Dismissed

Urvil Akshaya Jani v. the State of Maharashtra and Anr.

Bombay HC3 Aug 2022APL/134/2022

Case brief

AI extract

What is this about?

The High Court rejected multiple criminal applications against a petitioner prosecuted for cheque dishonour. The applicant argued insolvency proceedings barred liability under Section 138. The court held cross-examination necessitated trial and continued interim relief for four weeks.

What did the court decide?

Criminal Applications rejected; interim relief extended for four weeks pending trial.

Urvil Akshaya Jani Vs the State of Maharashtra and… — Insolvency and Bankruptcy | Bombay HC (2022)

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Ethape 2-APL-121-2022.doc

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION

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CRIMINAL APPLICATION NO. 121 OF 2022 WITH CRIMINAL APPLICATION NO. 122 OF 2022 WITH CRIMINAL APPLICATION NO. 123 OF 2022 WITH CRIMINAL APPLICATION NO. 124 OF 2022 WITH

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CRIMINAL APPLICATION NO. 134 OF 2022

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Urvil Akshaya Jani ...Applicant Versus State Of Maharashtra And Anr. ...Respondents

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Mr. Akshay Patil a/w Mr. Umesh Wayadande a/w Mr. Rajesh Devgharkar a/w Ms. Pallavi Kamble a/w Ms. Neha Patil a/w Meghnesh Birwadkar i/by Mr. Akshay Vijay Kamble, Advocate for the Applicant.

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Mr. Maitrey G. Shukla, Advocate for Respondent No.2. Mr. S. R. Agarkar, APP for the Respondent – State.

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Digitally signed by DNYANESHWAR DNYANESHWAR ASHOK ETHAPE ASHOK ETHAPE Date: 2022.10.18 19:56:05 +0530

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CORAM : PRAKASH D. NAIK, J. DATE : 3^rd AUGUST, 2022.

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PER COURT:

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The applicant is prosecuted for the ofence punishable under Section 138 of the Negotiable Instruments Act. The complaints are pending before the Court of learned Metropolitan Magistrate, 23^rd Court at Esplanade Mumbai. The process was issued against the applicant and others under Section 138 of the Negotiable

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Instruments Act vide order dated 13.02.2019. The complaints are fled by Respondent No.2.

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All the complaints are identical. The applicant is impleaded as accused No.2. The case of the complainant is that in April 2018, accused No.1 (Oneworld Industries Pvt. Ltd.) had approached the complainant through its directors, accused No.2 and 3, who are in-charge and responsible for the working and day to day afairs of the accused No.1, for grant of loan facilities. Accordingly, loan was advanced to the tune of Rs.5,00,000/- to accused No.1 against the bill of exchange dated 18.04.2018 that was executed by accused Nos.2 and 3 acting for and on behalf of accused No.1 in their capacity as directors of accused No.1. The said bill of exchange was further signed as acceptors by accused Nos. 2 and 3 as directors and also by M/s. Aashima M. Khushalani. The said bill of exchange was executed for a period of 5 months and the accused had to repay the amount by 14.09.2018. In discharge of liability, the accused issued cheque signed by accused No.3 as director and authorized signatory of accused No.1 for an amount of Rs. 3,00,000/-. The cheque

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was deposited. It was dishonoured on 22.11.2018 for the reason “Funds Insufcient”. The statutory demand notice dated 23.11.2018 was dispatched to the accused by post on 26.11.2018. It was delivered on the address of the accused. It was delivered to accused No.2 and 3 on 27.11.2018 and 28.11.2018 respectively. The accused replied to the notice but failed to make the payment. Hence, complaint was fled on 19.12.2018. it was registered as C.C. No. 2914/SS/2018. Process was issued for ofence under Section 138 of Negotiable Instruments Act.

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In June 2018, the accused No.1 Onworld Industries Pvt. Ltd. had approached the complainant through its directors, accused No.2 and 3, who are in-charge and responsible for the working and day to day afairs of accused No.1, for grant of loan facilities. Similarly the loan of Rs.10,00,000/- was advanced to the accused against the bill of exchange dated 01.06.2018. It was executed by accused Nos. 2 and 3 acting for and on behalf of accused No.1 in their capacity as the directors of accused No.1. The said bill of exchange was signed as acceptors by

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accused Nos. 2 and 3 as directors. It was executed for a period of fve months and the loan was to be repaid by 28.10.2018. The accused Nos. 2 and 3 had, in part discharge of legally enforceable liability, issued to the complainant a chaque dated 22.11.2018 bearing No. 005379 for amount of Rs. 9,00,000/-. The said cheque was dishonoured for the reason “Funds Insufcient” on 22.11.2018. The statutory demand notice dated 23.11.2018 was dispatched to the accused by post on 26.11.2018. It was delivered to accused Nos.1 to 3 at their ofce address on 27.11.2018. The accused replied the demand notice by reply dated 10.12.2018. Payment was not made. Complaint was fled on 19.12.2018. It was registered as CC No. 2912/SS/2018. Process was issued for the ofence punishable under Section 138 of the Negotiable Instruments Act by order dated 13.02.2019.

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In December 2017, the accused No.1 had approached the complainant through its directors accused Nos. 2 and 3, who are In-charge and responsible for the working and day to day afairs of accused No.1 for grant of loan facilities. The loan of Rs.10,00,000/- was advanced to

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the accused against the bill of exchange dated 27.12.2018. It was executed by accused Nos. 2 and 3 acting for and on behalf of accused No.1 in their capacity as the directors. The bill of exchange was executed for a period of 300 days and the accused had to repay the amount by 22.10.2018. In discharge of liabilities, the accused Nos. 2 and 3 had, in part discharged of legally enforceable liability, issued to the complainant a chaque dated 22.11.2018 bearing 004349 for an amount of Rs.4,00,000/- was issued. The cheque was dishonoured on 22.11.2018 for reason “Insufcient Funds”. Demand notice was dispatched to the accused. It was received by the accused. It was replied by accused. They failed to make the payment. The complaint was fled on 19.12.2018. It was registered as CC No. 2915/SS/2018. Process was issued under Section 138 of the Negotiable Instruments Act on 13.02.2019.

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In March 2018, The accused No.1/company had approached the complainant through its directors accused Nos. 2 and 3, who are In-charge and responsible for the working of accused No.1, for grant of loan facilities. The

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loan was advanced to accused No.1 to the tune of Rs. 16,00,000/- against the bill of exchange dated 15.03.2018 that it was executed by accused Nos. 2 and 3 acting for and on behalf of accused No.1 in their capacity as directors of accused No.1. The said bill of exchange was signed as acceptors by accused No.2 and 3. It was executed for a period of 8 months and the accused had to repay the amount by 09.11.2018. Cheque bearing 004817 was issued on 22.11.2018 for an amount of Rs.10,00,000/-. The cheque was dishonoured on 22.11.2018 for reason “Insufcient Funds”. Demand notice was sent to the accused. It was delivered to accused. It was replied by accused. They failed to make the payment. The complaint was fled on 19.12.2018. It was registered as C.C. No.2916/SS/2018. Process was issued under Section 138 of the Negotiable Instruments Act on 13.02.2019.

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In December, 2017, the accused/company had approached the complainant through its directors accused No.2 and 3, who are in-charge and responsible for the working and day to day afairs of accused No.1 for grant of

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Ethape 2-APL-121-2022.doc

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loan facilities. Loan of Rs. 15,00,000/- was advanced by accused No.1 against the bill of exchange dated 29.12.2017. The bill of exchange was signed by accused No.2 and 3 acting for and on behalf of accused No.1 in their capacity as directors of accused No.1. It was further signed as acceptors by accused Nos.2 and 3 as directors. The bill of exchange was executed for a period of 180 days and the accused had to repay the amount by 26.06.2018. Cheque bearing 0048174416 was issued on 22.11.2018 for an amount of Rs.1,25,000/-. The cheque was dishonoured on 22.11.2018 for reason “Funds Insufcient”. Demand notice was sent to the accused. It was received by them. Payment was not made. The complaint was fled on 19.12.2018. It was registered as CC No. 2913/SS/2018. Process was issued under Section 138 of the Negotiable Instruments Act on 13.02.2019. The complainant and the accused are common in all the complaints.

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Learned advocate for the applicant submitted as under:-

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(i) The applicant is not in-charge and responsible for day to day afairs of accused No.1

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Ethape 2-APL-121-2022.doc

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(ii) Process was issued mechanically.

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(iii) The applicant is not signatory to the cheque. He is not in-charge and responsible for the business of accused No.1. Section 141 of the Negotiable Instruments Act cannot be applied against the applicant.

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(iv) The accused No.1/Company was under Corporate Insolvency Resolution Process (CIRP) initiated by the M/s. Shanaya Fashions under Section 9 of the Insolvency and Bankruptcy Code (for short “IBC”) with efect from 16.11.2018. The application under Section 9 of the IBC was admitted on 16.11.2018. The consequence of the admission of Section 9 application, the National Company Law Tribunal (for short “NCLT”) declared a moratorium for the purposes referred to in Section 14 of the IBC. The NCLT appointed interim resolution professional in the manner laid down in Section 16 of the said Act. The combined efect of order dated 16.11.2018 passed by NCLT read with Sections 14, 16 and 17 of IBC is that management of afairs of accused No.1 vested in the interim resolution professional (IRP) with efect from 16.11.2018.

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(v) The powers of the Board of Directors were

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Ethape 2-APL-121-2022.doc

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suspended. Neither the applicant nor the accused were in-charge of the afairs of the accused No.1 with efect from 16.11.2018. The accused No.3 had no right to issue the cheque or give confrmation.

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(vi) It cannot be said that the debt was due and payable by accused No.1 company on 22.11.2018. In view of section 14 of the IBC; in view of the moratorium, the accused No.1 was not liable to make any payment or repayment of debt. In view of Section 14(1)(b) of IBC, there was a bar on enforcement or payment.

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(vii) The complaint was fled on 19.12.2018. In view of the order dated 16.11.2018 and the moratorium, there was bar under Section 14 (1)(a) of IBC, on institution of suits or proceedings against accused No.1. Thus, institution of the complaint is illegal.

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(viii) In view of order passed by NCLT, the remedy available with accused No.2/complainant was to fle its claim before the IRP appointed by the NCLT. The IRP after its appointment gave an advertisement in newspaper calling upon public at large to fle its claim against the Company.

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(ix) The liquidator was appointed by the NCLT, Mumbai

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pursuant to its order dated 15.11.2019. The liquidator gave newspaper advertisement calling upon public at large to fle its claim against the respondent No.1. The complainant ought to have fled its claim before the liquidator appointed by the NCLT, Mumbai. The complainant failed to fle its claim before the IRP as well as liquidator to secure its claim.

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(x) The complaint under Section 138 of the Negotiable Instruments Act is not maintainable. The complainant has failed to fle its claim before IRP and liquidator and adopted the route under Section 138 read with 141 of the Negotiable Instruments Act.

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The reliance is placed on the following decisions:-

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(i) Sandeep Khaitan, Resolution Professional For National Plywood Industries Limited. Vs. JSVM Plywood Industries Limited and Another 1.

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(ii) Girdhari Lal Gupta Vs. D. H. Mehta and Another 2.

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The learned advocate for the respondent submitted that the cheque was issued on 22.11.2018 and it was

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1 (2021) 9 SCC 401

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2 1971 (3) SCC 189

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Ethape 2-APL-121-2022.doc

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dishonoured on the same day. The reply to the show cause notice is silent about the claim of petitioner in this proceedings. The reply to notice only dispute to liability if the contention of the petitioner that he ceases to be director of the company and on the day of ofence he was not in-charge and responsible for afairs of the company. The petitioner could not have replied the notice as director of the company. The accused has proceeded the complainant as adduced his evidence. The issue raised in this petition will have to be urged during the trial. The advocate for the complainant has fled an application for production of documents before the trial Court. The complaint was due for hearing, the application for interim compensation. The accused fled reply stating that the insolvency proceedings has been admitted against accused No.1 at the instance of M/s. Shanaya Fashions being the operational creditor for work done. The proceedings are eyewash. There is no transaction between M/s. Shanaya Fashions and accused and they are handing love each other for common cause. The reliance is placed on the documents relating to remand report of the petitioner. The said remand report indicate that the

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petitioner is the Director of Oneword Group of Companies. The complaint was fled before the Court of Additional Chief Metropolitan Magistrate by Senior Intelligence Ofcer, Directorate General of Goods and Services Tax Intelligence, Zonal Unit, Mumbai. The application for remand mentions that searches conducted as confrm by the intelligence that Oneworld Group of Companies had connived with other group companies/frms etc. for assurance as well as receipt of bogus/fake invoices without supply or receipt of goods or services mentioned in the respective invoices. The applicant had received invoices from other companies without actual supply or receipt of goods. Mr. Rahul Jhaveri, proprietor of M/s. Shanaya Fashions and Karishma Exports, who had issued invoices and procured invoices from Oneworld Group of Companies without supply or receipt of goods. The business premises of Rahul Jhaveri, owner of M/s. Shanaya Fashions was conducted. His statement was recorded. He stated that he started eight additional proprietorship frms in addition to M/s. Shanaya Fashions at the behest of Shri. Urvil Jani (petitioner) that Shri. Urvil Jani had made it clear to him that the main purpose was to increase the turnover

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of the companies of Oneworld Group that belonged to Shri. Urvil Jani. He had never issued any invoices in the name of any of these frms that all invoices were issued by Shri. Urvil Jani. The sales and purchase fgures mentioned in the proft and loss account for the year 2014-15 and 2016-17 where mentioned in the report. He had not issued any sale invoice nor had he received any purchase invoice for the sales and purchase fgures mentioned in the proft and loss account. The Income Tax Returns and the supporting proft and loss account was prepared by applicant. There was no actual purchase and sale against the fgures mentioned in the proft and loss account for the said fnancial years. Bank transactions were undertaken by Mr. Urvil Jani to show bogus, fake purchase and sale transactions as genuine since a sale or purchase transaction would not look genuine without supporting bank transaction. During the course of inquiry it came to light that at the behest of the accuse/petitioner Rahul Jhaveri, proprietor of Shanaya Fashions has fled the petition seeking to set in motion the insolvency resolution process in the NCLT alleging that OGC is a corporate debtor as they are committed default in payment,

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whereas during inquiry it is admitted fact by both the accused and Shri. Rahul Jhaveri that there was no actual purchase of goods by OGC from Shanaya Fashions. The whole purpose of fling of petition was to defraud the bankers. It is submitted that initiation of the proceedings under the IBC itself malafde. The petitioner is instrumentally in initiating the said proceedings. Hence, by reliance on by such proceedings, no relief should be granted to the petitioner. The proceedings under the IBC are not maintainable. The petitioner has not come with clean hands. The ofence was already completed. The orders passed by NCLT, in any case would not restrict the proceedings under the Negotiable Instrument Act. The ofence was completed. The proceedings under IBC would not vitiate the proceedings under Section 138 of Negotiable Instrument Act in the present case.

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Learned advocate relied on the decision in the case of P. Mohanraj and others Vs. Shah Brothers Ispat Pvt. Ltd. (supra).

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The preliminary contentions of the applicant is that he was not in-charge and responsible for the business and

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afairs of accused No.1 company. There is sufcient material on record to show that applicant has actively participated in transactions of accused No.1 company. It is also contended that accused No.1 company was under CIRP initiated by Shanaya Fashions under Section 9 of IBC from 16.11.2018. NCLT declared moratorium and IRP was appointed. Powers of Board of Directors were suspended. The applicant or other accused were not in-charge of afairs of accused No.1 from 16.11.2028. The complainant could have fled its claim before NCLT.

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It is brought to the notice of this Court that there are malafdes in initiating the said proceedings before the NCLT. The said proceedings were initiated by M/s. Shanaya Fashions claiming that the accused No.1 company has not clear the debt of M/s. Shanaya Fashions. Complaint is fled against the petitioner before the Court of learned Metropolitan Magistrate by Directorate General of Goods and Services Tax, alleging that the applicant/accused and M/s. Shanaya Fashion are handing in blow. Although there was no sale of goods, the proceedings are initiated at the instance of the petitioner.

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These grounds will be matter of trial. In such circumstances, the petitioner is not entitled for the relief from this Court and the application is deserves to be dismissed.

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ORDER

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Criminal Application Nos. 121 of 2022, 122 of 2022, 123 of 2022, 124 of 2022 and 134 of 2022 are rejected and disposed of accordingly.

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At this stage the learned counsel for applicant seeks extension of interim relief granted by this Court to enable the applicant to move the higher Court challenging this order. The learned Advocate for respondent No.2/complainant opposed the prayer for extension of stay. On the ground that the trial is pending since long and the afdavit of evidence of the complainant has been fled and the cases are due for cross examination. Considering the fact that, interim relief was granted by this Court on 19^th April, 2022, the same is continued for a period of four weeks.

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(PRAKASH D. NAIK, J.)

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Urvil Akshaya Jani v. the State of Maharashtra and Anr.

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Urvil Akshaya Jani v. the State of Maharashtra and Anr.

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