Dismissed

M/S Priyanka Gehlot v. M/S Nxtgen Data Center

Karnataka HC13 Jul 2023CRL.P/4551/2019

Case brief

AI extract

What is this about?

The High Court of Karnataka dismissed a criminal petition seeking quashing of NI Act proceedings against a female director. The court held that specific allegations in the complaint demonstrating her active involvement in the transaction and management were sufficient to proceed against her, rejecting her claim of non-involvement due to lack of contrary documentary evidence.

What did the court decide?

The criminal petition was dismissed, and the proceedings against the petitioner were allowed to continue.

M/S Priyanka Gehlot Vs M/S Nxtgen Data Center — Company and Corporate | Karnataka HC (2023)

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1 - NC: 2023:KHC:24267 CRL.P No. 4551 of 2019

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 13^TH DAY OF JULY, 2023

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BEFORE

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THE HON'BLE MR JUSTICE SACHIN SHANKAR MAGADUM CRIMINAL PETITION NO. 4551 OF 2019

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BETWEEN:

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M/S. PRIYANKA GEHLOT, W/O. SH. NAZIS ULLAH KHAN, AGED ABOUT 44 YEARS, DIRECTOR, FRANS GLOBAL INFOTECH PVT. LTD., O/AT: A-77, DDA SHEDS, OKHLA INDUSTRIAL AREA, PHASE-2, NEW DELHI - 110 020.

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…PETITIONER

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(BY SRI. NAVIN GOYAL FOR SMT. CHANDINI. S., ADVOCATE)

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AND:

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M/S. NXTGEN DATA CENTER Digitally signed by LAKSHMINARAYAN & CLOUD TECHNOLOGIES PVT.LTD., N 72, 73, EPIP AREA WHITE FIELD, Location: High Court of Karnataka BENGALURU - 560 066

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REPRESENTED BY ITS ASSISTANT GENERAL MANAGER, SRI. AMIT SAHU.

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…RESPONDENT

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(BY SRI. A. MAHESH CHOWDHARY, ADVOCATE)

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THIS CRL.P IS FILED U/S.482 OF CR.P.C PRAYING TO A). QUASH THE ORDER DATED 02.06.2017 ENTIRE

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2 - NC: 2023:KHC:24267 CRL.P No. 4551 of 2019

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PROCEEDING IN C.C.NO.15267/2017 PASSED BY THE LEARNED XXV ADDITIONAL CHIEF METROPOLITAN MAGISTRATE, BENGALURU NOW PRESENTLY PENDING ON THE XI ADDITIONAL SMALL CAUSE JUDGE AND XXXVI ADDITIONAL CHIEF METROPOLITAN MAGISTRATE AT BENGALURU(SCHH-12) AND ETC.,

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THIS PETITION, COMING ON FOR FURTHER HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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The captioned petition is filed by accused No.3 seeking quashing of proceedings in C.C.No.15267/2017 for the offence punishable under Section 138 of N.I.Act.

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Accused No.3 is before this Court seeking quashing of the proceedings on the sole ground that accused No.3 herein has not issued any purchase order nor signed the impugned cheque which is subject to C.C.No.15267/2017 and she is a homemaker, so she is not concerned with the alleged offence. Therefore, the proceedings are sought to be quashed by invoking the jurisdiction of this Court under Section 482 of Cr.P.C.

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3 - NC: 2023:KHC:24267 CRL.P No. 4551 of 2019

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Heard learned counsel for the petitioner and

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learned counsel for the respondent/complainant. Perused the averments made in the complaint.

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Though it is trite law that offence under Section 138 of N.I.Act can be initiated against the company and its authorized director who has issued a cheque, but there is no bar to proceed against other directors if there are specific allegations in the complaint indicating that the other directors are also in active management and affairs of the company and that the transaction and consequent issuance of cheque was with the authorization of the other directors.

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The Hon'ble Apex Court in the cases of SMS Pharmaceuticals v. Neeta Bhalla, reported in AIR (2005) 3512; S.K.Alagh v. State of Uttar Pradesh (2008) 5 SCC 662; Maharashtra State Electricity Distribution Co.Ltd. v. Datar Switchgear Ltd ., (2010) 10 SCC 479 , and GHCL Employees Stock Option Trust

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NC: 2023:KHC:24267 CRL.P No. 4551 of 2019

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v. India Infoline Limited, reported in (2013) 4 SCC

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505 , observed as under:

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"In the light of the ratio in SMS Pharmaceuticals Ltd. (supra) and later judgments of which a reference has been made what is to be looked into is whether in the complaint, in addition to asserting that the appellants are the Directors of the Company and they are in-charge of and responsible to the Company for the conduct of the business of the Company and if statutory compliance of Section 141 of the NI Act has been made it may not open for the High Court to interfere under Section 482 CrPC unless it comes across some unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abused of process of Court. Despite the presence of basic averment, it may come to a conclusion that no case is made out against the particular Director for which there could be various reasons."

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6. Let me examine the averments made in the

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complaint at paragraphs No.3 and 4, which read as under:

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"3. The Complainant states that, Accused No.1 is carrying out and engaged in the business of System integration for Wireless; Optical & Fixed Campuses, LAN & WAN Networks in the name and style of Frans Global Infotech Pvt. Ltd. in the mentioned address and that the Accused No.2, Nazish Ullah Khan is the Director of Accused No.1 and Priyanka Gehlot Accused No.3 is the Director of the Accused No.1. Both the Accused No.2 and 3 are responsible for the entire business and management and day to day affairs of the Accused No.1.

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NC: 2023:KHC:24267 CRL.P No. 4551 of 2019

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4. The Complainant states that Accused No.2 and 3 had approached them with a request to provide materials required to complete a project undertaken by the Accused No.1 company in New Delhi. The said request was followed by an purchase order no. No. FGIPL/2K14-15/12 dated 23.03.2015 for purchase of 5 items namely:

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1) Power Edge(TM) M1000e

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2) Power Edge M630 Blade Server

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3) Equal Logic PS6210X

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4) Emerson-P AC3.5

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5) SC-26-AC"

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On reading paragraphs No.3 and 4, there are specific allegations indicating that accused Nos.2 and 3 are managing the business and management of the company. At paragraph No.4 of the complaint, there are specific allegations indicating that accused No.2 and accused No.3/present petitioner made a request to provide materials required to complete the project undertaken by accused No.1's company at New Delhi. There is further reference to the purchase order.

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The Apex Court in the above cited judgments has clearly held that this Court may quash the proceedings against other Directors provided the accused has

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NC: 2023:KHC:24267 CRL.P No. 4551 of 2019

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substantiated by producing unimpeachable and

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incontrovertible evidence beyond suspicion and doubt. In the present case on hand, nothing worth is placed on record which would warrant interference in the light of principles laid down by the Apex Court in the above-cited judgments.

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If these significant details are looked into, then I am of the view that the petitioner is not entitled to seek quashing of the proceedings. Though petitioner claims that she has nothing to do with the day-to-day affairs of the company, not a single piece of document is produced to demonstrate that she is not part to day-to-day affairs of the company, and therefore, she is not responsible and cannot be prosecuted for the offence punishable under Section 138 of N.I.Act. The amount involved in the cheque is Rs.40,00,000/- and since there are specific allegations that the present petitioner, along with her husband/accused No.2 approached the complainant with a request to provide materials, there is prima facie material

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