Calcutta High Court: In three revision petition combined together, challenging various orders, including prosecution against the petitioners under Section 138 and 141 of the Negotiable Instruments Act, 1881, issuance of a warrant of arrest and order of attachment against the petitioner company, a single-judge bench comprising of Rai Chattopadhyay,* J., upheld the validity of the prosecution against the accused directors, emphasising on the need for specific averments. The Court deemed the issuance of a warrant against the company inappropriate, considering its juridical nature. The Court allowed the trial to proceed, and the case is disposed of.
Factual Matrix
The instant matter involves three revision petitions under Section 482 of the CrPC which are consolidated, arising from the same complaint case dated 04-07-2015, pending before the Metropolitan Magistrate, Calcutta. The petitioners, accused persons, including individuals and a company challenged the maintainability of the complaint, legality of the process, and propriety of actions taken by the trial court.
The complainant, M/s. G.S. Fertilizers (P) Ltd, stated in a ten-page petition that they intended to purchase properties and flats, introduced by the accused persons. Allegedly allured, the complainant paid Rs. 4,05,00,000/- in advance for properties represented as worth Rs. 6 Crores. The accused informed inability to execute sale deed in September 2011 and promised to return the advance. In April 2014, the complainant discovered that the accused attempted to transfer the properties to others, prompting the accused to issue cheques for the advanced amount. However, these cheques were dishonored, leading to legal actions under Section 138 read with Section 141 of the NI Act. The complainant contended that the accused committed offenses by diverting the assets and failing to honor the cheques. The Chief Metropolitan Magistrate takes cognizance and transfers the case to the Metropolitan Magistrate, for enquiry. The petitioners, accused challenged the various orders, including summons issuance and warrant proceedings.
Parties’ Contentions
The petitioners challenged invocation of Section 141 of the NI Act, claiming the complaint lacks necessary averments against them. The petitioners emphasised on the specific requirements under the law for prosecuting directors, which allegedly are not fulfilled in this case. Reference is made to the SMS Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89, where the Supreme Court clarified that the complaint must specifically aver the accused person’s role in the company at the time of the offense. The petitioner company challenged the legality of the order of attachment, arguing that the same is beyond the legal provisions applicable to juridical persons. They invoke Section 305(4) of the CrPC, emphasising that the law does not allow the application of provisions meant for individuals to companies in the absence of a company representative.
The respondent-complainant contended that the accused of misleading the Court by obtaining stay orders without intending to repay the amount and highlighted the acceptance of funds and subsequent dishonor of cheques, forming the basis for the criminal proceedings. The complainant asserted that the complaint sufficiently establishes the involvement of the accused in the day-to-day affairs of the company. It was argued that specific details are not required at the initial stage, and the complaint provides enough information to prima facie establish the accused’s role in the offenses.
Court’s Assessment
The Court noted that the NI Act, is crucial for governing and regulating negotiable instruments. Sections 138 and 141 of the NI Act deal with offenses related to dishonor of cheques and liabilities of persons in charge of the company, respectively. The Court noted that Section 141 of the NI Act deals with offenses by companies. It holds the company, persons in charge of the company, and others accountable for offenses under Section 138. The Court observed that the three categories of persons were covered under Section 141 of the NI Act.
The Court observed that the complainant alleged that the accused persons, being directors and non-directors of the Company, misrepresented the profitability of a property, leading to a misunderstanding that resulted in the complainant transferring a substantial sum of money to the Company. On the other hand, the petitioners argued that a person can only be held vicariously liable for an offense under Section 138 of the NI Act if specific averments in the complaint establish their involvement in the company’s affairs.
The Court rejected the petitioners’ argument, citing a detailed description in the complaint of the role played by the petitioners in the Company’s affairs. The Court cited precedents and stated that merely being a director does not automatically imply being in charge of the company’s affairs and specific averments about a director’s role are necessary for liability.
“…by not merely in accordance with their designation in the company, but specific mention in the complaint of their roll and involvement in the affairs of the company, to implicate that they were in charge thereof at the time of commission of the alleged offence, would make the ‘directors’ and/or ‘non directors’ of the accused company be liable in a case of cheque bounce.”
The Court reviewed the complaint and found it sufficiently describing the petitioners’ involvement in the company’s affairs and held that strong prima facie material existed against the petitioners, justifying the Magistrate’s decision to take cognizance of the offense.
The Court deliberated on whether a warrant of arrest could be issued against a company. The Court emphasised that a company, being a juridical person, cannot be physically apprehended, and the usual provisions related to arrest might not be directly applicable. The Court held that the issuance of a warrant of arrest against the Company was not in accordance with statutory provisions.
Court’s Decision
The Court dismissed CRR 196 of 2016 and CRR 197 of 2016, finding sufficient prima facie evidence against the accused persons. Regarding CRR 278 of 2016, the Court allowed the petition in part and set aside the order of issuance of a warrant of arrest and order of attachment against the company.
The Court modified the impugned order to emphasising that a warrant of arrest against a company, being a juridical person, may not be executable under law. However, the company cannot evade trial and punishment if found guilty. The Court directed the magistrate to proceed with the trial based on due service of summons to the accused company.
Note
The Court clarified that its observations and findings are specific to these revision cases and should not influence the trial proceedings independently conducted by the Magistrate.
[Hans Raj Jain v. State of W.B., 2024 SCC OnLine Cal 789, order dated 30-01-2024]
*Judgment by Justice Rai Chattopadhyay
Advocates who appeared in this case:
Mr. Ayan Bhattacharjee, Mr. Indrajit Adhikari, Mr. Aditya Ratan Tiwary, Mr. Amitabrata Hait, Mr. Suman Majumder, Counsel for the Petitioners
Mr. Pawan Kr. Gupta, Mr. Manish Shukla, Ms. Sofia Naser, Mr. Santunu Sett, Counsel for the Opposite Party
Mr. Imran Ali, Ms. Debjani Sahu, Counsel for the State
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