Crl.M.C. Nos.2155 & 2156 of 2017

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE ALEXANDER THOMAS** **WEDNESDAY, THE 19TH DAY OF JULY 2017/28TH ASHADHA, 1939** ## **Crl.MC.No. 2155 of 2017 ()** ## **--------------------------CC.NO. 960/2016 OF JUDICIAL FIRST CLASS MAGISTRATE COURT, ANGAMALY -----------------** ## **PETITIONER(S)/8TH & 12TH ACCUSED:** ## **--------------------------------------------------------** ## **1. MRS. JYOTSANA CHAUDHARY, AGED 45 YEARS,** - **W/O.DILAWER SINGH BASRAON, DIRECTOR, FLIGHT SIMULATION SOLUTIONS PVT. LTD., NO.22, DOCTOR'S AVENUE, AMRITSAR, PIN-143 001, PUNJAB, RESIDING AT NO.103, GREEN AVENUE, AMRITSAR, PUNJAB-143 001., NOW RESIDING AT T.37, HOUSE NO.2305, ROYAL EMPIRE, SHASTRI NAGAR, LOKHANDWALA, ANDHERI(W), MUMBAI-400 053.** ## **2. MRS. JYOTSANA CHAUDHARY,AGED 45 YEARS,** - **W/O DILAWER SINGH BASRAON,DIRECTOR, FSTC (FIGHT SIMULATIONS TECHNIQUE CENTRE) PVT. LTD., PLOT NO.46, SECTOR-35, KHIIDC, GURGAON, PIN-122 001, HARYANA, INDIA, NOW RESIDING AT T.37, HOUSE NO.2305, ROYAL EMPIRE, SHASTRI NAGAR, LOKHANDWALA, ANDHERI(W), MUMBAI-400 053.** ## **BY ADV. SRI.RAJIT** ## **RESPONDENT(S)/STATE, COMPLAINANT & ACCUSED 1 TO 7 AND 9 TO 11:** - **-----------------------------------------------------------------------------------------------------------** ## **1. STATE OF KERALA,** - **REPRESENTED BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM.** **2. MR. KONSTANTIONS KATSIKIAS,** - **S/O KYRIAKOS KATSIKIAS, R/O FLAT NO. 1 A, PVS IRIS TOWER-1, DESOM, ALUVA, PIN-683 102, ERNAKULAM.** **3. FLIGHT SIMULATION SOLUTIONS PVT LTD., NO.22, DOCTOR'S AVENUE, AMRITSAR,PIN-143 001, PUNJAB, INDIA REPRESENTED ITS WHOLE TIME DIRECTOR.** **2/-** **-2-** ## **Crl.MC.No. 2155 of 2017 ()** ## **4. KARAN VERMA,** - **AGED 39 YEARS, S/O. RAKESH VERMA, DIRECTOR, FLIGHT SIMULATION SOLUTIONS PVT. LTD., NO.22, DOCTOR'S AVENUE, AMRITSAR, PIN-143 001, PUNJAB, INDIA.** ## **5. VARUN VERMA,** - **AGED 36 YEARS, S/O RAKESH VERMA, DIRECTOR,FLIGHT SIMULATION SOLUTIONS PVT. LTD., NO.22, DOCTOR'S AVENUE, P.O LAWRENCE ROAD, AMRITSAR,PIN-143 001, PUNJAB, INDIA.** ## **6. RAJIV MEHRA,** - **AGED 58 YEARS, S/O JAGDISH CHAND MEHRA, DIRECTOR, FLIGHT SIMULATION SOLUTIONS PVT. LTD., NO.22, DOCTOR'S AVENUE, AMRITSAR, PIN-143 001, PUNJAB, INDIA, RESIDING AT NO.103, GREEN AVENUE, AMRITSAR,PIN-143 001, PUNJAB, INDIA.** ## **7. RAKESH MEHRA,** - **AGED 60 YERS, S/O JAGDISH CHAND MEHRA, DIRECTOR, FLIGHT SIMULATION SOLUTIONS PVT. LTD., NO.22, DOCTOR'S AVENUE, AMRITSAR, PIN-143 001, PUNJAB, INDIA, RESIDING AT NO.103, GREEN AVENUE, AMRITSAR,PIN--143 001, PUNJAB, INDIA.** ## **8. SANJAY MANDAVIA,** **58 YEARS, S/O JAGDISH CHAND MEHRA, DIRECTOR, FLIGHT SIMULATION SOLUTIONS PVT. LTD., NO.22, DOCTOR'S AVENUE, AMRITSAR, PIN-143001, PUNJAB, INDIA, RESIDING AT NO.103, GREEN AVENUE, AMRITSAR, PUNJAB INDIA,PIN-143 001** ## **9. DILAWER SINGH BASRAON,** **58 YEARS S/O JAGDISH CHAND MEHRA, DIRECTOR, FLIGHT SIMULATION SOLUTIONS PVT. LTD., NO.22, DOCTOR'S AVENUE, AMRITSAR, PIN-143 001, PUNJAB, INDIA, RESIDING AT NO.103, GREEN AVENUE, AMRITSAR,PIN-143 001, PUNJAB, INDIA.** **10. FSTC (FLIGHT SIMULATION TECHNIQUE CENTRE) PVT. LTD., PLOT NO. 46, SECTOR-35, HSIIDC, GURGAON, PIN-122 001, HARYANA, INDIA, REPRESENTED BY THE DIRECTOR** **MR. DILAWER SINGH BASRAON.** **11. DILAWER SINGH BASRAON,** **DIRECTOR, FSTC(FLIGHT SIMULATION TECHINIQUE CENTRE), PVT. LTD. PLOT NO.46, SECTOR-35, HSIIDC, GURGAON, PIN-122 001, HYARYANA, INDIA.** **3/-** **-3-** **Crl.MC.No. 2155 of 2017 ()** ## **12. SANJAY MANDAVIA,** **DIRECTOR, FSTC(FLIGHT SIMULATION TECHINIQUE CENTRE) PVT. LTD. PLOT NO.46, SECTOR-35, HSIIDC, GURGAON, PIN-122 001, HARYANA, INDIA.** **R1 BY PUBLIC PROSECUTOR SRI.JESTIN MATHEW** **R2 BY ADVS. SRI.K.S.FRIJO SRI.C.ANIL KUMAR R4 TO R9,R11 & R12 BY ADV. SRI.V.V.JOY** **THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 19-07-2017, ALONG WITH CRL.MC.NO. 2156/2017, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **sts** ## **Crl.MC.No. 2155 of 2017 ()** ## **--------------------------------------** ## **APPENDIX** **PETITIONER(S)' ANNEXURES: --------------------------------------------** **ANNEXURE A TRUE COPY OF THE E-MAIL SEND BY THE COMPLAINANT TO THE 7TH ACCUSED AND THE REPLY GIVEN BY THE 7TH ACCUSED TO THE COMPLAINANT. ANNEXURE B TRUE COPY OF THE COMPLAINT IN CC NO.960/2016 OF THE LEARNED JUDICIAL FIRST CLASS MAGISTRATE, COURT, ANGAMALY. ANNEXURE C TRUE COPY OF THE PARTICULARS OF THE COMPANY FLIGHT STIMULATION TECHNIQUES CENTER PVT LTD AS MAINTAINED IN THE REGISTRAR OF COMPANIES, DELHI.** **ANNEXURE D TRUE COPY OF THE FLIGHT STIMULATION SOLUTIONS PVT LTD HAS BEEN INCORPORATED ON 31.10.2007 AND THE RECORDS OF THE REGISTRAR OF COMPANY IN DELHI.** **RESPONDENT(S)' ANNEXURES: NIL ----------------------------------------------** **/TRUE COPY/** **P.A.TO JUDGE** **sts** **ALEXANDER THOMAS, J. ----------------------------------------Crl.M.C.Nos.2155 & 2156 of 2017 -----------------------------------------Dated this the 19[th] day of July, 2017** ## **ORDER** The petitioner-Company in Crl.M.C.No.2156/2017 is the 9[th] accused for offence under Section 138 of the Negotiable Instruments Act in C.C.No.960/2016 on the files of the Judicial First Class Magistrate Court, Angamaly, instituted on the basis of a complaint filed by the 2[nd] respondent. Whereas the petitioner in Crl.M.C.No.2155/2017 has been arrayed as accused Nos.8 and 12 in the said complaint. It is contended by the petitioners that even going by the averments in the complaint, the dishonoured cheque for Rs.13.5 lakhs was issued and drawn from the bank account maintained by the 1[st] accused company (respondent No.3 herein) and that the 1[st] accused company had taken over the liability of the petitioner Company in Crl.M.C.No.2156/2017 in the alleged transaction with the complainant and that the dishonoured cheque in question was issued from the account of accused No.1 company. It is also stated that as per the averments in the Crl.M.C.Nos.2155 & 2156/2017 **==> picture [20 x 9] intentionally omitted <==** complaint, the petitioner in Crl.M.C.No.2155/2017 is both the Director of the 1[st] accused company as well as the 9[th] accused company. 2. The prayers in these Crl.M.Cs. are for quashing the impugned complaint to the extent the petitioners herein have been arrayed as the accused. 3. Heard Sri.Rajit, learned Counsel appearing for the petitioners in these cases, Sri.K.S.Frijo, learned Counsel appearing for the respondent No.2 (complainant), Sri.V.V.Joy, learned Counsel appearing for the other contesting respondents and Sri.Justin Mathew, learned Public Prosecutor appearing for respondent No.1-State. 4. Construing the provision for vicarious liability envisaged under Section 141 of the Negotiable Instruments Act, a three judge Bench of the Apex court in the celebrated judgment in _**S.M.S.Pharmaceuticals Ltd. V. Neeta Bhalla and another**_ reported in _**(2005) 8 SCC 89**_ has dealt with a similar issue and has held that necessarily there should be averments in the complaint that the co-accused Crl.M.C.Nos.2155 & 2156/2017 ..3.. director/partners/employees of the Companies/partnership firm, are in charge of and responsible for the affairs of the business of the Company/partnership firm as against the case may be and in the absence of such necessary averments in the complaint, the impugned offence under Section 138 of the Negotiable Instruments Act, cannot be made out as against such co-directors/partners/employees/officials of the Company/ partnership firm as the case may be. The only exception by the Apex Court is in relation to Managing Director/Joint Managing Director or signatories of the cheque. Paragraphs 1 and 19 of the said judgment in _**S.M.S.Pharmaceuticals Ltd. V. Neeta Bhalla and another**_ reported in _**(2005) 8 SCC 89**_ deals with the issues framed by the Apex Court in that case as well as the answers rendered therein by the Bench and paragraphs 1 and 19 of the said judgment reads as follows : - _**“** 1. This matter arises from a reference made by a two-Judge Bench of this Court for determination of the following questions by a larger Bench :_ - _(a) Whether for purposes of Section 141 of the Negotiable Instruments Act, 1881, it is sufficient if the substance of the_ Crl.M.C.Nos.2155 & 2156/2017 ..4.. _allegation read as a whole fulfill the requirements of the said section and it is not necessary to specifically state in the complaint that the person accused was in charge of, or responsible for, the conduct of the business of the Company._ - _(b) Whether a director of a Company would be deemed to be in charge of, and responsible to, the Company for conduct of the business of the Company and, therefore, deemed to be guilty of the offence unless he proves to the contrary._ - _(c) Even if it is held that specific averments are necessary, whether in the absence of such averments the signatory of the cheque and or the managing directors or joint managing director who admittedly would be in charge of the Company and responsible to the Company for conduct of its business could be proceeded against.”_ - _**“** 19. In view of the above discussion, our answers to the questions posed in the reference are as under :_ - _(a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for_ Crl.M.C.Nos.2155 & 2156/2017 ..5.. _the conduct of business of the Company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied._ - _(b) The answer to the question posed in sub-para (b) has to be in the negative. Merely being a Director of a Company is not sufficient to make the person liable under Section 141 of the Act. A director in a Company cannot be deemed to be in charge of and responsible to the Company for the conduct of its business. The requirement of Section 141 is that 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._ - _(c) The answer to Question (c) has to be in the affirmative. The question notes that the managing director of joint managing director would be admittedly in charge of the Company and responsible to the Company for the conduct of its business. When that is so, holders of such positions in a Company become liable under Section 141 of the Act. By virtue of the_ Crl.M.C.Nos.2155 & 2156/2017 ..6.. _office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the Company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141.”_ 5. The same stand was again reiterated by the Apex Court in the judgment in **National Small Industries Corporation Ltd. v. Harmeet Singh Paintal** reported in **2010 (3) SCC 330** , paragraph 39, which reads as follows : - _“39. From the above discussion, the following principles emerge :_ - _(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 the criminal liability, there is no presumption that every Director knows about the transaction._ - _(ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the_ Crl.M.C.Nos.2155 & 2156/2017 ..7.. _time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the Company._ - _(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 the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the 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._ - _(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred._ - _(v) If the accused is a Managing Director or a 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._ - _(vi) If the 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 the complaint._ - _(vii) The person sought to be made liable should_ Crl.M.C.Nos.2155 & 2156/2017 **==> picture [20 x 9] intentionally omitted <==** _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.”_ 6. On a perusal of the impugned complaint (produced as Annexure-C in Crl.M.C.No.2156/2017 and as Annexure-B in Crl.M.C.No.2155/2017), it can be seen that the specific case set up by the complainant is that the liabilities were initially owed to him by accused No.9 Company and to the effect that Accused Nos.6 and 7 were acting as Directors for and on behalf of Accused No.9 company and that the liability of Accused No.9 company was voluntarily taken over by Accused No.1 company and that the dishonoured cheque in question was issued from the account maintained by Accused No.1 company and that the signatory to the said cheque is accused No.7. So it is the specific case of the complainant that the drawer of the dishonoured cheque in question is accused No.1 company and not accused No.9 company. Since even according to the complainant, the drawer of cheque is Accused No.1 company, Crl.M.C.Nos.2155 & 2156/2017 **==> picture [20 x 9] intentionally omitted <==** the prosecution initiated against Accused No.9 company is illegal on that ground alone. Accused No.9 company is the petitioner in Crl.M.C.No.2156/2017. 7. Further according to the averments in the complaint, the petitioner in Crl.M.C.No.2155/2017 (Smt.Jyotsana Chaudhary) is a director of accused No.1 company as well as director of accused No.9 company. The petitioner in Crl.M.C.No.2155/2017 has been arrayed as accused Nos.8 and 12 in the complaint. She has been arrayed as accused No.12 in her alleged capacity as Director of Accused No.9 company. Since accused No.9 company is not the drawer of the dishonoured cheque, there is no question of imputing any vicarious liability to any of the directors or officials of that company merely on the ground that they happened to be the director or official of that company. Therefore the complaint to the extent the petitioner in Crl.M.C.No.2155/2017 has been arrayed as Accused No.12 in her alleged capacity as the director of Accused No.9 company, is illegal. The petitioner in Crl.M.C.No.2155/2017 has produced the details from the Registrar of companies regarding Accused No.9 company, as Crl.M.C.Nos.2155 & 2156/2017 **==> picture [27 x 9] intentionally omitted <==** per Annexures-C and D. Annexure-C would show that she is one of the Directors of Accused No.9 company. Annexure-D would show that the she is not a Director of Accused No.1 company. 8. The Apex Court in the judgment in **Central Bank of India Vs. Asian Global Ltd. & others** reported in **[AIR (2010) SC 2835]** has held that for launching a prosecution against the directors of the company under Section 138 read with Section 141 of the Negotiable Instruments Act, there has to be specific and cogent allegations in the complaint in regard to the part played by such directors or officials of the company in the alleged transaction in question. So also it has been reiterated by the Apex Court in the judgment in **N.K.Vahi vs. Sheker Singh & others** reported in **(2007 (9) SCC 481)** that to launch a prosecution against the alleged directors of a company, there must be specific allegations in the complaint as to the part played by them in the transaction. This Court in its order dated 31.3.2017 rendered in Crl.M.C.No.2433/2015 and connected cases has scanned various case laws on this point Crl.M.C.Nos.2155 & 2156/2017 **==> picture [27 x 9] intentionally omitted <==** and has held that there should be sufficient and cogent averments in the complaint to establish that the directors or officials of the body corporate like companies or partnership firm as the case may be was in charge of the affairs of the business of the company in question, in order to attract vicarious liability envisaged under Section 141 of the N.I. Act. There is only a bald averment in the impugned complaint that the petitioner in Crl.M.C.No.2155/2017 is a director of Accused No.1 company and Accused No.9 company. Annexure-D details from the official website of the Registrar of Companies, Delhi would clearly show that the petitioner in Crl.M.C.No.2155/2017 is not a director of Accused No.1 company. 9. In the light of all these aspects, this Court is constrained to hold that the prosecution initiated against the petitioners in Crl.M.C.Nos.2155/2017 and 2156/2017 is illegal and any further continuation of the said prosecution as against those petitioners would be nothing but an abuse of process of court. In this view of the matter the impugned complaint in C.C.No.960/2016 to the extent to which the petitioner in Crl.M.C.Nos.2155 & 2156/2017 ..12.. Crl.M.C.No.2156/2017 has been arrayed as accused No.9 therein and to the extent the petitioners in Crl.M.C.No.2155/2017 has been arrayed as accused Nos.8 and 12 therein, will stand quashed. However it is made clear that the impugned complaint to the extent it relates to the other accused therein could proceed further in accordance with law. It is also made clear that none of the observations and findings in this judgment shall in any manner hinder the trial court from independently considering all issues that may be posed for its determination based on the evidence that may be adduced by the rival parties. With these observations and directions both the Crl.M.Cs. will stand disposed of. Sd/- **ALEXANDER THOMAS, JUDGE** skj True copy P.A.to Judge