Allowed

Neeta Nilesh Shah and Anr. v. State of Punjab and Ors.

Punjab & Haryana HC4 Dec 2012CRM-M/15573/2011

Case brief

AI extract

What is this about?

The High Court of Punjab and Haryana quashed criminal proceedings under Section 138 NI Act against petitioners who were directors. The court held that the complaint failed to specifically aver how the petitioners were responsible for the company's business, relying on Supreme Court precedents requiring such specificity for vicarious liability.

What did the court decide?

The complaint and summoning order along with consequential proceedings against the petitioners are quashed.

Neeta Nilesh Shah and Anr. Vs State of Punjab and… — Cheque Dishonour | Punjab & Haryana HC (2012)

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Crl.Misc.No.M-15573 of 2011 (O&M).

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In the High Court of Punjab and Haryana at Chandigarh.

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Crl.Misc.No.M-15573 of 2011 (O&M). Date of Decision:- December 04 , 2012

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Neeta Nilesh Shah and another

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Petitioners.

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Versus

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State of Punjab and others

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Respondents.

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CORAM : HON’BLE MR.JUSTICE NARESH KUMAR SANGHI.

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Present: - Mr.B.S.Sra, Advocate, for the petitioners.

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Mr. Pardeep Rajput, Advocate, for respondent No.2.

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NARESH KUMAR SANGHI,J.

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The present petition has been filed by Neeta Nilesh Shah and Nilesh Yashwant Shah for quashing of Criminal Complaint No. 2897 dated 18.09.2010, under Section 138 of the Negotiable Instruments Act, 1881, titled as “Dinesh Anand Vs. M/s. Vee India Retail Private Limited and others”, (Annexure P-4) pending adjudication before the learned Judicial Magistrate Ist Class, Amritsar, the summoning order dated 19.10.2010 (Annexure P-6) and all

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Crl.Misc.No.M-15573 of 2011 (O&M).

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the consequential proceedings arising therefrom.

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Brief facts of the case are that respondentcomplainant Dinesh Anand filed complaint (Annexure P-4) under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as “the Act”) against six persons wherein the petitioners were arrayed as respondents No. 4 and 5 respectively. The respondent-complainant alleged that M/s. Vee India Retail Private Limited, Mumbai, was carrying on business of retail outlets of multi-branded products. The petitioners were the Directors, whereas Darmesh L. Soni and Sri Chand Talreju were the Authorized signatory of M/s. Vee India Retail Private Limited. While O.P.Gupta, was the Chief Executive Officer of M/s. Vee India Retail Private Limited. Being the authorized persons, Darmesh L. Soni and Sri Chand Talreju issued cheque No. 028858 dated 30.03.2010 for a sum of `90,000/- in favour of the respondent-complainant. It was averred in the complaint that Darmesh L. Soni, Sri Chand Talreju, Neeta Nilesh Shah, Nilesh Yashwant Shah and O.P.Gupta i.e. Respondent Nos. 2 to 6 in the complaint were in-charge of and actively managing and controlling all the affairs and day to day activities of M/s. Vee India Retail Private Limited. The

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Crl.Misc.No.M-15573 of 2011 (O&M). 3

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cheque so issued by M/s. Vee India Retail Private Limited in favour of respondent-complainant bounced on account of insufficient funds. The respondent-complainant after completing the formalities filed the criminal complaint (Annexure P-4) before the learned Area Judicial Magistrate, Amritsar, and after recording preliminary evidence, the summoning order (Annexure P-6) was passed. The above said complaint (Annexure P-4), the summoning order (Annexure P-6) and the consequential proceedings emanating therefrom have been challenged before this court by petitioners Neeta Nilesh Shah and Nilesh Yashwant Shah mainly on the premise that no specific averments have been made in the complaint that they are responsible for the day to day affairs of the company.

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Learned counsel for the petitioners submitted that the petitioners had resigned from M/s. Vee India Retail Private Limited and their resignations were accepted by the Registrar of the Companies with effect from 20.08.2010 vide Form No. 32, a copy of which has been attached with the petition. He further submitted that the petitioners were merely nominal Directors of M/s. Vee India Retail Private Limited and had never been responsible for the conduct of

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Crl.Misc.No.M-15573 of 2011 (O&M). 4

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business of the said company. He further submitted that the impugned cheque was issued under the signatures of Darmesh L. Soni and Sri Chand Talreju and this fact fortifies the stand of the petitioners that they were not taking part in day to day affairs of M/s. Vee India Retail Private Limited. He further submitted that though, the respondent-complainant had averred that all the persons arrayed as respondents in the complaint were in-charge and actively managing and controlling all the day to day affairs of M/s. Vee India Retail Private Limited, yet, the respondent-complainant failed to specify in what manner, the petitioners were responsible and in-charge for the day to day affairs of the company. He also submitted that mere allegation that a particular person is the Director of the company, is not sufficient for his prosecution unless the complainant specifically describes in his complaint as to in what manner the Director arrayed as an accused is responsible.

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To buttress his submissions, reliance has been

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placed on:

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(i) Anita Malhotra Versus Apparel Export Promotion Council and another, (2012) I

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Crl.Misc.No.M-15573 of 2011 (O&M).

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Supreme Court Cases 520;

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(ii) Saroj Kumar Poddar Versus State (NCT of Delhi) & Anr., 2007(1) R.C.R.(Criminal) 741;

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(iii) N.K.Wahi Versus Shekhar Singh and others, 2007(2) R.C.R.(Criminal) 266; and

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(iv) Pepsico India Holdings Private Limited Versus Food Inspector and another, (2011) 1 Supreme Court Cases 176.

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On the other hand, learned counsel for the respondent-complainant had submitted that it was specifically averred in the complaint that the petitionersaccused were responsible for the day to day affairs of M/s. Vee India Retail Private Limited and as such the learned trial court had rightly passed the summoning order for their prosecution along with other co-accused.

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Heard.

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It is conceded position that the impugned cheque

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was signed by Darmesh L. Soni and Sri Chand Talreju, the authorized signatories of M/s. Vee India Retail Private Limited. Shri O.P.Gupta was the Chief Executive Officer and

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Crl.Misc.No.M-15573 of 2011 (O&M). 6

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authorized signatory of M/s. Vee India Retail Private Limited. Except the averments that all the accused were incharge and actively managing and controlling the day to day affairs of M/s. Vee India Retail Private Limited, no specific instance has been mentioned as to how and in what manner the petitioners were responsible for the affairs of the company being the Directors.

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In the matter of Anita Malhotra's case (supra),

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the Hon'ble Supreme Court held as under:-

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“ This court has repeatedly held that in case of a Director, the complaint should specifically spell out how and in what manner the Director was in charge of or was responsible to the accused company for conduct of its business and mere bald statement that he or she was in charge of and was responsible to the company for conduct of its business is not sufficient. (vide National Small Industries Corpn. Ltd. V. Harmeet Singh Paintal. ) In the case in hand, particularly, in para 4 of the complaint, except the mere bald and cursory statement with regard to the appellant, the complainant has not specified her role in the day-to-day affairs of the company. We have verified the averments as regards to the same and we agree with the contention of Mr. Akhil Sibal that except reproduction of the statutory requirements the complainant has not

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Crl.Misc.No.M-15573 of 2011 (O&M).

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specified or elaborated the role of the appellant in the day-to-day affairs of the Company. On this ground also, the appellant is entitled to succeed.”

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In Saroj Kumar Poddar's case (supra), the Hon'ble Supreme Court held as under:-

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“ A person would be vicariously liable for commission of an offence on the part of a Company only in the event the conditions precedent laid down therefor in Section 141 of the Act stand satisfied. For the aforementioned purpose, a strict construction would be necessary.

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The purported averments which have been made in the complaint petitions so as to make the appellant vicariously liable for the offence committed by the company read as under:-

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“That the accused No.1 is a public limited company incorporated and registered under the Companies Act, 1956, and the accused 2 to 8 are/were its Directors at the relevant time and the said company is managed by the Board of Directors and they are responsible for the incharge of the conduct and business of the company-Accused No.1. However, the cheques referred to in the complaint have been signed by the Accused No.3 & 8. i.e. Shri K.K.Pilania and Shri N.K.Munjal for and on behalf of Accused Company No.1.”

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Crl.Misc.No.M-15573 of 2011 (O&M).

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Apart from the company and the appellant, as noticed hereinbefore, the Managing Director and all other Directors were also made accused. The appellant did not issue any cheque. He, as noticed hereinbefore, had resigned from the Directorship of the Company. It may be true that as to exactly on what date the said resignation was accepted by the company is not known, but, even otherwise, there is no averment in the complaint petitions as to how and in what manner the appellant was responsible for the conduct of the business of the Company or otherwise responsible to it in regard to its functioning. He had not issued any cheque. How he is responsible for dishonour of the cheque has not been stated. The allegations made in paragraph 3, thus, in our opinion do not satisfy the requirements of Section 141 of the Act.

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Our attention, however, has been drawn to the averments made in paragraphs 7 and 10 of the complaint petition, but on a perusal thereof, it would appear that therein merely allegations have been made that the cheques in question were presented before the bank and they have been dishonoured. Allegations to satisfy the requirements of Section 138 of the Act might have been made in the complaint petition but the same principally relate to the purported offence made by the Company. With a view to make a Director

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Crl.Misc.No.M-15573 of 2011 (O&M).

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of a company vicariously liable for the acts of the company, it was obligatory on the part of the complainant to make specific allegations as are required in law.”

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In N.K.Wahi's case (Supra), the Hon'ble Supreme Court held as under:-

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“ There should be clear and unambiguous allegation as to how the Directors are incharge and responsible for the conduct of the business of the company”

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In Pepsico India Holdings Private Limited's case (Supra), the Hon'ble Supreme Court held as under:-

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“In a complaint against the company and its Directors, the complainant has to indicate in the complaint itself as to whether the Directors concerned were either incharge of or responsible to the Company for its day-to-day management, or whether they were responsible to the Company for the conduct of its business. A mere bald statement that a person was a Director of the Company against which certain allegations had been made is not sufficient to make such Director liable in the absence of any specific allegations regarding his role in the management of the Company. Having considered the matter in its totality and also having regard to the fact that a manager had been nominated under Section 17 (2) of 1954 Act to be a person in charge of and responsible to the Company for the conduct of its business, the appeals are allowed.

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Crl.Misc.No.M-15573 of 2011 (O&M). 10

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In view of the above facts and the law laid down by the Hon'ble Supreme Court, this court has no other option but to hold that the allegations levelled in the complaint (Annexure P-4) qua the petitioners even if taken to be correct in their entireties, do not disclose commission of any offence as against the petitioners. Consequentially, the present petition is allowed and the complaint (Annexure P- 4), the summoning order (Annexure P-6), as well as the consequential proceedings emanating thereform qua the petitioners, Neeta Nilesh Shah and Nilesh Yashwant Shah, are hereby quashed.

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(NARESH KUMAR SANGHI) JUDGE

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December 04 , 2012. Anoop

Neeta Nilesh Shah and Anr. v. State of Punjab and Ors.

Case brief

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Neeta Nilesh Shah and Anr. v. State of Punjab and Ors.

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