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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
NIRZAR S. DESAI, J.
KANCHANBEN RASIKBHAI BAVARIA – Appellant
Versus
HDFC BANK LTD. – Respondent
Criminal Misc. Application Nos. 18523, 18752, 19661 of 2019
Decided On : 10-06-2022
Negotiable Instruments Act, 1881 – Section 138 – Learned advocate with learned advocate waive service of notice of Rule for and on behalf of respondent no. 1 and learned APP Ms. Maithili Mehta waives service of notice of Rule for and on behalf of respondent no. 2-State – Held, In instant case, in absence of such averments against present applicants, proceedings under Section 138 of N.I. Act against present applicants are absolutely misconceived and illegal and hence, entire proceedings against present applicants are required to be quashed and set aside – Applicants did not object recording of pleas at time when pursis was given, is concerned, once complainant himself in complaint has not made any averments against present applicants by stating that they were in-charge of affairs of company and were responsible for business of company at time when offence was committed, merely because pleas are recorded, those persons, who otherwise are not concerned with day-to-day affairs of company, as per complainant, as no averments were made in complaint, cannot be held liable and can be forced to face trial under Section 138 of N.I. Act – Applications allowed.
JUDGMENT :
NIRZAR S. DESAI, J.
1. Rule. Learned advocate Mr. Darshan Kinariwala with learned advocate Mr. Nikunj D. Balar waive service of notice of Rule for and on behalf of respondent no. 1 and learned APP Ms. Maithili Mehta waives service of notice of Rule for and on behalf of respondent no. 2-State.
2. By way of three different applications, present applicants have challenged three different criminal complaints under the Negotiable Instruments Act, 1881 (hereinafter referred to as “the N.I. Act” for short) in respect of three different cheques issued by applicants, which are returned with an endorsement of “funds insufficient.”
3. Since all these three petitions are identical petitions in respect of three different cheques, facts are taken from Criminal Misc. Application No. 19661 of 2019.
4. Prayers in Criminal Misc. Application No. 19661 of 2019 read as under:
(B) YOUR LORDSHIPS may be pleased to quash and set aside the Criminal Complaint No. 6769 of 2015 and impugned pleas at Exh.23, 24, 25 and 26 recorded of the Petitioners by Ld. 5th Additional Chief Judicial Magistrate Rajkot dated September 10, 2015 (10.09.2015) in Criminal Complaint No. 6769 of 2015 qua the Petitioners annexed as ANNEXURE-A.
(C) Pending admission, hearing, and final disposal of the petition, YOUR LORDSHIPS be pleased to stay the proceedings of Criminal Case No. 6769 of 2015 pending before the Ld. 5th Additional Chief Judicial Magistrate Rajkot.
(D) Special costs of this petition be awarded to the Petitioners from the Respondent No. 1.
(E) Any other relief, order or direction which may be just, fit proper and equitable in the facts and circumstances of the petition.”
5. It is the case of applicants that applicants are Directors of Eagle Corporation Private Limited. Eagle Corporation Private Limited took loan from respondent no. 4-Bank. Affairs of Eagle Corporation Private Limited were looked after by one Shri Jayendra Rasikbhai Bavaria, who was the Director and Authorized Signatory of the said Corporation. A cheque for an amount of Rs. 19,20,975/- dated 11.06.2015 bearing Cheque No. 745794 drawn on the State Bank of India was given by present applicants towards the repayment of loan, which was dishonoured by the bank with an endorsement of “funds insufficient” vide bank memo dated 11.06.2015 and hence, respondent no. 2 herein vide notice dated 01.07.2015 under Section 138 of the N.I. Act called upon the address to Eagle Corporation Private Limited, Jayendra Rasikbhai Bavaria and all other Directors of Eagle Corporation Private Limited paid the amount of the said cheques within a period of 15 days. The notice was duly received by the Eagle Corporation Private Limited and the same was not replied. Thereafter, respondent no. 2 initiated the proceedings before the Court of Chief Judicial Magistrate, Rajkot, which was registered as Criminal Case No. 6769 of 2015. Initially at the time when the complaint was registered, it was registered only against Eagle Corporation and Shri Devendra Bavaria. During the course of complaint, a pursis was given by respondent no. 2 to arraign other Directors of the company as accused in the said complaint. On the basis of the aforesaid pursis at Exh.67, pleas of present applicants were recorded on 18.09.2017. After pleas were recorded on the some occasions, even the warrant was issued against present applicants to secure their presence in the proceedings under Section 138 of the N.I. Act.
6. Thereafter, it seems that present applicants have preferred these three applications in respect of three different cheques before this Court, wherein vide order dated 27.11.2019, the Coordinate Bench of this Court issued notice and protected applicants by granting relief in terms of Paragraph-10(C) of the application, which reads as under:
Dishonour of cheque – Offence by company – For maintaining prosecution under Section 141 of NI Act, arraigning of company as an accused is imperative and non-impleadment of company would be fatal for....
Directors cannot be prosecuted under Section 138 of the NI Act without the company being joined as an accused, as vicarious liability requires the company to be a party to the proceedings.
(1) Dishonour of cheque – Offence by company – For fastening criminal liability, there is no legal requirement for complainant to show that accused partner of firm was aware about each and every tran....
The main legal point established in the judgment is the necessity of arraigning the company as an accused for maintaining the prosecution under Section 141 of the NI Act, and the requirement of speci....
The main legal point established in the judgment is the requirement for specific averments and unimpeachable evidence to establish vicarious liability of directors in cases of cheque bounce under Sec....
Point of Law : Where there is not even an averment against the Managing Director or joint Managing Director of the Company therein. [Para 11]
Directors can only be held vicariously liable under Section 141 of the Negotiable Instruments Act if specific averments are made in the complaint regarding their responsibility for the company's cond....
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