refund
the entire subscription amount received from the applicants for allotment of
shares.
4.3 Continuing with the narrative, the request for withdrawal of share
application had been received by the Registrar between 08.03.1996 to
14.05.1996. Since the subscription had dropped to 83% of the total share
issue, the lead Manager to the public issue, issued a certificate stating
therein, inter alia, that respondent no.1/company had failed to achieve
minimum subscription. It may be pertinent to note that the lead Manager to
the Share issue was one, Allianz Capital and Management Services Limited.
4.4 Based on the aforesaid events, SEBI shot of a communication dated
07.06.1996, whereby it advised respondent no.1/company to immediately
refund the share application money to the concerned applicants, and file a
status report with it, latest by 12.06.2012. Respondent no.1/company was
also put to notice that if it failed to do the needful, SEBI would be
constrained to take action against it, in accordance with the provisions of the
Securities & Exchange Board of India Act, 1992 and the Companies Act,
1956 (in short the Companies Act). It may also be pertinent to note that
in this very communication of 07.06.1996, there was a discussion as to the
applicability of the provisions of Section 72(5) of the Companies Act. SEBI
seems to have indicated in the said communication that, the applicant(s) who
were desirous of being allotted shares, could withdraw their application after
the expiry of the 5th day from the opening of the subscription list. A
reference was also given to a previous precedent wherein SEBI had come to
the same conclusion. A copy of the said appellate decision, in the case of
Vishwalaxmi Petro Products Limited, was also, evidently furnished to
respondent no.1/company .
4.4 It appears that being aggrieved, respondent no.1/company filed an
appeal with SAT which, by an order dated 20.11.1996, rejected the appeal
on the ground that the order impugned was not appealable as it was not an
order passed under the provisions of the SEBI Act. Respondent
no.1/company was thus permitted to approach the Chairman of the SEBI for
redressal of its grievance.
4.5 Accordingly, respondent no.1/company approached the Chairman of
the SEBI who by an order dated 22.05.1998 directed respondent no.1/company to refund the monies received from the applicants against the
public issue.
4.6 It is this order which was assailed by respondent no.1/company before
SAT. As indicated above, SAT by virtue of the impugned order dated
18.10.2000 reversed the order of the Chairman of SEBI dated 22.05.1998. It
may only be recorded as a matter of fact that prior to approaching SAT
respondent no.1/company had approached the High Court of Punjab and
Haryana which in effect directed it to SAT, vide its order dated 14.10.1999
passed in CWP 10811/1998.
4.7 This resulted in SEBI being aggrieved by the order of SAT and hence
chose to take recourse to a writ petition. For this purpose, a writ petition
was filed in the Bombay High Court, wherein respondent no.1/company
raised a preliminary objection with regard to the territorial jurisdiction,
whereupon SEBI withdrew its writ petition, with liberty to approach the
appropriate court. This order was passed on 09.01.2002.
4.8 Importantly, in the interregnum, the Bombay High Court had passed
an order on 11.05.2001, whereby the bankers to the issue were restrained
from making over moneys to respondent no.1/company.
5. It is in this background that the captioned writ petition has been filed
in this court, by SEBI. The captioned writ petition was moved on
20.02.2002, when this court while issuing notice issued a similar ad interim
direction, which was passed by the Bombay High Court, in effect,
restraining the bankers to the issue from releasing payment to respondent
no.1/company.
6. Pleadings in the writ petition are complete. There is no appearance on
behalf of respondent no.1/company today in court. However, in pursuance
to the directions issued by this court, written synopsis have been filed on
behalf of the parties including respondent no.1/company.
6.1 The sum and substance of the respondent no.1/company’s defence is
as follows :-
(i). the prospectus constitutes an offer for subscription of shares and once
an application is made the contract is complete and hence, it cannot be
revoked by seeking withdrawal of the share application money. In other
words, what is contended is that even after the 5th day of the opening of the
subscription list, there can be no unilateral withdrawal of the share
application money;
(ii). the withdrawal of the share application money can only be accepted
by the company i.e., in this case respondent no.1/company and not by the Registrar. It is evidently the stand of respondent no.1/company that on the
date of closure the public issue was over-subscribed by 1.71 times which
was well over the minimum subscription of 100% as per the requirement
stipulated in respondent no.1/company’s prospectus and therefore, the
condition prescribed therein was met. The provisions of Rule 2(3) of the
SEBI, Registrar to an issue and Share Transfer Agents Rules 1993 are
sought to be invoked to establish that it was never within the remit of the
Registrar to permit withdrawal of the share applications. It is sought to be
submitted that power, if any, to permit withdrawal of the share application
vested with the Board of Directors of respondent no.1/company, and that,
the Registrar in that regard had no power to return the share application
money to the subscribers.
7. On the other hand, learned counsel for the petitioner, Ms. Acharya has
submitted that it is well settled that the prospectus is an invitation to offer
and that an applicant desirous of applying for shares, if any, of a listed
company or otherwise can withdraw his offer prior to its acceptance. Ms.
Acharya submits that the offer of an applicant culminates into a contract
only upon allotment of the shares. In this case, according to Ms. Acharya
withdrawal of the share application(s) took place before the allotment and
therefore, as a matter of fact, in effect, the Registrar was only carrying out
what is a ministerial act. Reliance was placed by her on the judgment of the
Bombay High Court in the case of Vishwalakshmi Petro Products Ltd. vs
Securities Exchange Board of India in WP(C) No. 728/1996 in the High
Court of Judicature at Bombay.
7.1. In the alternative, Ms. Acharya argues that the Registrar is empowered
to receive and permit withdrawal of the share applications. In this regard,
Ms. Acharya places reliance on Rule 2(3)(i) and (iii)(b) of SEBI.
7.2 Furthermore, Ms. Acharya thus submits that, in terms of Section 69 of
the Companies Act, the company which is respondent no.1 was prohibited
from making an allotment if, it did not receive subscription equivalent to the
minimum amount prescribed in the prospectus.
7.3. Mrs. Acharya also places reliance on Sub-Section (5) of Section 72 of
the Companies Act, to contend that the prohibition on an applicant to
withdraw his share application extends to the 5th day from the date of
opening of the subscription list, and therefore, upon expiry of the said
period, an applicant can make a request for withdrawal, in respect of which,
neither the Registrar nor the company can have any say. 8. Having heard learned counsel for the petitioner and on perusal of
pleadings, record and the written submissions filed on behalf of respondent
no.1/company, what emerges is as follows :-
(i). That, on the date of closure of the share issue i.e., 08.03.1996, the
public issue of respondent no.1/company was over-subscribed. The over
subscription was to the extent of 1.17 times;
(ii). There were both rejections and withdrawals;
(iii). If, rejections are taken into account, the over-subscription dropped to
1.60 times of the total public issue;
(iv). If, however, the withdrawals were also taken into account, the
subscription to the share issue dropped to a figure below the minimum
subscription, which was equivalent to, in percentage terms 83% of the total
issue.
9. The question, therefore, arises as to whether the date of closure is to
be taken into account for determining whether or not the petitioner company
achieved the minimum subscription. Undoubtedly, what can be said in
favour of respondent no.1/company that the clause pertaining to minimum
subscription, as appearing in the prospectus, did indicate that respondent
no.1/company was required to refund subscription amount received if it did
not receive 100% of the total issue amount till the date of closure of the
issue. However, this contractual clause has to be understood in the context
of the transaction at hand. The transaction at hand concerns an application
for shares which is made by an entity including an individual to a company,
pursuant to a prospectus being issued, in this case by respondent
no.1/company.
9.1. If that be so a share application is like any other offer which would
require acceptance of the offer made. The acceptance of an offer of this
nature can only be brought about, inter alia by allotment of shares made in
favour of the applicant by some overt method. Like in any other transaction
between two individuals before an offer is accepted, the offerer is entitled to
revoke the offer. This is precisely what happened in the present case. The
minimum subscription clause is inserted in a prospectus to protect the
interest of the investors, which is why Section 69 of the Companies Act
provides that if minimum subscription is not achieved, a company issuing
the prospectus cannot proceed to allotment of shares. The purpose being
that it would be pointless to have investors provide capital to the recipient
company unless the minimum amount is received by such a company for the
purpose stated in the prospectus. The argument advanced on behalf of
respondent no.1/company that on receipt of the share application form, a concluded contract came into existence, is a submission which is completely
misconceived because if it was so the concerned company would have to, as
of necessity, allot to the applicant, without fail, the exact number of shares
for which a request is lodged. As is well known, on very many occasions
the opposite happens. This is legitimate since in law, a share application is
only an offer.
9.2 Therefore, in my opinion, the minimum subscription clause appearing
in the prospectus would have to yield to the right of an applicant to withdraw
his offer before its acceptance. I may note here the argument of Ms.
Acharya, learned counsel for the petitioner, made on the same lines, that the
prospectus issued by a company was an invitation to offer and if the
application for shares is made, pursuant to issuance of a prospectus, it was
only an offer which could be withdrawn at any stage before its acceptance.
I am in agreement with this submission of the learned counsel for the
petitioner. [See AIR 1933 Madras 320, Official Liquidator of Bellary
Electric Supply Co. Ltd. Vs. Kanniram Rawoothmal and A. Sirkar vs Parjoar
Hosiery Mills Ltd. 1933 (3) Comp.Cas 454]
9.3 Therefore, in my opinion, minimum subscription would have to be
calculated after taking into account the requests made for withdrawal of
share application.
9.4 There is another reason for coming to the same conclusion.
Undoubtedly, in this case like in other public issues, there are rejections by
a Registrar based on various technical grounds. If as per the clause of
minimum subscription, the minimum subscription had to be calculated as on
the date of closure, it would be well-nigh impossible to carry out that
exercise as more often than not the rejections are made even after the date of
closure.
9.5 Therefore, if the minimum subscription amount is not reached, which
is the case in the present petition, then surely no allotment can be made.
There can be no dispute about this position in view of the provisions of
Section 69 of the Companies Act. The minimum subscription, therefore,
would have to be calculated by taking into account the factum of number of
withdrawal request rejections made qua share application received. Since the
contract between the applicant and the company is concluded only on the
allotment of shares the withdrawal request can be made by an applicant well
before the said date. There is no dispute vis-a-vis the fact that withdrawal
requests were made.
10. The other aspect of the matter which has come to fore is, does the
request for withdrawal get triggered automatically or does it require acceptance. The stand of the respondent no.1/company which has been
accepted by SAT is that the withdrawal can only take place if its is accepted
by the company and since in the present case, the withdrawal request was
accepted by the Registrar the order of the Chairman SEBI had to be
reversed. As rightly argued by Ms. Acharya, the fallacy in this conclusion is
that it is premised on the reasoning that a request for withdrawal of a share
application requires acceptance. Once a request is triggered for withdrawal
of a share application, in law, it requires no acceptance. The only bar which
is statutorily introduced, is one, provided under section 72(5) of the
Companies Act. The bar is also put in place for a limited period of time i.e.,
till the closing of the 5th day of the opening of the subscription list. It is no
one’s case before the authorities below that withdrawal applications were
not received after the expiry of the eclipse period, as provided in section
72(5) of the Companies Act.
11. Having regard to the aforesaid, I am of the view that the order of the
SAT deserves to be set aside. It is ordered accordingly. In that view of the
matter, the order of the Chairman SEBI dated 22.05.1998 would have to be
sustained and the directions contained therein for refund of the money to the
share applicants would have to be implemented. It is ordered accordingly.
The SEBI shall ensure that refund is made to the share applicants, as
expeditiously as possible, in accordance with law. Any interest earned on
the interregnum amongst the applicants in accordance with law. Deficiency,
if any, shall be recovered from respondent no.1/company, once again, by
taking recourse to the relevant provisions of law.
12. Before I conclude, I may also notice that there is something to be said
vis-a-vis the power of the Registrar to permit withdrawal of a share
application and consequent refund. A reference in this regard may be made
to Rule 2(e)(i)(iii)(b) of the SEBI Rules. It is quite clear if the Registrar has
the power to finalise the list, implicit in that power is the power to order
refund qua request for withdrawal of share application. Accordingly the
order dated 20.02.2002 which was made absolute on 22.08.2005 is vacated.
13. The writ petition is, accordingly, disposed of.
Sd/-
RAJIV SHAKDHER, J
JANUARY 14, 2013
Thursday, 7 February 2013
To attract the criminal liability of the drawer of the cheque, the collecting bank is obliged to present the cheque in the drawer’s bank and the Courts where the collecting Bank is situated on this ground itself will not have jurisdiction to entertain the complaint
IN THE HIGH COURT OF DELHI AT NEW DELHI
SUBJECT : NEGOTIABLE INSTRUMENTS ACT, 1881
Date of decision: 15th January, 2013
CRL. REV. P. 65/2012
M/S. GEE PEE FOODS PVT. LTD. & ORS. ..... Petitioners
Through: Mr. Ranjeet Kumar Jaiswal, Adv. with Mr. Sheo Kumar Singh,
Adv.
versus
SH. DIGVIJAY SINGH ..... Respondent
Through: Respondent in person.
CORAM:
HON'BLE MR. JUSTICE G.P.MITTAL
J U D G M E N T
G. P. MITTAL, J. (ORAL)
1. The question that falls for determination in this Revision Petition is,
“whether a complaint under Section 138 of the Negotiable Instruments Act,
1881 (the Act) can be presented at a place where the Complainant deposited
the cheque in his Bank (i.e. at the place where the collecting Bank is
situated).”
2. A complaint under Section 138 read with Section 142 of the Act was
presented against the Petitioners on the averments that on 01.03.2009, the
Respondent was appointed as Chief Executive Officer (CEO) with the First
Petitioner on a monthly salary of `75,000/- to establish its operations in
Northern India. In discharge of the liability to pay the salary, the Petitioners
handed over a cheque No.082471 dated 29.04.2009 for `74,800/- drawn on
IDBI Bank, 44, Shakespeare Sarani Branch, Kolkata-700 017 to the
Respondent. The said cheque when presented with HDFC Bank, New Delhi
stood dishonoured with remarks of ‘insufficient funds’. In the complaint it
was alleged that bouncing of the said cheque was brought to the notice of
Petitioners No.2 and 3 and on their instructions, the Respondent presented the cheque again but it was again dishonoured on presentation with the
remarks “payment stopped by drawer”. When the factum of bouncing of the
said cheque again was brought to the notice of Petitioners No.2 and 3
(accused No.2 and 3 before the learned Metropolitan Magistrate) they again
apologized and assured to make arrangement for encashment of the cheque.
The cheque was again dishonoured when presented on 18.08.2009. A legal
notice through the lawyer at New Delhi was dispatched to the Petitioners
and on failure to make the payment within the statutory period as laid down
under Section 138 of the Act, a complaint under Section 138 read with
Section 142 of the Act was filed against the Petitioners.
3. After recording pre summoning evidence, the Petitioners were summoned
for the offence punishable under Section 138 of the Act. They moved a
Petition before the High Court for quashing of the complaint on the ground
that the Delhi Courts had no territorial jurisdiction to try the complaint as no
part of the cause of action took place within the jurisdiction of NCT of
Delhi. It is stated that the said Petition was withdrawn with liberty to
approach the Trial Court. Thus, the Petitioners filed an application under
Section 177 of the Code of Criminal Procedure before the Court of learned
Metropolitan Magistrate (‘MM’). The following averments were made in the
application:-
“(a) Applicants/accused are having their residence and office in Kolkata in
the State of West Bengal.
(b) Complainant has been allegedly appointed as a CEO of the accused
No.1 – Company in Kolkata.
(c) As per para 2 of the complaint, the cheuqe issued to the
complainant which got allegedly bounced was drawn on IDBI Bank, 44,
Shakespeare Sarani, Kolkata.
(d) As per para 3 of the complaint, the aforesaid cheque was re-presented
to the applicants’ banks at Kolkata which also stood allegedly returned.
(e) As per para 5 of the compliant, a legal notice was allegedly served
upon the applicants/accused in Kolkata.
(f) The entire cause of action pertaining to the question of
employment of the complainant as well as issuance of cheque and service of
legal notice, if any, arose in Kolkata and no part of the same arose in Delhi
(as per the averments of the complainant in the complaint itself). As such,
this Ld. Court does not possess the territorial jurisdiction to try and proceed
with the entire complaint.” 4. It was stated that the legal notice allegedly served upon the Petitioners
from Delhi will not confer jurisdiction of Delhi Courts.
5. The application moved under Section 177 Cr.P.C. was contested by the
Respondent. However, the factum of the cheque in question having not been
delivered to the Respondent at Kolkata being drawn on IDBI Bank 44,
Shakespeare Sarani Branch, Kolkata-700 017 was not disputed. It was
asserted that since the Respondent presented the cheque to HDFC Bank at
New Delhi branch for collection, part of cause of action arose within the
Union Territory of Delhi and thus, the Delhi Courts did have the jurisdiction.
6. The learned MM relying on a judgment of learned Single Judge of this
Court in Religare Finvest Ltd. v. State & Anr. 173 (2010) DLT 185 opined
that the place where the cheque was presented by the payee was one of the
essential ingredients of Section 138 of the Act and thus, part of the cause of
action arose within the territory of Delhi, consequently, the application was
dismissed.
7. In the Revision Petition, it is stated that in fact the Respondent had
worked with the First Petitioner only for one month. It was stated that the
first cheque was dishonoured on presentation on the ground of insufficient
funds but because of suspicious and unbecoming conduct of the Respondent,
they had stopped payment of the cheque and when the Respondent
approached the Petitioners, the amount of `74,800/- was deposited in the
Respondent’s account but, thereafter the Respondent maliciously presented
the cheque. Obviously, these questions being disputed questions of facts are
not to be gone into at this stage. What is to be seen is whether on the basis
of the averments made in the complaint, whether some of the essential acts
forming part of the offence or cause of action was done within the territory
of Delhi so as to confer jurisdiction on Delhi Courts. The question of
presentation of the cheque at a place other than the drawee Bank directly
came up for consideration before a learned Single Judge of this Court in
Online IT Shoppe India Pvt. Ltd. & Ors. v. State & Anr. Crl.MC
No.2695/2009 decided on 20.11.2009 (V.K.Jain, J.). The learned Single
Judge while relying on Shri Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd;
(2001) 3 SCC 609 observed that Shri Ishar Alloy had dealt with the issue of
“the Bank” referred to in Clause (a) to the proviso to Section 138 of the Act
as the drawee Bank on which the cheque is drawn and not all the banks
where the cheque is presented for collection including the Bank of the payee, in whose favour the cheque is issued. In paras 8 and 9, the learned Single
Judge held as under:-
“8. As regards presentation of the cheque, the learned counsel for the
petitioner has relied upon the decision of the Hon’ble Supreme Court in Shri
Ishar Alloy Steels Ltd. Vs. Jayaswals Neco Ltd; (2001) 3 SCC 609. In this
case the Hon’ble Supreme Court, inter-alia, held that “The bank” referred to
in clause (a) to the proviso of Section 138 of the Act would mean the drawee
bank on which the cheque is drawn and not all the banks where the cheque is
presented for collection including the bank of the payee, in whose favour the
cheque is issued.”
It was further observed that “the payee of the cheque has the option to
present the cheque in any bank including the collecting bank where he has
his account but to attract the criminal liability of the drawer of the cheque
such collecting bank is obliged to present the cheque in the drawee or Payee
bank on which the cheque is drawn within the period of six months from the
date on which it is shown to have been issued.”
In para 10 of the judgment the Hon’ble Supreme Court further observed that
“Sections 3, 72 and 138 of the Act would leave no doubt in our mind that the
law mandates the cheque to be presented at the bank on which it is drawn if
the drawer is to be held criminally liable.”
9. The ratio of the above referred judgment of the Hon’ble Supreme Court is
that a cheque is deemed to have been presented to the banker of the drawer
irrespective of the fact whether it is deposited by the payee in his own bank.
The banker of the payee, after receiving the cheque from him, is required to
present it to the banker of the drawer and therefore if the cheque issued from
a bank in Ernakulam is deposited in Delhi, the bank in which it is deposited
in Delhi, is required to present it to the bank at Ernakulam, for the purpose
of encashment. Therefore, it cannot be said that the cheques issued by the
petitioners were presented in Delhi, despite the fact that the bank in which
the respondent No. 2 had an account was in Delhi, the cheque shall be
deemed to have been presented only to the bank at Ernakulam on which they
were drawn. Therefore, deposit of cheques in Delhi would not confer
jurisdiction of Delhi court to try this complaint.”
8. Another Single Judge of this Court in Mahika Enterprises & Anr. v. State
(NCT of Delhi) & Anr. 173 (2010) DLT 361 relied on the judgment of the
Supreme Court in Shri Ishar Alloy Steels Ltd. v. Jayaswals Neco Ltd; (2001) 3 SCC 609 and the judgment of this Court in Shroff Publishers &
Distributors Pvt. Ltd. v. Springer India Pvt. Ltd. 143 (2007) DLT 661; ICICI
Bank Limited v. Subhash Chand Bansal & Ors., 160 (2009) DLT 379; and
Online IT Shoppe India Pvt. Ltd. & Ors. v. State & Anr. I (2010) DLT (Crl.)
110 and held that to attract the criminal liability of the drawer of the cheque,
the collecting bank is obliged to present the cheque in the drawer’s bank and
the Courts where the collecting Bank is situated on this ground itself will not
have jurisdiction to entertain the complaint. Para 12 of the report is
extracted hereunder:-
“12. In Shroff publisher and Distributors Pvt. Ltd. vs. Springer India Pvt.
Ltd. 2008 Criminal Law Journal 1217, it has been held that the payee has an
option to present the cheque in any bank including the collecting bank
where he has his account, but to attract the criminal liability of the drawer
of the cheque such collecting bank is obliged to present the cheque in the
drawer’s bank, on which cheque is drawn. In Ishar Alloy Steel Ltd. vs.
Jayaswals NECO Ltd. 2001 II AD (S.C.) 330, Supreme Court held that “the
bank” referred to in Clause (a) to the proviso to Section 138 of the Act
means the drawee bank on which the cheque is drawn and not all banks
where the cheque is presented for collection including the bank of the payee
in whose favour the cheque is issued. In ICICI Bank Ltd. vs. Subhash
Chand Bansal & Ors. 160 (2009) Delhi Law Times 379, this Court held that
the court in whose territorial jurisdiction drawee bank is situated would have
territorial jurisdiction to entertain the complaint in question. Similar view
has been taken in Online IT Shopee India Pvt. Ltd.,and V.S. Thakur (reports
cited supra).
9. Yet another learned Single Judge of the Court in Ramaswamy S. Iyengar
v. The State (NCT of Delhi) & Anr. Crl.MC No.4140/2009 decided on
16.03.2011; Grandlay Electricals (India) v. ESS ESS Enterprises & Ors.
CRP No.313/2011 decided on 18.07.2011; and Dushyant Verma v. Tek
Chand Crl.MC No.3531/2010 decided on 30.08.2011 also relied on Shri
Ishar Alloy (supra) and held that the place where the cheque is presented by
the payee for collection by itself will not have any jurisdiction.
10. In Ramaswamy S. Iyengar, the learned Single Judge opined that the
judgment passed by the learned Single Judge of this Court in Religare
Finvest Ltd. would be of no avail to the Complainant in view of the
judgment of the Supreme Court in Shri Ishar Alloy and M/s. Harman
Electronics (P) Ltd. & Anr. v. M/s. National Panasonic India Ltd., 2009 (1)
SCC 720. 11. To confer jurisdiction on a Court for an offence of dishonour of the
cheque, one or the other act which constitute the offence must be done
within the jurisdiction of the Court where the complaint under Section 138
of the Act is filed. In the instant case all the acts, that is, the handing over of
the cheque to the payee, that is, the Respondent, was at Kolkata; the cheque
was drawn at IDBI Bank having its branch at Kolkata; the cheque was
dishonoured by the earlier said branch at Kolkata which was the drawee of
the cheque. The drawer of the cheque in spite of the receipt of notice at
Kolkata failed to make the payment within the stipulated period.
12. It is no longer res integra that service of notice from any place, in the
instant case Delhi, would not confer jurisdiction on Delhi Courts (See M/s.
Harman Electronics (P) Ltd. & Anr. v. M/s. National Panasonic India Ltd.,
2009 (1) SCC 720.). Similarly, on the strength of the judgment of the
Supreme Court in Shri Ishar Alloy, the presentation of the cheque for
collection at HDFC Bank New Delhi would not confer jurisdiction on Delhi
Courts.
13. The learned MM erred in holding that the Delhi Courts have jurisdiction
to entertain the complaint under Section 138 of the Act.
14. The Revision Petition, therefore, has to succeed; the same is accordingly
allowed. Consequently, the complaint stands dismissed on the ground that
Delhi Courts did not have any territorial jurisdiction.
Sd/-
(G.P. MITTAL)
JUDGE
JANUARY 15, 2013
Once the settlement reached is accepted by the Court or an undertaking is given, it becomes binding on the parties
IN THE HIGH COURT OF DELHI AT NEW DELHI
SUBJECT : NEGOTIABLE INSTRUMENTS ACT, 1881
Date of decision: 9th January, 2013
CRL.REV.P. 11/2013
HARDEEP BAJAJ ..... Petitioner
Through: Mr. Akil Rataeeya, Adv.
versus
ICICI BANK LTD. ..... Respondent
Through: Nemo.
CORAM:
HON'BLE MR. JUSTICE G.P.MITTAL
J U D G M E N T
G. P. MITTAL, J. (ORAL)
Crl.MA No.227/2013 (delay)
1. There is a delay of 8 days in filing the Petition.
2. For the reasons as stated in the Application, the delay of 8 days in filing
the Petition is condoned.
3. The Application is allowed.
CRL.REV.P. 11/2013 and Crl.MA 228/2013 (stay)
4. The Petitioner approached the Respondent ICICI Bank Limited for grant
of some credit facility. The Respondent Bank acceded to the Petitioner’s
request and granted him credit facility to carry out the business of his sole
Proprietorship firm Bajaj Machinery Stores. The Petitioner undertook to pay
the outstanding amount to the Respondent Bank as due and payable from
time to time. In discharge of part of his debts/liability towards the
Respondent Bank, the Petitioner issued a cheque for amount of `15 lacs bearing No.097644 dated 02.01.2010 drawn on Canara Bank in favour of the
Respondent. When the cheque was presented for encashment, the same was
dishonoured with the remarks “fund insufficient.” A demand notice issued
under Section 138 of the Negotiable Instruments Act, 1881 (the N.I.Act)
remained unheeded compelling the Respondent Bank to file a Complaint
under Section 138 read with Section 141 of the N.I.Act.
5. The learned Metropolitan Magistrate (MM) took cognizance of the
complaint and issued summons to the Petitioner for his appearance. During
pendency of the Complaint case, it was referred to the Mediation Centre,
Dwarka Courts, New Delhi where on 26.05.2012 the parties entered into an
amicable settlement whereby the Petitioner agreed to pay a sum of `
9.08,800/- in full and final settlement of the Claim of the Respondent Bank
in monthly installments of `1,50,000/- commencing from 26.05.2012. The
last installment of `1,58,800/- was to be paid on 26.10.2012.
6. The Petitioner did not honour the settlement. His plea is that on
07.06.2012 he was admitted in Sir Ganga Ram Hospital where angioplasty
was done and he was discharged from the hospital on 11.06.2012. A perusal
of the photocopies of the documents from Sir Ganga Ram Hospital testifies
that the Petitioner did undergo angioplasty on 08.06.2012. He was advised
rest for three weeks w.e.f. 11.06.2012.
7. On 25.08.2012, the Petitioner approached the learned MM for modifying
the settlement dated 26.05.2012 reached between the parties and waiving the
costs of `5,000/- imposed by an order dated 16.08.2012. The learned MM
noticed that the Petitioner had violated the successive undertakings given by
him. It was observed that the Petitioner failed to pay a sum of `1 lac also in
view of his revised undertaking and had brought a demand draft for just
`17,000/- on 25.08.2012. The Court further noticed that the Petitioner
committed breach of the undertaking given by him on 26.05.2012,
26.06.2012, 01.08.2012 and 16.08.2012. Admittedly, the Petitioner had to
be suddenly admitted in the hospital only on 07.6.2012. He was discharged
from the hospital on 11.06.2012. Knowing his condition fully well, the
Petitioner gave undertakings dated 26.06.2012, 01.08.2012 and 16.08.2012.
The learned MM noticed that there was no change of circumstances since
the previous undertakings (right from 26.06.2012) and thus, the application
for modification of the settlement dated 26.05.2012 was dismissed with
adjournment costs of `25,000/-. 8. The Petitioner unsuccessfully challenged the order dated 25.08.2012
before the learned ASJ.
9. It is true that the Court has to be sympathetic to a litigant particularly
when he/she suddenly suffers some ailment. In the instant case, the
Petitioner was admitted in the hospital on 07.06.2012 and was discharged on
11.06.2012. The entire amount of `9,08,800/- was payable by the Petitioner
in six installments and the last installment of `1,58,800/- was payable on
26.10.2012. We are in the month of January, 2013. Out of sum of
`9,08,800/-, the Petitioner has paid only a sum of `2.5 lacs which sufficiently
reflects the conduct of the Petitioner. On an amount of `9,08,800/-
adjournment costs of `25,000/- particularly by moving an application to
change the terms of settlement cannot be said to be exorbitant and excessive.
10. Once the settlement reached is accepted by the Court or an undertaking
is given, it becomes binding on the parties. Moreover, the Petitioner’s
conduct does not entitle him of any indulgence.
11. In my view, there is no illegality or irregularity in the order dated
25.08.2012 passed by the learned MM and order dated 28.09.2012 passed by
the learned ASJ.
12. The Petition is dismissed being devoid of any merit.
13. Pending Applications, if any, stand disposed of.
Sd/-
(G.P. MITTAL)
JUDGE
JANUARY 09, 2013
Tuesday, 5 February 2013
The Petitioner was not the Director of the Company on the date when the offence was allegedly committed, he cannot be prosecuted by taking aid of Section 141 of the N.I.Act
IN THE HIGH COURT OF DELHI AT NEW DELHI
SUBJECT : NEGOTIABLE INSTRUMENTS ACT, 1881
Date of decision: 8th January, 2013
CRL. M.C. 1050/2012
AMUL URHWARESHE ..... Petitioner
Through: Mr. Vishal Gosain Adv. with Mr. Harsh Bora, Adv.
versus
STATE (NCT OF DELHI) & ANR. ..... Respondents
Through: Ms. Rajdipa Behura, APP for the State.
Mr. Ashok Anand Adv. with Ms. Priya Pathania, Adv. for R-2.
CRL. M.C. 3071/2012
AMUL URHWARESHE ..... Petitioner
Through: Mr. Vishal Gosain Adv. with Mr. Harsh Bora, Adv.
versus
STATE (NCT OF DELHI) & ANR. ..... Respondents
Through: Ms. Rajdipa Behura, APP for the State.
Mr. Ashok Anand Adv. with
Ms. Priya Pathania, Adv. for R-2.
CRL. M.C. 3072/2012
AMUL URHWARESHE ..... Petitioner
Through: Mr. Vishal Gosain Adv. with Mr. Harsh Bora, Adv.
versus
STATE (NCT OF DELHI) & ANR. ..... Respondents
Through: Ms. Rajdipa Behura, APP for the State.
Mr. Ashok Anand Adv. with Ms. Priya Pathania, Adv. for R-2. CRL. M.C. 3073/2012
AMUL URHWARESHE ..... Petitioner
Through: Mr. Vishal Gosain Adv. with Mr. Harsh Bora, Adv.
versus
STATE (NCT OF DELHI) & ANR. ..... Respondents
Through: Ms. Rajdipa Behura, APP for the State.
Mr. Ashok Anand Adv. with Ms. Priya Pathania, Adv. for R-2.
CORAM:
HON'BLE MR. JUSTICE G.P.MITTAL
J U D G M E N T
G. P. MITTAL, J. (ORAL)
1. By virtue of these four Petitions, the Petitioner seeks quashing of the four
Complaints titled ‘M/s. Indian Renewable Energy Development Agency Ltd.
(IREDA) v. M/s. Enbee Infrastructure Ltd. Etc.’ qua him on the ground that
the dishonoured cheques were dated 31.03.2005; and the Petitioner resigned
from the Directorship of M/s. Enbee Infrastructure Ltd. on 31.08.2000 and
information in this regard was sent to the Registrar of Companies (ROC) on
10.09.2000, thus the Petitioner cannot be said to be guilty of offence
punishable under Section 138 of the Negotiable Instruments Act, 1881 (the
N.I.Act).
2. The learned counsel for the Petitioner also relies on the order dated
24.01.2011 passed by A.K.Pathak, J. in Criminal M.C. No.1366/2010 and
dated 11.04.2012 passed by Pratibha Rani, J. in Criminal M.C.
No.1926.2011 where in similar circumstances the complaint against the
Petitioner was quashed.
3. The learned counsel for Respondent No.2 opposes the Petition on the
ground that a perusal of Form No.32, certified copy of which has been
placed on record shows that its effective date was only 06.04.2004. He
urges that the Petitioner’s liability arose much before 06.04.2004 and mere
recording in Column No.6 of Form No.32 that the Petitioner resigned as Director w.e.f. 31.08.2000 would not be sufficient to absolve him of his
liability under the N.I.Act. In support of this contention, the learned counsel
for Respondent No.2 places reliance on Atul Kohli & Anr. v. State of Punjab
& Anr. (2005) 127 Comp. Cas. 237 (P&H).
4. Learned counsel for the Petitioner has taken me through the certified copy
of Form No.32 and also the receipt through which the information regarding
resignation was communicated to the ROC. The demand draft for `1,000/-
for lodging an information regarding date of change in appointment was
prepared on 03.09.2000 and the information was lodged on 10.09.2000.
Therefore, the information regarding Petitioner’s resignation would be
effective from 10.09.2000. It cannot be said that this information was
manipulated or was pre-dated as the same was documented. Atul Kohli
relied upon by the learned counsel for Respondent No.2, therefore, does not
apply to the facts of the present case.
5. Since the Petitioner was not the Director of the Company on the date
when the offence was allegedly committed, he cannot be prosecuted by
taking aid of Section 141 of the N.I.Act. A reference in this connection may
be made to a judgment of this Court in M.L. Gupta v. DCM Financial
Services Limited 167 (2010) DLT 428. In similar circumstances, the
complaints were quashed by the Delhi High Court in Criminal MC
Nos.1317/2009, 1318/2009, 1319/2009, 1320/2009, 1321/2009 &
1322/2009.
6. I find no reason to take a different view. Thus, the Petitions preferred by
the Petitioner are allowed and Criminal Complaint Case Nos.2106/1 of
2003, 895/12 of 2005, 901/12 of 2004 and 897/12 of 2004 and the
proceedings arising there from as against the Petitioner are quashed.
7. Pending Applications also stand disposed of.
Sd/-
(G.P. MITTAL)
JUDGE
JANUARY 08, 2013
The petitioners had resigned from the Directorship of the Company much before cheques in question were presented for encashment
Crl.M.C.Nos.1317-1322/09 Page 1 of 13
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ Crl.M.C.1317/2009
Date of Order: 20
th
January 2010
# M.L. GUPTA & ORS. ..... Petitioners
! Through: Mr. R.K. Bharti & Mr. Mahipal
Khangwal, Advs.
versus
$ M/S DCM FINANCIAL SERVICES LTD. ..... Respondent
^ Through: Mr. Sachin Chopra, Adv.
CRL.M.C. 1318/2009
# M.L. GUPTA & ORS. ..... Petitioners
! Through: Mr. R.K. Bharti & Mr. Mahipal
Khangwal, Advs.
versus
$ M/S DCM FINANCIAL SERVICES LTD. ..... Respondent
^ Through: Mr. Sachin Chopra, Adv.
Crl.M.C. 1319/2009
# M.L. GUPTA & ORS. ..... Petitioners
! Through: Mr. R.K. Bharti & Mr. Mahipal
Khangwal, Advs.
versus
$ M/S DCM FINANCIAL SERVICES LTD. ..... Respondent
^ Through: Mr. Sachin Chopra, Adv.
Crl.M.C. 1320/2009
# M.L. GUPTA & ORS. ..... PetitionersCrl.M.C.Nos.1317-1322/09 Page 2 of 13
! Through: Mr. R.K. Bharti & Mr. Mahipal
Khangwal, Advs.
versus
$ M/S DCM FINANCIAL SERVICES LTD. ..... Respondent
^ Through: Mr. Sachin Chopra, Adv.
Crl.M.C. 1321/2009
# M.L. GUPTA & ORS. ..... Petitioners
! Through: Mr. R.K. Bharti & Mr. Mahipal
Khangwal, Advs.
versus
$ M/S DCM FINANCIAL SERVICES LTD. ..... Respondent
^ Through: Mr. Sachin Chopra, Adv.
And
Crl.M.C. 1322/2009
# M.L. GUPTA & ORS. ..... Petitioners
! Through: Mr. R.K. Bharti & Mr. Mahipal
Khangwal, Advs.
versus
$ M/S DCM FINANCIAL SERVICES LTD. ..... Respondent
^ Through: Mr. Sachin Chopra, Adv.
* CORAM:
HON'BLE MR. JUSTICE V.K. JAIN
1. Whether the Reporters of local papers
may be allowed to see the judgment? Yes
2. To be referred to the Reporter or not? YesCrl.M.C.Nos.1317-1322/09 Page 3 of 13
3. Whether the judgment should be
reported in the Digest? Yes
: V.K. JAIN, J. (Oral)
1. By this common judgment, I shall dispose of all the six
petitions referred above. Criminal complaints under Section 138
of Negotiable Instrument Act were filed by the respondent
against M/s.Sakura Seimitsu India Limited and seven others
including the petitioners M.L. Gupta, Rajiv Gupta and Sanjeev
Gupta. The allegation against the petitioners was that they were
the Chairman, Managing Director and Director respectively of
the company and were the persons in charge of and responsible
to the company for conduct of its business at the time of
commission of the offence.
2. The petitioners were summoned by the learned
Metropolitan Magistrate under Section 138 of the Negotiable
Instrument Act r/w Section 141 thereof. The petitioners are
seeking quashing of the complaint on the ground that they had
resigned from the Directorship of the company much prior to the
date(s) on which cheques in question were presented to the bank
for encashment. The petitioners have placed on record certified
copies of Form 32 issued by Registrar of Companies, which
would show that the petitioner M.L. Gupta had resigned from Crl.M.C.Nos.1317-1322/09 Page 4 of 13Directorship on 4th September, 1997, whereas the petitioner Rajiv Gupta resigned on 5thJune, 1998.
3. Sanjeev Gupta, who is petitioner in Criminal M.C.
No.1317/2009, Criminal M.C. No.1318/2009, Criminal M.C.
No.1320/2009 and Criminal M.C. No.1321/2009, has not filed
certified copy of Form 32 though he has placed its photocopy on
record. He, however, has placed on record copies of the
judgments of this Court in Crl.M.(M).242 of 1999 titled as
“Sanjeev Gupta Vs. The State of Delhi & Another”, decided
by Hon’ble Mr. Justice Dalveer Bhandari, on 11thof July, 20000
and Crl.M.C.1056/2003 to 1058/2003, titled as “Sanjeev Gupta
Vs. The State of Delhi & Another”, decided by Hon’ble
Mr.Justice A.K.Sikri on 23rdof August, 2006. The case of the
petitioner Sanjeev Gupta is that he had resigned as a Director of
the Company on 25thof September, 1995. This factual position
was accepted by this Court in Crl.M.(M).242/1999, as is evident
from paragraph 2 of the order, though the order does not
indicate the name of the Company from directorship of which he
resigned with effect from 25thof September, 1995. However, a
perusal of the order of this Court in Crl.M.C.1056/2003 to
1058/2003 dated 23.8.2006, would show that DCM Financial
Services Limited, which is the respondent in the present Crl.M.C.Nos.1317-1322/09 Page 5 of 13petition, was respondent No.2 in those cases as well. It furthershows that the petitioner Sanjeev Gupta claimed in those
petitions that he was a Director of M/s.Sakur Seimitsu India
Limited up to 25thSeptember, 1995 when he left India for
overseas assignments. He placed on record copy of Form No.32
issued by the Registrar of Companies. Accepting his claim, this
Court quashed the complaints filed against him under Sections
138 of the Negotiable Instruments Act. Thus, in another
proceedings between Sanjeev Gupta and the respondent DCM
Financial Services Limited, this Court accepted his claim of
having resigned from the Directorship of M/s.Sakura Seimitsu
India Limited with effect from 25thof September, 1995.
4. There are five essential ingredients of offence under
Section 138 of the Negotiable Instruments Act, (i) drawing of the
cheque, (ii) presentation of the cheque to the bank of the payee,
(iii) return of the cheque unpaid by the drawee bank, (iv) giving
of notice to the drawer of the cheque demanding payment of the
cheque amount and (v) failure of the drawer to make payment
within 15 days of the receipt of the notice.
5. The learned counsel for the respondent DCM Financial
Services Limited fairly concedes that the cheques subject matter
of all these complaints were presented to the Bank much after Crl.M.C.Nos.1317-1322/09 Page 6 of 13
the petitioners M.L.Gupta, Rajiv Gupta and Sanjeev Gupta claim
to have resigned from the directorship of the Company
M/s.Sakur Seimitsu India Limited. Since they had already
resigned from the directorship of Company before even before
these cheques were presented for encashment, there is no way
they could have ensured that these cheques were encashed
when presented to the Bank of the Company. They were not the
Directors of the Company when demand notice under Section
138(b) of the Act was issued by the complainant/respondent.
Therefore, they were not in a position to comply with the
demand made in the notice by making payment of the amount of
the cheques as payment was to be made by the Company and
not by them in their personal capacity.
6. The learned counsel for the petitioner has relied to the
decision of the Hon’ble Supreme Court in “DCM Financial
Services Limited Vs. J.N.Sareen & Another”, 2008 (3) RCR
(Criminal) 152. In the case before the Hon’ble Supreme Court
post-dated cheques were issued by the Company known as M/s.
International Agro Allied Products Limited. The first respondent
before the Hon’ble Supreme Court resigned from the
Directorship of the Company on 25thof May, 1996. One of the
post-dated cheques, which was issued in April, 1995, i.e., before Crl.M.C.Nos.1317-1322/09 Page 7 of 13
he resigned from the Directorship of the Company, was dated
28.1.1998. The cheque when presented in the Bank for
encashment was dishonoured. The payment to the complainant
was not made despite issue of Notice of Demand by it. The
complaint against the first respondent before the Hon’ble
Supreme Court was based on the allegation that he was the
person in charge and responsible to the Company at the time
when the offence was committed. It was also alleged that the
offence had been committed by the Company with the consent
and connivance of accused Nos.2 to 10, which included
respondent No.1 before the Hon’ble Supreme Court. He filed an
application seeking discharge, relying upon Form No.32 issued
by Registrar of Companies in support of his contention that he
had resigned as a Director of the Company much prior to
dishonour of the cheque in question. The learned Additional
Sessions Judge took note of Form No.32 and also noted that the
complainant had not filed any affidavit to the effect that it had
verified from the Registrar of Companies and Form No.32 filed
by the accused was not genuine. A Criminal Revision Petition
filed against the order of the learned Additional Sessions Judge
was dismissed by the High Court. Relying upon its earlier
decisions in the case of “K.Srikanth Singh Vs. M/s.North East Crl.M.C.Nos.1317-1322/09 Page 8 of 13
Securities Limited & Another”, 2007(3) RCR (Criminal) 934 :
207 (4) RAJ 226 : JT 2007 (9) SC 449, the Hon’ble Supreme
Court observed as under:
“Section 141 of the Act provides for a
constructive liability. A legal fiction has been
created thereby. The statute being a penal
one, should receive strict construction. It
requires strict compliance of the provision.
Specific averments in the complaint petition so
as to satisfy the requirements of Section 141
of the Act are imperative. Mere fact that at
one point of time some role has been played by
the accused may not by itself be sufficient to
attract the constructive liability under Section
141 of the Act.”
7. In the case before the Hon’ble Supreme Court, the
respondent No.1 had resigned from the Directorship of the
Company under intimation to the complainant and, in these
circumstances, the Hon’ble Supreme Court was of the view that
a person who had resigned with the knowledge of the
complainant in the year 1996, could not be a person in charge of
the Company in the year 1999 when the cheque was
dishonoured as he had no say in the matter that the cheque is
honoured and he could not have asked the Company to pay the
amount. In my view even if resignation was not given by the
petitioners under intimation to the complainant, that would not
make any difference, once the Court relying upon certified copy Crl.M.C.Nos.1317-1322/09 Page 9 of 13
of Form 32 accepts their plea that they were not directors of the
Company, on the date the offence under Section 138 of
Negotiable Instruments Act was committed. They having
resigned from the directorship much prior to even presentation
of the cheque for encashment, they cannot be vicariously liable
for the offence committed by the Company, unless it is alleged
and shown that even after resigning from directorship, they
continued to control the affairs of the company and therefore
continued to be persons in charge of and responsible to the
company for the conduct of its business.
8. This issue was considered at length by this Court in “Shri
Raj Chawla Vs. Securities and Exchange Board of
India(SEBI) & Another”, in Crl.M.C.3937/09 decided on 12thof
January, 2010. Referring to an earlier decision of this Court in
“Dr.(Mrs.) Sarla Kumar vs. Srei International Finance
Ltd.”, 2007 (2) NIJ 208 (Del) and the recent decision of the
Hon’ble Supreme Court in “K.K. Ahuja vs. V.K. Vora and Anr.,
2009 (3) JCC (NI) 194, this court, inter alia held as under:
“Since the petitioner was not a Director of the
company on the date Regulations were framed
by SEBI, he cannot be held vicariously liable
for violation of those Regulations and the
directions, issued to SEBI by M/s Fair Deal
Forests Limited. This is not the case of the
respondent that the petitioner was Manager, Crl.M.C.Nos.1317-1322/09 Page 10 of 13Secretary or a person in accordance with
whose directions or instructions, the Board of
Directors of the company was accustomed to
act. He is not stated to be one of the persons
falling in any of the categories (a) to (g)
mentioned in Section 5 of Companies Act at
the time offence under SEBI Act was
committed by the company. Therefore, he
could not have been a person in charge of
business of the company on the date the
offence was committed.
There is no allegation that the regulations,
framed by SEBI, were violated or the
direction, issued by it, was ignored by the
company with the consent or connivance of
the petitioner or it was otherwise attributable
to any act on the part of the petitioner.
Therefore, he has not covered even by sub
Section (2) of Section 27of SEBI Act.”
9. The plea taken by the complainant that the information
contained in Form No.32 was a defence available to the accused
which could not be considered at the initial stage was dealt with
by this Court as under:
“Though as a general proposition of law, the
defence available to the accused is not to be
examined at this stage, there can be no valid
objection to considering an authentic Public
Document such as certified copy of Form-32,
issued by Registrar of Companies, in a petition
under Section 482 of the Code of Criminal
Procedure, when the genuineness of the
documents is not disputed and the matter can
be finally disposed of on the basis of such a
documents. ……
A criminal trial is a serious matter, having
grave implications for an accused, who not Crl.M.C.Nos.1317-1322/09 Page 11 of 13
only has to engage a lawyer and incur
substantial expenditure on defending him, but,
has also to undergo the ordeal of appearing in
the Court on every date of hearing, sacrificing
all his engagements fixed for that day. If he is
in business or profession, he has to do it at the
cost of affecting his business or profession, as
the case may be. If he is in service, he has to
take leave on every date of hearing. Besides
inconvenience and expenditure involved, a
person facing criminal trial undergoes
constant anxiety and mental agony, as the
sword of possible conviction keeps hanging on
his head throughout the trial. Therefore, when
there is a reasonably certainty that the trial is
not going to result in conviction, it would be
neither fair nor reasonable to allow it to
proceed against a person such as the
petitioner in this case.”
10. In taking a view that certified copy of Form 32 being a
public document, authenticity of which had not been disputed, it
could be considered in proceedings under Section 482 of the
Code of Criminal Procedure, this Court also relied upon the
decision of the Hon’ble Supreme Court in “All Carogo Movers
(I) Pvt. Ltd. Vs. Dhanesh Badarmal Jain & Anr.” (2007) 12
SCALE 39, “V.Y. Jose & Anr. Vs. State of Gujarat & Anr.”
2009 I AD (Cr.) (S.C.) 567, and “Minakshi Bala v. Sudhir
Kumar”, (1994) 4 SCC 142. I must note here that the
authenticity of the certified copies of Form 32 filed by the
petitioners has not been disputed by the respondent. This is not
the case of the respondent that it had got the record of the Crl.M.C.Nos.1317-1322/09 Page 12 of 13
Registrar of Companies verified and that these Forms wer not
issued by his office.
11. In the present cases, the petitioners had resigned from the
Directorship of the Company much before cheques in question
were presented for encashment. Therefore, they were not in a
position to compel the Company to ensure that the cheques
when presented to its Bank were honoured. Similarly, they were
not in a position to compel the Company to comply with the
Notice of Demand by making payment of the amount of the
cheques. This is not the case of the respondent that even after
resigning as Directors of the Company, any of these petitioners
occupied any such position on account of which they continued
to be person in charge of and responsible to the Company for
conduct of its business. Vicarious liability to the petitioners has
been imputed solely on account of their being Directors of the
Company. This is also not the case of the complainant that the
cheques were dishonoured and/or the Notice of Demand was not
complied with the consent or connivance of the petitioner or
dishonour of cheques or non-compliance of notice was otherwise
attributable to any negligence on the part of any of them. This is
also not the case of the complainant that even after reassigning
as Directors of the Company these petitioners continue to Crl.M.C.Nos.1317-1322/09 Page 13 of 13
control the affairs of the Company and were the persons who
could have given instructions to the Board of Directors of the
Company to ensure that the cheques when presented for
encashment were honoured or that Notice of Demand sent to the
Company was duly complied with by making payments of the
amount of the cheques. Therefore, the petitioners are not
covered even under sub-Section 2 of Section 141 of Negotiable
Instruments Act.
12. For the reasons given in the preceding paragraphs, the
criminal complaints No.4140/1, 4141/1, 2338/1, 4139/1, 4145/1
and 4138/1 filed against the petitioners and pending in the Court
of Shri Naveen Kumar Kashyap, MM, Dwarka Court, Delhi,
cannot be allowed to continue and are hereby quashed to the
extent they pertain to the petitioners. The trial will, however,
continue to proceed against the other accused persons. The
quashing against petitioner Sanjeev Kumar Gupta however is
subject to the condition that a certified copy of the Form No.32
will be filed by him before the Trial Court within six weeks,
failing which the trial would continue against him.
V.K. JAIN
(JUDGE)
JANUARY 20, 2010
RS/
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