RAVINDRAN PILLAI Vs. HI LITE BUILDERS PRIVATE LTD

JUDGEMENT

(1.) Petitioners are directors of a company who are proceeded with that company and its managing director in a complaint, for the offence under Section 138 of the Negotiable Instruments Act, 1881, for short, 'the Act'. First respondent, which is also a company, is the complainant. Petitioners have filed the petition to quash the criminal proceedings against them contending such proceedings are an abuse of the process of the court, under Section 482 of the Code of Criminal Procedure, for short, 'the Code'. Complainant a private limited company, is a builder and developer of property. That company entered into Annexure B agreement with the first accused, another private limited company, on 18-12-2007, for joint development of a property belonging to that accused, situate in Kasaba Village, Kozhikode Taluk, for putting up a multi-storied commercial complex, named, 'The Blue Diamond Mall'. The Director Board of first accused, then, consisted of the second accused as its managing director and his two sons as directors. Complainant advanced an amount of Rs. 3 crores and spent another sum of Rs. 61,33,752 for the betterment of first accused. The first accused under Annexure B agreement has to pay back the amount advanced and spent on completion of the project or on realization of sale revenue from the project, whichever is earlier. In addition the agreement stipulated that the first accused has to pay the complainant 10% of the total sale proceeds collected by sale of the developed space. While so petitioners, who are accused 3 to 6 in the complaint, purchased the Blue Diamond Mall by transfer of shares, for a total consideration of Rs. 85 crores. On such sale two directors of first accused, two sons of the second accused, retired, and petitioners stepped in as Directors. The first accused, then, according to complainant was liable to it for Rs. 3 crores, received as advance, and further sum of Rs. 8.5 crores--10% of 85 crores, the value paid for transfer of shares of that company. Towards part payment of that liability a cheque for Rs. 2 crores from the account maintained by first accused was issued to the complainant, that cheque presented for encashment was dishonoured due to insufficiency of funds, and notice of dishonour and demand made to accused Nos. 2 to 6 was responded with reply from accused Nos. 3 to 6 denying their liability, is the case of the complainant to proceed against first accused company and its directors for the offence under Section 138 of the Act. Cheque was issued with the knowledge, consent, concurrence and approval of accused Nos. 3 to 6, all of them had participated in the deliberations held in the negotiations for sale of Blue Diamond Mall by 2nd accused and others, accused persons 3 to 6 with the second accused are in charge of the affairs of first accused and after issue of cheque accused Nos. 2 to 6 requested the directors and officers of complainant company to defer presentation of the cheque till June 2011 on account of financial constraints of first accused, is the further case of complainant to prosecute the directors, accused Nos. 2 to 6, with the first accused for the offence imputed.

(2.) The Magistrate took cognizance of the offence on the complaint and issued process to the accused. Receiving summons petitioners (A-3 to A-6) have filed the petition to quash the criminal proceedings against them. Complaint is not maintainable against them since they were not in charge of the company when the liability was allegedly incurred, and, further, Annexure B agreement entered by the first accused with complainant company has been annulled and cancelled by a subsequent agreement (Annexure F) between the complainant and another company M/s. Swargachitra Property Developers Private Ltd., for short, 'Swargachitra', in which also the second respondent is the managing director, according to them. First petitioner (A-3) is a nonresident Indian, second petitioner (A-4) is his wife and petitioners 3 and 4 (A-5 and A-6) are his children, who are students, and, none of them was in charge and responsible to the company in respect of the transaction or liability covered by the cheque, is their case to quash the proceedings.

(3.) I heard the counsel on both sides. Learned counsel for petitioners (A-3 to A-6) contended that the complaint is not maintainable against them, and their prosecution solely based on the statements made in the complaint that as directors they knew about the transaction and they were in charge of or responsible to the first accused for the conduct of its business, is gross abuse of process of the court and patently unsustainable. Allegations raised that these petitioners had participated directly in the negotiations for transfer of shares of the first accused company, they knew about the pre-existing liability of that company entered with the complainant and after issue of cheque they along with second respondent requested for deferring its presentation to the bank, according to the counsel have been incorporated in the complaint only to rope in petitioners, directors of first accused, as co-accused with the: company and the second accused, its managing director. Under Annexure F agreement entered by Swargachitra, another company of second respondent, and the complainant company, Annexure B agreement was cancelled, and a farther covenant made that the liability arising from the terms of Annexure B agreement had been taken over by the other company, according to the counsel. When that be so, it is contended that no prosecution would lie against the petitioners over the dishonoured cheque issued by the second accused. Per contra, learned counsel appearing for the complainant company placing emphasis on the averments made in the complaint contended the defences projected can be considered only at the stage of trial, and the grounds canvassed for quashing the proceedings cannot at all be appreciated or taken into consideration to impeach the process issued against the accused. Learned counsel contending that the offence under Section 138 of the Act is committed when the bank returns the cheque as unpaid, submitted that at that stage these petitioners, all of them, have become directors of the company and they continued in charge of the company. Where specific allegations are imputed that these petitioners were directly involved in the transaction over the issue of cheque and on their joint request with the second accused its presentation was deferred and that they were put in charge of the affairs of the company on transfer of shares of the company in their favour, factual disputes canvassed disowning their liability can be decided only at the stage of trial, and, therefore, this court will not be justified in quashing the proceedings against the petitioners invoking its inherent powers under Section 482 of the Code, is the submission of the counsel. Learned counsel has relied on Malwa Cotton and Spinning Mills Ltd. v. Virsa Singh Sidhu, 2008 17 SCC 147 and Rallis India Ltd. v. Poduru Vidya Bhusan, 2011 13 SCC 88 to contend that where the Magistrate being satisfied from the allegations made in the complaint ordered process against the accused, this court, at the threshold of the complaint, should not interfere with the cognizance taken by the Magistrate on the challenges canvassed by accused persons over disputed facts, which can be decided only in trial. So much so, the petition moved by petitioners for quashing the criminal proceedings against them is only to be dismissed, is the submission of the counsel.