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Case Number

Criminal Revision Case Nos. 267 to 271 of 1999

Attorney(S)

For the Appellant: D. Manohar, P. Kamalakar, Advocates.
For the Respondent: R2 & R2, B. Nalini Kumar, R3, Public Prosecutor.

Judges

K.B Siddappa, J.

Acts

section 610 (3) of the companies act
section 504, r/w section 34, i. P. C.

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Smart Summary

Concise Analytical Summary of the Opinion

Factual and Procedural Background

These five connected criminal revision petitions (Cr. Rev. Nos. 267–271 of 1999) challenge orders passed in various Criminal Miscellaneous Petitions (MPs) on the file of the XV Metropolitan Magistrate, Hyderabad. The petitions arise from complaints filed under section 138 of the Negotiable Instruments Act concerning several cheques issued by a company referred to as A‑1 and allegedly signed or issued by its director(s). The petitioners in these revisions are accused numbers 2 to 6.

The opinion records, for each revision, the dates of the cheques, the bank endorsements (commonly "payment stopped by drawer" or similar), the dates on which the complainant received the bank memo, and the dates on which the complainant served the statutory notice under section 138 of the Negotiable Instruments Act. The petitioners sought discharge on the ground that accused nos. 2–6 had ceased to be directors of A‑1 before the commission of the alleged offences (specific resignation effective dates are set out in the opinion). The trial magistrate dismissed the discharge petitions after considering provisions of Chapter XX (summons trial provisions) and the matter is before the revisional court by way of these connected revisions.

Legal Issues Presented

Whether accused nos. 2–6 are entitled to discharge at the stage of summons proceedings on the ground that they had ceased to be directors of the company before the alleged cheque dishonour (i.e., whether the resignation dates establish absence of culpability as a matter for discharge).
Whether a magistrate conducting a summons-case (Chapter XX) has jurisdiction or power to drop or discharge proceedings in the absence of an express statutory provision permitting discharge, particularly where the complaint does or does not disclose a prima facie case against the accused.
What evidentiary role, at the discharge stage, should be afforded to certified company records (such as Form No. 32) produced under section 610(3) of the Companies Act — specifically whether such documents can be relied upon by the magistrate at the pre‑trial/discharge stage without a full trial and cross‑examination.

Arguments of the Parties

Petitioners' (Accused nos. 2–6) Arguments

The magistrate erred in dismissing the discharge petitions on the ground that no specific provision exists under summons proceedings to order discharge.
Reliance placed on the Supreme Court decision in K. M. Mathew v. State of Kerala, AIR 1992 SC 2206 (1992 Cri LJ 3779), which, petitioners say, recognizes the magistrate's power in summons cases to drop proceedings where the complaint does not disclose a prima facie case against the accused.
By virtue of section 610(3) of the Companies Act and the contents of Form No. 32 (and similar registered company records), the petitioners argued that the magistrate could, upon inspection of those certified documents, satisfy himself that the resignations occurred before the alleged offences and therefore order discharge.

Respondents' (Complainant's) Arguments

The Supreme Court authority relied upon (K. M. Mathew) is distinguishable on facts because in that case the complaint contained no allegation implicating the accused (chief editor); whereas, in the present matters the complaint contains specific allegations against accused nos. 2–6 that they were directors at the time the cheques were issued.
The factual question whether the petitioners were directors at the relevant time has to be established on the record and can only be properly adjudicated upon in a trial where Form No. 32 and other company records are produced, admitted, and subjected to cross‑examination. Accordingly, discharge at this stage would be premature.
Reliance was placed on the Bombay High Court decision in Rajan Kinnerkar v. Eric Cordeiro, (1994) 80 Com Cas 487, where it was held that the fact of a person no longer being a director/employee must be substantiated from the record and that a petition for discharge was premature if this could only be determined at trial.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
K. M. Mathew v. State of Kerala, AIR 1992 SC 2206 (1992 Cri LJ 3779)	The principle that in summons‑trial proceedings a magistrate may drop or rescind process and discharge an accused where the complaint on its face does not disclose any offence against the accused; absence of an explicit statutory provision does not preclude such exercise of judicial discretion.	The petitioners relied on this decision to argue for discharge. The court distinguished it on the facts (noting that in Mathew there was no allegation against the chief editor), concluding that Mathew did not assist the petitioners because in the present cases the complaint does contain specific allegations against accused nos. 2–6.
Rajan Kinnerkar v. Eric Cordeiro, (1994) 80 Com Cas 487 (Bombay High Court)	The principle that a person’s cessation as an employee or director must be substantiated on record; if the fact is to be established from documentary or other evidence, it is a matter for trial and a discharge petition may be premature.	The respondents relied upon this authority; the court accepted the respondents' contention in line with this reasoning and held that resignation and director‑status issues should be tested at trial rather than at the discharge stage.

Court's Reasoning and Analysis

The court proceeded by comparing the present facts with the authorities cited and by examining the evidentiary posture at the summons/discharge stage:

The court observed that the Supreme Court in K. M. Mathew endorsed the magistrate's power to drop proceedings in a summons case where the complaint on its face discloses no offence against the accused. However, that decision turned on the absence of any allegation against the accused in the complaint itself.
In the present matters, the court found that the complaint does contain specific allegations against accused nos. 2–6 that they were directors at the time the cheques were issued. That factual averment meant that a prima facie case existed against them at the summons stage, unlike in Mathew.
Regarding the petitioners' reliance on section 610(3) of the Companies Act and Form No. 32 (certified company records), the court acknowledged that such certified records are admissible in evidence as equal in validity with the original documents. Nevertheless, admissibility does not dispense with the need to prove such documents "according to law."
The court emphasized that the resignations and related proceedings relied upon by the petitioners originated in Madhya Pradesh and that the complainant had no prior knowledge of these facts. Therefore, the complainant must be afforded an opportunity to verify those documents and to cross‑examine witnesses when such documents are produced — an exercise that cannot properly be conducted at the discharge stage.
While conceding that at the end of a full trial the accused might in all probability not be held guilty, the court held that the proper forum to determine and test the documentary proof of resignation and the accuseds' status is the trial itself. Consequently, the petitioners were not entitled to discharge at the summons/discharge stage.

Holding and Implications

HOLDING: The revision petitions are dismissed. The magistrate's orders dismissing the discharge petitions are upheld and the magistrate is directed to expedite the hearing of the criminal cases according to law.

Implications:

Direct effect on the parties: Accused nos. 2–6 are not discharged at the pre‑trial/discharge stage and must face trial on the complaints filed under section 138 of the Negotiable Instruments Act. The factual question whether they had ceased to be directors at the time of the alleged offences must be established and tested during trial through production, proof and opportunity for cross‑examination of the relevant company records.
Broader legal implication: The court did not purport to lay down any new general rule beyond applying existing principles; it distinguished the Supreme Court authority relied on by petitioners on the facts and followed the established approach that contested documentary and factual issues about corporate records and resignation must ordinarily be tested at trial. The opinion does not state that it sets a new precedent beyond its factual application.

Disposition: Petitions dismissed. Magistrate directed to expedite proceedings.

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Bharat Kumar Modi And Others Petitioners/A-2 To A-6 v. M/S. Pennar Peterson Securities Ltd. And Others

(1) These revision cases are connected. Hence, they are disposed of by a common order.

(2) Criminal revision case no. 267 of 1999 is filed against the order passed in crl. M. P. No. 3567 of 1998 in c. C. No. 506 of 1997 on the file of xv metropolitan magistrate, hyderabad.

(3) Criminal revision case no. 268 of 1999 is filed against the order passed in criminal m. P. No. 3829 of 1998 in c. C. No. 18 of 1998 on the file of the same magistrate.

(4) Criminal revision case no. 269 of 1999 is filed against the order passed in criminal m. P. No. 383 of 1998 in cc no. 19 of 1998 on the file of the same magistrate.

(5) Criminal revision case no. 270 of 1999 is filed against the order passed in criminal m. P. No. 3563 of 1998 in c. C. No. 189 of 1998 on the file of the same magistrate.

(6) Criminal revision case no. 271 of 1999 is filed against the order passed in criminal m. P. No. 3566 of 1998 in cc no. 491 of 1998 on the file of the same magistrate.

(7) In all these revision case the petitioners are a2 to a6.

(8) The complaint is filed under section 138 of the negotiable instruments act when the cheques issued by the director of the company were dishonoured.

(9) In criminal r. C. No. 267/99 two cheques were issued by a1 company and they are dated 1 - 4 - 1997 and 1 - 5 - 1997 and when they were presented to the bank, the bank made an endorsement on 20 - 5 - 1997 'payment stopped by drawer'. The complainant issued notice as required under section 138 of the negotiable instruments act on 20 - 6 - 1997.

(10) In criminal revision case no. 268 of 1999 two cheques were issued by a1 - company dated 1 - 9 - 1997 and 1 - 10 - 1997. The bank made an endorsement on 13 - 10 - 1997 'payment stopped by drawer' and this was communicated to the complainant on 20 - 10 - 1997. Thereupon the complainant issued notice as required under section 138 of the act on 24 - 10 - 1997.

(11) In criminal revision case no. 269/99 three cheques were issued by a - 1 company and they are dated 1 - 6 - 1997, 1 - 7 - 1997 and 1 - 8 - 1997. The bank made an endorsement saying that 'payment stopped by drawer' on 8 - 10 - 1997. The cheques were returned by the banker to the complainant on 20 - 10 - 1997. Notice under section 138 of the act was given on 24 - 10 - 1997.

(12) In criminal revision case no. 270 of 1999 two cheques were issued by a1 company and they are dated 1 - 11 - 1997 and 1 - 12 - 1997. The bankers endorsement dated 8 - 12 - 1997 was 'suit filed account' and the bankers memo is dated 15 - 12 - 1997. The complainant issued notice under section 138 of the act on 23 - 12 - 1997.

(13) In criminal revision case no. 271 of 1999 three cheques were issued by a1 - company and they are dated 1 - 1 - 1998, 1 - 2 - 1998 and 1 - 3 - 1998. The bank made an endorsement 'payment stopped by the drawer' dated 14 - 3 - 1998. The cheques were returned with a bankers memo to the complainant on 21 - 3 - 1998. Notice under section 138 of the act was given on 2 - 4 - 1998.

(14) The main contention of the petitioners is that by the time the offence was alleged to have been committed the petitioners who are accused 2 to 6 were no longer the directors of the a - 1 company. A2 ceased to be managing director by resignation with effect from 3 - 3 - 1997, a3 ceased to be director by resignation with effect from 20 - 5 - 1996, a4 ceased to be director by resignation with effect from 31 - 3 - 1997, a5 ceased to be director by resignation with effect from 20 - 4 - 1995 and a6 ceased to be director by resignation with effect from 1 - 10 - 1996. Therefore, they filed a petition to discharge.

(15) The lower court after considering the provisions of chapter 20 held that there is no provision under which the petition could be filed and after discussing the case on merits dismissed the petitions. Hence, the present revisions are filed.

(16) Mr. E. Manohar, learned senior counsel appearing for the petitioners submitted that the magistrate was wrong in dismissing the petitions on the ground that there is no specific provisions under summon proceedings to order discharge. In support of his contentions a strong reliance was placed on the judgment of the supreme court rendered in k. M. Mathew v. State of kerala, air 1992 sc 2206 : (1992 cri lj 3779). In this case a private complaint was filed under section 504, r/w section 34, i. P. C. The entire complaint does not disclose any prima - facie case against the chief editor. In those circumstances, the supreme court held that there is need to try the accused when there is no allegation that the accused has committed the crime. The supreme court further held :

"7. The high court seems to be too technical in this regard. If one reads carefully the provisions relating to trial of summons - cases the power to drop proceedings against the accused cannot be denied to the magistrate. section 204 of the code indicates that the proceedings before the magistrate commences upon taking cognizance of the offence and the issue of summons to the accused. When the accused enters appearance in response to the summons, the magistrate has to take proceedings under chapter xx of the code. But the need to try the accused arises when there is allegation in the complaint that the accused has committed the crime. If there is no allegation in the complaint involving the accused in the commission of the crime, it is implied that the magistrate has no jurisdiction to proceed against the accused. 8. It is open to the accused to plead before the magistrate that the process against him ought not to have been issued. The magistrate may drop the proceedings if he is satisfied on reconsideration of the complaint that there is no offence for which the accused could be tried. It is his judicial discretion. No specific provision is required for the magistrate to drop the proceedings or rescind the process. The order issuing the process is an interim order and not a judgment. It can be varied or recalled. The fact that the process has already been issued is no bar to drop the proceedings if the complaint on the very face of it does not disclose any offence against the accused."

therefore, in his submission the absence of specific provision is not a bar for the magistrate to discharge if no case is made out against the accused.

(17) The learned counsel appearing for the respondents - complainants submitted that the supreme court case is distinguishable on facts. In that case the complaint itself shows that there was no allegation on the chief editor. In those circumstances, the supreme court was pleased to hold as stated above. But in the present case there is a specific allegation against each of the accused 2 to 6 and they were directors at the time of issuing cheques. The fact that they ceased to be directors subsequently is a matter to be decided during trial. The form no. 32 and the other documents can be established during trial. There are specific allegations in the complaint and prima facie case is made out against the accused 2 to 6. If they prove that they were not the directors when the offence was committed they can as well be acquitted but this is not the case for discharge at this stage. In support of his contention, while distinguishing the facts of the supreme court judgment referred to (1992 cri lj 3779) (supra) he strongly relied upon the judgment of the bombay high court rendered in rajan kinnerkar v. Eric cordeiro, (1994) 80 com cas 487. In this case it was held while dismissing the petition, that although the petitioner might have to face unnecessary inconvenience by appearing before the criminal court in order to answer a charge in respect of which in all probability he could not be held guilty, the fact that he was no longer an employee or director of the company had to be substantiated on record and this could be done only at the stage of the trial. The petition was, therefore, premature.

(18) I am inclined to accept the contention of the learned counsel appearing for the respondents - complainants. In the judgment of the supreme court there was no allegation at all against the chief editor. In those circumstances, the supreme court held that eventhough there was no specific provision in summon proceedings the magistrate is not diverted with the power from discharging. In the present case there are specific allegations in the complaint against a2 to a6 that they were directors at the time of issuing cheques. The fact that they ceased to be directors with effect from the dates mentioned above is a matter to be decided during trial.

(19) Mr. E. Manohar, learned senior counsel submitted that by virtue of section 610 (3) of the companies act and the facts mentioned in form no. 32, a copy of, or extract from, any document kept and registered at any of the offices for the registration of companies under this act, certified to be a true copy under the head of the registrar (whose official position it shall not be necessary to prove) , shall, in all legal proceedings, be admissible in evidence as of equal validity with the original document. Therefore, on seeing the document the magistrate can satisfy himself that the accused ceased to be the directors with effect from the respective dates.

(20) It is true that form no. 32 and other documents kept and registered at any of the offices for the registration of companies under the act shall be admissible in evidence as of equal validity with the original documents but they are to be proved according to law. The proof of such document is not dispensed with, particularly the resignation and the proceedings issued are from madhya pradesh. The fact that the accused 2 to 6 have resigned from the respective dates is not known to the complainant. Therefore, he should be given an opportunity to verify the fact and cross - examine the witnesses when these documents were produced. This exercise cannot be done at this stage. This full - fledged enquiry can be taken up during trial. It is another point that the accused in all probability could not be held guilty after the full trial but they have to undergo this trial and prove the documents on which they relied upon. Therefore, they are not entitled for discharge at this stage. Hence, these revision cases have to be dismissed.

(21) Accordingly, the revision cases are dismissed and the magistrate is directed to expedite hearing of these c. Cs according to law. Petitions dismissed.

Bharat Kumar Modi An... v. M/S. Pennar Peterson...