Allowed

Priti Premji Ruparel v. Dr. Niranjan Vijaykumar Shah and Anr.

Bombay HC23 Jun 2022APL/96/2022

Case brief

AI extract

What is this about?

The High Court, Criminal Appellate Jurisdiction, allowed criminal applications to quash prosecution under Section 138 NI Act against applicants. The court held that the impugned complaint failed to specifically attribute a role to the applicants sufficient to invoke vicarious liability under Section 141 NI Act, rendering the proceedings liable to be set aside.

What did the court decide?

Quashed proceedings under C.C. No.558 of 2021 and impugned order dated 16.09.2021 issued under Section 138 NI Act qua the applicants.

Priti Premji Ruparel Vs Dr. Niranjan Vijaykumar Shah… — Company and Corporate | Bombay HC (2022)

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3-apl-88-96-92-2022.doc

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION

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CRIMINAL APPLICATION NO.88 OF 2022

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Premji Khepar Ruparel…Applicant
Versus

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Dr. Niranjan Vijaykumar Shah and Ors....Respondents

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WITH

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CRIMINAL APPLICATION NO.92 OF 2022

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Jeetendra Jaykumar Dharu…Applicant
Versus
Dr. Niranjan Vijaykumar Shah and Ors....Respondents

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WITH CRIMINAL APPLICATION NO.96 OF 2022

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Priti Premji Ruparel…Applicant
Versus
Dr. Niranjan Vijaykumar Shah and Ors....Respondents

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Mr. Vineet Naik, Senior Advocate a/w Sukand Kulkarni, Mr. Parikshit
Ruparel, Ms. Sayli Shinde i/by M/s. Kartikeya & Associates Advocate
for the Applicants.

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Mr. Pratap Patil, Advocate for Respondent No.1.

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Mr. A. R. Patil, APP for the Respondent – State.

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PER COURT:

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1.The applicants are prosecuted for offence under Section 138

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of Negotiable Instruments Act, 1881 vide C.C. No.558 of 2021

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pending before the Court of Joint Civil Judge Junior Division,

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Digitally signed by SAJAKALI SAJAKALI LIYAKAT LIYAKAT JAMADAR JAMADAR Date:2022.10.07 Sajakali Jamadar 14:10:18 +0530

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Saswad. The process was issued by the trial Court vide order dated
16.09.2021 under Section 138 of Negotiable Instruments Act,
1881. The applicants were impleaded as accused Nos.3, 4 & 5.

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2.The brief facts of the complaints are as follows :-

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i)The accused No.1 is Sugar Factory existing Co-
operative Society registered under the Companies Act.
Accused No.2 is the Chairman and Managing Director of
accused No.1. Accused No.2 looks after whole affairs of and
authorized signatory of accused No.1. Accused No.2 signed
the cheques on behalf of accused Nos.1 to 6. Accused Nos. 3
& 4 are the directors of accused No.1. They are authorized
signatory of accused No.1. Accused No.5 is whole time
director looking after day-to-day affairs and authorized
signatory director of accused No.1. Accused No.6 is the
Company Secretary looking after secretarial, legal matter and
authorized signatory of accused No.1

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ii)The complainant sent the letter for purchase of 4,000
M.T. ‘A’-grade Molasses from accused No.1. Accordingly
accused No.2 replied for and behalf of accused Nos.1 to 6 by
letter dated 30.10.2017 and agreed to supply 4,000 MT
‘A’-grade Molasses at the rate of 2,700/- per ton excluding tax

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Sajakali Jamadar

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along with other terms and condition. As per letter dated
31.10.2017, the complainant paid advance payment of
Rs.1,08,00,000/- by RTGS. The accused No.2 on behalf of
accused Nos.1 to 6 and complainant executed agreement on
31.10.2017 for purchase/sale of Molasses. It was agreed that
4,000 m.t. Molasses will be supplied to complainant from
accused No.1 sugar factory commencing of seal on 2017-18 till
completion of order of 4,000 m.t.

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iii)The accused supplied Molasses of 816.840 M.T. for
Rs.22,05,468/- from 5th January, 2018 to 17th January 2018.
The accused was supposed to supply 4,000 M.T. Molasses for
season 2017-18, but failed to supply.

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iv)Accused No.2 issued cheques on behalf of accused
Nos.1 to 6 bearing No.151417 of Rs.54,00,000/- and cheque
bearing No.151418 for Rs.54,00,000/-.

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v)The complainant learnt that the accused are supplying
Molasses to others which was in violation of the terms and
conditions of the agreement executed between the
complainant and accused.

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vi)The complainant deposited cheque of Rs.54,00,000/-
dated 24.09.2020 bearing No.151417. It was dishonoured on

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Sajakali Jamadar

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01.10.2020 for the reason ‘Insufficient Funds’. The
complainant deposited cheque dated 24.09.2020 bearing
No.151418 and it was dishonoured on 01.10.2020 for the
reason ‘drawers signature differs’. The demand notice was
issued to the accused. The notice was served upon the
accused. They failed to make the payment. The complaints
were filed.

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3. Learned Senior Advocate Mr. Naik submitted that the
process was issued mechanically. The applicants cannot be
prosecuted for offence under Section 138 of Negotiable
Instruments Act, 1881. No role is assigned to them for invoking
Section 141 of Negotiable Instruments Act. The applicants are
Directos of Shri Dutt India Pvt. Ltd., having its registered office at
Kolkatta, West Bengal and Administrative Office at Mumbai. By
order dated 11.11.2019 passed by National Company Law Tribunal,
Mumbai Bench (NCLT), The accused No.1 company has been
merged and amalgamated with Shri Dutt India Pvt. Ltd. with effect
from 09.02.2020. The accused No.1 has ceased to exist from
09.02.2020. By order dated 11.11.2019 passed by the National
Company Law Tribunal, Mumbai, the resolution plan submitted by
Shri. Datt India Pvt. Ltd was accepted and approved by committee

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Sajakali Jamadar

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of Creditors was approved by NCLT. On 20.02.2019. NCLT
admitted application filed by Cosmos Co-operative Bank Ltd. being
the Financial Creditor of accused No.1 under Section 7 of
Insolvency & Bankruptcy Code, 2016 ( herein after referred to as
‘IBC’) for initiation of Corporate Insolvency Resolution Process
(CIRP). Mr. Vishram Narayan Panchpor was appointed as Interim
Resolution Professional (‘IRP’) of accused No.1. By virtue of
Section 17 of the Code, the powers of the Board of Directors of the
accused No.1 stood suspended and vested in the IRP. The accused
No.1 entered into contract for supply of Molasses to complainant.
The accused No.2 was Chairman and Managing Director of accused
No.1. The accused No.2 was concerned with day-to-day
management and operation of accused No.1. After initiating CIRP
i.e. from 20.02.2019, the accused No.2 had no authority to
represent and act on behalf of accused No.1. After the
commencement of CIRP proceedings, all contracts, agreement,
entered into by the Company i.e. Corporate Debtor stand
suspended. With effect from 11.11.2019, accused No.1 was taken
over by the new management in accordance with order passed by
the NCLT and in accordance to the Resolution Plan submitted by
Shri. Dutt India Pvt. Ltd. The accused No.1 ceased to exist and
stood merged and or amalgamated with Shri. Dutt India Pvt. Ltd.

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Sajakali Jamadar

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pursuant to order dated 11.11.2019. The applicants were not
directors of accused No.1 at the time of transaction nor accused
No.1 exists on the date when the cheques were issued. The trial
Court failed to ascertain whether at the relevant time, the
applicants were directors of accused No.1 Company. The
complainant is the Creditor of accused No.1 Company. However,
the accused No.1 did not filed claim in respect to public notice
issued by IRP on 23.02.2019. Sections 13, 14, 15, 17 & 31 were
ignored by the Court. Section 31 of the IBC relates to approval of
resolution plan. The applicants are not signatory to Cheques.
Section 141 of the Negotiable Instruments Act cannot be invoked
against the applicants. There are no sufficient averments in the
complaint for invoking vicarious liability against the applicants
under Section 141 of the Negotiable Instruments Act.

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4.The applicants have filed affidavit for bringing certain
documents. In the affidavit it is stated that Shri Dutt India Pvt. Ltd.
had requested Axis Bank to provide certain information/documents
pertaining to the cheques by letters dated 27.01.2022 and
28.01.2022. By letter dated 15.03.2022, the Axis Bank had stated
that sole signatory to the bank account held by accused No.1 was
accused No.2. Axis Bank received the letter from Vishram Narayan

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Sajakali Jamadar

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Panchpor. The IRP of respondent No.1 stating that the NCLT
Mumbai had ordered initiation of Corporate Insolvency Resolution
Process of complainant and Axis Bank was instructed not to honour
any cheque or any transaction without his direction. The Axis
Bank was informed that, a moratorium under Section 14 of the
Code had been ordered by way of admission order prohibiting
institution or continuation of pending suits or proceedings against
corporate debtor including execution of any judgment, decree or
order in any court of law, tribunal, arbitration panel or other
authority, transferring, encumbering alienating or disposing of
assets and legal rights or beneficial interests, any action to
foreclose, recovery or enforce any security interest credited by the
corporate debtor in respect of its property including any action
under the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (SARFAESI Act),
recovery of any property by owner or lessor, where such property is
occupied or in possession of the corporate debtor. The said account
had not been operated from 20.02.2019. The cheques were signed
by accused No.2. The status of the accused is ‘dormant’.

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5. Learned counsel for the applicants have relied upon the

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decision in the case of A.K. Singhania V/s. Gujrat State Fertilizers

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Sajakali Jamadar

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Company Limited and Another (2013)16 SCC 630and another
decision of apex Court in the case of Committee of Creditors of
Essar Steel India Ltd. Vs. Satishkumar Gupta and others in Civil
Appeal No. 8766-67 of 2019.

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6.Learned Advocate for the respondent-complainant submitted
that the submissions of learned counsel for the applicants cannot be
accepted at this stage. The issues urged by the applicants can be at
the most urged during trial. The applicants were directors of
accused No.1 - Company. Specific role has been attributed to them.
They were responsible for day-to-day affairs of the company at the
relevant time. The cheques were issued in discharge of liability.
The proceedings under the IBC would not cause any restraint in
stopping the proceedings under Section 138 of Negotiable
Instruments Act, 1881. The decision relied upon by the learned
counsel for the applicant is not applicable in this case.

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7.From documents on record, it appears that accused No.1
company has been merged with Shri. Dutt India Pvt. Ltd. The
applicants were impleaded as Directors of accused No.1. The
complaint it is stated that accused No.2 signed the cheques. The
accused No.2 is Chairman and Managing Director of accused No.1.
As far as the vicarious liability of the applicants is concerned, the

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Sajakali Jamadar

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complaint does not attribute specific role to the applicants. They
are described as directors of accused No.1. The averments in the
complaints specifically mentions that the accused No.2 was
discharging the activities on behalf of the accused Nos.3 to 5.
There is no material to invoke the Section 141 of the Negotiable
Instruments Act against applicants. In the case of A.K. Singhania
V/s. Gujrat State Fertilizers Company Limited and Another (supra),

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it was observed that essential averments in the complaint are
required to invoke Section 141 of Negotiable Instruments Act.
Referring to Section 141 of the Act, the Court had observed that on
plane reading of Section 141 it is evident that every person who at
the time of offence was committed was in charge of and
responsible to the company shall be deemed to be guilty for the
offence under Section 138 of the Act in the face of it. In the case
of offence by the company, to bring its Directors within the mischief
of Section 138 of the Act, it shall be necessary to allege that they
were in charge of and responsible to the conduct of the business of
the company. It is necessary ingredients which would be sufficient
to proceed against such directors.

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8. On perusal of the contents of the complaints it is apparent

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that the applicants are described as directors of accused No.1 –

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Sajakali Jamadar

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Company. Accused No.2 is described as Chairman and Managing
Director of accused No.1. No role is assigned to the applicants.
Hence, for lack of material even prima facie to invoke Section 141
of the NI Act, the proceedings against applicants deserves to be
quashed and set aside. It is not necessary to embark upon the
other issues urged by the applicants about effect of orders passed
by NCLT and Provisions of IBC Code.

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9. Hence, I pass the following order :-

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ORDER

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i. Criminal Application Nos.88 of 2022, 92 of 2022 and 96 of 2022 are allowed.

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ii. Impugned order dated 16.09.2021 passed by the learned Jt. Civil Judge Junior Division Saswad, issued process under Section 138 of Negotiable Instruments Act, 1881 and the proceedings in C.C. No.558 of 2021 are quashed and set aside qua the applicants.

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iii. All Criminal Applications are disposed off accordingly.

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(PRAKASH D. NAIK, J.)

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Sajakali Jamadar

Priti Premji Ruparel v. Dr. Niranjan Vijaykumar Shah and Anr.

Case brief

What is this about?

What did the court decide?

Priti Premji Ruparel v. Dr. Niranjan Vijaykumar Shah and Anr.

Case brief

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What did the court decide?

What the court decided

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