Anubhav Maheshwari And Others @APPELLANT@Hash M/s RPG Infratech

Lok Pal Singh, J

Present criminal miscellaneous application, under section 482 Cr.P.C., has been preferred by the petitioners for quashing of the proceedings of

criminal case no. 109 of 2017 RPG Infratech vs. MBL Infrastructure Ltd. and others pending in the court of Judicial Magistrate, Ranikhet District

Almora and summoning order dated 25.07.2017.

Brief facts of the case, are that the respondent filed complaint under section 138 of Negotiable Instruments Act 1881 against the MBL

Infrastructures Ltd. and its CMD and Directors, namely, Mr. Anjanee Kumar Lakhotia, Mr. Ashwini Kumar Singh, Mr. Darshan Singh Negi, Ms.

Sunita Palta, Mr. Bhagwan Singh Duggal and Mr. Anubhav Maheshwari, with the averments that the complainant is a registered partnership firm and

is involved in the civil engineering project.

M/s MBL Infrastructures Ltd. (hereinafter referred as Company) is a company registered under the provisions of the Companies Act, 1956. A

cheque no. 639991 dated 13.03.2017 for an amount of Rs. 1,35,84,099/- was issued in the name of the respondent which was dishonoured on account

of “funds insufficientâ€​.

According to the complainant, at the material time, the accused (petitioners) were in charge and at the helm of affairs of the Company, and therefore

petitioners are liable for the default of the Company as they are responsible for the conduct of its business. On 25.05.2017, respondent issued legal

notices to the petitioners which were served upon them and after expiry of 15 days of the notice when no reply was filed by the petitioners; the

complainant was constrained to file the criminal complaint before the Judicial Magistrate, Ranikhet.

On filing of the criminal complaint, statement of the complainant under section 200 Cr.P.C. was recorded. In support of the complaint, copy of the

original cheque and other documents were produced as evidence. The learned Magistrate, after perusal of the complaint and documents and

statement recorded under section 200 Cr.P.C., passed the order dated 25.07.2017 summoning the petitioners under section 138 of N.I. Act.

Heard learned counsel for the parties.

It is the contention of the learned counsel for the petitioners that dispute between the parties is purely civil in nature and petitioners have falsely

been implicated in the criminal proceedings. It is further contended that petitioners are independent Directors of the Company and are not connected

with the conduct of business or management of day to day affairs of the Company.

Learned counsel for the petitioners placed reliance upon the judgment of the Hon’ble Apex Court in the case of Pepsi Foods vs. Special Judicial

Magistrate and Ors. reported in 1998 (5) SCC 749 and submit that that the learned Magistrate has passed the summoning order without application of

mind and has not considered the public documents, like Form 32 and annual accounts of the Company. It is further submitted that in the entire

complaint neither the role of the petitioners in the affairs of the company was explained nor in what manner they were responsible for the conduct of

business of the Company was explained. In support of his submission, learned counsel for the petitioners place reliance upon the judgment of

Hon’ble Apex Court in the case of National Small Industries Corporation vs. Harmeet Singh Paintal and Anr. reported in AIR (2010) 3SC,C

Adalat Prasad vs. Rooplal and Ors., reported in AIR 2004 Sc 4674 and Subramanium Sethuraman vs. State of Maharashtra and Anr. AIR 2004 SC

4711.

Counter affidavit has been filed on behalf of the respondent through Mr. Rajat Kumar Garg. The stand taken by the respondent, inter alia, is as

follows:-

“7. That whether the evidence to be led without establish the accusations is a matter for trial. Further, it needs no reiteration that proviso to sub-

section (1) of Section 141 enable the accused to prove his innocence by discharging the burden which lies on him, in the light of the judgment by the

Hon’ble Supreme Court in S.V. Mazumdar and Ors. vs. Gujarat State Fertilizer Co. Ltd., AIR 2005 SCC (Cri.) 1020.

That it was held by the Hon’ble Supreme Court of India in N. Rangachari vs. Bharat Sanchar Nigam Ltd. 2007 (2) SCC (Cri.) 460:

We think that, in the circumstances, the High Court has rightly come to the conclusion that it is not a fit case for exercise of jurisdiction under Section

482 of the Code of Criminal Procedure for quashing the complaint. In fact, an advertence to sections 138 and 141 of the Negotiable Instruments Act

shows that on the other elements of an offence under Section 138 being satisfied, the burden is on the Board of Director or the Officers incharge of

the affairs of the company to show that they are not liable to be convicted. Any restriction on their power or existence of any special circumstances

that makes them not liable is something that is peculiarly within their knowledge and it is for them to establish at the trial such a restriction or to show

that at the relevant time they were not incharge of the affairs of the company. Reading the complaint as a whole, we are satisfied that it is a case

where the contentions sought to be raised by the appellant can only be dealt with after the conclusion of the trial.â€​

Learned counsel for the respondent submitted that it is settled position of law that proviso to sub-section (1) Section 141 enables the accused to

prove his innocence by discharging the burden which lies on him.

A rejoinder affidavit has been filed on behalf of petitioner no. 4. Copy of the appointment letters of the petitioners herein as a Director is annexed

as Annexure 2 to the rejoinder affidavit whereby Ms. Sunita Palita, Bhagwan Singh Duggal and Mr. Ashwini Kumar Singh were appointed as

independent Director by the Board of the Company. It is mentioned in the appointment letter that “we are looking forward to your participation and

contribution to our Board of Directors.â€​

Learned counsel for the petitioners placed reliance on the provisions contained in section 149 and 150 of the Indian companies Act, 2013 and

submitted that as independent directors they have no connection with the daily affairs or management of the company. Section 149 and 150 of the

Indian Companies Act, 2013 is extracted hereunder:-

Company to have Board of Directors

(1) Every company shall have a Board of Directors consisting of individuals as directors and shall haveâ€

(a) a minimum number of three directors in the case of a public company, two directors in the case of a private company, and one director in the case

of a One Person Company; and (b) a maximum of fifteen directors:

Provided that a company may appoint more than fifteen directors after passing a special resolution:

Provided further that such class or classes of companies as may be prescribed, shall have at least one woman director.

(2) Every company existing on or before the date of commencement of this Act shall within one year from such commencement comply with the

requirements of the provisions of sub-section (1).

(3) Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two days in the

previous calendar year.

(4) Every listed public company shall have at least one-third of the total number of directors as independent directors and the Central Government may

prescribe the minimum number of independent directors in case of any class or classes of public companies.

Explanation. â€"For the purposes of this sub-section, any fraction contained in such one-third number shall be rounded off as one.

(5) Every company existing on or before the date of commencement of this Act shall, within one year from such commencement or from the date of

notification of the rules in this regard as may be applicable, comply with the requirements of the provisions of sub-section (4).

(6) An independent director in relation to a company, means a director other than a managing director or a whole-time director or a nominee

director,â€

(a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience;

(b)(i) who is or was not a promoter of the company or its holding, subsidiary or associate company;

(ii) who is not related to promoters or directors in the company, its holding, subsidiary or associate company;

(c) who has or had no pecuniary relationship with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the

two immediately preceding financial years or during the current financial year;

(d) none of whose relatives has or had pecuniary relationship or transaction with the company, its holding, subsidiary or associate company, or their

promoters, or directors, amounting to two per cent. or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be

prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year;

(e) who, neither himself nor any of his relativesâ€" (i) holds or has held the position of a key managerial personnel or is or has been employee of the

company or its holding, subsidiary or associate company in any of the three financial years immediately preceding the financial year in which he is

proposed to be appointed;

(ii) is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial year in which he is

proposed to be appointed, ofâ€

(A) a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; or

(B) any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to ten per

cent. Or more of the gross turnover of such firm;

(iii) holds together with his relatives two per cent. or more of the total voting power of the company; or

(iv) is a Chief Executive or director, by whatever name called, of any nonprofit organisation that receives twenty-five per cent. or more of its receipts

from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds two per cent or more of the total voting

power of the company; or

(f) who possesses such other qualifications as may be prescribed.

(7) Every independent director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the

Board in every financial year or whenever there is any change in the circumstances which may affect his status as an independent director, give a

declaration that he meets the criteria of independence as provided in sub-section (6).

Explanation.â€"For the purposes of this section, “nominee director†means a director nominated by any financial institution in pursuance of the

provisions of any law for the time being in force, or of any agreement, or appointed by any Government, or any other person to represent its interests.

(8) The company and independent directors shall abide by the provisions specified in Schedule IV.

(9) Notwithstanding anything contained in any other provision of this Act, but subject to the provisions of sections 197 and 198, an independent director

shall not be entitled to any stock option and may receive remuneration by way of fee provided under sub-section (5) of section 197, reimbursement of

expenses for participation in the Board and other meetings and profit related commission as may be approved by the members.

(10) Subject to the provisions of section 152, an independent director shall hold office for a term up to five consecutive years on the Board of a

company, but shall be eligible for reappointment on passing of a special resolution by the company and disclosure of such appointment in the Board's

report.

(11) Notwithstanding anything contained in sub-section (10), no independent director shall hold office for more than two consecutive terms, but such

independent director shall be eligible for appointment after the expiration of three years of ceasing to become an independent director:

Provided that an independent director shall not, during the said period of three years, be appointed in or be associated with the company in any other

capacity, either directly or indirectly.

Explanation.â€"For the purposes of sub-sections (10) and (11), any tenure of an independent director on the date of commencement of this Act shall

not be counted as a term under those sub-sections.

(12) Notwithstanding anything contained in this Act,â€" (i) an independent director;

(ii) a non-executive director not being promoter or key managerial personnel, shall be held liable, only in respect of such acts of omission or

commission by a company which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or

where he had not acted diligently.

(13) The provisions of sub-sections (6) and (7) of section 152 in respect of retirement of directors by rotation shall not be applicable to appointment of

independent directors.

SECTION-150 (Manner of selection of independent directors and maintenance of databank of independent directors).-

(1) Subject to the provisions contained in sub-section (5) of section 149, an independent director may be selected from a data bank containing names,

addresses and qualifications of persons who are eligible and willing to act as independent directors, maintained by any body, institute or association, as

may by notified by the Central Government, having expertise in creation and maintenance of such data bank and put on their website for the use by

the company making the appointment of such directors:

Provided that responsibility of exercising due diligence before selecting a person from the data bank referred to above, as an independent director shall

lie with the company making such appointment.

(2) The appointment of independent director shall be approved by the company in general meeting as provided in sub-section (2) of section 152 and

the explanatory statement annexed to the notice of the general meeting called to consider the said appointment shall indicate the justification for

choosing the appointee for appointment as independent director.

(3) The data bank referred to in sub-section (1), shall create and maintain data of persons willing to act as independent director in accordance with

such rules as may be prescribed.

(4) The Central Government may prescribe the manner and procedure of selection of independent directors who fulfill the qualifications and

requirements specified under section 149.

Learned counsel for the petitioner drew attention of this Court to the judgment of Hon’ble Apex Court in the case of Gunmala Sales Private

Limited vs. Anu Mehta and others reported in (2015) 1 SCC 103 and placed reliance upon the paragraph no. 11, 13 and 14. Same are extracted

hereunder:-

“11. It is necessary to first reproduce Section 141 of the NI Act because the issue involved in this matter revolves around it. Section 141 of the NI

Act reads thus:

“141. Offences by companies. â€" (1) If the person committing an offence under section 138 is a company, every person who, at the time the

offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the

company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without

his knowledge, or that he had exercised all due diligence to prevent the commission of such offence:

[Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central

Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case

may be, he shall not be liable for prosecution under this Chapter.] (2) Notwithstanding anything contained in sub-section (1), where any offence under

this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable

to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall

also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Explanation.â€" For the purposes of this section,â€

(a) “companyâ€​ means any body corporate and includes a firm or other association of individuals; and

(b) “directorâ€​, in relation to a firm, means a partner in the firm.]â€​

Several judgments have been cited before us. It is necessary to refer to them in brief to get an idea as to how different Benches of this Court have

dealt with this issue. We must begin with SMS Pharma-(1), which is a decision of three-Judge Bench of this Court. All subsequent decisions are of

two-Judge Benches. The three-Judge Bench was dealing with the reference made by a two-Judge Bench for determination of the following questions:

“(a) Whether for purposes of Section 141 of the Negotiable Instruments Act, 1881, it is sufficient if the substance of the allegation read as a whole

fulfill the requirements of the said section and it is not necessary to specifically state in the complaint that the person accused was in charge of, or

responsible for, the conduct of the business of the company.

(b) Whether a director of a company would be deemed to be in charge of, and responsible to, the company for conduct of the business of [pic]the

company and, therefore, deemed to be guilty of the offence unless he proves to the contrary.

(c) Even if it is held that specific averments are necessary, whether in the absence of such averments the signatory of the cheque and or the

managing directors or joint managing director who admittedly would be in charge of the company and responsible to the company for conduct of its

business could be proceeded against.â€​

After considering Sections 138 and 141 of the NI Act, Sections 203 & 204 of the Code and the relevant provisions of the Companies Act, this

Court answered the questions posed in the reference as under:

“(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 sub-para (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 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.â€​

Section 141 laid down a special provision in respect of issuance of cheques by companies and commission of offence by companies under Section

138 of the N I Act. Therein it was provided that if the person committing an offence under Section 138 is a company, every person who, at the time

the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the

company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Suffice it to say, that the

prosecution could be launched not only against the company on behalf of which the cheque issued has been dishonoured, but it could be initiated

against every person who at the time of offence was committed, was in charge of and was responsible for the conduct of the business of the

company. It is specifically mentioned that the petitioners were involved in day to day affairs of the company.

Section 149 sub-section 6(c) makes it clear that proceedings cannot be initiated against the independent director who has or had no pecuniary

relationship with the company. It is not the case of the petitioners that petitioners have no pecuniary command over the business of the company.

Perusal of the appointment letter of the petitioners reveals that they have participation and contribution to the Company; therefore they cannot be

absolved from the liability in connection of the cheque issued at the behest of the Company. Further, there is no averment made in the criminal

miscellaneous application that petitioners are not taking pecuniary benefits of the Company.

The ratio of the case law cited by the petitioner is not applicable to the facts of the present case. In fact, the facts of the present case are similar

to the case S.V. Mazumdar and others vs. Gujarat State Fertilizer Co. ltd. wherein it is held that whether or not the evidence to be led would establish

the accusations is a matter of trial. It needs no reiteration that proviso to sub-section (1) of Section 141 enables the accused to prove his innocence by

discharging the burden while lies on him.

This Court is also of the view that it is for the trial court to examine whether the petitioners are innocent or not? At the stage of cognizance and

summoning, the Magistrate is required to apply his judicial mind only with a view to take cognizance of offence or in other words, to find out whether,

prima facie, case is made out for summoning the accused persons. The Hon’ble Apex Court in the case of Sonu Gupta vs. Deepak Gupta and

others reported in (2015) 3SCC 424 has held that prima facie satisfaction of the Magistrate concerned is sufficient for summoning the accused. The

relevant paragraphs are quoted hereunder:-

“7. Considering the stage at which the criminal complaint is pending and the nature of proposed order, this Court would not like to express any

definite opinion on the merits of the allegations made in the complaint petition or upon the defence taken by the accused persons before the courts

below or in this Court lest it prejudices one or the other party in future.

Having considered the details of allegations made in the complaint petition, the statement of the complainant on solemn affirmation as well as

materials on which the appellant placed reliance which were called for by the learned Magistrate, the learned Magistrate, in our considered opinion,

committed no error in summoning the accused persons. At the stage of cognizance and summoning the Magistrate is required to apply his judicial mind

only with a view to take cognizance of the offence, or, in other words, to find out whether prima facie case has been made out for summoning the

accused persons. At this stage, the learned Magistrate is not required to consider the defence version or materials or arguments nor he is required to

evaluate the merits of the materials or evidence of the complainant, because the Magistrate must not undertake the exercise to find out at this stage

whether the materials will lead to conviction or not.â€​

It is settled law that the factual controversy need not be gone into by this court in exercise of its inherent jurisdiction. Inherent jurisdiction under

section 482 Cr.P.C., should be used sparingly and with great caution, and only when such exercise is justified by the tests, specifically laid down in the

section. Petitioners failed to bring their case within the provisions enumerated under section 482 Cr.P.C.

Considering the facts and circumstances of the case, this Court is not inclined to interfere with the impugned summoning order dated 25.07.2017.

The C-482 petition is devoid of merits and is liable to be dismissed.

Accordingly, the C-482 petition is dismissed. It is however made clear that this Court has not express any opinion on the merits of the case.

Interim order dated 20.11.2017 stands vacated.