Back
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Sandeep N. Bhatt, J.
M/s V S Synthetics – Applicant
Versus
Reliance Capital Ltd. Thro. Hitesh Joshi, Authorise Officer & others – Respondents
R/Criminal Misc. Application No. 3174, 6105, 6601, 9086, 9334 of 2017
Decided On : 08-08-2023
Section 482 - Quashing of Complaints - Code of Criminal Procedure, 1973 - Payment and Settlement Systems Act, 2007 - 25, 27
Fact of the Case:
The applications were filed under Section 482 of the Code of Criminal Procedure, 1973 for quashing complaints under Section 25 of The Payment and Settlement Systems Act, 2007. The complaints alleged dishonour of electronic funds transfer initiated by the accused companies and their directors.
Finding of the Court:
The court found that prima facie case was made out against the applicants and dismissed the applications, stating that the applicants should face trial and present their defenses.
Issues: The issues involved the liability of the applicants under Section 25 of the Act of 2007 and the applicability of provisions similar to Section 141 of the Negotiable Instruments Act.
Ratio Decidendi: The court held that the provisions of the Act of 2007 are special and cannot be equated with the NI Act. It emphasized that the complainant's specific averments were sufficient to proceed with the case, and the applicants should face trial.
Final Decision: The applications were dismissed, and the court discharged the rule and notice in the respective applications, stating that the applicants should face trial.
Key Points: - The Act of 2007 imposes liability on both the company and persons in charge of the company for contraventions; directors or officers may be deemed liable where consent, connivance, or neglect is established (!) (!) [13000380030008]. - The court held that the provisions of the Act of 2007 are special and cannot be equated with the NI Act; complainant's averments can be sufficient to proceed to trial, and applicants should face trial (!) (!) (!) - (!) . - Quashing under Section 482 Cr.P.C. is to be exercised sparingly; if the complaint discloses a cognizable offence and contains specific averments, the matter should proceed to trial rather than be quashed (!) - (!) (!) - (!) . - Parallel principles from NI Act (Sections 138/141) are discussed, with caution against treating the 2007 Act as identical; however, vicarious liability principles may apply where the complaint alleges director-level involvement (!) - (!) (!) - (!) . - The specific factual findings indicate that the complaint contains allegations that the ECS mandate was issued with company involvement and that the applicant was a director/co-borrower; trial is warranted to determine liability [13000380030004]-[13000380030012]. - Final decision in the judgment: applications under Section 482 are dismissed; the rule and notices are discharged; respondents may proceed to trial; interim reliefs are vacated [13000380030016].
JUDGMENT :
1. All these applications are filed under Section 482 of the Code of Criminal Procedure, 1973 (‘the Code’ for short) for quashing and setting aside the complaints being Criminal Case Nos.6018 of 2016, 888 of 2017, 5009397 of 2016, respectively qua the applicants, pending before the learned Metropolitan Magistrate, Court No.29, Ahmedabad filed under Section 25 of The Payment and Settlement Systems Act, 2007 (‘the Act of 2007’ for short).
2. As the common question of facts and law are involved in these applications, at the request of learned advocates for the parties, they are heard together and disposed of by this common oral judgment.
3. The facts as stated in the applications are such that it is alleged by respondent no.1 in the complaint that one M/s V.S.Texmills Pvt.Ltd. Had availed finance/loan from it and had opted for Electronic Clearing Service (ECS) for repayment of finance/lona. As the ECS initiated by M/s V.S.Texmills Pvt.Ltd., got dishonoured, the complaint is filed.
4. Heard learned advocate Mr.Gupta for the applicants and learned APP Mr.Joshi for respondent no.2- state. Learned advocate for the respondent no.1- complainant was not present.
4.1. Learned advocate for the applicants submitted that in Criminal Miscellaneous Application No.3174 of 2017, the applicant is a proprietorship firm and the proprietor is one Umashankar Agarwal; that the applicant-M/s V.S.Synthetics has neither initiated ECS from an account maintained by it nor is the signatory of ECS mandate and is merely a co-borrower; that the account is not maintained by the applicant with the bank but it is maintained by the company M/s V.S.Texmills Pvt.Ltd., with the bank; that the ECS was initiated by the company M/s V.S.Texmills Pvt.Ltd. And the signatory of the ECS mandate was Ashit Agarwal and therefore the necessary ingredients of Section 25 of the Act of 2007 are not made out; that the applicant is neither partner nor has any relation as set out in Section 27 of the Act of 2007 with the accused namely M/s V.S.Texmills Pvt.Ltd.
4.2 In Criminal Miscellaneous Application No.9334 of 2017, it is submitted that the applicant-Umashankar Shyamlal Agarwal is one of the director in the accused company M/s V.S.Textile Pvt.Ltd.; that the applicant stated that there is no deemed liability on the director of the company and it is necessary to aver/allege in the complaint that the director is incharge of day-to-day affairs of the company; that the averment/allegation against the director is a condition sine quo non to bring the case under Section 141(1) of the Negotiable Instruments Act (‘NI Act’ for short) and that Section 27 of the Act of 2007 is pari materia to Section 141 of the NI Act; that the applicant is neither a signatory of ECS mandate and nor he is the managing director of the company.
4.3 In Criminal Miscellaneous Application No.9086 of 2017, the applicant is a proprietorship firm and the proprietor is one Umashankar Agarwal; that the applicant-M/s V.S.Synthetics has neither initiated ECS from an account maintained by it nor is the signatory of ECS mandate and is merely a co-borrower; that the account is not maintained by the applicant with the bank but it is maintained by the company M/s V.S.Texmills Pvt.Ltd., with the bank; that the ECS was initiated by the company M/s V.S.Texmills Pvt.Ltd. And the signatory of the ECS mandate was Ashit Agarwal and therefore the necessary ingredients of Section 25 of the Act of 2007 are not made out and that the applicant is neither partner nor has any relation as set out in Section 27 of the Act of 2007 with the accused namely M/s V.S.Texmills Pvt.Ltd.
4.4 In Criminal Miscellaneous Application No.6601 of 2017, it is submitted that the applicant-Umashankar Shyamlal Agarwal is one of the director in the accused company M/s V.S.Textile Pvt.Ltd.; that the applicant stated that there is no deemed liability on the director of the company and it is necessary to aver/allege in the complaint that the director is incharge
The main legal point established in the judgment is the special nature of the provisions of The Payment and Settlement Systems Act, 2007, and the principles of vicarious liability, as well as the lim....
The court emphasized that N.I.Act proceedings cannot be used as a means to recover outstanding amounts when no other recovery proceedings have been initiated, and that the offer made by the petitione....
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....
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
