Dr. Sailendra Narain Vs the State of Maharashtra and Anr.

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TAUSEEF LAIQUEE FAROOQUI

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Digitally signed by TAUSEEF LAIQUEE FAROOQUI Date: 2022.11.23 17:43:44 +0530

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Tauseef Farooqui 22-WP.1986.2017 corrected.odt

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION

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CRIMINAL WRIT PETITION NO.1986 OF 2017

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Sailendra Narain …Petitioner

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V/s.

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State of Maharashtra & Anr. …Respondents

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WITH

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CRIMINAL WRIT PETITION NO.1987 OF 2017

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WITH

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CRIMINAL WRIT PETITION NO.1988 OF 2017

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*****

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Mr. Rohan Kelkar a/w Mr. Chirag Bhatia, Mr. K. G. Mhatre and Ms.
Shivani Trivedi i/by Mhatre & Associates for the Petitioner.
Ms. G. P. Mulekar, APP for the Respondent No.1 (State).

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Mr. Pranav Badheka, Counsel a/w Mr. Prashant Pawar for
Respondent No.2.

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*****

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CORAM : AMIT BORKAR, J.

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DATE:OCTOBER 12, 2022

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P.C.:

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1.The petitioner who claims to be independent director
of accused No.1 has filed this Petition challenging order of Sessions
Judge rejecting challenge to order of issuance of process. The
learned Sessions Judge rejected the Revision Application mainly on
three following grounds:

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(i).The petitioner attended 5 out of 11 meetings.

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(ii). The petitioner was member of the audit committee.

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Tauseef Farooqui 22-WP.1986.2017 corrected.odt

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(iii). The accused attended meeting of audit committee.

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2.The Sessions Court though, prima facie, accepted the
fact that the petitioner was independent director of accused No.1-
company, however based on aforesaid three circumstances, the
learned Sessions Judge recorded a finding that the petitioner
actively participated in day-to-day activity of accused No.1-
company.

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3.Learned advocate for the petitioner invited my
attention to the Judgment of Single Judge of this Court in the case
of Ram kishore Mangal & Ors. Vs. State of Maharashtra & Anr.,
2015 SCC Online Bom 7406. He invited my attention to paragraph
14 of the said decision. Learned Single Judge in the said paragraph
observed that as under:

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“14. In order to indicate what role the petitioners played in
commission of the offence, the learned counsel for the complainant
placed reliance on the accused-company's audited balance-sheet, in
which the names of the petitioners are shown as Non-Executive
Directors. They are, of course, members of various committees
such as the audit committee, share-holders' grievance committee,
etc. The balance-sheet also indicated the number of meetings the
petitioners attended during the relevant time. From this
information, the learned counsel for the complainant tried to
convince me that being the Directors, the petitioners were
responsible to the company for the conduct of its business. I am
afraid, the Directors do participate in the conduct of business of
the company, they attend meetings and participate in taking
decisions, etc. But what is pertinent to note in this case is that the
cheques issued by the company bounced and despite service of
notice, no payments were made. Who could be responsible for this

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Tauseef Farooqui 22-WP.1986.2017 corrected.odt

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failure? As indicated, in sub-section (1) of Section 141 of the N.I
Act only the Executives of the Company who look after the day-to-
day business of the company would be held liable for the failure. It
was their duty to attend to the discomfiture of failure of the
cheques and receipt of notice under section 138 of the n.i act. If we
go by the submissions made by the learned counsel for the
respondent-complainant, in a company if there are 21 Directors, all
21 Directors would be liable to be prosecuted. This will not help
the complainant in the longer run. His case would become bulky
and would get delayed. A complainant should not also forget that
if a complaint is made against a company, it is the company which
is the principal accused. The Executive Directors can be penalized
for the failure of the company. The other Directors who are not
related to the day-to-day business of the company should not be
bothered.”

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4.A careful reading of the said paragraph shows that it
does not lay down any precedent or statement of law which would
bind this Court. . Learned Single Judge in the facts of the case held
that considering the peculiar facts of the case, the petitioner
therein was not incharge or was not responsible for day-to-day
affairs of the company.

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5.The law on the point of ratio has been already settled
in view of the decision in the case of QuinnVs.Leathem[(1901)
AC 495] that the ratio of any decision must be understood in the
background of the facts of that case. A case is only an authority for
what it actually decides, and not what logically follows from it. In
that view of the matter, in my opinion, the Judgment cited by the
learned advocate for the petitioner will be of no help to him.

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Tauseef Farooqui 22-WP.1986.2017 corrected.odt

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6.He next relied upon the Judgment in the case of Sunita
Palita V/s. Panchami Stone Quarryin Criminal Appeal No.1105 of
2022 decided on 1st August 2022. In the facts of the said case, the
Apex Court was dealing with a case where the contention was
raised by appellants therein that the non-executive directors who
had no role to apply day-to-day affairs of the company were
proceeded against in a complaint filed under Section 138. The
Apex Court in paragraph 43 of the said Judgment held that the
liability of a director depends on the role one plays in the affairs of
the company and not on the designation or status of the company.

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7.In the case of S.P.ManiandMohanDairy V/s Dr.
Snehalatha Elangovan reported in 2022 SCC OnLine SC 1238 it is
held paragraphs 47 as under:

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“47.Our final conclusions may be summarised as under:-

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a.) The primary responsibility of the complainant is to make
specific averments in the complaint so as to make the accused
vicariously liable. For fastening the criminal liability, there is no
legal requirement for the complainant to show that the accused
partner of the firm was aware about each and every transaction.
On the other hand, the first proviso to sub-section (1) of Section
141 of the Act clearly lays down that if the accused is able to prove
to the satisfaction of the Court that the offence was committed
without his/her knowledge or he/she had exercised due diligence
to prevent the commission of such offence, he/she will not be liable
of punishment.

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b.) The complainant is supposed to know only generally as to who
were in charge of the affairs of the company or firm, as the case
may be. The other administrative matters would be within the
special knowledge of the company or the firm and those who are in
charge of it. In such circumstances, the complainant is expected to
allege that the persons named in the complaint are in charge of the
affairs of the company/firm. It is only the Directors of the company
or the partners of the firm, as the case may be, who have the
special knowledge about the role they had played in the company
or the partners in a firm to show before the court that at the

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Tauseef Farooqui 22-WP.1986.2017 corrected.odt

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relevant point of time they were not in charge of the affairs of the
company.Advertence to Sections 138 and Section 141 respectively
of the NI Act shows that on the other elements of an offence under
Section 138 being satisfied, the burden is on the Board of Directors
or the officers in charge of the affairs of the company/partners of a
firm to show that they were not liable to be convicted. The
existence of any special circumstance that makes them not liable is
something that is peculiarly within their knowledge and it is for
them to establish at the trial to show that at the relevant time they
were not in charge of the affairs of the company or the firm.

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c.) Needless to say, the final judgment and order would depend on
the evidence adduced. Criminal liability is attracted only on those,
who at the time of commission of the offence, were in charge of
and were responsible for the conduct of the business of the firm.
But vicarious criminal liability can be inferred against the partners
of a firm when it is specifically averred in the complaint about the
status of the partners ‘qua’ the firm. This would make them liable
to face the prosecution but it does not lead to automatic conviction.
Hence, they are not adversely prejudiced if they are eventually
found to be not guilty, as a necessary consequence thereof would
be acquittal.

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d.) If any Director wants the process to be quashed by filing a
petition under Section 482 of the Code on the ground that only a
bald averment is made in the complaint and that he/she is really
not concerned with the issuance of the cheque, he/she must in
order to persuade the High Court to quash the process either
furnish some sterling incontrovertible material or acceptable
circumstances to substantiate his/her contention. He/she must
make out a case that making him/her stand the trial would be an
abuse of process of Court.”

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8.Learned advocate at this stage is not in a position to
controvert findings of fact recorded by the Revisional Court based
on the material before it. In the absence of some sterling
incontrovertible material or acceptable circumstances to
substantiate his contention that petitioner was not in charge or
responsible for day today activities, at the material time or
anything shown that the findings recorded by the learned Sessions
Judge are perverse, no interference under Article 227 of the
Constitution of India is called for.

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Tauseef Farooqui 22-WP.1986.2017 corrected.odt

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9.In that view of the matter, there is no merit in the
Petitions, therefore, Petitions are disposed of.

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(AMIT BORKAR, J.)

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(The order is modified as per order dated 22nd November, 2022. The corrections in the
paragraph no.9 of the order are shown in italics)

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Dr. Sailendra Narain v. the State of Maharashtra and Anr.

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Dr. Sailendra Narain v. the State of Maharashtra and Anr.

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