Mr Karthik B. Athreya & Ors. v. State of Maharashtra

Judgment

1. Rule. Heard finally.

2. The applicants question prosecution in the capacity as Directors or persons actively involved in the affairs of the respondent – M/s Hydroair Tectonics Pvt.Ltd.

3. The principal contention from the vrd 2 APL1261/11 applicants are applicant No.1 (as accused No.10) has already resigned from the company on 16th April 2011, the cheque was dated 27th April 2011, the statutory notice was dated 18th May 2011, the compliance accepted was of June 2011. Consequently, the applicants would not come to face the liability as a Director in the said Company.

4. The other canvass is that applicant No.2 (as accused No.2), applicant No.3 (as accused No.7), applicant No.4 (as accused No.8) are the non- executive independent professional nominee Directors in the Company M/s Hydroair Tectonics Pvt.Ltd. as representative of M/s Clearwater Capital Partners India Ltd. The applicant No.5 (accused No.9) – Shankar Bharadhwaj is not a Director, at the most he could be branded as an employee looking after the accounts of the Company.

5. The learned counsel for applicants has placed reliance to the requisite documents in the form of Form 32 obtained from Registrar of Companies vrd 3 APL1261/11 with receipt, resignation of the applicant No.1 dated 16th April 2011 and cessation as Director effective from 12th April 2011.

The learned counsel has placed reliance to the judgments in the matters of K.K. Ahuja v/s V.K. Vora and anr., reported in (2009) 10 SCC 48, Ramrajsingh v/s State of Madhya Pradesh and anr., reported in (2009) 6 SCC 729 and National Small Industries Corporation Ltd. v/s Harmeet Singh Paintal and anr., reported in (2010) 3 SCC 330.

7. The Apex Court has indicated purport and effect of provisions of section 141 of Negotiable Instruments Act and the required averment in the complaint petition to rope in such Directors to deal with prosecution under section 138 of Negotiable Instruments Act. In the matter of National Small Industries Corporation Ltd., in paragraph 39, the observations are as under :- “39. following principles emerge : From the above discussion, the vrd 4 APL1261/11 (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 time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company; Vicarious liability can be inferred (iii) against 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 vrd 5 APL1261/11 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. The person sought to be made liable (vii) 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.” The legal position in respect of placing reliance to the public document particularly like Form No.32, has been indicated by the Hon'ble Supreme Court in the matter of Harshendra Kumar D. v/s Rebatilata Koley and others, reported in (2010) 3 SCC 351 and in the matter of Anita Malhotra v/s Apparel Export Promotion Council and anr., reported in (2012) 1 SCC 520. In these judgments, the Apex Court indicated, while exercising powers under 482 of Cr.P.C. the High Court is not eclipsed from reading the public documents which are in terms of sections 150, 159 of the Companies Act, having import of public document, to be considered for dealing with the case of the respective applicants challenging liability. vrd 6 APL1261/11

8. The learned counsel for original complainant (respondent) asserts that while exercising powers under section 482 of Cr.P.C., there cannot be a roving enquiry by the Court where disputed questions are projected, which warrants evidence, the resignation of applicant No.1 from the certified copy available with the respondent No.1 complainant illustrate that it was on 12th August 2011 to the extent of M/s Hydroair Tectonics Pvt. Ltd. He asserts the resignation referred by applicant No.1 should not be considered. He has invited attention to the Articles of Association of M/s Hydroair Tectonics Pvt.Ltd. Which are after amendment, after incorporation of applicant Nos.1 to 4 in the said Company. According to the learned counsel, the applicants have the veto rights being investors Directors, this was clearly indicated in the said Articles of Association, particularly in clauses 17(d), 18. According to him, by virtue of clause 18(p), the prosecution of settlement of any proceedings, legal actions or claims which within vrd 7 APL1261/11 any financial year would exceed INR Rs.10,00,00,000/- (Indian Rupees Ten Million). The veto rights of investors / Directors shall prevail. Clause 17(i) of the Articles of Association provides no liability of the investors / Directors.

9. Any document to which reliance is to be placed and to be read even at prima facie stage will have to be read completely, need not be read divorced from any clause to the benefit of a party. The rights vested in applicants by virtue of clause 18(p) of Articles of Association referred above comes into play only while dealing with prosecution or settlement of any proceedings. Clause 18 will have to be read in juxtaposition to clause 17(i) which conceives no liability of the investors / Directors. The position as is emerged is, applicant No.1 by virtue of placement of Form 32 dated 16th April 2011 has already resigned. The other three applicants i.e. applicant Nos.2 to 4 are prevailing non-executive Directors representatives of M/s Clearwater Capital Partners India Ltd., Fund vrd 8 APL1261/11 3, Singapore. Applicant No.1 is employee of the said Firm, applicant No.2 is also a whole time employee with the said Company, a Public Limited Company, applicant No.3 is a practicing Chartered Accountant, applicant No.4 is also a Chartered Accountant.

10. In the light of status of respective applicants, even if in the complaint application averments are made that the applicants herein were nominee Directors and concerned with day-to-day affairs of the Company, it would not attract liability to be fastened in terms of section 141 of Negotiable Instruments Act.

11. So far as applicant No.5 is concerned, he is not a Director, this is established from the list of Directors produced at page 274 of application, he is a professional engaged to develop systems and processes and appointment section and looks after administrative work of M/s Hydroair Tectonics Pvt.Ltd. He is not in-charge of the said Company or vrd 9 APL1261/11 involved in day-to-day financial activities. He had never any interaction with complainant.

12. Survey of above facts illustrate no liability can be fastened against the applicants by branding them as Directors or in-charge of day-to- day affairs of the respondent Company. The applicant No.1 had already resigned, applicant Nos.2, 3 and 4 were non-executive Directors, applicant No.5 was not concerned with the issuance of cheque. They did not perilously border with complainant. Application is allowed, rule is made absolute. The observations are to be restricted to the extent of applicants. (K.U. CHANDIWAL J.)