Davinder Kaur And An... v. Small Scale Industri...

A. Hanumanthu, J. -

These two petitions have been filed under section 482 cr.p.c. for quashing the proceedings in C.C. No. 245/97 pending before XV Metropolitan Magistrate, Hyderabad and C.C. No. 246/97 pending before IV Metropolitan Magistrate, Hyderabad initiated against these petitioners by the 1st respondent.

2. As the parties involved are the same and the point involved in both the petitions is the same, they are being disposed of by a common order.

3. The facts in brief, are as under :

The 1st respondent, Small Scale Industries Development Bank of India, is a Public Financial Institution having its Head Office at Lucknow and a branch office at Hyderabad, represented by its Dy. General Manager. Kittis Limited is a registered Company and it is having dealings with the 1st respondent under the "Direct discounting of Bills (Components) Scheme". Under the said scheme, the said Company has to honour the bills discounted by the 1st respondent on the respective due dates from time to time. The Company fell due in a sum of Rs. 1,29,26,500/- by 19.2.1997. In discharge of that liability, the Company issued the Cheque bearing No. 377825, dated 18.2.1997 for Rs. 32,80,000/-

(2) Cheque bearing No. 377826 dated 18.2.1997 for Rs. 33,04,625 and (3) Cheque bearing No. 377827 dated 19.2.1997 for Rs. 23,31,375/- and the Cheque bearing No. 377828, dated 24.2.1997 for Rs. 30,76,125/-. When those cheques were presented for collection of payment through clearing by their banker Reserve Bank of India, Saifabad, they were dishonoured and they were returned unpaid by the bankers of the said Company by remark "exceeds arrangements". Thereafter, the Respondent No. 1 issued a demand notices by registered post to the Company and its Directors. Though the notices were served upon them, they failed to pay the said cheque amounts. Hence, the 1st respondent filed C.C. No. 245/97 against the Company (A-1) and the Managing Director (A-2) and these two petitioners (A-3 and A-4), who are the Directors of the said Company with respect to the dishonour of the cheques dated 8.2.1997 and 19.2.1997. The respondent filed C.C. No. 246/97 against the Company and Managing Director of the Company and these petitioners as regards the dishonour of the cheque, dated 24.2.1997. The learned Magistrate took the cases on file for the offence under section 138 of the negotiable instruments act with respect to the Company, its Managing Director and these two petitioners and process has been issued for the appearance of all the accused. The petitioners, who are A-3 and A-4 in both the cases have come up with these petitions in quash the said proceedings initiated against them.

4. The only point urged by the learned Counsel for the petitioners is that the petitioners who were Directors of the accused-1st respondent-Company have resigned from the Company with effect from 21.12.1996 and as such, they ceased to be the Directors of the Company by the date of issuance of the cheques on behalf of the Company. It is further contended by the learned Counsel for the petitioners that even before their retirement as Directors with effect from 21.12.1996, these petitioners were only sleeping Directors of the Company and the entire transactions for the Company were being looked after the Managing Director-A2 and that the petitioners never participated in the day-to-day affairs of the 1st accused-Company and that there no averments in the complaints that the petitioners herein were participating in the day-to-day management of the Company. The learned Counsel for the 1st Respondent- complainant on the other hand, submits that the allegation that these petitioners ceased to be the Directors of the 1st accused-Company is false, that they stood as guarantors for the discount facility extended to the 1st accused-Company as Directors of the said Company and the present plea that they resigned from the Company as Directors with effect from 21.12.1996 has been set up with a view to avoid their prosecution in the cases. The learned counsel for the respondent No. 1 also points out to the letter, dated 3.2.1997 submitted by the Company wherein, it is indicated that these petitioners continue to be Directors of the Company. The learned Counsel also pointed out that there are averments in the complaint that these petitioners also approached the complainant and requested for the sanction of the facility under that scheme and that they have been assisting the Managing Director in running the business of A-1.

5. The point for consideration is whether there are any justifiable reasons to quash the said proceedings as against these petitioners ?

6. It is not disputed that the petitioners herein have been the Directors of Kittis Steels Ltd. (A-1) and the 2nd accused is its Managing Director. It is also not disputed that the dishonoured cheques were issued by the Managing Director of the said Company. The complainant filed these cases against these petitioners also alleging that they are the Directors of the said Company and that they have been assisting the Managing Director in the management of the Company. But, it is the case of the petitioners that they ceased to be the Directors of the Company with effect from 21.12.1996 and as such, they were not on the management of the Company by the dates when the cheques were issued i.e., in February, 1997.

7. It is relevant to refer to section 141(1) of negotiable instruments act to appreciate the rival contentions. It reads thus :

Section 141. Offences by Companies :

(1) If the person committing an offence under Section 138 of the Act, every person who, at the time of offence was committed, was incharge 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 liable to be proceeded and punished accordingly :

Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge or that he has exercised all due diligence to prevent the commission of such offence."

It is clear from a reading of this section that if the offence under sec. 138 of the negotiable instruments act has been committed by the Company or a Firm, every person who was incharge and responsible for the affairs and conduct of the business of the Company or Firm, as the case may be, at the time when the alleged offence was committed, is also liable for prosecution along with the Company.

8. There is no substance in the contention of the learned Counsel for the petitioners that there are no averments in the complaint that these petitioners were also participating in the day-to-day business transactions of the Company. Copies of the complaint petitions in both the cases are filed along with these petitions. In para 2 of both the complaints, there are averments to the effect that "Accused No. 3 and 4 are the other Directors of the Accused No. 1 and are assisting the Accused No. 2 in running the business of the Company, that direct discounting of bills (Components) Schemes is one of the Scheme of the Complainant under which, financial assistance is granted to borrowers for purchase of components, parts, some assemblies, accessories, intermediaries manufactured by Small Scale Units by directly discounting the bills of the same, covering some purchase persons No. 1, 2, 3 and 4 approached the complainant and requested the complainant to sanction a loan under the above scheme, that at the request of the accused persons, the complainant under the letter of intent No. 3767/DDS (C) 462/KSN, dated 21.3.1996 sanctioned a limit of Rs. 200 lakhs to the accused No. 1. The said letter of intent was duly accepted by the accused through its officials and accordingly, various security documents were executed by the accused." It is clear from the averments in this para that these petitioners, who are A-3 and A-4 were also equally responsible in approaching the complainant, for extending the facility of direct discounting of bills to the Company which is the 1st accused. It is no doubt true that in para 8 of the complaint, it is mentioned that Accused No. 2 is the person incharge and responsible on behalf of Accused No. 1 taking care of the business interests of the Company. By this, it does not mean that the petitioners who are A-3 and Aa-4 are not taking any interest in the management of the Company. Further, the learned Counsel for the 1st respondent filed letter dated 31.1.1997 addressed to the Managing Director of the Company relating to the renewal of the limit of direct discounting (Component) Scheme, there is a reference in the said letter that these two petitioners Devinder Kaul and Amit Sethi that they offered collateral security by way of personal guarantees. The learned Counsel for respondent also filed the letter dated 3.2.1997 addressed by the Managing Director (A-2) to the 1st respondent accepting the terms and conditions imposed by the 1st respondent in his letter dated 31.1.1997 and in the said letter, there is a mention that these petitioners as promoters have given personal guarantees. This letter is dated 3.2.1997. If really, these petitioners had resigned as Director of the Company by 21.12.1996, definitely that would have been mentioned in this letter. Moreover, whether these petitioners had discontinued as Directors of the Company by the date of issuance of these cheques as contended by them, is a question of fact and normally, the questions of fact cannot be decided by this Court while dealing with the petition under section 482 cr.p.c. The material on record does not conclusively establish that these petitioners had ceased to be the Directors of the Company by the date of issuance of these cheques. It is well settled that under section 482 cr.p.c., the High Court has to confine to the facts as alleged in the complaint by the prosecution and no investigation into the facts should normally be done by the High Court. Truth or otherwise of the allegations made by the prosecution has to be determined only by the trial Court after evidence has been let in by both sides. The High Court has to see whether the allegations made in the complaint make out a prima facie offence and whether the accused has prima facie committed the offence. As seen from the complaints in these cases, there is prima facie case against these petitioners also. Hence, I do not find any justifiable grounds to quash the proceedings initiated against these petitioners in C.C. No. 245/97 and C.C. No. 246/97.

9. For the aforesaid reasons, I do not find any reasons to quash the proceedings. Hence, both the petitions are dismissed.

Petitions dismissed.

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