Kuljinder Singh v. Bhatana Alloys Pvt Ltd

o o INoTHEoHIGHoCOURToOFoPUNJABo&oHARYANAo AToCHANDIGARHo o o o o o o o o ooooReservedoon:o16.01.2025o o o o o o o o ooooPronouncedoon:o15.02.2025o o

1.o o o o o o o CRM-M-27027-2016o(O&M)o KuljinderoSingho o o o o oooooo o o o...Petitioner o o o o o o Versuso BhatanaoAlloysoPvt.oLtd.o o o o oooooooooooo oo...Respondento

2.o o o o o o o CRM-M-1112-2017o(O&M)o KuljinderoSingho o o o o o ooooo o oooo...Petitioner o o o o o o Versuso BhatanaoAlloysoPvt.oLtd.o o o o o ooooooooooo...Respondento o

3.o o o o o o o CRR-1081-2023o(O&M)o BhatanaoAlloysoPvt.oLtd.o o o o oooooo o oooo...Petitioner o o o o o o Versuso YadvinderoSingho andoanothero o o o oooooooooo...Respondentso CORAM:oo HON'BLEoMR.oJUSTICEoHARPREEToSINGHoBRARo Present:oooo Mr.oMansuroAli,oAdvocateo o ooooooo forotheopetitioner(s)oinoCRM-M-27027-2016o&o o ooooooo CRM-M-1112-2017.oo o o o ooooooo Mr.oAlokoMittal,oAdvocateo o ooooooo forotheorespondentoinoCRM-M-27027-2016o&o o ooooooo CRM-M-1112-2017oandoforotheopetitioneroo o o inoCRR-1081-2023.o ***o HarpreetoSinghoBrar,oJ.oo

1.o o Thiso commono ordero shallo disposeo ofo allo theo abovementionedo petitionsoasotheyoariseofromosimilarofactualomatrix.oHowever,oforotheosakeoofo brevity,otheofactsoareotakenofromoCRM-M-27027-2016.oo CRM-M-27027-2016o(O&M)o 2o o o o

2.o o TheopresentopetitionohasobeenopreferredounderoSectiono482,oCodeo ofo Criminalo Procedure,o 1973o (hereinaftero 'Cr.P.C.')o seekingo quashingo ofo complaintoNo.9117odatedo11.12.2014ounderoSectionso138,o141oreadowitho142oofo theo Negotiableo Instrumentso Act,o 1881o (hereinaftero 'NIo Act')o aso wello aso summoningo ordero datedo 21.03.2015o (Annexureo P-3)o passedo byo theo learnedo JudicialoMagistrateoIstoClass,oChandigarh.oo

3.o o Briefly,otheofacts,oasoalleged,oareothatopetitioner,onamelyoKuljindero Singho ando Ajito Singho areo promoterso ando ino chargeo ofo M/so Aakaro Indiao DeveloperoPvt.oLtd.oTheosaidocompanyowasoinotheobusinessoofoironoandosteelo goodso witho theo respondent.o Ino ordero too settleo theo outstandingo amounto ofo Rs.17,04,157/-,oaopostodatedochequeobearingono.161702odatedo15.04.2014oforo Rs.14,00,000/-owasoissuedoinofavouroofotheorespondent.oTheosaidochequeowaso signedo byo theo petitioner-Kuljindero Singh,o beingo itso Director/authorisedo signatory.o Ono presentationo foro encashment,o theo sameo waso dishonouredo ando returnedovideo memoo datedo03.05.2014,owitho theo remarks-o 'accounto closed.'o Thereafter,oaolegalonoticeodatedo31.05.2014owasoservedoonotheoaccused.oSinceo theoaccusedofailedotoopayotheoamountowithinotheostipulatedotime,otheocomplainto (supra)owasoinstituted.oo

4.o o Learnedocounseloforotheopetitioner(s)-accusedointeroaliaocontendso thato theo petitioner-Kuljindero Singho waso ao Directoro ando byo virtueo ofo it,o ano Authorisedo Signatoryo tillo heo resignedo ono 25.06.2012.o Ato theo timeo ofo presentationoofotheochequeoforoencashment,otheopetitioner-KuljinderoSinghohado resignedoandorespondent-YadvinderoSinghowasotheodirector.oRespondentoNo.2o wasowelloawareoofotheofactothatoYadvinderoSinghohadotakenooveroasoDirector,o CRM-M-27027-2016o(O&M)o 3o o o o ando aso such,o heo cannoto feigno ignoranceo quao theo same.o Furthero still,o theo complainto waso initiallyo filedo beforeo learnedo Chiefo Metropolitano Magistrateo (South),o Saketo Courts,o Newo Delhio ono 14.07.2014.o However,o theo sameo waso returnedotoorespondentoNo.2-complainantoasotheosaidoCourtolackedoterritorialo jurisdiction.oTherefore,orespondentoNo.2ooughtotoohaveosoughtocondonationoofo delayobeforeoproceedingsowereoinitiatedoinocomplainto(supra)obeforeolearnedo Judicialo Magistrateo Isto Class,o Chandigarh.o Moreover,o theo summoningo ordero datedo21.03.2015ohasobeenopassedoinoaomechanicalomanneroandotheopetitionero hasoonlyobeenosummonedoforotheoreasonoofobeingotheosignatoryoofotheodisputedo cheque.oFurtherostill,otheopetitionerohadoleftotheocountryoono31.05.2015owhileo theoproclamationowasoissuedoagainstohimoono03.11.2015.oSubsequently,oheowaso declaredoaoproclaimedopersonovideoorderodatedo10.02.2016.oAsosuch,osinceotheo petitionerowasoneveroserved,otheoentireoprocessostandsovitiated.oo

5.o o Perocontraolearnedocounseloforotheorespondentosubmitsothatotheo petitionerowasotheoDirector/AuthorisedoPersonoatotheotimeoofoissuanceoofotheo disputedocheque,owhichodulyobearsohisosignature.oInofact,otheolearnedotrialoCourto haso erredo ino onlyo summoningo theo petitionero ino theo complaint(supra)o aso YadvinderoSinghoandoAjitoSinghowereoalsooactivelyoinvolvedoinodayotoodayo activitiesoofotheoaccusedocompany.oAsosuch,obyovirtueoofoSectiono141,oNIoAct,o everyopersonoresponsibleoforomanagingotheoaffairsoofotheocompanyoonoaodailyo basiso willo beo vicariouslyo liable.o Relianceo ino thiso regardo iso placedo ono theo judgmentorenderedobyotheoHon'bleoSupremeoCourtoinoSMSoPharmaceuticalso Ltd.ovs.oNeetaoBhallaoandoanothero(2005)o8oSCCo89.o CRM-M-27027-2016o(O&M)o 4o o o o

6.o o Havingoheardolearnedocounseloforotheopartiesoandoafteroperusingo theorecordowithotheiroableoassistance,oitotranspiresothatotheodisputedochequeowaso issuedounderotheosignatureoofotheopetitioner,owhoowasotheoDirectoroandotheo AuthorisedoSignatoryoatotheotime.oHowever,otheopetitionerohadoresignedofromo theo saido posto ono 25.06.2012o ando Yadvindero Singho waso appointedo aso hiso successor.o

7.o o Sectiono141oofotheoNIoActoreadsoasofollows:o oSectiono141.Offencesobyocompanies.-o

(1)oIfotheopersonocommittingoanooffenceounderosectiono138oisoao company,o everyo persono who,o ato theo timeo theo offenceo waso committed,o waso ino chargeo of,o ando waso responsibleo to,o theo companyoforotheoconductoofotheobusinessoofotheocompany,oasowello asotheocompany,oshallobeodeemedotoobeoguiltyoofotheooffenceoando shallobeoliableotoobeoproceededoagainstoandopunishedoaccordingly:o o Providedothatonothingocontainedoinothisosub-sectionoshallo rendero anyo persono liableo too punishmento ifo heo proveso thato theo offenceo waso committedo withouto hiso knowledge,o oro thato heo hado exercisedo allo dueo diligenceo too prevento theo commissiono ofo sucho offence:o o Providedo furthero thato whereo ao persono iso nominatedo aso ao Directoro ofo ao companyo byo virtueo ofo hiso holdingo anyo officeo oro employmentoinotheoCentraloGovernmentooroStateoGovernmentooroao financialo corporationo ownedo oro controlledo byo theo Centralo Governmento oro theo Stateo Government,o aso theo caseo mayo be,o heo shallonotobeoliableoforoprosecutionounderothisoChapter.o o

(2)oNotwithstandingoanythingocontainedoinosub-sectiono(1),owhereo anyooffenceounderothisoActohasobeenocommittedobyoaocompanyoando itoisoprovedothatotheooffenceohasobeenocommittedowithotheoconsento oroconnivanceoof,ooroisoattributableoto,oanyoneglectoonotheopartoof,o anyodirector,omanager,osecretaryoorootheroofficeroofotheocompany,o suchodirector,omanager,osecretaryoorootheroofficeroshalloalsoobeo deemedo too beo guiltyo ofo thato offenceo ando shallo beo liableo too beo proceededoagainstoandopunishedoaccordingly.o o CRM-M-27027-2016o(O&M)o 5o o o o Explanation.--oForotheopurposesoofothisosection,o--o

(a)o"company"omeansoanyobodyocorporateoandoincludesoao firmoorootheroassociationoofoindividuals;oando

(b)o"director",oinorelationotooaofirm,omeansoaopartneroinotheo firm."oooo(emphasisoadded)o o oo o Ito iso evidento thato theo legislativeo intentiono behindo theo aforementionedoprovisionowasotoocreateovicariousoliability.oItofurtheroclarifieso thato sucho liabilityo wouldo onlyo beo placedo ono allo sucho personso whoo wereo responsibleoforoconductingodayotoodayobusinessoofotheosaidocompany.oAotwoo JudgeoBenchoofotheoHon'bleoSupremeoCourtoinoS.P.oManioandoMohanoDairyo vs.oDr.oSnehlataoElangovan,o2022oSCCoOnlineoSCo1238ospeakingothrougho JusticeoJ.B.oPardiwala,oheldoasofollows:o "46.oWhenoinoviewoofotheobasicoavermentoprocessoisoissuedotheo complaintomustoproceedoagainstotheoDirectorsooropartnersoasotheo caseomayobe.oBut,oifoanyoDirectorooroPartnerowantsotheoprocessotoo beoquashedobyofilingoaopetitionounderoSectiono482oofotheoCodeoono theogroundothatoonlyoaobaldoavermentoisomadeoinotheocomplainto ando thato heo iso reallyo noto concernedo witho theo issuanceo ofo theo cheque,oheomustoinoorderotoopersuadeotheoHighoCourtotooquasho theo processo eithero furnisho someo sterlingo incontrovertibleo materialo oro acceptableo circumstanceso too substantiateo hiso contention.oHeomustomakeooutoaocaseothatomakingohimostandotheo trialowouldobeoanoabuseoofoprocessoofocourt.oHeocannotogetotheo complaintoquashedomerelyoonotheogroundothatoapartofromotheobasico avermentonooparticularsoareogivenoinotheocomplaintoaboutohisorole,o becauseoordinarilyotheobasicoavermentowouldobeosufficientotoosendo himotootrialoandoitocouldobeoarguedothatohisofurtheroroleocouldobeo broughtooutoinotheotrial.oQuashingoofoaocomplaintoisoaoseriouso matter.o Complainto cannoto beo quashedo foro theo asking.o Foro quashingoofoaocomplaint,oitomustobeoshownothatonoooffenceoisomadeo outoatoalloagainstotheoDirectorooroPartner.o

47.oOurofinaloconclusionsomayobeosummarisedoasounder:-o a.)oTheoprimaryoresponsibilityoofotheocomplainantoisotoomakeo specifico avermentso ino theo complainto soo aso too makeo theo accusedo vicariouslyo liable.o Foro fasteningo theo criminalo liability,othereoisonoolegalorequirementoforotheocomplainanto CRM-M-27027-2016o(O&M)o 6o o o o too showothato theo accusedo partneroofo theo firmo wasoawareo aboutoeachoandoeveryotransaction.oOnotheootherohand,otheo firstoprovisootoosub-sectiono(1)oofoSectiono141oofotheoActo clearlyolaysodownothatoifotheoaccusedoisoableotooproveotootheo satisfactiono ofo theo Courto thato theo offenceo waso committedo withouto his/hero knowledgeo oro he/sheo hado exercisedo dueo diligenceotoopreventotheocommissionoofosuchooffence,ohe/sheo willonotobeoliableoofopunishment.o b.)oTheocomplainantoisosupposedotooknowoonlyogenerallyoaso toowhoowereoinochargeoofotheoaffairsoofotheocompanyoorofirm,o asotheocaseomayobe.oTheootheroadministrativeomattersowouldo beowithinotheospecialoknowledgeoofotheocompanyoorotheofirmo andothoseowhooareoinochargeoofoit.oInosuchocircumstances,o theo complainanto iso expectedo too allegeo thato theo personso namedoinotheocomplaintoareoinochargeoofotheoaffairsoofotheo company/firm.oItoisoonlyotheoDirectorsoofotheocompanyooro theopartnersoofotheofirm,oasotheocaseomayobe,owhoohaveotheo specialoknowledgeoaboutotheoroleotheyohadoplayedoinotheo companyoorotheopartnersoinoaofirmotooshowobeforeotheocourto thatoatotheorelevantopointoofotimeotheyowereonotoinochargeoofo theoaffairsoofotheocompany.oAdvertenceotooSectionso138oando Sectiono141orespectivelyoofotheoNIoActoshowsothatoonotheo othero elementso ofo ano offenceo undero Sectiono 138o beingo satisfied,otheoburdenoisoonotheoBoardoofoDirectorsoorotheo officersoinochargeoofotheoaffairsoofotheocompany/partnersoofo aofirmotooshowothatotheyowereonotoliableotoobeoconvicted.oTheo existenceoofoanyospecialocircumstanceothatomakesothemonoto liableoisosomethingothatoisopeculiarlyowithinotheiroknowledgeo andoitoisoforothemotooestablishoatotheotrialotooshowothatoatotheo relevantotimeotheyowereonotoinochargeoofotheoaffairsoofotheo companyoorotheofirm.o c.)oNeedlessotoosay,otheofinalojudgementoandoorderowouldo dependo ono theo evidenceo adduced.o Criminalo liabilityo iso attractedoonlyoonothose,owhooatotheotimeoofocommissionoofo theooffence,owereoinochargeoofoandowereoresponsibleoforo theo conducto ofo theo businesso ofo theo firm.o Buto vicariouso criminaloliabilityocanobeoinferredoagainstotheopartnersoofoao firmowhenoitoisospecificallyoaverredoinotheocomplaintoabouto theostatusoofotheopartnerso?qua?otheofirm.oThisowouldomakeo themoliableotoofaceotheoprosecutionobutoitodoesonotoleadotoo automatico conviction.o Hence,o theyo areo noto adverselyo CRM-M-27027-2016o(O&M)o 7o o o o prejudicedoifotheyoareoeventuallyofoundotoobeonotoguilty,oasoao necessaryoconsequenceothereofowouldobeoacquittal.o d.)oIfoanyoDirectorowantsotheoprocessotoobeoquashedobyofilingo aopetitionounderoSectiono482oofotheoCodeoonotheogroundothato onlyoaobaldoavermentoisomadeoinotheocomplaintoandothato he/sheo iso reallyo noto concernedo witho theo issuanceo ofo theo cheque,ohe/sheomustoinoorderotoopersuadeotheoHighoCourtotoo quasho theo processo eithero furnisho someo sterlingo incontrovertibleo materialo oro acceptableo circumstanceso too substantiateohis/herocontention.oHe/sheomustomakeooutoao caseo thato makingo him/hero stando theo trialo wouldo beo ano abuseoofoprocessoofoCourt."o(emphasisoadded)o o

8.o o Furtherostill,oaotwooJudgeoBenchoofotheoHon'bleoSupremeoCourtoino K.K.oAhujaovs.oV.K.oVoraoandoanothero(2009)o10oSCCo48ohasocategoricallyo heldothatosignatureoofoaoDirectoroofotheocompanyowouldoautomaticallyoattracto liabilityo undero Sectiono 141(2),o NIo Act.o Speakingo througho Justiceo R.V.o Raveeendran,otheofollowingowasoobserved:o "20.oTheopositionounderosectiono141oofotheoActocanobeosummarisedo thuso:o

(i)o Ifo theo accusedo iso theo Managingo Directoro oro ao Jointo ManagingoDirector,oitoisonotonecessaryotoomakeoanoavermento inotheocomplaintothatoheoisoinochargeoof,oandoisoresponsibleo too theo company,o foro theo conducto ofo theo businesso ofo theo company.oItoisosufficientoifoanoavermentoisomadeothatotheo accusedo waso theo Managingo Directoro oro Jointo Managingo Directoro ato theo relevanto time.o Thiso iso becauseo theo prefixo 'Managing'otootheowordo'Director'omakesoitoclearothatotheyo wereoinochargeoofoandoareoresponsibleotootheocompany,oforo theoconductoofotheobusinessoofotheocompany.o

(ii)oInotheocaseoofoaodirectorooroanoofficeroofotheocompanyo whoosignedotheochequeoonobehalfoofotheocompany,othereoiso nooneedotoomakeoaospecificoavermentothatoheowasoinochargeo ofoandowasoresponsibleotootheocompany,oforotheoconductoofo theobusinessoofotheocompanyooromakeoanyospecificoallegationo abouto consent,o connivanceo oro negligence.o Theo veryo facto thatotheodishonouredochequeowasosignedobyohimoonobehalfo CRM-M-27027-2016o(O&M)o 8o o o o ofotheocompany,owouldogiveoriseotooresponsibilityoundero sub-sectiono(2)oofoSectiono141.o xxxo o o o xxxo o o o xxx"oo o o o o o o (emphasisoadded)o o

9.o o However,owhileotheopetitionerowasotheoAuthorisedoPersonotoosigno theodisputedochequeoonobehalfoofotheoaccused,oatotheotimeoofoitsoissuance,oheodido notohaveoanyoassociationowithotheocompanyosinceohisoretirementoono25.06.2012.o RespondentowasoalsoomadeoawareoofotheofactothatoYadvinderoSinghowillonowobeo actingoasotheoDirectoroofotheocompany,opostotheopetitioner'soresignation.oInospiteo ofothat,otheopetitionerowasoarraignedoasoanoaccusedowithoutohighlightingohowoheo wasoresponsibleoforooverseeingotheoencashmentoofotheodisputedochequeoeveno aftero resignationo fromo theo company.o Ao twoo Judgeo Bencho ofo theo Hon'bleo SupremeoCourtoinoDCMoFinancialoServicesoLtd.oVs.oJ.N.oSareenoandoanothero

(2008)o3oSCC(Cri)o401,ospeakingothroughoJusticeoS.B.oSinha,otheofollowingo wasoheld:o "20.oTheochequeoinoquestionowasoadmittedlyoaopostodatedo one.oItowasosignedoono3rdoApril,o1995.oItowasopresentedoonlyo sometimesoinoJune,o1998.oInotheomeantimeoheohadoresignedo fromo theo directorshipo ofo theo Company.o Theo complainto petitiono waso filedo ono oro abouto 20tho August,o 1998.o Intimationo abouto hiso resignationo waso giveno too theo complainantoinowritingobyotheo1storespondentoonoseveralo occasions.o Appellanto was,o therefore,o awareo thereof.o Despiteo havingo theo knowledge,o theo 1sto respondento waso impleadedo oneo ofo theo accusedo ino theo complainto aso ao DirectoroInchargeoofotheoaffairsoofotheoCompanyoonotheodateo ofocommissionoofotheooffence,owhichoheowasonot.oIfoheowaso proceededoagainstoasoaosignatoryotootheocheques,oitoshouldo haveobeenodisclosedobeforeotheolearnedoJudgeoasoalsootheo HighoCourtosooasotooenableohimotooapplyohisomindoinothato behalf.oItowasonotodone.oAlthough,otherefore,oitomayobeothato asoanoauthorisedosignatoryoheowillobeodeemedotoobeopersono incharge,oinotheofactsoandocircumstancesoofotheocase,oweoareo ofo theo opiniono thatotheo saido contentiono shouldo noto beo CRM-M-27027-2016o(O&M)o 9o o o o permittedotoobeoraisedoforotheofirstotimeobeforeous.oAopersono whoohadoresignedowithotheoknowledgeoofotheocomplainanto ino1996ocouldonotobeoaopersonoinchargeoofotheoCompanyoino 1998owhenotheochequeowasodishonoured.oHeohadonoosayoino theomatteroofoseeingothatotheochequeoisohonoured.oHeocouldo notoaskotheoCompanyotoopayotheoamount.oHeoasoaoDirectoro oro otherwiseo couldo noto haveo beeno madeo responsibleo foro paymento ofo theo chequeo ono behalfo ofo theo Companyo oro otherwise.o(SeeoalsooShivoKumaroPoddarov.oStateo(NCToofo Delhi),o(2007)3oSCCo693:oEverestoAdvertisingoPvt.oLtd.ov.o Stateo (NCTo ofo Delhi),o 2007(2)o RCRo (Criminal)o 575o :o 2007(2)oRCRo(Civil)o738o:o2007(2)oRAJo412o:o(2007)5oSCCo 54oandoRaghuo Lakshminarayanano v.o Fineo Tubes,o 2007(2)o RCRo(Criminal)o571o:o2007(2)oRCRo(Civil)o728o:o2007(2)o RAJo332o:o(2007)5oSCCo103.o xxxo o o xxxo o o xxxo

22.oWhenopostodatedochequesoareoissuedoandotheosameoareo accepted,o althougho itomayo beopresumedo thato theomoneyo willo beo madeo availableo ino theo banko wheno theo sameo iso presentedoforoencashment,obutoforothatopurpose,otheoharsho provisiono ofo constructiveo liabilityo mayo noto beo availableo exceptowhenoanoappropriateocaseoinothatobehalfoisomadeo out."o(emphasisoadded)o o o Relianceo cano alsoo beo placedo ono theo judgmento renderedo byo theo Hon'bleoSupremeoCourtoinoAshokeoMaloBafnaovs.oM/s.oUpperoIndiaoSteelo Mfg.o&oEngg.oCo.oLtd.o2018(14)oSCCo202.o

10.o o Inoviewoofotheodiscussionoabove,otheoaforementionedopetitionsoareo decidedoinotheofollowingomanner:o

1.o TheopetitionsobearingoNo.oCRM-M-27027-2016oandoCRM-M-1112-2017o areo allowedo ando theo complainto bearingo No.9117o datedo11.12.2014ounderoSectionso138,o141oreadowitho142oofotheo NegotiableoInstrumentsoAct,o1881oasowelloasosummoningoordero datedo21.03.2015o(AnnexureoP-3)opassedobyotheolearnedoJudicialo Magistrateo Isto Class,o Chandigarho areo quashedo quao petitioner-YadvinderoSingh.oo CRM-M-27027-2016o(O&M)o 10o o o o

2.o Aso faro aso theo petitiono bearingo No.o CRR-1081-2023o iso concerned,oitoisoclearothatotheooperationsoofotheoaccused-companyo wereo runo byo ao closeo knito familyo aso Yadvindero Singh,o currento director,oandoAjitoSinghoareosonoandofather.oTheocomplainantopartyo waso dulyo informedo ofo theo changeo ino leadershipo aftero theo resignationoofoKuljinderoSingh.oAoperusaloofotheosummoningoordero datedo21.03.2015o(AnnexureoP-3)oalsooindicatesothatoonlyoreasono forosummoningoKujinderoSinghowasothatoheowasotheosignatoryoofo theodisputedocheque.oHowever,othatoreasoningowouldonotoabsolveo YadvinderoSinghoandoAjitoSinghofromoalloliability.oInofact,oallotheo accusedoalsoohadoaomutualoopenorunningoaccount.oTherefore,otheo summoningoorderodatedo21.03.2015o(AnnexureoP-3)oisosetoasideo andotheomatteroisoremandedobackotootheolearnedotrialoCourt,owithoao directionotooconsiderotheosameoafreshowithorespectotootheoliabilityo ofoYadvinderoSinghoandoAjitoSingh,ostrictlyoinoaccordanceowitho law.oo

11.o o Pendingo miscellaneouso application(s),o ifo any,o shallo alsoo stando disposedoof.ooooo

12.o o Aophotocopyoofothisoorderobeoplacedoonotheofileoofootheroconnectedo cases.o o Reservedoono:o16.01.2025o o o (HARPREEToSINGHoBRAR)o Pronouncedoono:o15.02.2025o o o oooooo oooooJUDGEo manishao o Whetherospeaking/reasonedo Yes/Noo WhetheroReportableo Yes/Noo