Dismissed

Suresh Kumar Herralal v. M/S.Larsen and Toubro Limited

Madras HC20 Jun 2022CRL OP/6472/2020

Case brief

AI extract

What is this about?

Petitioner challenged proceedings under Section 138 of NI Act arguing he was merely a sponsor director with no liability. Court held that as trial commenced and facts were disputed, quash petition could not be entertained under Section 482 CrPC.

What did the court decide?

Petition for quashing of proceedings under Section 138 of the Negotiable Instruments Act dismissed; connected miscellaneous petition closed.

Suresh Kumar Herralal Vs M/S.Larsen and Toubro Limited — Cheque Dishonour | Madras HC (2022)

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Crl.O.P.No. 6472 of 2020

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED : 20.06.2022

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CORAM

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THE HONOURABLE Mr.JUSTICE G.K.ILANTHIRAIYAN

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Crl.O.P.No. 6472 of 2020 and Crl.M.P.No.3572 of 2020

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Mr.Suresh Kumar Herralal, Director of Hallmark Living Space Pvt. Ltd., Having office at No.43, Old No.62/3, United Plaza, Usman Road, T.Nagar, Chennai - 600 017.

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... Petitioner

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M/s Larsen and Toubro LImited, Rep. by its Authorized Representative, Mr.V.K.Natarajan, Mount Poonamallee Road, Manapakkam, Chennai - 600 017.

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... Respondent

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PRAYER: Criminal Original Petitions filed under Section 482 of Cr.P.C, praying to call for the entire records relating to the complaint in C.C.No.6574 of 2017 on the file of the XIII-Metropolitan Magistrate and now pending with Fast Track Court - I, Allikullam, Egmore, Chennai.

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https://www.mhc.tn.gov.in/judis

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Crl.O.P.No. 6472 of 2020

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For Petitioner : Mr.R.Chandramohan For Respondent : Mr. Vaibhav R.Venkatesh for M/s.Nithyaesh and Vaibhav

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ORDER

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This petition has been filed to quash the proceedings in C.C.No.6571 of 2017 on the file of the XIII Metropolitan Magistrate and now pending before the Fast Track Court - I, Allikullam, Egmore, Chennai, for the offence punishable under Section 138 of the Negotiable Instrument Act.

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2.1. The case of the prosecution is that the respondent / Company

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lodged a complaint for the offence punishable under Section 138 of Negotiable Instrument Act, alleging that the petitioner had entered into a contract with the respondent / Company on 06.01.2014 for construction of Residential Project with the 1st accused/Company, represented, by its other Directors. The said contract was entered based on their representation of the good faith and also undertaking that the payments would be effected as per the contract to the satisfaction of the complainant / respondent. However, in spite of prompt service rendered to the full satisfaction of the accused 2/9

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https://www.mhc.tn.gov.in/judis

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Crl.O.P.No. 6472 of 2020

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persons, the payments were not made in accordance with the contract. Therefore, in order to clear the outstanding payments to the tune of Rs.23,15,52,800/- (Rupees Twently Three Crores Fifteen Lakhs Fifty Two Thousand and Eight Hundred only), the accused issued a cheque to the tune of Rs.5,50,00,000/- (Rupees Five Crores and Fifty Lakhs only) towards partial payment of dues, as per the instruction of the accused persons. The respondent deposited the said cheque and the same was returned by the Bank as dishonoured with endorsement "Funds Insufficient".

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2.2. Thereafter, the respondent had issued a statutory notice on 10.07.2017 and the same was duly delivered to all the accused persons on 12.07.2017. On receipt of the same, the accused persons failed to pay the cheque amount and also did not bother to reply to the statutory notice. Therefore, the respondent / Company lodged the complaint.

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The learned counsel for the petitioner submitted that there are totally six accused in this case, in which, petitioner is arrayed a A5 and he raised three grounds as follows:

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3/9

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https://www.mhc.tn.gov.in/judis

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Crl.O.P.No. 6472 of 2020

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(i) The petitioner is only a Sponsor Director of the

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Company and as such, he is not liable to be punished for issuance of the cheque on behalf of the 1st Accused.

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(ii) The petitioner was in-charge of the day-to-day affairs of the Company, and there is absolutely no specific pleadings to that effect, and the Company itself filed complaint under Section 141 of the Negotiable Instrument Act, which stipulates that at the time of the commission of the offence, the accused was in charge and he was responsible to the Company for the conduct of the business of the company. In the present complaint, no such pleadings or averments were made out.

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(iii) As per the Memorandum of Association and Articles of Association of the 1st Accused /company, the petitioner is one of the Sponsor Director and he is no way responsible or liable for the act committed by the 1st Accused/Company.

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https://www.mhc.tn.gov.in/judis

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Crl.O.P.No. 6472 of 2020

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The learned Counsel for the respondent submitted that, already trial

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had commenced and in fact, after questioning of the accused under Section 313 of Cr.P.C, they also examined the defence witnesses before the Trial Court. He further submitted that in the Companies Act, there is no word as "Sponsor Director" and whatever documents produced by the petitioner are of their own documents and it would bind the respondent to prosecute them for the offence under Section 138 r/w 142 of Negotiable Instruments Act.

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On a perusal of the documents produced by the petitioner, such as Memorandum of Association and Articles of Association, it revealed that the petitioner is only a Sponsor Director. Though it is stated that the Sponsors and the Investors shall exercise their respective voting rights and shall cause the Directors nominated by them to exercise their powers and duties in the manner consistent with the Agreement, they never appointed any Director so far. For their convenience, they executed Memorandum of Association and Articles of Association as if they are the Sponsor Directors, whereas on a perusal of the definition for the word ''Director'' under Section 2 (34) of the Companies Act,defines that a 'Director" means the Director

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https://www.mhc.tn.gov.in/judis

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Crl.O.P.No. 6472 of 2020

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appointed by the Board of Directors of a Company.

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That apart, the definition for Key Managerial Personnel under Section 2(51) of Companies Act in relation to the company is as follows;-

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'' (i) the Chief Executive Officer or the

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Managing Director or the Manager; (ii) the Company

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Secretary; (iii) the Whole -time Director; (iv) the Chief Financial Officer''.

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Further, Section 2(60) of the Companies Act defines as follows;-

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"Officer who is in default" and it mentions

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officer such as Whole -time director, KMP, directors, etc., who shall be liable to any penalty or punishment in case of default committed by the Company under the

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Companies Act''.

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Therefore, the petitioner is one of the Sponsor Director, who is responsible for the day-to-day affairs of the 1st accused / Company, since he is also involved in the day to day affairs of the Company.

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https://www.mhc.tn.gov.in/judis

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Crl.O.P.No. 6472 of 2020

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On a perusal of the complaint in Paragraph 6 and 7, it revealed that the 2nd to 6th accused are wholly responsible for the management of the affairs for the 1st accused /Company and they are also managing the day-today affairs of the 1st accused/ Company and further they are managing and administering the 1st accused /Company. Therefore, they are liable to be punished under Sections 138 and 142 of the Negotiable Instruments Act.

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The 2nd to 6th accused being the Directors of the 1st accused/ Company, they are vicariously liable for the offences under Section 138 and 142 of the Negotiable Instruments Act. That apart, on a perusal of the records, it revealed that, already trial had commenced in C.C.No.6574 of 2017 before the Trial Court, and in fact, after questioning of accused under Section 313 of Cr.P.C., the defence witnesses were also examined on behalf of the accused persons. At this stage, this Court cannot entertain the quash petition filed under Section 482 of Cr.P.C. That apart, the grounds raised by the petitioner are mixed question of facts and they have to be considered only before the Trial Court during the time of trial.

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https://www.mhc.tn.gov.in/judis

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Crl.O.P.No. 6472 of 2020

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In view of the above discussion, this Court is not inclined to quash the proceedings in C.C.No.6574 of 2017 on the file of the Fast Track Court-I, Allikulam, Egmore, Chennai. Accordingly, the Criminal Original Petition stands dismissed. Consequently, connected miscellaneous petition is closed.

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20.06.2022

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Index:Yes/no

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Speaking Order/Non-Speaking Order nti/ata

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The Fast Track Court - I, Allikullam, Egmore, Chennai.

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The Fast Track Court - I, Allikullam, Egmore, Chennai.

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The Public Prosecutor, Madras High Court.

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https://www.mhc.tn.gov.in/judis

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Crl.O.P.No. 6472 of 2020

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G.K.ILANTHIRAIYAN. J, nti/ata

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Crl.O.P.No. 6472 of 2020

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20.06.2022

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https://www.mhc.tn.gov.in/judis

Suresh Kumar Herralal v. M/S.Larsen and Toubro Limited

Case brief

What is this about?

What did the court decide?

Suresh Kumar Herralal v. M/S.Larsen and Toubro Limited

Case brief

What is this about?

What did the court decide?

What the court decided

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Statutes considered

Parties & counsel

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