S.B. Shankar vs Amman Steel Corporation

The petitioner in all these petitions is one and the same person and he is Accused No.2 in C.C.Nos.449, 486, 576, 584, 589 and 464 of 2000

respectively, on the file of Judicial Magistrate No.II, Trichirappalli and he seeks to quash the proceedings in the cases in so far as he is concerned.

The point for determination in all the petitions is one and the same and hence they are disposed of by common order.

The averments in all the petitions are similar and they are summarised. The respondent in all the petitions is one and the same person and it is a

proprietary concern. The petitioner, who is accused No. 2 in all the cases is mentioned as Chairman of first accused company in all the petitions,

viz.. M/s.Sree Aravindh Steels Limited. Accused Nos. 3 to 5 are all same in all the petitions and they are Managing Director, General Manager

and Authorised Officer of the first accused company, respectively.

The first accused company is a Steel Rolling Company which used to purchase Heavy Melting Scraps from the respondent/complainant for many

years. The allegation is that the first accused company from 5.12.1999 till 17.1.2000 had purchased Heavy Melting Scraps under 28 invoices for a

total value or Rs. 19.60,525.50. After deduction of Excise charges, the first accused owes the complainant a sum of Rs.17,50,051.50. Towards

the said purchase, the first accused company issued a total of 16 cheques, for a tola! sum of Rs. 12.05,588 on various dates, dated between

3.2.2000 to 15.2.2000 which are the subject matter in C.C.Nos. 449, 486, 576, 584, 589 and 464 of 2000. All the cheques were presented for

encashment on the date of the cheques and they were all returned on 16.2.2000 for the reason ''insufficient funds''.

The petitioner herein has resigned from the Chairmanship of the first accused company on 4.10.1999 even before the credit purchase transaction

between the first accused company and the respondent/complainant. The Company Law Board has issued Form-32, on 4.10.1999. The said

document is a public document as defined u/s 74 of the Indian Evidence Act and per se admissible in the Court of law. The allegation in the

complaints that the petitioner is responsible for the day-to-day affairs of the company is false, frivolous and vexatious. Hence the continuation of

the proceedings in all the cases against the petitioner amounts to abuse of the process of law and the same are liable to be quashed.

The learned counsel appearing for the petitioner contended that the petitioner in all the petitions was Chairman and Director of the first accused

company and he tendered his resignation from the Directorship of the Company on 4.10.1999 and his resignation was placed before the Meeting

of the Board of Directors of the Company held on 4.10.1999 and it was resolved to accept the resignation of the petitioner herein as Director of

the Company and it was further resolved to authorise G.S.Venkataraman, Director of the Company, to file Form No.32 with the Registrar of

Companies in this regard and accordingly, Form No.32 also was filed. The learned counsel for the petitioner placed before the Court certified

copy of Form No.32 issued by the Registrar of Companies, true copies of the resignation letter, dated 4.10.1999 and the minutes of the

proceedings of the meeting of Board of Directors of the first accused company held on 4.10.1999 and the 25th Annual Report of the Company for

the year 1999-2000, in which, it is mentioned that the petitioner herein resigned as a Director of the Company with effect from 4.10.1999.

The learned counsel for the petitioner contended that the petitioner herein resigned on 4.10.1999 itself as evidenced by the public documents

produced and the resignation took effect from the date of resignation letter and in this regard, he relied on the judgments of this Court in V.K.

Lakshmana Mudaliar and Another Vs. Emperor, . P.R.M. Abdul Huq Vs. Katpadi Industries Ltd. and Another, and Murari v. Registrar of

Company, 1975 T.L.N.J. 287. This Court in the above decisions held that the Director, who has resigned, will be deemed to have resigned from

the date of his resignation. Ratnavel Pandian, J (as his Lordship then was) in the decision in S.S.Lakshmana Pillai v. Registrar of Companies, 1977

T.L.N.J. 11, has reiterated the position of law and the relevant portion is extracted below.

.....For the above stated reasons and in the absence of any provision either in the Act or in the memorandum of Articles, I am of the view that the

Director who had submitted his resignation would be deemed to have resigned from his office from the date of the submission of his resignation,

when his intention is unequivocally expressed either orally or by a letter. A Fortiori in the instant case, the petitioner by his letter dated 4.12.1972

has tendered his letter of resignation, resigning his directorship from the evening of 4.12.1972 and the said letter has been acknowledged by the

first respondent, the Registrar of Companies and therefore I hold that the resignaiion had taken effect from 4.12 1972 and consequently the

petitioner has ceased to hold the office from the evening of 4.12.1972.

With respect, I agree with the views expressed in the above decisions. The director, who is resigned, will be deemed to have resigned from the

date of his resignation. In the present case, the petitioner has resigned as Director of ihe first accused company on 4.10.1999 and he was no longer

in the Board of the Company after that date either as Director or Chairman.

The learned counsel for the petitioner further contended that the petitioner did not function as Director either on the date when the cheques in all

the cases were issued or when the cause of action arose for non payment of those cheque amounts on receipt of the statutory notices respectively

and hence the proceedings u/s 138 of the Negotiable Instruments Act in all the cases are not valid in law in so far as the petitioner is concerned and

he mainly relied on the judgment of this Court in Ashok Muthanna, Managing Director, M/s.Fidelity Industries Ltd. and 3 others v. Wipro Finance

Ltd., 2001 (2) CTC 78, wherein M.Karpagavinayagam, J has held as follows.

In regard to the first point in relation to the second petitioner V.G.Sub-baraman (A3), I find merit in the contention of the learned counsel for

the petitioner, inasmuch as Form No. 32 issued by the Registrar of companies, which has been produced before this Court and the same has not

been disputed by the counsel for the respondent/ complainant, would reveal that the said second petitioner retired on 28.3.1998 itself and as such,

he did not function as a Director either on the date when the cheques were issued (i.e.) on 23.1.1999 or when the cause of action arose for non-

payment of the cheque amount on receipt of the statutory notice on 10.7.1999.

Though the said document is not form part of the complaint and other records accompanied with the complaint, this can be taken into

consideration by this Court, since the contents of the said document, which is a public document, is not disputed by the learned counsel for the

respondent.

As held by the Supreme Court in Satish Mehra v. Delhi Administration and another, 19% (3) Crimes 85 the Court is within its powers to

consider even materials which the accused may produce even before the commencement of trial for the purpose of deciding whether the accused

could be discharged, when those documents are not in dispute.

In the present case, as noted above, the document Form No. 32 would reveal (hat the second petitioner was not the director who was in-

charge of and responsible for the affairs of the company during the relevant period and as such, the proceedings as against the second petitioner

are liable to be quashed and accordingly, quashed.

S.Thangaraj, J in the decision in M.Chockalingan v. M/s. Sundaram Finance Service Ltd., 2000 (1) L.W.(Crl.) 16 and K.Natarajan. J in the

decisior in Ashok Muthanna & others v. Escorts Finance Ltd., 2001 (2) Crimes 602 have also held that the persons, who cease to be Directors of

the Company, cannot be proceeded against for the offence u/s 138 of Negotiable Instruments Act alleged against the company and quashed the

proceedings of the case against them u/s 482 of Cr.P.C.

The learned counsel for the respondent contended that the question as to whether the petitioner was a Director of the Company on the relevant

date could only be gone into in the trial of the case and he relied on the judgment of this court in Habibunnisa Akthar and another v. S. & S.

Industries and Enterprises Ltd., 1995 Com. Cas 593. The above decision will not apply to the facts of the present case, since the question that

arose for determination in that case was whether the third accused was a partner of the first accused firm for being proceeded against for an

offence u/s 138 of Negotiable Instruments Act and in the facts of that case the learned Judge concluded that the real state of affairs of the firm can

be gone into only when evidence is let in at the stage of trial.

The other decision relied on by the learned counsel for the respondent is the decision in Rajan Kinnerkar v. Erick Cordeiro and another, 1994

Com. Cas. 487. In that case, the signatory of the cheque filed a petition for quashing the complaint on the ground that he was no longer a Director

of the company when the cheque was presented and in those circumstances, the Bombay High Court -Panaji Bench held that the fact as to

whether the petitioner was no longer an employee or Director of the Company has to be substantiated on record and this can be done only at the

stage of trial and held that the petition u/s 482 of Cr.P.C. was premature. The above decision also does not apply to the facts of the present case.

I am in entire agreement with the views expressed by the Learned Judges of this Court in the decisions referred to by the learned counsel for the

petitioner. Form No. 32 issued by the Registrar of Companies is a public document and coupled with the Annual Report published by the

Company can be taken into consideration by this Court and it shows that the petitioner resigned as Director of the Company on 4.10.1999 and he

ceased to be on the Board of the Company from that date. All the cheques pertaining to the cases were drawn between the period 3.2.2000 to

15.2.2000 and during that period, the petitioner did not function as Chairman and Director of the first accused company and he was also not in-

charge of and responsible for the affairs of the company when the cause of action arose for non payment of the cheque amounts on receipt of

respective statutory notices. Hence the proceedings in all the cases as against the petitioner are liable to be quashed.

In the result, all the petitions are allowed and the proceedings in all the Calendar Cases are quashed in so far as the petitioner is concerned.

Connected Crl.M.P.Nos. 9741 to 9752 of 2000 are closed.