Full Judgment Text
2024 INSC 111
NON-REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO…………….2024
(Arising out of Special Leave Petition(Crl.) No.6905 of 2022)
RAJESH VIREN SHAH … APPELLANT(S)
VERSUS
REDINGTON (INDIA) LIMITED … RESPONDENT(S)
WITH
CRIMINAL APPEAL NO…………….2024
(Arising out of Special Leave Petition(Crl.) No.7050 of 2022)
J U D G M E N T
SANJAY KAROL, J.
Leave granted.
2. Whether a Director who has resigned from such position and which fact
stands recorded in the books as per the relevant rules and statutory provisions, can
be held liable for certain negotiable instruments, failing realization, is the sole
Signature Not Verified
Digitally signed by
Nidhi Ahuja
Date: 2024.02.14
17:22:17 IST
Reason:
short and common question that this Court must consider in these appeals arising
1|SLP (Crl) 6905 & 7050 of 2022
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out of the judgment and order dated 6 April, 2022 in CRLOP No.34923 of 2019;
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and 8 April, 2022 in CRLOP No.34248 of 2019.
3. A brief conspectus of facts for adjudication of the present lis is:-
(a) The appellants in both the appeals were Directors in the Respondent-
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Company and had resigned from such Directorship on 9
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December,2013 and 12 March, 2014 respectively;
(b) Form 32 in accordance with Sections 303(2), 264(2), 266(1)(a), and
266(1)(b)(iii) of the Companies Act, 1956, in respect thereof stood
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accepted on 9 December, 2013 and 20 March, 2014 respectively. The
relevant records stood rectified, incorporating these changes;
(c) The appellants, namely, Rajesh Viren Shah and Sanjay Babulal Bhutada
in Crl.Appeal Nos…..@ SLP(Crl)No.6905 and SLP(Crl)No.7050 of
2022, respectively, were arrayed as accused in a complaint filed under
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Section 138 of the Negotiable Instruments Act, 1881 in relation to three
cheques bearing nos. 002535 for Rs.7,10,085/-; 002777 for
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Rs.1,85,09,054; and 002791 for Rs.10,00,000/-, all dated 22 March,
2014, by the Company respondent herein against M/s MIEL e-Security
Private Limited and its Directors, with one Mr. Narayanan Kutty Nair,
1
Annexure P-1, Page 45 of Paperbook
2
Annexure P-1, Page 43 of Paperbook
3
‘the N.I.Act’
2|SLP (Crl) 6905 & 7050 of 2022
Managing Director, being arrayed as A-2, and A-3 to A-7 being its
Directors, including the appellants who were arrayed as A-4 and A-6
respectively.
(d) With the dishonouring of the cheque on presentation on account of
insufficient funds the complainant-respondent after serving statutory
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notice dated 11 April, 2014 preferred a complaint under Sections 200
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and 191A Code of Criminal Procedure, 1973 read with Section 144 of
the N.I. Act, seeking quashing of such an action initiated by the
respondent herein, the appellant(s) preferred a petition under Section 482
of the Cr.PC which stands dismissed by the impugned order.
4. The position of law as to the liability that can be fastened upon a Director for
non-realisation of a cheque is no longer res integra. Before adverting to the
judicial position, we must also take note of the statutory provision - Section 141 of
the N.I. Act, which states that every person who at the time of the offence was
responsible for the affairs/conduct of the business of the company, shall be held
liable and proceeded against under Section 138 of the N.I. Act, with exception
thereto being that such an act, if done without his knowledge or after him having
taken all necessary precautions, would not be held liable. However, if it is proved
that any act of a company is proved to have been done with the connivance or
4
‘Cr.PC’
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consent or may be attributable to (i) a director; (ii) a manager; (iii) a secretary;
or (iv) any other officer – they shall be deemed to be guilty of that offence and
shall be proceeded against accordingly.
5. Coming to the judicial position, we notice a judgment of this Court in
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Monaben Ketanbhai Shah v. State of Gujarat wherein it was observed that:-
“…The primary responsibility is on the complainant to make
necessary averments in the complaint so as to make the accused
vicariously liable. For fastening the criminal liability, there is no
presumption that every partner knows about the transaction. The
obligation of the appellants to prove that at the time the offence was
committed they were not in charge of and were not responsible to the
firm for the conduct of the business of the firm, would arise only
when the complainant makes necessary averments in the complaint
and establishes that fact…”
6. A Bench of three learned Judges in S.M.S. Pharmaceuticals Ltd . v. Neeta
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Bhalla and Anr . observed:-
“18. To sum up, there is almost unanimous judicial opinion that
necessary averments ought to be contained in a complaint before a
person can be subjected to criminal process. …A clear case should
be spelled out in the complaint made against the person sought to
be made liable. Section 141 of the Act contains the requirements
for making a person liable under the said provision. That the
respondent falls within the parameters of Section 141 has to be
spelled out…”
7. We also notice this Court to have observed, in regards to the exercise of the
inherent powers under Section 482, CrPC, in cases involving negotiable
instruments that interference would not be called for, in the absence of “some
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(2004) 7 SCC 15
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(2005) 8 SCC 89
4|SLP (Crl) 6905 & 7050 of 2022
unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or
totally acceptable circumstances which may clearly indicate that the Director
could not have been concerned with the issuance of cheques and asking him to
stand the trial would be abuse of process of Court.” This principle as held in
S.M.S Pharmaceuticals (supra) was followed in Ashutosh Ashok Parasrampuriya
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and Anr. v. Gharrkul Industries Pvt. Ltd. and Others .
8. We find the High Court, in the impugned order to have elaborately discussed
the principles of law in regard to the quashing of such proceedings but, however,
not dealt with the factual matrix. Ex facie, we find that the complainant has not
placed any materials on record indicating complicity of the present appellant(s) in
the alleged crime. Particularly, when the appellant(s) had no role in the issuance of
the instrument, which is evident from Form 32 (Exh.P.59) issued much prior to the
date on which the cheque was drawn and presented for realisation.
9. The veracity of Form-32 has neither been disputed by the Respondent nor
has the act of resignation simpliciter been questioned. As such, the basis on which
liability is sought to be fastened upon the instant appellant(s) is rendered
questionable.
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10. The record reveals the resignations to have taken place on 9 December
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2013 and 12 March 2014. Equally, we find the cheques regarding which the
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2021 SCC OnLine SC 915
5|SLP (Crl) 6905 & 7050 of 2022
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dispute has travelled up the courts to have been issued on 22 March 2014. The
latter is clearly, after the appellant(s) have severed their ties with the Respondent-
Company and, therefore, can in no way be responsible for the conduct of business
at the relevant time. Therefore, we have no hesitation in holding that they ought to
be then entitled to be discharged from prosecution.
11. In this view of the matter, the judgments captioned above of the High Court
of Judicature at Madras, deserve to be set aside. Accordingly, all criminal
proceedings pertaining to the instant appellant(s) arising out of the complaints filed
by the respondent herein are quashed.
12. The appeal(s) are therefore allowed in the above terms. Pending
application(s) if any, shall stand disposed of.
…………………………J.
(B.R. GAVAI)
………………………..J.
(SANJAY KAROL)
New Delhi;
February 14, 2024.
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