The High Court · 2025

The State of Telangana, Rep. by its Public Prosecutor, High Court of Telangana, Hyderabad . . . . RespondenU Petitioner/Accused No. 3 ... . RespondenURespondent No.,2 Petition under Section 528 of BNSS praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition, the High Court may .r. - be pleased to vacate the stay granted in t.A. No.1 of 2024 in lRL.P.No 2024 and pass 5424 0F LA. NO: 1OF2024 Petition r-rnder Section 482 of Cr.P .C praying that irr the circumstances stated in the lVlemorandum of Grounds of Criminal Petitior, ,he High Court may be pleased to S IAY all further proceedings including perso'ri,l appearance of the Petitioner/Accused No.3 in C.C. No. 4577 12019 on the lilt' of Xl Metropolitan Magistrate, At Kukatpally, pendrng disposal of the main Crirrittal Petitron. This Petition coming on for hearing, upon perusing the Memorandum of Grounds of Criminal Petition and upon hearing the argume rtli of Sri Syed Tousif Basha, Advocate for the Petitioner and Sri B. Naresh Kume r, learned counsel for the Respondent No.1 and Sri Jithender Rao Veerama la, Additional Public Prosecutor (TG) on behalf of the Respondent No. 2. The Court made the following: ORDER " n THE HONOURABLE SRI JUSTICE N.TUKARAMJI Criminal Petition No.5424 ot 2024 ORDER This Criminal Petition is filed under Section 482 of Code of Criminal Procedure, 1973 (for short, 'the CrPC') seeking quashment of proceedings in C.C.No.4577 of 2019 on the file of the Xl Metropolitan Magistrate, Kukatpally.

2. I have heard Mr. Syed Tousif Basha, learned counsel for the petitioner, Mr.B.Naresh Kumar, learned counsel for the respondent No.1 and Mr.Jithender Rao Veeramalla, learned Additional Public Prosecutor, representing the respondent No.2-State.

3. The petitioner is arrayed as accused No.3 in C.C.No.4577 of 2019 filed under Section 142 of lhe Negotiable lnstruments Act, '1881 (for short, 'the Nl Act')

4. Factual matrix : The case of respondent No. 1/complainant, in brief, is that on

02.03.2018, Bilwa lnfrastructure Ltd./accused No. '1 company, entered into an agreement with the complainant for the establishment of a batching plant. A financial dispute subsequently \ 2 NTR,J CdO-5424 2024 arose regarding an alleged outstanding balance o" Rs.38,43,7681, which was later settled for Rs.24,64,3001. ln pr.rn;uance of the settlement, four post-dated cheques were issued by the Executive Director/accused No. 2, allegedly on behalf of the pet tioner/accused No. 3 and accused No. 1 company. Upon pres€)n iation, all four cheques were dishonoured with the bank's endors-'r'rent "payment stopped by drawer." Following this, the compl:rinant issued a statutory notice, and thereafter filed a private complarnt against the company and its directors. The petitioner has be:en shown as Managing Director

5. Submissions on Behalf of the Petitioner Learned counsel for the petitioner sutrn'its that the petitioner/accused No. 3 has been falsely implicated il the matter by being described as the Managing Director of rlr:cused No. '1 company. It is contended that the petitioner war; neither the Managing Director nor in charge of the day-to-day affarirs of accused No. 1 company. Merely holding the designation o' Director,' it is argued, does not render a person liable for prosecutrorr under the Nl Act unless there are specific allegations detailing l-ris role in the commission of the offence. ln the present complairrt apart from a bald assertion that the petitioner was thir Managing I I 3 NTR.] cl'p 5424_2024 1-) Director/Director, no specific averments have been made to show his involvement in the alleged offence. It is further submitted that the petitioner was neither a party to the commercial agreement nor the drawer of the cheques, and had no role in the underlying transaction. At the relevant time, he was serving as the Chief Financial Officer of M/s Orchasp Limited, which, according to counsel, made it functionally incompatible for him to be involved in the affairs of accused No. 1 company. Continuance of the criminal proceedings against him would therefore amount to an abuse of process. Reliance is placed on the judgment of the Hon'ble Supreme Court in K.S. Mehta v. M/s Morgan Securties and Credits Pivate Limited, 2025 SCC Online SC 492, wherein it was held that non- executive and independent directors cannot be held liable for offences under Section 138 read with Section 141 of the Negotiable lnstruments Act unless specific allegations are made demonstrating their active participation in the company's affairs at the relevant point in time

6. Submissions on Behalf of Res ondent No. 1 Learned counsel for respondent No. 1, on the other hand, contends that the petitioner is the Managing Director of M/s Orchasp 4 NTR,] Cdp 5424-2024 Limited and that, since the company-issued clreques were dishonoured, the petitioner is liable to be prosecuteC along with the other accused. The contention that the petiti(r ner had no involvement in the transaction, it is argued, is a matter to be determined by the trial court after appreciation of evidence, and not at the present stage. It is further pointed out that although the pet tioner claims to have no connection with accused No. 1 conrprany, he has prosecuted a writ petitions in the company's nam,: Counsel also submits that Bilwa lnfrastructure Limited was forrnr.'rly known as Kanthi Rekha Power Limited, and that the petti:rner was the Managing Director at the relevant time. This is supprtrted by Form No. l/Certificate of lncorporation issued by the Registrar of Companies, which records the petitioner's aoltointment as Managing Director on 14.03.2011. A subsequert Certificate of lncorporation. issued upon change of the company'i name to Bilwa lnfrastructure Limited with effect from 24.0t\.,a017, further establishes this continuity. ln view of these facts, it is submitted that the p,etitioneis role in the operational, financial, and day{o-day affairs oi the company cannot be ruled out. Therefore, the continuance c,F proceedings \ l I ;i I 5 NTR,J Crlp_5424 _2024 o against him is necessary to secure justice and ensure accountability for the financial loss allegedly suffered by respondent No. 1.

7. I have perused the materials on record

8. Analvsis: The averments in the complaint indicate that accused No. '1 is a limited company, accused No.2 is its Executive Director, and accused No. 3/the petitioner is described as the Managing Director of accused No. 'l company. lt is alleged that the complainant and accused No. 'l company entered into an agreement on 02.03.20'18 for the establishment of a batching plant and the supply of ready-mix concrete. While the complainant duly performed its obligations under the agreement, the accused failed to make timely payment for the services rendered. As of 12.03.2019, there remained an outstanding balance. After negotiations, on 29.03.2019, accused No. 2, acting on behalf of accused Nos. 1 and 3, entered into a settlement agreement, which was signed by the complainant, accused No. 2, and one Mr. A.S.N. Prasad, General Manager (Projects) of accused No. 1. Pursuant to this settlement, accused No. 2, on behalf of accused Nos. 1 and 3, issued four post-dated 6 NTR.] Ctlp-5424 2024 cheques, all of which were dishonoured upon pres!-,ntation with the bank's endorsement 'payment stopped by the drawerr The complaint further avers that the agreerre;nt in question was executed after Kanthi Rekha Power Limited rad changed its name to Bilwa lnfrastructure Limited on 02.08.20f i. The petitioner relies on Form No. 32 of Kanthi Rekha Power Limitrld, filed in 2011, showing him (Chandra Sekhar Pattapurathi) as Managing Director, and Form No, l, records him as a promoter. ln Fc,rrr No.32, one Chenchaiah Pantulu Pattapurathi is also shown as lVlanaging Director, with the petitioner similarly designated. H:vrever, there is no specific document placed on record derrr: nstrating the petitionels continuance as a Director after 2017. lt is undisputed from the pleadings that the agreement was ex€,cuted, and the cheques vuere issued, by accused No. 2. Neverthe er;s, no specific document has been produced establishing that thr: retitioner was the Managing Director of Bilwa lnfrastructure Limiterl itt the relevant time. Pertinently, the petitioner, as Director, filed \A'.1:,. No. g462 of 2024 laking exception to the order issued by the Deputy Commissioner for the tax period 2017-18 unde. the extended period of limitation in Section 1684 of the CGST ,A,:1,2017. The I ;t ( 7 NrR,] Ctlp-5424-2024 filing of this writ petition on behalf of Bilwa lnfrastructure Limited in respect of tax matters prima facie indicates that the petitioner/accused No. 3 was involved in the affairs of the company. This is further supported by the fact that respondent No. 2 in the complaint specifically alleged that the agreement was entered into by accused No. 1 on behalf of accused Nos. 2 and 3 in their respective capacities. Accordingly, the act of filing a writ petition on behalf of Bilwa lnfrastructure Limited concerning its tax liability is, on the face of it, indicative of the petitioner's involvement in the financial affairs of the company. As noted above, the petitioner has been arrayed in the complaint as the Managing Director. A role of Managing Director or active director in settled law, is distinct from that of other directors who are not concerned with the day-to-day affairs of the company.

9. ln National Small lndusties Corporation Limited v. Harmeet Singh Paintal and Another, (2010) 3 SCC 330, the Hon'ble Supreme Court observed as under "39. From the above discusslor, the following pinciples emerge: (i) The primary responsibility is on the complainant to make specific averments as are requred under the law in the complaint so as to make the accused vicariously liable. For fastening the ciminal 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 ciminal liability can be fastened onty on those who, at the time o NTR,] Ctlp 924.2024 of the commission of the offence, were in charge of and w(.e responsible for the conluct of fhe busness of the company. (iii) Vicaious liab,ity can be infened against a company registered or incotporated under the aonpanies Act, 1956 only if lhe requisite statements, which are required t<t lrc averred in the complainUpetition are ntade so as to make the accused thcHn vicariously liable for c'ffence committed by the company along with aver,nents in the petition containing that the accused were in charge of and respon-.jil)te for the business of the company and by viftue of their position they are liabb to be proceeded with. (tv) Vicarious liability on the paft of a person must bf t eaded and proved and not nferred. (v) lf the accused is a Managing Directot ct a Joint Managing Direclor then it is not necessary to make specific averment ir the complaint and by vilue of thei position they are liable to be proceeded vl,lh (vi) lf the accused $ a Drector or an officer of a company who signed the che.lr,2s on behalf of the com[tany then also it ,s not necessary to make spec ft(: averment in the complaint (vu) The person sought to be made liable shoLthl be in charge of and responsible for the conduct of the business of the compant .. the relevant time Ihis has to be averred as a fact as there ,s no deemed lit b,lty of a Director in such cases.' (v) lt the accused is a Managing Directar )r a Joint Managing Director then it is not necessary to make specific averment i the complaint and by vtttue of their position they are liable to be proceeded wit', '10. Thus, the precise role of the petitioner and t'r(, extent of his liability are matters that can only be determined upon irppreciation of evidence Juring trial. ln light of the preliminary 'inding that the petitioner is the Director, who has a role in the finanr;ial affairs of the company, it would be premature and inappropriate, althis stage, to equate his position with that of a non-executive direrclor. His status within the company and the nature of his involvem,:nt in its affairs must be adjudicated in the course of trial for the p lr lose of fixing .any financial liability. I I 9 NTR,] Up_5424 2024

11. ln this view of the matter, a pima facie case for proceeding to trial has been made out. Consequently, keeping open the involvement and liability of the petitioner for determination by the trial Court, the petitioner's prayer for quashment of the proceedings at this stage is found premature and is liable to be dismissed. 12 ln the result, the criminal petition is dismissed Pending miscellaneous applications, if any, shall stand closed I I l To, '"'. t*?;?iJli:3[t[iE t/ a SEGTION OFFICER ,fTRUE COPY/I 1 2. 3 4 5 tr#nt{+'ffi :ii;li";"[1$ffi F$fr*:+'ffi I*l*""*'ou'' Two CD Copies BJLB,gh N/ :li 5[P ZW ta,: HIGH COURT DATED:13/08/2025 ORDER CRLP.No.5424 ot 2024 CRIMINAL PETITION IS DISMISSED 1 ;, q )\