Shri Dattatraya Narayan Ghandge Vs Vinir Engineering Private Limited

¶1

1 - NC: 2026:KHC:13543 CRL.P No. 883 of 2018

¶2

HC-KAR

¶3

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

¶4

DATED THIS THE 5^TH DAY OF MARCH, 2026

¶5

BEFORE

¶6

THE HON'BLE MR. JUSTICE R. NATARAJ CRIMINAL PETITION NO. 883 OF 2018

¶7

BETWEEN:

¶8

SHRI DATTATRAYA NARAYAN GHANDGE, AGE - 65 YEARS, OCCUPATION-SERVICE, DIRECTOR ANAND TEKNOW AIDS ENGINEERING LIMITED, R/A. FLAT NO.5-B, UJWAL APARTMENT, HINGANE (KHURD), VITTHALWADI, PUNE - 411 030.

¶9

Digitally signed by SUMA Location: HIGH COURT OF KARNATAKA

¶10

MRS. RAGINI RAKESH RANJAN AGE - 45 YEARS, OCCUPATION - SERVICE DIRECTOR ANAND TEKNOW AIDS ENGINEERING LIMITED, R/A KUNAL ICON, ROW HOUSE 21, PIMPLE SAUDAGAR, PUNE - 411027.

¶11

SHRI. ANIRUDDHA JOSHI, AGE - 52 YEARS, OCCUPATION-SERVICE, SENIOR VICE PRESIDENT - PROJECTS, ANAND TEKNOW AIDS ENGINEERING LIMITED, R/A. C/O L T PATIL, 519, DATTAWADI, NEAR

¶12

2 -

¶13

NC: 2026:KHC:13543 CRL.P No. 883 of 2018

¶14

HC-KAR

¶15

CORPORATION SCHOOL, PUNE - 411030.

¶16

SHRI. SHAILESH KISHOR TIWARY, AGE - 39 YEARS, OCCUPATION - SERVICE, GENERAL MANAGER-FINANCE, HAVING OFFICE AT KUNAL PURAM, G BUILDING, 2^ND FLOOR, OPPOSITE ATLAS COPCO(I) LIMITED, MUMBAI-PUNE ROAD, DAPODI, PUNE - 411 012.

¶17

…PETITIONERS

¶18

(BY SRI. SUSHIL NIMBKAR, ADVOCATE)

¶19

AND:

¶20

VINIR ENGINEERING PRIVATE LIMITED, A COMPANY REGISTERED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956, HAVING ITS OFFICE AT 102-104, BOMMASANDRA INDUSTRIAL AREA, HOSUR ROAD, BANGALORE - 560099.

¶21

…RESPONDENT

¶22

(BY SRI. MAHESH ARKALGUD SRIKANTH, ADVOCATE)

¶23

THIS CRL.P FILED UNDER SECTION 482 CR.P.C PRAYING TO QUASH THE COMPLAINT IN C.C.NO.2027/2017 PREFERRED BY THE RESPONDENT AGAINST THE PETITIONERS AND QUASH THE ORDER DATED 24.04.2017 ISSUING NBW AGAINST THE PETITIONERS IN THE PROCEEDINGS IN C.C.NO.2027/2017 FILED IN THE COURT OF THE CHIEF JUDICIAL MAGISTRATE RURAL COURT, BENGALURU, BENGALURU RURAL.

¶24

THIS PETITION, COMING ON FOR DICTATING ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

¶25

3 - NC: 2026:KHC:13543 CRL.P No. 883 of 2018

¶26

HC-KAR

¶27

CORAM: HON'BLE MR. JUSTICE R. NATARAJ

¶28

ORAL ORDER

¶29

The accused Nos.4, 5, 6 and 7 in C.C No.2027/2017 on the file of the Chief Judicial Magistrate Rural Court, Bengluru, Bengaluru Rural, are before this Court seeking to quash the proceedings initiated by the respondent against them under Section 138 of the Negotiable Instruments Act, 1881. They have prayed to quash the order dated 24.04.2017 passed by the Trial Court in so far as it relates to ordering issuance of non-bailable warrant against petitioner Nos.2 to 4 herein.

¶30

The respondent claimed that the accused Nos.2 to 6 had approached it for manufacture and supply of forgings and placed several purchase orders. The complainant had manufactured the same and supplied it to the accused. The respondent claimed that towards discharge of the liability, the accused issued five cheques for a sum of Rs.1,13,10,309/- and assured that they would arrange for the funds in their account so that the cheques would be encashed on presentation. The respondent claimed that the said cheques were dishonored due to insufficient funds in the account, following which, the

¶31

4 -

¶32

NC: 2026:KHC:13543 CRL.P No. 883 of 2018

¶33

HC-KAR

¶34

respondent caused a notice of demand to the accused. However, all the accused failed to pay the amount, which forced the respondent to initiate proceedings for prosecution of the accused for an offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (for short, 'the N.I. Act'). In the private complaint filed by the respondent, the accused No.2 was shown as the Managing Director of the accused No. 1, while the accused Nos.3, 4 and 5 were shown as the Directors of the accused No.1 and accused Nos.6 and 7 were shown as the Senior Vice President - Projects and General Manager - Finance respectively. In the complaint, it was stated as follows:

¶35

"…the 3^rd accused Mr. D. N. Ghandge, Director along with other Accused approached the complainant representing that all accused are the directors of 1^st Accused Anand Teknow Aids Engineering India Ltd. Pune, handling its day to day affairs and also represented that accused No 2 to 7 are responsible for its management and also its day to day affairs. All accused also represented that they are into the business of high performance valves & systems and that they require forgings which should be manufactured by the complainant. …"

¶36

5 - NC: 2026:KHC:13543 CRL.P No. 883 of 2018

¶37

HC-KAR

¶38

Further, it was stated that, "… all the accused 2 to 7 represented that they are actively involved in handling the day to day affairs of the 1^st accused company and are carrying on its business collectively. Accused No. 2 to 7 also represented that they are carrying on the business of the company in various capacities collectively. The 2^nd accused is the Managing Director of the 1^st Accused Company while Accused No.3, 4 and 5 are its directors. The 6^th accused is the person who is directly connected with the affairs of the 1^st accused company as the Sr. Vice President - Projects while 7^th accused is the General Manager - Finance who is also directly connected with the affairs of the 1^st accused company. Hence as all the accused herein are responsible for the day to day affairs of the 1^st accused company and are carrying on its business activities actively and thus they are liable to be prosecuted in the above case" .

¶39

It appears from the cheques, that they were all drawn by the Managing Director of the accused No.1. The Trial Court took cognizance of an offence under Section 138 of the N.I. Act and ordered issuance of hand summons to the accused. Being aggrieved by the same, the petitioners, who

¶40

6 - NC: 2026:KHC:13543 CRL.P No. 883 of 2018

¶41

HC-KAR

¶42

were arraigned as accused Nos.4, 5, 6 and 7 in C.C.

¶43

No.2027/2017 are before this Court.

¶44

The learned counsel for the petitioners/accused Nos.4, 5, 6 and 7 submits that the respondent had made an omnibus statement that all the Directors and the employees of the accused No.1 were responsible for the day-to-day affairs of the Company without clearly disclosing the role and responsibility of each of them in managing the affairs of the accused No.1 - Company. He, therefore, submits that unless there was specific averment as to how the accused Nos.2 to 7 are responsible, the Trial Court committed an error in taking cognizance against the said accused. He also submits that the Trial Court failed to exercise jurisdiction under Section 202 of the Criminal Procedure Code (for short, 'the Cr.P.C') as the accused Nos.4, 5, 6 and 7 were residing outside the jurisdiction of the Court. In support of his contention, he relied upon the judgment of the Hon'ble Apex Court in K.K. Ahuja v. V.K. Vora [2009 LawSuit(SC) 1232] and contended that if the Managing Director of a Company is arraigned as an accused, that would be sufficient. He also contended that for the Directors of a Company to be arraigned as accused, there

¶45

7 -

¶46

NC: 2026:KHC:13543 CRL.P No. 883 of 2018

¶47

HC-KAR

¶48

should be a specific averment as to how such Director is responsible to the Company for the conduct of its business and also whether such Director is in-charge of the business of the Company. He contends that a reading of the entire complaint would show that an omnibus statement is made that the accused Nos.2 to 7 are responsible for the day-to-day affairs and the business of the Company. Thus, he contends that the cognizance of an offence under Section 138 of the N.I. Act taken by the Trial Court in so far as accused Nos.4, 5, 6 and 7 are concerned is liable to be quashed.

¶49

Per contra, the learned counsel for the respondent submitted that the respondent has specifically averred in the complaint that the accused Nos.2 to 7 were responsible for the affairs of the accused No.1 - Company and all of them were involved in the business of the Company. He, therefore, contends that for the purpose of Section 141 of the N.I. Act, this would be sufficient. He also contends that it is for the respondent to establish at the trial as to how the accused Nos.4, 5, 6 and 7 are responsible for the affairs of the Company. He, thus, contends that the order passed by the Trial Court taking cognizance of the offence punishable under

¶50

8 -

¶51

NC: 2026:KHC:13543 CRL.P No. 883 of 2018

¶52

HC-KAR

¶53

Section 138 of the N.I. Act against the accused Nos.4, 5, 6 and 7 is just and proper.

¶54

I have considered the submissions of the learned counsel for the petitioners as well as the learned counsel for the respondent.

¶55

7(i). An offence under Section 138 of the N.I. Act is said to be committed when a cheque drawn by a person on his or its account towards payment or towards discharge of a loan or liability is returned unpaid by the Bank due to insufficient funds in the account and also when such person fails to pay the amount covered under the cheque soon after a notice of demand is received by the drawee of the cheque. When such person is a Company, every person who, at the time the offence was committed, was in charge of, and was responsible to the Company for the conduct of the business of the Company, as well as the Company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Therefore, it was incumbent upon the respondent to not only plead the particulars of the person who was in-charge of and was responsible to the accused No.1 -

¶56

9 - NC: 2026:KHC:13543 CRL.P No. 883 of 2018

¶57

HC-KAR

¶58

Company for the conduct of the business of the Company, but also specifically point out as to how each one of them was responsible to the accused No.1 - Company for the conduct of the business of the Company. The accused No.2 is the Managing Director of the accused No.1-Company who had passed on the cheques to the respondent under his signature. The Hon'ble Apex Court in K.K. Ahuja's case while considering the question as to who can be arraigned as an accused when the drawer of the cheque is a Company, held as follows:

¶59

"14. The words "every person who, at the time of the offence was committed, was in charge of, and was responsible for the conduct of the business of the company" occurs not only in section 141(1) of the Act but in several enactments dealing with offences by companies, to mention a few - Section 278 B of the Income Tax Act, 1961, Section 22C of Minimum Wages Act, 1948, Section 86A of the Employees State Insurance Act, 1948, Section 14A of Employees Provident Fund and Miscellaneous Provisions Act, 1952, Section 29 of Payment of Bonus Act, 1965, Section 40 of The Air (Prevention and Control of Pollution) Act, 1981 and section 47 of Water (Prevention and Control of Pollution) Act, 1974. But neither section 141(1) of the Act, nor the pari materia provisions in other enactments give any indication as to who are the persons responsible to the

¶60

10 -

¶61

NC: 2026:KHC:13543 CRL.P No. 883 of 2018

¶62

HC-KAR

¶63

company, for the conduct of the business of the company. Therefore, we will have to fall back upon the provisions of Companies Act, 1956 which is the law relating to and regulating companies. Section 291 of the said Act provides that subject to the provisions of that Act, the Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do. A company though a legal entity can act only through its Board of Directors. The settled position is that a Managing Director is prima facie in charge of and responsible for the company's business and affairs and can be prosecuted for offences by the company. But insofar as other directors are concerned, they can be prosecuted only if they were in charge of and responsible for the conduct of the company's business. A combined reading of Sections 5 and 291 of Companies Act, 1956 with the definitions in clauses (24), (26), (30), (31), (45) of section 2 of that Act would show that the following persons are considered to be the persons who are responsible to the company for the conduct of the business of the company : -

¶64

(a) the managing director/s;

¶65

(b) the whole-time director/s;

¶66

(c) the manager;

¶67

(d) the secretary;

¶68

(e) any person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act;

¶69

11 -

¶70

NC: 2026:KHC:13543 CRL.P No. 883 of 2018

¶71

HC-KAR

¶72

(f) any person charged by the Board with the responsibility of complying with that provision (and who has given his consent in that behalf to the Board); and

¶73

(g) where any company does not have any of the officers specified in clauses (a) to (c), any director or directors who may be specified by the Board in this behalf or where no director is so specified, all the directors.

¶74

It follows that other employees of the company, cannot be said to be persons who are responsible to the company, for the conduct of the business of the company."

¶75

7(ii). It was further held, " It is evident that a person who can be made vicariously liable under sub-section (1) of Section 141 is a person who is responsible to the company for the conduct of the business of the company and in addition is also in charge of the business of the company. There may be many directors and secretaries who are not in charge of the business of the company at all". The Hon'ble Apex Court referred to its earlier judgment in Katta Sujatha v. Fertiliser and Chemicals Travancore Ltd. [2002 7 SCC 655], where it was held that the words " person in charge of the business of the company" refer to "a person who is in overall control of the day to day business of the company.” It is also pointed out

¶76

12 -

¶77

NC: 2026:KHC:13543 CRL.P No. 883 of 2018

¶78

HC-KAR

¶79

“that a person may be a director and thus belongs to the group of persons making the policy followed by the company, but yet may not be in charge of the business of the company; that a person may be a Manager who is in charge of the business but may not be in overall charge of the business; and that a person may be an officer who may be in charge of only some part of the business.” It was further held “ Therefore, if a person does not meet the first requirement, that is, being a person who is responsible to the company for the conduct of the business of the company, neither the question of his meeting the second requirement (being a person in charge of the business of the company), nor the question of such person being liable under sub-section (1) of section 141 does not arise". It was further held " To put it differently, to be vicariously liable under subsection (1) of Section 141, a person should fulfill the 'legal requirement' of being a person in law (under the statute governing companies) responsible to the company for the conduct of the business of the company and also fulfill the 'factual requirement' of being a person in charge of the business of the company."

¶80

13 -

¶81

NC: 2026:KHC:13543 CRL.P No. 883 of 2018

¶82

HC-KAR

¶83

7(iii). While considering the position of a Managing Director or a Joint Managing Director of a company, it was held by the Hon'ble Apex Court in K.K. Ahuja's case (supra), "… (i) If the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director or Joint Managing Director at the relevant time. This is because the prefix 'Managing' to the word 'Director' makes it clear that they were in charge of and are responsible to the company, for the conduct of the business of the company ".

¶84

7(iv). In so far as a director is concerned, it was held "(ii) In the case of a director or an officer of the company who signed the cheque on behalf of the company, there is no need to make a specific averment that he was in charge of and was responsible to the company, for the conduct of the business of the company or make any specific allegation about consent, connivance or negligence. The very fact that the dishonoured cheque was signed by him on behalf of the company, would

¶85

14 -

¶86

NC: 2026:KHC:13543 CRL.P No. 883 of 2018

¶87

HC-KAR

¶88

give rise to responsibility under sub-section (2) of Section 141 . It was further held “ (iii). In the case of a Director, Secretary or Manager (as defined in Sec. 2(24) of the Companies Act) or a person referred to in clauses (e) and (f) of section 5 of Companies Act, an averment in the complaint that he was in charge of, and was responsible to the company, for the conduct of the business of the company is necessary to bring the case under Section 141(1). No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable under section 141(2) by making necessary averments relating to consent and connivance or negligence, in the complaint, to bring the matter under that sub-section."

¶89

The Hon'ble Apex Court in the case of National Small Industries Corp. Ltd. v. Harmeet Singh Paintal and Another [2010 Supp AIR (SC) 569] , while referring to its judgment in K.K. Ahuja's case referred supra, held as follows:

¶90

"(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening

¶91

15 -

¶92

NC: 2026:KHC:13543 CRL.P No. 883 of 2018

¶93

HC-KAR

¶94

the criminal liability, there is no presumption that every Director knows about the transaction.

¶95

(ii) Section 141 does not make all Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.

¶96

(iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make accused therein vicariously liable for offence committed by company along with averments in the petition containing that accused were in-charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.

¶97

(iv) Vicarious liability on the part of a person must be pleaded and proved and not interfered.

¶98

(v) If accused is Managing Director or Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.

¶99

16 - NC: 2026:KHC:13543 CRL.P No. 883 of 2018

¶100

HC-KAR

¶101

(vi) If accused is a Director or an Officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint.

¶102

(vii) The person sought to be made liable should be in-charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases."

¶103

When this Court called upon the learned counsel for

¶104

the petitioners to disclose as to who is responsible for the affairs of the accused No.1 - Company and who conducts the businesses of the Company, the learned counsel submitted that it is the accused No.2, who conducts the business of the accused No.1 - Company and is overall in charge of the affairs of the Company.

¶105

In the background of the above exposition of law, if the private complaint is perused, the accused Nos.4 and 5 are arraigned as accused on the ground that they are Directors of the accused No.1 while accused Nos. 6 and 7 are arraigned as accused in view of their position in the Company, namely, Senior Vice President - Projects and General Manager - Finance.

¶106

17 -

¶107

NC: 2026:KHC:13543 CRL.P No. 883 of 2018

¶108

HC-KAR

¶109

There is no averment as to how the accused Nos.4, 5, 6 and 7 are responsible for the business of the accused No.1 - Company and there is no mention as to how they are vicariously liable for the acts of the accused No.1. The accused No.2 is the Managing Director of the accused No.1, who has drawn the cheques in favour of the respondent and therefore, it was the accused No.2 alone who was to be prosecuted for an offence punishable under Section 138 of the N.I. Act. It is however made clear that if whatever reason the accused No.2 cannot be prosecuted, then the person in-charge and responsible for the affairs of the Company at that point of time may be arraigned as an accused.

¶110

In that view of the matter, this petition is allowed. The order dated 08.03.2017 passed by the Chief Judicial Magistrate Rural Court, Bengaluru, Bengaluru Rural, in so far as it relates to taking cognizance for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881, against the petitioners / accused Nos.4, 5, 6 and 7 in C.C. No.2027/2017, is quashed. The order dated 24.04.2017 passed by the Trial Court in so far as it relates to issuance of non-bailable warrant against petitioner Nos.2 to 4 / accused Nos.5 to 7 in C.C. No.2027/2017, is quashed.

¶111