Full Judgment Text
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on:24.02.2025
+ CRL.M.C. 6104/2019 & CRL.M.A. 41453/2019
MAHENDRA KUMAR JAIN ..... Petitioner
versus
M/S. SHIVAAN EXPORTS & IMPORTS ..... Respondent
+ CRL.M.C. 6177/2019 & CRL.M.A. 41704/2019
MONICA JAIN ..... Petitioner
versus
M/S. SHIVAM EXPORTS & IMPORTS ..... Respondent
Advocates who appeared in these case:
For the Petitioner(s) : Mr. Neelambar Jha, Adv.
For the Respondent(s) : Ms. Rubi Bedi, Adv. through V.C.
CORAM
HON’BLE MR JUSTICE AMIT MAHAJAN
JUDGMENT
1. The present petitions are filed challenging the proceedings in
Complaint Case No. 5312/2018 filed by the respondent under Section
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138 of the Negotiable Instruments Act, 1881 (‘ NI Act ’).
2. The complaint was filed alleging that the petitioners are the
Directors and are managing the day-to-day affairs of the accused
company, namely– M/s Jain MFG (India) Pvt. Ltd. It has been alleged
in the complaint that a business transaction took place between the
accused company and the complainant company, namely – M/s
Shivaan Exports & Imports, in or around May, 2018, for the sale of
import-export licenses whereby, it was agreed that 50% payment
would be made by the accused company immediately on the date of
invoice being issued by the complainant, and the balance 50% would
be made the next day. Consequently, the complainant sold various
licenses to the accused company between the period 17.05.2018 to
16.08.2018.
3. The complainant alleged that though the accused company
initially made regular payments towards the invoices raised however,
subsequently stopped making the payments. It is further the case of the
complainant that the accused company had issued two cheques
bearing no. 00119 for ₹4,02,31,000/- dated 18.08.2018 and 000179
dated 25.09.2018 for ₹3,97,00,000/- drawn on HDFC Bank. The
cheque bearing no. 000179 was issued in lieu of cheque no. 000119,
after deduction of ₹5,31,000/- towards discharge of liability for the
payment of outstanding dues by the accused company. The said
cheque no. 000179, upon presentation, was dishonoured with remarks
“ Payment stopped by Drawer ” vide return memo dated 27.09.2018.
Upon the failure of the accused persons to make the payment despite
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the service of notice, the respondent filed the subject complaint.
4. The learned counsel for the petitioners submitted that the
learned Trial Court has mechanically passed the summoning orders
without appreciating that the petitioners were not involved in the day-
to-day affairs of the accused company.
5. He submitted that the cheque in question was issued on
25.09.2018, whereas the petitioners namely – Mahindra Kumar Jain
and Monica Jain had already resigned from the Directorship of the
accused company, with effect from 01.08.2018 and 25.08.2018
respectively, and hence, the complaint case under Section 138 of the
NI Act is not maintainable against them. Resignation Form No. DIR-
12, in respect of both the petitioners has been relied upon, evidencing
that the petitioners had resigned from the accused company.
6. He submitted that to make the petitioners vicariously liable in
terms of Section 141 of the NI Act, the complainant has to specifically
plead and show that the petitioners were the persons responsible for
the conduct and had control over the financial affairs of the accused
company at the time of commission of the offence.
7. The learned counsel for the respondent disputed the contention
of the petitioners and submitted that the petitioners were actively
involved in the day-to-day affairs of the accused company. She
submitted that the grounds raised are factual defense of the accused
persons and the same can only be raised at the stage of trial.
8. She points out specific averments regarding the petitioners
actively participating in negotiations and transactions with the
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complainant company, giving assurances to the respondent regarding
the cheques in dispute being honoured on presentation.
9. At the outset, it is relevant to note that this Court can quash the
summoning orders issued in NI Act cases, in exercise of its inherent
jurisdiction under Section 482 of the CrPC, if such unimpeachable
material is brought forth by the accused persons which indicates that
they were not concerned with the issuance of the cheques. The
Hon’ble Court in the case of S.P. Mani & Mohan Dairy v.
Snehalatha Elangovan : (2023) 10 SCC 685 had discussed the scope
of interference by High Court against issuance of process and also
summarised the law in reference to Section 141 of the NI Act as
under:
“ 55. Had the respondent herein given appropriate reply
highlighting whatever she has sought to highlight before us then
probably the complainant would have undertaken further enquiry
and would have tried to find out what was the legal status of the
firm on the date of the commission of the offence and what was the
status of the respondent in the firm. The object of notice before the
filing of the complaint is not just to give a chance to the drawer of
the cheque to rectify his omission to make his stance clear so far as
his liability under Section 138 of the NI Act is concerned.
56. Once the necessary averments are made in the statutory notice
issued by the complainant in regard to the vicarious liability of the
partners and upon receipt of such notice, if the partner keeps quiet
and does not say anything in reply to the same, then the
complainant has all the reasons to believe that what he has stated
in the notice has been accepted by the noticee. In such
circumstances what more is expected of the complainant to say in
the complaint.
57. When in view of the basic averment process is issued the
complaint must proceed against the Directors or partners as the
case may be. But, if any Director or Partner wants the process to
be quashed by filing a petition under Section 482 of the Code on
the ground that only a bald averment is made in the complaint
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and that he is really not concerned with the issuance of the
cheque, he must in order to persuade the High Court to quash the
process either furnish some sterling incontrovertible material or
acceptable circumstances to substantiate his contention. He must
make out a case that making him stand the trial would be an abuse
of process of Court. He cannot get the complaint quashed merely
on the ground that apart from the basic averment no particulars
are given in the complaint about his role, because ordinarily the
basic averment would be sufficient to send him to trial and it
could be argued that his further role could be brought out in the
trial . Quashing of a complaint is a serious matter. Complaint
cannot be quashed for the asking. For quashing of a complaint, it
must be shown that no offence is made out at all against the
Director or partner.
58. Our final conclusions may be summarised as under:
58.1. The primary responsibility of the complainant is to make
specific averments in the complaint so as to make the accused
vicariously liable. For fastening the criminal liability, there is no
legal requirement for the complainant to show that the accused
partner of the firm was aware about each and every transaction.
On the other hand, the first proviso to sub-section (1) of Section
141 of the Act clearly lays down that if the accused is able to
prove to the satisfaction of the Court that the offence was
committed without his/her knowledge or he/she had exercised due
diligence to prevent the commission of such offence, he/she will
not be liable of punishment.
58.2. The complainant is supposed to know only generally as to
who were in charge of the affairs of the company or firm, as the
case may be. The other administrative matters would be within the
special knowledge of the company or the firm and those who are in
charge of it. In such circumstances, the complainant is expected to
allege that the persons named in the complaint are in charge of the
affairs of the company/firm. It is only the Directors of the company
or the partners of the firm, as the case may be, who have the
special knowledge about the role they had played in the company
or the partners in a firm to show before the Court that at the
relevant point of time they were not in charge of the affairs of the
company. Advertence to Sections 138 and Section 141,
respectively, of the NI Act shows that on the other elements of an
offence under Section 138 being satisfied, the burden is on the
Board of Directors or the officers in charge of the affairs of the
company/partners of a firm to show that they were not liable to be
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convicted . The existence of any special circumstance that makes
them not liable is something that is peculiarly within their
knowledge and it is for them to establish at the trial to show that
at the relevant time they were not in charge of the affairs of the
company or the firm.
58.3. Needless to say, the final judgment and order would depend
on the evidence adduced. Criminal liability is attracted only on
those, who at the time of commission of the offence, were in charge
of and were responsible for the conduct of the business of the firm.
But vicarious criminal liability can be inferred against the
partners of a firm when it is specifically averred in the complaint
about the status of the partners “qua” the firm. This would make
them liable to face the prosecution but it does not lead to
automatic conviction. Hence, they are not adversely prejudiced if
they are eventually found to be not guilty, as a necessary
consequence thereof would be acquittal.
58.4. If any Director wants the process to be quashed by filing a
petition under Section 482 of the Code on the ground that only a
bald averment is made in the complaint and that he/she is really
not concerned with the issuance of the cheque, he/she must in
order to persuade the High Court to quash the process either
furnish some sterling incontrovertible material or acceptable
circumstances to substantiate his/her contention. He/she must
make out a case that making him/her stand the trial would be an
abuse of process of Court. ”
(emphasis supplied)
10. The learned counsel for the respondent submits that the offence,
in the present case, is a continuing offence. The petitioners, at the
relevant time, were the directors of the accused company and resigned
just before the cheque was presented with the bank for realizing the
liability. She submits that there is no document on record to show
when the resignation was tendered and when it was accepted by the
board of directors vide a board resolution to that effect accepting the
resignation on record.
11. It is well settled that under Section 138/ 141 of NI Act, the
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complainant is to make the particular averment in the complaint, to the
effect that the accused person was the director of the accused company
at the relevant time and is responsible for its day-to-day affairs, and
therefore is vicariously liable for the offence. Thereafter, the onus of
proving that at the relevant time, the accused persons were not the
directors of the accused company and were not responsible for its day-
to-day affairs, lies upon the accused persons and the same is matter of
trial. Reliance is placed on Rallis India Ltd. vs. Poduru Vidya
Bhusan and Ors. (13.04.2011 - SC) : MANU/SC/0422/2011 wherein
it was observed as under:
“11. Thus, in the light of the aforesaid averments as found by us in the
Criminal Complaint, we are of the considered opinion that sufficient
averments have been made against the Respondents that they were the
partners of the firm, at the relevant point of time and were looking
after day to day affairs of the partnership firm. This averment has
been specifically mentioned by the Appellant in the complaint even
though denied by the Respondents but the burden of proof that at
the relevant point of time they were not the partners, lies specifically
on them. This onus is required to be discharged by them by leading
evidence and unless it is so proved, in accordance with law, in our
opinion, they cannot be discharged of their liability …. The question
as to whether or not they were partners in the firm as on 31.03.2004,
is one of fact, which has to be established in trial. The initial burden
by way of averment in the complaint has been made by the Appellant.”
12. The primary responsibility of the complainant is to make specific
averments in the complaint so as to make the accused vicariously
liable. For fastening the criminal liability, there is no legal
requirement for the complainant to show that the accused partner of
the firm was aware about each and every transaction. On the other
hand, proviso to Section 141 of the Act clearly lays down that if the
accused is able to prove to the satisfaction of the Court that the
offence was committed without his knowledge or he had exercised due
diligence to prevent the commission of such offence, he will not be
liable of punishment …. But vicarious criminal liability can be
inferred against the partners of a firm when it is specifically averred
in the complaint about the status of the partners "qua" the firm.
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This would make them liable to face the prosecution but it does not
lead to automatic conviction. Hence, they are not adversely prejudiced
- if they are eventually found to be not guilty, as a necessary
consequence thereof would be acquitted.”
(emphasis supplied)
12. With reference to the resignation, it is observed that the
petitioners have not placed on record FORM 32, which is required to
be filed with the Registrar of Companies to indicate the status of the
company’s directors. Furthermore, FORM NO. DIR-12, pertaining to
the petitioner, Mahender Kumar Jain, was filed by the authorization of
the Board of Directors on 20.08.2018, with effect from 01.08.2018.
Mahender Kumar Jain contends that he had resigned even before the
issuance of the first cheque dated 18.08.2018. In the opinion of this
Court, this argument lacks merit. The question whether the
authorization by the board has any retrospective effect on his
directorship is a matter to be determined at trial. No unimpeachable
evidence has been placed on record at this stage to establish that the
resignation took effect before the issuance of the first cheque.
13. Similarly, concerning the resignation of the petitioner, namely,
Monica Jain, it is pertinent to note that the cheque in question was
issued on 18.08.2019. Monica Jain argues that she resigned before the
dishonour of the cheque, i.e., on 25.08.2018, whereas the cheque was
dishonoured on 25.09.2018. In the opinion of this Court, this argument
is also without merit. At the time of issuance of the cheque, she was
admittedly director of the company and was prima facie responsible
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for its business and affairs. In the absence of any unimpeachable
evidence to the contrary, her liability remains.
14. It must be borne in mind that Section 141 of the NI Act is a
penal provision that creates vicarious liability for the accused. The
petitioners have been implicated on the premise that they were
responsible for the day-to-day affairs of the company. It is also settled
that every person, regardless of whether they are in charge of the
company during each series of act necessary to constitute the offence
under Section 138 read with Section 141 of the NI Act or not, could be
proceeded against if they are in charge of the affairs of the company
even during one of the omissions’ that is necessary to constitute an
offence under Section 138 read with Section 141 of the NI Act. This
would include being in charge of the company at the time of drawing
of the cheque, or the dishonour of cheque, or at the time of failure to
pay after the receipt of notice. [Ref: S P Mani and Mohan Dairy v.
Dr. Snehalatha Elangovan : (2023) 10 SCC 685 ]
15. Therefore, the Court can exercise its jurisdiction only upon
unimpeachable and uncontroverted evidence being placed on record,
however, in the absence of such evidence, the fact whether the
accused person is responsible for the affairs of the accused company
becomes a factual dispute, which is to be seen during trial.
16. In a situation where the accused moves the Court for quashing
even before the trial has commenced, the Court’s approach should be
careful not to prematurely extinguish the case by disregarding the
legal presumption supporting the complaint.
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17. In Malwa Cotton and Spinning Mills Ltd. v. Visra Singh
Sidhu & Ors. : (2008) 17 SCC 147 , the Hon’ble Apex Court made
certain observations in this regard, which reads as under:
“6. As rightly contended by learned Counsel for the appellant
factual disputes are involved. What was the effect of delayed
presentation before the Registrar of Companies is essentially a
matter of trial. Whether respondent No. 1 had intimated the company
and whether there was any resolution accepting his resolution are
matters in respect of which evidence has to be led. Therefore, the High
Court was not justified in its view.
8. We find that the prayers before the courts below essentially were to
drop the proceedings on the ground that the allegations would not
constitute a foundation for action in terms of Section 141 of the Act.
These questions have to be adjudicated at the trial. Whether a person
is in charge of or is responsible to the company for conduct of
business is to be adjudicated on the basis of materials to be placed by
the parties. Subsection (2) of Section 141 is a deeming provision
which as noted supra operates in certain specified circumstances.
Whether the requirements for the application of the deeming
provision exist or not is again a matter for adjudication during trial.
18. The Hon’ble Apex Court in N. Rangachari v. Bharat Sanchar
Nigam Ltd. : MANU/SC/7316/2007 , observed as under:
“19. Therefore, a person in the commercial world having a
transaction with a company is entitled to presume that the
Directors of the company are in charge of the affairs of the
company. If any restrictions on their powers are placed by
the memorandum or articles of the company, it is for the
Directors to establish it at the trial. It is in that context that
Section 141 of the Negotiable Instruments Act provides that
when the offender is a company, every person, who at the
time when the offence was committed was in charge of and
was responsible to the company for the conduct of the
business of the company, shall also be deemed to be guilty of
the offence along with the company. It appears to us that an
allegation in the complaint that the named accused are
Directors of the company itself would usher in the element of
their acting for and on behalf of the company and of their
being in charge of the company.”
(emphasis supplied)
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19. Reference to the observations made in Gunmala Sales Private
Ltd. Vs. Anu Mehta (supra) are crucial to conclude the issue at hand.
It was observed by the Hon’ble Apex Court that once the basic
averments have been made by the complainant in the complaint,
alleging that the director was in charge of the company and was
responsible for the day-to-day affairs of the company, the proceedings
against the accused persons may commence. To quash the proceedings
by petition filed under Section 482 of CrPC, the Petitioner is to place
some unimpeachable and uncontroverted evidence which is beyond
suspicion or doubt.
20. The factual issues that serve as defences in the case are not
appropriate for determination under the powers conferred by Section
482 of the CrPC at this stage. It is well-established that this Court
should refrain from expressing any views on disputed questions of fact
in proceedings under Section 482 of the CrPC, as doing so could pre-
empt the findings of the trial court. The relevant paragraphs of
Gunmala Sales Private Ltd. Vs. Anu Mehta (Supra) in this respect
reads as under:
33. We may summarize our conclusions as follows:
a) Once in a complaint filed Under Section 138 read with Section
141 of the NI Act the basic averment is made that the Director was
in charge of and responsible for the conduct of the business of the
company at the relevant time when the offence was committed, the
Magistrate can issue process against such Director;
b) If a petition is filed Under Section 482 of the Code for quashing of
such a complaint by the Director, the High Court may, in the facts of a
particular case, on an overall reading of the complaint, refuse to
quash the complaint because the complaint contains the basic
averment which is sufficient to make out a case against the Director
.
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c) In the facts of a given case, on an overall reading of the complaint,
the High Court may, despite the presence of the basic averment, quash
the complaint because of the absence of more particulars about role of
the Director in the complaint ….Take for instance a case of a
Director suffering from a terminal illness who was bedridden at the
relevant time or a Director who had resigned long before issuance of
cheques. In such cases, if the High Court is convinced that
prosecuting such a Director is merely an arm-twisting tactics, the
High Court may quash the proceedings. It bears repetition to state
that to establish such case unimpeachable, uncontrovertible evidence
which is beyond suspicion or doubt or some totally acceptable
circumstances will have to be brought to the notice of the High Court .
Such cases may be few and far between but the possibility of such a
case being there cannot be ruled out. In the absence of such
evidence or circumstances, complaint cannot be quashed;
d) No restriction can be placed on the High Court's powers Under
Section 482 of the Code . The High Court always uses and must use
this power sparingly and with great circumspection to prevent inter
alia the abuse of the process of the Court. There are no fixed
formulae to be followed by the High Court in this regard and the
exercise of this power depends upon the facts and circumstances of
each case. The High Court at that stage does not conduct a mini trial
or roving inquiry, but, nothing prevents it from taking
unimpeachable evidence or totally acceptable circumstances into
account which may lead it to conclude that no trial is necessary qua
a particular Director.
21. In such circumstances, at this stage, considering the
contradicting material on record, the documents adduced by the
petitioners cannot be said to be of such sterling and unimpeachable
quality that it merits the quashing of the summons and consequential
proceedings thereof. It cannot be said that the petitioners are not
responsible for the functioning of the accused company or that the
complaint is bereft of the requisite ingredients so as to proceed against
the petitioners.
22. Needless to say, it will be open to the petitioners to justify the
arguments taken by them regarding their resignation and non-
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involvement in the during the course of the trial.
23. In view of the above, this Court finds no reason to interfere with
the impugned orders.
24. The present petitions are dismissed in the aforesaid terms.
Pending applications also stand disposed of.
25. A copy of this judgment be placed in both the matters.
AMIT MAHAJAN, J
FEBRUARY 24, 2025
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