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Karnataka High Court
CHAIRMAN, HMT WATCHES LIMITED - Appellant
Versus
COSMOS CO-OPERATIVE BANK LIMITED - Respondent
Decided On : 10-06-05
CRIMINAL PETITION : 2344 of 2005
CRIMINAL PETITION : 3555 of 2005
Officers responsible for affairs of the company -Dishonour of cheque issued by company -Petitioners signed balance sheet which showed complainants debt -They did not even deny their responsibility in the reply to demand notice -In any event, whether some of the Directors or all of them were responsible for the affairs of the company at the relevant point of time, has to be ascertained at the time of trial.
Cases Referred: SLP Nos. 2286/02 disposed of on 20-9-2005 Followed: 2005 SCR (Cri) 567.
Complaint for dishonour of cheque
NEGOTIABLE INSTRUMENT ACT, 1881 - Section 138 - Complaint for dishonour of cheque - Dishonour of cheque issued by Company - Responsible persons - Who are - Petitioners instead of disclaiming responsibility, when demand notice was served, promised payee settlement - Hence, they cannot turn around when complaint is lodged and say that, they are not responsible -Whether petitioners were responsible or not is a pure question of fact which can only be dealt with during trial - Proceedings cannot be interfered with.
[Mohan Shantanagoudar, J]: These petitioners have not sent a reply stating that they are only sleeping director or dormant directors and not in-charge of management, control or conduct of the business or having responsibility in the management and administration of the company. On the other hand, the reply has been sent by all the petitioners through their Counsel admitting their liability and promising to settle the same within a reasonable time. After sending such a reply notice, it is unfair on the part of the petitioners now to turn around and say that they are not responsible for the affairs, administration and management of the company. The criminal proceedings cannot be scuttled at this stage of the proceedings as this Court finds that these petitioners were in-charge of and responsible for the day-to-day business of the company. At this stage, prima facie material is found against the petitioners.
Cases Referred:
Followed: 2005 AIR SCW 4740; 2005 AIR SCW 2364: 2005 SCR (Cri) 567.
Negotiable Instruments Act, 1881 -Persons responsible for affairs of the company at the relevant time -Section 141 -Persons responsible for affairs of the company at the relevant time -Demand notice sent to all Directors including the petitioners -All of them replied to it jointly -Petitioners did not say they are only dormant Directors -Moreover, it is practically impossible to ascertain the specific role played by each Director in the management of the company s affairs -Such specific details have to be culled out during the course of trial -Hence, complaint cannot be scuttled at the threshold. [Mohan Shanthan Goudar, J]: Thus the question as to whether the petitioners were involved in the day-to-day affairs of the business of the company or not is a pure question of fact, which cannot be decided in this petition filed under Section 482 of the Cr. P.C. The said question has to be determined based on the material to be collected during the course of the trial and this Court cannot transform itself into a Court of trial to decide such issue at this stage. There may be several directors in a company. The complainant who has lent money and supplied goods cannot know what is the role played by the different directors in the company. It is also impossible for the complainant to verify the activities of each director in the management and responsibility in the conduct of the business of the company and on whose behalf the cheque is issued. The complainant may not be in a position to fish out information from the officers of the company and nevertheless from the directors themselves. Therefore, it may be practically impossible for the complainant to describe the responsibility of each Director of the company in the complaint itself who are all the directors of the company, the role played by them in the affairs of the company or the management of the company and in the conduct of the company can be established only at the time of trial. As far as this case is concerned, a specific notice has been issued to all the directors including these petitioners. These petitioners have not sent any reply stating that they are only sleeping director or dormant directors and not in-charge of management, control or conduct of the business or having responsibility in the management and administration of the company. On the other hand, the reply has been sent by all the petitioners through their Counsel admitting their liability and promising to settle the same within a reasonable time. After sending such a reply notice, it is unfair on the part of the petitioners now to turn around and say that they are not responsible for the affairs, administration and management of the company. The criminal proceedings cannot be scuttled at this stage of the proceedings as this Court finds that these petitioners were in-charge of and responsible for the day-to-day business of the company. At this stage, prima facie material is found against the petitioners.
Negotiable Instruments Act, 1881 -Dispensation with personal appearance -Section 138 -Dispensation with personal appearance -Petitioners are Directors of a public undertaking -Their identity cannot be disputed -Hence, held, if they make appropriate application, their presence may be exempted.
Interference with criminal proceedings
DISHONOUR OF CHEQUE
Interference with criminal proceedings - Dishonour of cheque issued by Company - Responsible persons - Who are - Petitioners instead of disclaiming responsibility, when demand notice was served, promised payee to settle the liability - Hence, they cannot turn around when complaint is lodged and say that, they are not responsible - Whether petitioners were responsible or not is a pure question of fact which can only be dealt with during trial - Proceedings cannot be interfered with.
[Mohan Shantanagoudar, J]: These petitioners have not sent a reply stating that they are only sleeping director or dormant directors and not in-charge of management, control or conduct of the business or having responsibility in the management and administration of the company. On the other hand, the reply has been sent by all the petitioners through their Counsel admitting their liability and promising to settle the same within a reasonable time. After sending such a reply notice, it is unfair on the part of the petitioners now to turn around and say that they are not responsible for the affairs, administration and management of the company. The criminal proceedings cannot be scuttled at this stage of the proceedings as this Court finds that these petitioners were in-charge of and responsible for the day-to-day business of the company. At this stage, prima facie material is found against the petitioners.
Cases Referred:
Followed: 2005 AIR SCW 4740; 2005 AIR SCW 2364: 2005 SCR (Cri) 567.
Interference with criminal proceedings
CRIMINAL PROCEDURE CODE, 1973
Section 482 - Interference with criminal proceedings - Dishonour of cheque issued by Company - Responsible persons - Who are - Petitioners instead of disclaiming responsibility, when demand notice was served, promised payee to settle the liability - Hence, they cannot turn around when complaint is lodged and say that, they are not responsible - Whether petitioners were responsible or not is a pure question of fact which can only be dealt with during trial - Proceedings cannot be interfered with.
[Mohan Shantanagoudar, J]: The question as to whether the petitioners were involved in the day-to-day affairs of the business of the company or not is a pure question of fact, which cannot be decided in this petition filed under Section 482 of the Cr. P.C. The said question has to be determined based on the material to be collected during the course of the trial and this Court cannot transform itself into a Court of trial to decide such issue of this stage.
Cases Referred: Followed: 2005 AIR SCW 4740; 2005 AIR SCW 2364: 2005 SCR (Cri) 567.
( 2 ) BASED on the eighty-eight (88) complaints lodged by respondent herein viz. , Cosmos Co-operative Bank Limited, Pune ('bank' for short), eighty-eight criminal cases are registered against petitioners herein and others in the Court of the XVI Additional Chief Metropolitan magistrate, Bangalore for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 ('n. I. Act' for short ). The petitioners herein who have been arrayed as accused 2 and 4 in all the cases have sought for quashing the said proceedings pending in 88 criminal cases by filing these criminal petitions.
( 3 ) THE only contention raised in these petitions by Sri Joshua H. Sarmuel, learned Counsel appearing for the petitioners is that the petitioners herein are not responsible or in-charge of day-to-day affairs of business of the first petitioner-company viz. , M/s. HMT Watches limited, which is a subsidiary company and that the averments made in the complaint do not disclose that the petitioners herein are in-charge and are responsible for conducting the business of the company and consequently, the proceedings initiated against them are not maintainable and hence are liable to be quashed. In support of his contentions, he placed reliance upon recent judgment of the Apex Court in S. L. P. No. 2286 of 2002, dated 20-9-2005 rendered in S. M. S. Pharmaceuticals Limited v Neeta Bhalla and Another , and other connected matters.
( 4 ) PER contra, Sri N. V. Sreenivasan, learned Counsel appearing on behalf of the respondent-Bank vehemently contented that the complaints have been lodged against the 1st accused-company and against the officials who are in-charge of or responsible for the day-to-day affairs of the said company; that none of the other directors, who are not in-charge of the company are not made as accused; that statutory notice has been issued before initiating the proceedings to these petitioners and that there is no denial of the liability of the petitioners in the reply notice; that Section 293 of the Companies Act, 1956 makes it clear that the petitioners herein are responsible for the day-to-day affairs of the company; that in the balance-sheet of the company to which petitioners are the signatories, there is an admission regarding liability of the debt due by the company to the respondent-Bank and that petitioners cannot plead ignorance about the same; that the material on record, if read in toto would clearly disclose that the petitioners herein are in-charge of and responsible for the day-to-day affairs of the subsidiary company as well; that the plea of not having knowledge or that they are not responsible for the day-to-day affairs/business of the company is a pure question fact, which cannot be gone into at this stage of the proceedings. On these amongst other grounds, he prays for dismissal of the petitions.
( 5 ) TOTALLY six (06) persons have been arrayed as accused in the complainant, of which, 1st accused is the company viz. , M/s. HMT watches Limited. Accused 3, 5 and 6 are the Secretary, Deputy Manager (Finance) and Manager (Finance) respectively and these accused 3, 5 and 6 have not approached this Court. The 1st petitioner is the chairman of the holding company viz. , HMT Limited, as well as the chairman of the subsidiary company i. e. , M/s. HMT Watches Limited. The 2nd petitioner is a Group General Manager (Watches) of said subsidiary company.
( 6 ) THE Supreme Court in the case of S. M. S. Pharmaceuticals Limited, has laid down the following guidelines to be followed in such matters:" (a) It is necessary to specificall
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