[ad_1]
Bangalore District Court
M/ Grs Enterprises vs M/S Fortuna Urban Scape Pvt Ltd on 16 April, 2025
KABC030854712019
Presented on : 19-11-2019
Registered on : 19-11-2019
Decided on : 16-04-2025
Duration : 5 years, 4 months, 27 days
IN THE COURT OF XX ADDL.CHIEF JUDICIAL
MAGISTRATE AT BENGALURU CITY
PRESENT: SRI. SHRISHAIL BHIMASHEN BAGADI,
B.Com.,L.L.B.,
XX ADDL. C.J.M., Bengaluru.
Dated this the 16th day of April 2025
C.C.No. 27584/ 2019
Complainant : M/s. GRS Enterprises,
a proprietorship concern,
No.2/1, 3rd floor, Bankinavab
Street,
S P Road Cross,
Bangalore - 560 002
Represented by its proprietor
Sri. Narayanappa,
S/o. C Jawarappa
Aged about 55 years,
Mobile No. 9880251314
{ By - Vittal Shetty P. - Advocate }
2 C.C. 27584 / 2019
Vs.
Accused : 1) M/s.Fortuna Urban Scape
Pvt. Ltd. Wind Flower
Rajiv Gandhi Nagar Road,
Sahakaranagar,
Kodigehalli,
Bengaluru - 560 065
Represented by its Managing
Director
2) Sri. Sailesh Sreeramulu,
The Director & Authorized
Signatory
M/s. Fortuna Urbanscape Pvt.
Ltd.,
Wind Flower,
No. 390, New No.7, 13th Cross,
Sadashivanagar,
Bengaluru 560 080
And also residing
at No.12, Lalitha Manor,
2nd and 3rd Floor,
14th Cross,
AECS Layout,
Sanjaynagar,
Bengaluru - 560 094
3) Sri. Rajesh Kumar,
The Director and Authorized
Signatory
M/s. Fortuna Urbanscape Pvt.
Ltd., Wind Flower,
No.390, New No.7, 13th Cross,
Sadashivanagar,
Bengaluru - 560 080
3 C.C. 27584 / 2019
And also residing at No.12,
Lalitha Manor,
Flat No.2A, 15th Cross,
AECS Layout,
Sanjaynagar,
Bengaluru - 560 094
4) Smt. Shilpa Nagaraj
The Director M/s. Fortuna Urban
scape Pvt. Ltd.,
No.390, New No. 7, 13th Cross,
Sadashivanagar,
Bengaluru - 560 080
And also residing at No.12,
Lalitha Manor,
2nd and 3rd Floor, 14th floor,
AECS Layout,
Sanjaynagar,
Bengaluru - 560 094
(By Sri.S A Horkeri - Advocate
Offence complained : U/S. 138 of N.I. Act.,
Plea of accused : Pleaded not guilty.
Date of Order : 16.04.2025
4 C.C. 27584 / 2019
JUDGMENT
The complainant has filed this complaint under
section 200 of the Cr.P.C., alleging that the accused
persons have committed an offence punishable under
section 138 of the Negotiable Instruments Act.
2. The brief facts of the complainant’s case are as
follows :
This is the case of the complainant that it is one of
the dealers and suppliers of iron and steel and has been
carrying on its business in Bangalore for many years. The
accused No. 2 and 3 approached the complainant in the
year 2014, stating that the accused No.2 to 4 are the
directors of M/s. Fortuna Urban Scape Pvt. Ltd. and M/s.
Fortuna Build Corn India Pvt. Ltd. they are in the field of
construction of buildings, and they require iron steel for the
completion of various projects in Bangalore. The
complainant is in the field of iron and steel business, and
he agreed to supply the materials on a credit basis. The
accused persons are regular customers of the complainant,
5 C.C. 27584 / 2019and they used to purchase the materials on a credit basis
and have a running account with the complainant. As per
the purchase orders placed by the accused persons for the
supply of iron and steel products to the three different
project sites of the accused, namely (a) Fortuna Casabona
near Church Street, Bangalore (b) Fortuna Viva Kogilu,
Bangalore, and (c) Fortune Wind Flower, Sahakaranagar,
Bangalore, the complainant supplied the iron and steel
materials to the above-mentioned projects from 17.12.2014
to 18.12.2015 for a total sum of Rs. 5,17,81,720/-. Out of
the said amount, the accused persons have made a total
payment of Rs. 4,57,23,510/-, which includes discounts
and sale returns; the accused persons have to pay a total
outstanding amount of Rs. 60,58,210/- till date. The
accused persons, after purchasing the iron and steel
materials, became defaulters in payment of the balance
amount. The complainant has made several requests and
reminders to the accused persons for the payment of the
entire outstanding amount, including the interest as of
6 C.C. 27584 / 201931.03.2019. On repeated demands and requests, accused
No.2 approached the complainant on 14.07.2019 and
issued a cheque bearing No. 000484 dated 15.07.2019 for
Rs. 40,58,210/- drawn on HDFC Bank Ltd., Kasturba Road
Branch, Bangalore, and also sought some more time to
settle the remaining balance amount, including the
interest. While issuing the cheque, accused No.2 assured
the complainant that the cheque would be honoured on its
presentation since accused No.1 had maintained a
sufficient balance in its bank account. The complainant
presented the said cheque for collection on 15.09.2019
through his banker, i.e., Syndicate Bank, City Market
Branch, Bangalore, but the said cheque came to be
dishonoured with an endorsement “Account Blocked” as
per the cheque return memo dated 16.09.2019. The
accused No. 2 to 4 are the responsible persons for the day-
to-day affairs of the accused No.1 company and have
intentionally issued the cheque in favour of the
complainant to defeat the legitimate claim. The accused
7 C.C. 27584 / 2019
persons had already blocked their account and thereby
allowed the cheque to be dishonoured. The factum of
dishonour of cheque was duly communicated to the
accused by issuing a legal notice dated 26.09.2019, but the
notice was sent to the official address of the accused
persons returned with an endorsement ‘not claimed’ as per
postal endorsement dated 28.09.2019, and the notice sent
to the residential address of the accused persons returned
as “Addressee left”. The complainant sent the legal notice to
the last known address of the accused; hence, it is deemed
a service of notice to the accused. Despite the issuance of
the legal notice, the accused persons did not come forward
to pay the cheque amount nor issue any reply notice;
hence, the complainant has filed this complaint against the
accused.
3. The court, after receipt of the complaint, verified it;
later, the complainant entered the witness box to depose
his sworn statement in the form of an affidavit and also got
marked documents at Ex.P.1 to P.26. After the recording of
8 C.C. 27584 / 2019
the sworn statement, the court satisfied that the
complainant made out valid grounds to take cognizance of
the offence; accordingly, the court took cognizance of the
offence punishable under section 138 of the Negotiable
Instruments Act, registered the criminal case, and also
issued a summons to the accused persons. On receipt of
the summons, the accused persons appeared before this
court through their counsel and got enlarged on bail. In
compliance with section 207 of the Cr.P.C., a copy of the
complaint and other relevant documents were supplied to
the accused persons. The substance of the accusation was
read over to them; they did not plead guilty and claimed to
be tried. When the case was set for complainant side
evidence, the complainant moved an application under
section 145(1) of the Negotiable Instruments Act with a
prayer to treat the sworn statement affidavit of the
complainant as his chief examination. The court allowed
the application and treated the sworn statement affidavit of
the complainant as his chief examination, and the
9 C.C. 27584 / 2019
documents marked at the time of recording of his sworn
statement were adopted as documentary evidence. The
learned counsel for the accused has fully cross-examined
the PW.1, the complainant has also examined the Bank
Manager of HDFC Bank, Kasturba Road Branch, as PW2
and got marked 3 documents as per Ex.P27 to P29; after
the closure of the complainant’s side evidence. The
statement of the accused under section 313 of the Cr.P.C.
was recorded by explaining to them the incriminating
evidence available in the complainant’s evidence. The
accused persons have denied the entire evidence of the
complainant and, to prove their defense, the accused No.2
examined himself on oath as DW.1, and got marked
documents as per Ex.D.1 to D.5.
4. On perusal of the material records placed before
this court, the following points that arise for my
consideration.
POINTS FOR CONSIDERATION
1. Whether the accused persons have
successfully rebutted the presumption
10 C.C. 27584 / 2019
available against them under section
139 of the Negotiable Instruments Act
that, they had not issued the cheques
in favor of the complainant to pay the
legally enforceable debt?
2. Whether the complainant has complied
with the mandatory requirements of
section 138 of the Negotiable
Instruments Act?
3. What order or sentence?
5. The learned counsel for complainant and accused
have canvased their arguments.
6. The learned counsel for the accused has placed his
reliance on the following judgments.
1) 2022 2 SCC 271 between M/s. Nag
Leathers Pvt. Ltd. V/s. M/s. Dynamic
Marketing Partnership represented by its
parents and another.
2) Docid # India Law Lib / 15704124
Deewan Housing Finance Coproation Limited
11 C.C. 27584 / 2019
and others V/s. Union of India and others
Bombay High Court.
3) (2021) 4 Kar.LJ 214 between Union of
India V/s. M/s. Ruchi Soya Industries Ltd.
7. Upon hearing arguments and on careful analysis
the oral and documentary evidence provided by the
complainant and the accused and on going through the
ratio laid down in the decisions relied upon by the learned
counsel for the accused my answers to the above points
are as follows.
Point No.1 In the negative
Point No.2 In the affirmative
Point No.3 As per the final order for the
following
REASONS
Point No.1 and 2:
8. These points are interrelated to each other, and
findings given one point having a direct impact on other
points; hence, to avoid repetition of facts and appreciation
12 C.C. 27584 / 2019
of the evidence, both points are taken together for common
discussion.
9. The complainant submits that the accused persons
purchased iron and steel materials from 17.12.2014 to
18.12.2015 worth Rs..5,17,81,720/-, out of the total
outstanding amount. The accused persons have paid a sum
of Rs.4,57,23,510/-, which includes discount and sales
return; the accused persons have to pay an outstanding
balance amount of Rs.60,58,210/-. To discharge the
amount, the accused No.2 had issued a cheque bearing
No.000484 dated 15.07.2019 for Rs.40,58,210/-, drawn on
HDFC Bank, Kasturba Road, Bangalore.The accused
persons have given an assurance to the complainant that
the cheque would be honoured on its presentation, reposing
confidence in the accused the complainant presented the
said cheque for collection on 15.09.2019, but the cheque in
question came to be dishonoured with an endorsement
‘Account blocked’, thereafter the complainant issued a legal
notice to the accused persons on 26.09.2019, the notice
13 C.C. 27584 / 2019
sent to the official address of the accused was returned with
an endorsement ‘not claimed’ and the notice sent to the
residential address of the accused returned with an
endorsement as ‘Addressee left’, the complainant has sent
the legal notice to the last known address of the accused
persons, therefore he is exempted from proving the service of
notice to the accused persons.
10. Accused No. 1 is a private limited company and is
represented by the directors of accused No. 2 to 4 in the
case. The learned counsel for the accused submitted before
the court that in the insolvency petition filed before the
National Company Law Tribunal, accused No. 1 company
has been declared insolvent; henceforth, the company is not
liable to pay any amount to the complainant and is absolved
from criminal liability. Further, the Company Law Tribunal,
Bangalore has issued a moratorium order restraining the
creditors from taking criminal action against accused No. 1
i.e. a corporate debtor. The Company Law Tribunal has
appointed a Resolution Officer to settle the claims against
14 C.C. 27584 / 2019
accused No. 1 company. In such cases, if the complainant
has any claims against accused No. 1, he can file his claim
application before the Resolution Officer. If the corporate
debtor i.e. accused No.1 company is declared bankrupt,
then its representatives i.e. directors of the company are
also exempted from criminal liability. Therefore this is the
only defense taken by the accused in this case.
11. The complainant, to prove its case, examined its
proprietor as PW1 and got marked documents as per Ex.P1
to P24. The learned counsel for the accused has duly cross-
examined the PW1 and tried to extract from the mouth of
the complainant that, because of the orders passed by the
National Company Law Tribunal declaring the accused No.
1 company as insolvent, the remaining accused persons are
also exonerated from the criminal liability. The PW1 in his
cross-examination has stated that he used to make
business transactions with accused No.2 in the name of
accused No.1’s company , but he has not seen the other
accused as they were engaged in the management of the
15 C.C. 27584 / 2019
company. He further stated that the cheque in question
belongs to accused No.1’s company, but the said cheque
was signed by accused No.2 as an authorised signatory. The
complainant further admitted that the accused persons
have given the outstanding amount of Rs.4,57,23,510/- by
way of cheque. The complainant further deposed that the
store manager of the accused No. 1 company has
subscribed his signatures on the invoice bill; except for
these admissions, the learned counsel for the accused has
failed to elicit from the mouth of the complainant that the
accused No.2 to 4 are not liable to pay the cheque amount.
In addition to the oral evidence, the complainant has
produced the documents at Ex.P1 to P24. Among these,
Ex.P1 is a cheque issued by the accused No.1 company
signed by accused No.2 as an authorised signatory; the
signature of the accused was marked as Ex.P1 (a). Ex.P2 is
the cheque returns memo, wherein it is mentioned that the
cheque issued by the accused in favour of the complainant
was returned with an endorsement “Account blocked”.
16 C.C. 27584 / 2019
Ex.P3 is the legal notice given to the accused by the
complainant calling upon them to pay the cheque amount.
The said notice was sent to the last known address of the
accused. Ex. P11 to P17 are the unserved legal notices and
postal envelopes, all the notices were sent to the official and
residential addresses of the accused persons, and they have
not denied the addresses mentioned on the legal notices and
also on the postal envelopes. Ex.P18 is the ledger account
which shows that the accused persons have to pay an
outstanding balance amount of Rs. 5,300,429. Ex.P18(a) is
the certificate u/s 65(B) of the Indian Evidence Act to prove
the electronic records produced by the complainant. Ex.P20
is the 50 invoice bills about the supply of materials by the
complainant to the accused persons on a credit basis.
Ex.P21 is the way bridge bills; Ex.P22 is the GST
Registration Certificate of the complainant firm. Ex.P22 (a)
is the certificate u/s 65(B) of Indian Evidence Act to prove
the authenticity to electronic record, Ex.P23 is the certified
copy of joint memo filed by the accused in Criminal R P
17 C.C. 27584 / 2019
No.982 / 2019 and 983 /2019 before the Hon’ble High
Court of Karnataka wherein it is clearly mentioned that, the
both the complainant and accused have agreed to settle the
dispute for Rs.33,54,065/- and the joint memo was filed by
the accused persons on 23.12.2021, which shows that, even
after initiation of proceedings before National Company Law
Tribunal the accused persons have voluntarily settled the
dispute, the payment made by the accused persons clearly
established that, they have financial capacity to pay the
cheque amount to the complainant, Ex.P24 is the certified
copy of Criminal Revision Petition No.982/2019 filed by the
accused persons against Bhanu Steels and Aloys for setting
aside the judgment of conviction passed against them by the
12th ACMM, Bangalore, in CC No.18311/2017 dated
22.12.2018. Ex.P25 is the cheque issued by the accused
No.2 in favour of Hydro Tools and Engineering for
Rs..8,85,160/-.
12. The complainant, to prove the signature of the
accused persons appeared on the cheque, examined the
18 C.C. 27584 / 2019
present bank manager of HDFC Bank as PW2. He deposed
that for 6 months he has been working at HDFC Bank, and
he has produced the specimen signature as per the
summons issued by the court. He further deposed that the
accused No. 2 and 3 are the authorised signatories of the
accused No. 1 company. The PW2 further deposed that the
signature that appeared on the account opening form and
the specimen signature did not match the signature that
appeared on the cheque, but he cannot say exactly that the
signature that appeared on the cheque does not belong to
the accused No.2 because, at the time of opening of the
bank account by the accused No.2, he was not working in
the bank as the Bank Manager. He further deposed that he
has blocked the bank account of accused No.1 company as
per the direction given by NCLT, but he does not know on
which date he received the direction from NCLT to block the
bank account of accused No. 1. The PW2 has produced the
account opening form as per Ex.P27 and specimen
signature as per Ex.P28. A perusal of the signature that
19 C.C. 27584 / 2019
appeared on Ex.P28 and Ex.P1 cheque reveals that the
signatures belong to accused No.2. Ex.P29 is the copy of the
resolution forwarded by the accused No.1 company
authorising the accused No.2 to subscribe his signature on
the negotiable instruments issued on behalf of the accused
No.1 company. The PW2 is not the competent person to
examine the signature of the accused No. 2 because he was
not working as the manager at the time of accepting the
account opening form of the accused No. 2. The learned
counsel for the accused has not shown any interest in
cross-examining the PW2.
13. The accused persons, to prove their defence,
accused No. 2 examined himself and, on behalf of the other
accused, as DW1, and got marked documents as per Ex. D1
to D.5. The learned counsel for the complainant has duly
cross-examined the DW1 and extracted the material
admissions about payment of outstanding amounts and
issuance of cheques. The DW1 in his cross-examination
has admitted that, after the death of Naresh Kumar, he
20 C.C. 27584 / 2019
used to sign the negotiable instrument on his behalf.
Further deposed that the assets and liabilities statement
and bank statements of the accused No. 1 company have
been given to the custody of a resolution professional of
09.08.2019. He further admits that as per Ex.D3, he is
liable to pay the outstanding amount of Rs. 1,25,76,141/-
and he has not filed any objection before the resolution
professional that they have liable to pay the above-said
amount to the complainant. He further admits that all the
postal letters sent to them would be served to the 2nd
address as mentioned in the legal notice. He further stated
that he was not working as the Director of accused No. 1 at
the time of the alleged transaction and issuance of the
cheque, and he denied his signature appeared on Ex.P1.
The counsel for the complainant has confronted the joint
memo filed by the accused before the Hon’ble High Court of
Karnataka; on perusal of the same, the accused No. 2
admits the signature that appeared on the petition and
Ex.P1 are one and the same. The accused further submitted
21 C.C. 27584 / 2019
that the NCLT Bangalore has given the management of the
accused No. 1 company in favour of third parties. Further,
he denied the signature and seal appeared on the invoice
bill. The counsel for the complainant has confronted the
cheque to the accused; he admits the signature appeared on
the cheque. Though accused No. 2 has denied his signature
appearing on Ex.P1, he has not placed any record to show
that the signature that appeared on Ex.P1 does not belong
to him. In addition to the oral evidence, the accused has
produced a copy of resolution order no. CP(IB) No.
132/BB/2017 passed by NCLT Bangalore wherein the NCLT
has passed a moratorium order against the creditors of the
accused No. 1 company by restraining them from initiating
any legal action against the company to recover the
outstanding amount. Ex.D2 is the detailed order passed by
NCLT by handing over the management of the accused No.1
company in favour of koncept shelters; Ex.D3 is the list of
creditors wherein it can be seen that the name of the
complainant is mentioned as unsecured creditors, and the
22 C.C. 27584 / 2019
accused persons have to pay the outstanding amount of
Rs.1,25,76,141/-. Ex.D4 is the form No.32 submitted by
accused No.2 for his appointment as the director of the
accused No.1 company; Ex.D5 is the company master data
wherein it can be seen that one Komminni Shankar
Govindaraj, Vinay Dega Kumar and Chandrashekar
Abhishek are the directors and signatories of the accused
No.1 company with effect from 29.01.2021 and 31.07.2021.
Ex.D3(a) is the certificate under section 65(B) of the Indian
Evidence Act to prove the authenticity of the electronic
records produced by the accused.
14. The learned counsel for accused has placed his
reliance on the judgment of the Hon’ble Supreme Court of
India reported in 2022 (1) SCC (Cri) 508 between M/s. Nag
Lethers Pvt. Ltd. V/s. Dynamic Marketing Pvt. Ltd. And
other wherein the Hon’ble Supreme Court of India has held
that, the proceedings u/s 138 / 141 of NI Act against the a
corporate debtors is covered by section 14 (1) (a) of IBC held
that, the proceedings u/s 138 / 141 of NI Act will continue
23 C.C. 27584 / 2019
both against company as well as the accused persons for
the reasons that the insolvency resolution process does not
involve a new management taking over and the moratorium
period has come to an end, accordingly the criminal
proceedings against the corporate debtors stands set aside.
15. The learned counsel for accused has also replaced
his reliance on the judgment of the Hon’ble Bombay High
Court reported in Docid # India Law Lib / 1570424
between Deewan Housing Finance Corporation Ltd. And
other V/s. Union of India and others in this case the
Hon’ble Bombay High Court has held that, the object of
section 32A of IBC code is to protect the interests of all the
stake holders including most importantly the imperative
need to attract resolution applicants who would not shy-
away from offering reasonable and fare value as part of the
resolution plan if the legislature thought that immunity be
granted to the corporate debtor as also its priority. The
extinguishment of the criminal liability of the corporate
debtor is apparently important to the new management to
24 C.C. 27584 / 2019
make a clean break with the past and start on a clean slate.
The immunity is premised on various conditions being full
filled there must be a resolution plan and it must be
approved and there must be a change in the control of the
corporate debtor. The new management cannot be the
subject matter of an investigation which has resulted in
material showing abetment or conspiracy for the
commission of the offense and the report or complaint filed
there too. The creation of a criminal offense as also
abolishing criminal liability must be ordinarily be left to the
judgment of the legislature. Further held that, subsequent
events in disputably caused change in the management and
control of corporate debtor. The immunities sought by the
corporate debtor though conditional subject to full filament
of the conditions, the resolution plan has to be approved by
adjudicating authority u/s 31 of IBC. The resolution plan
so approved caused and resulted in change in management
of corporate debtor and change in management is in favour
of the persons who were not related to party of corporate
25 C.C. 27584 / 2019
debtor. Therefore the immunities u/s 32A of IBC cannot be
denied to corporate debtor.
16. The learned counsel for accused has also relied
upon the judgment of the Hon’ble High Court of Karnataka
reported in Union of India V/s. M/s. Ruchi Soya Industries
Pvt. Ltd. , in this case the Hon’ble High Court of Karnataka
has held that, Section 31 of the IBC code is classificatory
and declaratory in nature. When the resolution plan is
approved by the NCLT, the claims which are not the part of
the resolution plan, shall stands extinguished and
proceedings related there too shall stands terminated.
Since the subject matter of the petition are the proceedings
which relates to the claims of the respondents /
complainant prior to the approval of the plan, in the light of
the view taken by us the same cannot be continued.
Equally the claims, which are not part of the resolution
plant shall stand extinguished.
17. The learned counsel for the accused has
vehemently argued that the accused no.1 company was
26 C.C. 27584 / 2019
formed by its directors; once the company was declared
insolvent, its directors were also exempted from criminal
liability, and the directors are held liable only because of
transacting business on behalf of the company or the
corporate debtor. Further argued that the NCLT Bangalore
has approved the resolution plan and also appointed the
resolution officer to resolve the claims against the accused
No.1 company, and new management has taken over full
control of the accused No.1 company; under such
circumstances, its erstwhile directors cannot be made liable
to face the prosecution of the offence u/s 138 of NI Act.
Admittedly, accused No.2 had issued the cheques on behalf
of the accused No. 1 company, and the accused No.2 knew
that he was the authorised signatory and the managing
director of the accused No.1 company and had issued the
cheques to pay the outstanding amount to the complainant
towards the supply of materials; the accused No. 2 had the
knowledge that the bank account of the accused No.1
company had been closed despite that he had issued a
27 C.C. 27584 / 2019
cheque in favour of the complainant. Furthermore, the legal
notice sent to the accused was returned with an
endorsement ‘not claimed and addressee left’. The
complainant has sent the legal notices to the last known
address of the accused persons. If the addresses shown in
the legal notice as well as on the postal envelope were the
wrong addresses, then the accused could have produced
relevant documents to show their correct address. Therefore
the contentions taken by the learned counsel for the
accused are not acceptable. The important aspect of this
case before the court is that when the company law tribunal
approved the resolution plan and declared the accused No.1
company as insolvent, whether the proceedings u/s 138 of
the NI Act shall be continued against the company or only
against the directors of the company. This proposition of
law has been extensively discussed by the Hon’ble Supreme
Court in the case of the Ajay Kumar Radheyshyam Goenka
V/s. Tourism Finance Corporation of India Ltd. Reported in
28 C.C. 27584 / 2019
(2023) 10 SCC 545, in this case the Hon’ble Apex Court of
India has held that,
” The scope and nature of the proceedings
under IBC code and NI Act are quite different
and would not interdict each other.’ Further
held that, section 14 of IBC would make it
clear that the nature of proceedings which
have to be kept in abeyance do not include
criminal proceedings, which is the nature of
proceedings u/s 138 of NI Act, and also it
cannot be said that the process under IBC
whether u/s 31 or section 38 to 41 of IBC
which can extinguish the debt would ipso-
facto apply to the extinguishment of the
criminal proceedings , held that, under a
scheme which may be approved IBC, a part
of amount will be recovered or if there is no
scheme a person may stand in a queue to
recover the debt would absolve the
29 C.C. 27584 / 2019
consequences of section 138 of NI Act is
unacceptable. After passing of resolution
plan u/s 31 of the IBC code by the
adjudicating authority and in the light of the
provisions of section 32A of IBC, the criminal
proceedings u/s 138 of the NI Act will stand
terminated only in relation to the corporate
debtor if the same is taken over by a new
management and section 138 of NI Act
proceedings in relation to the signatories /
directors who are liable are covered by the
two proviso of section 32A (1) of IBC code
held will continue in accordance with law as
per section 141 and 148 of the NI Act. The
signatories/directors cannot take benefit of
the discharge obtained by the corporate
debtor by operation of law under IBC. The
extinguishment of debt u/s 31 of IBC leads
to the discharge of signatories/directors u/s
30 C.C. 27584 / 2019
138 of the proceedings is not acceptable. If
the guarantor does not get the benefit of
extinguishment of debt u/s 31 of IBC then
similarly for the extinguishment of debt the
signatories/director cannot get any benefit.
Section141 of the NI Act states that, if the
person committing an offense u/s 138 of NI
Act is a Company, every person who, at the
time of the offense was committed, was in
charge of, and was responsible to the
company for the conduct of the business of
the company, as well as the company, shall
be deemed to be guilty of the offense and
shall be liable to be proceed against and
punish accordingly. As per section 17 to 21
and 23 of IBC code, it is only the resolution
professional who can represent the accused
Company during the pendency of the
proceedings under IBC, after proceedings are
31 C.C. 27584 / 2019
over, either the corporate entity may be
dissolved or it can be taken over by a new
management in which event the company
will continue to exit, held that, when a new
management takes over, it will have to make
arrangements for representing the company.
However, if the company is dissolved as a
result of the resolution process obviously the
proceedings against the company will have
to be terminated, but even then its erstwhile
directors may not be able take advantage of
the situation.”
18. The Company Law Tribunal has approved the
resolution process only in respect of the debts of the
accused No. 1 company; if the new management board
takes over the control of the accused No. 1 company, the
accused No. 1 company will be exempted from criminal
liabilities, but its erstwhile directors will not be exempted
from criminal liabilities. The accused No. 1 company was
32 C.C. 27584 / 2019
formed by its directors or promoters. If the directors are not
in a position to manage the affairs of the company, the new
management board will take over, and the company will
continue its business through the new management. If the
erstwhile directors of the company have committed any
offence, they will have to face prosecution. Apart from that,
the proceedings under Section 138 of the NI Act have a
penal provision, i.e., the court can impose a fine and punish
the directors for issuing the cheque by closing the bank
account; therefore, accused No. 2 and 3 are liable to face
the prosecution under section 138 of the NI Act.
19. As per the Ex.D1 filed by the accused, it is
revealed that accused No.2, Shailesh Sriramalu, is the
director and authorized signatory of the accused No.1
company. After the death of the previous director S.V.
Nareshkumar: accused Nos.2 and 3 have taken charge of
the accused No.1 company and they became active
directors. The complainant has not produced any relevant
document to show that accused No.4 is also an active
33 C.C. 27584 / 2019
director and is in charge of the business activities of the
accused No.1 company; unless the complainant produces a
document to show the active involvement of accused No.4,
she cannot be held liable under Section 138 of the NI Act.
20. The complainant in his cross-examination has
stated that he had transacted business with accused Nos. 2
and 3, Shailesh and Rajesh Kumar, and that they had
issued cheques to the complainant to pay a debt which was
legally recoverable. The complainant has not specifically
stated in his complaint that accused No. 4 was involved in
the alleged transaction and that she was performing her
duties at the time of the transaction. If accused No. 4 was
not involved in the day-to-day activities of the accused
company, merely putting a signature by the director is not
sufficient to hold her guilty unless the complainant has
established before the court that the said director was
involved in the day-to-day affairs of the company, in this
regard I have relied upon the judgment of the Hon’ble
Supreme Court of India reported in [2024] 3 S.C.R. 655
34 C.C. 27584 / 2019
Susela Padmavathy Amma v. M/S Bharti Airtel Limited, in
this case the Hon’ble Supreme Court of India has held that,
” A company is in charge of its everyday
affairs. We have discussed about the
position of a director in a company in order
to illustrate the point that there is no magic
as such in a particular word, be it director,
manager or secretary. It all depends upon
the respective roles assigned to the officers
in a company. It was held that merely
because a person is a director of a company,
it is not necessary that he is aware about the
day-to-day functioning of the company. This
Court held that there is no universal rule
that a director of a company is in charge of
its everyday affairs. It was, therefore,
necessary, to aver as to how the director of
the company was in charge of day-to-day
affairs of the company or responsible to the
35 C.C. 27584 / 2019
affairs of the company. This Court, however,
clarified that the position of a managing
director or a joint managing director in a
company may be different. This Court
further held that these persons, as the
designation of their office suggests, are in
charge of a company and are responsible for
the conduct of the business of the company.
To escape liability, they will have to prove
that when the offence was committed, they
had no knowledge of the offence or that they
exercised all due diligence to prevent the
commission of the offence.”
21. In the case of Pooja Ravinder Devidasani vs. State
of Maharashtra and another this Court observed thus:
” Every person connected with the
Company will not fall into the ambit
of the provision. Time and again, it
has been asserted by this Court that
36 C.C. 27584 / 2019only those persons who were in
charge of and responsible for the
conduct of the business of the
Company at the time of commission
of an offence will be liable for
criminal action. A Director, who was
not in charge of and was not
responsible for the conduct of the
business of the Company at the
relevant time, will not be liable for an
offence under Section 141 of the NI
Act.”
22. Therefore, keeping in mind the ratio laid down in
the above-mentioned decision, it is clear that accused no. 4
was not involved in the day-to-day business activities of the
accused company, and she has not put her signature on
the cheque. As per Ex.P23, the accused No.1 and 2 have
jointly filed a memo before the Hon’ble High Court of
Karnataka to settle the dispute on behalf of accused No.1’s
company; under such circumstances, the accused No.2 and
3 are personally and severally liable to pay the
compensation amount to the complainant. The company
37 C.C. 27584 / 2019
law tribunal, Bangalore, has declared the accused No.1
company as insolvent; under such circumstances, the
accused No.1 is not liable to pay the compensation to the
complainant. The liquidation proceedings initiated by the
resolution officer are applicable only to the recovery
proceedings against the accused No. No.2 and 3, but as far
as criminal proceedings, the order passed by the company
law tribunal is not applicable. At the time of issuance of the
cheque, the accused No. No.2 and 3 were the directors of
the accused No.1 company. A perusal of Ex.P1 to P21
discloses that the accused persons have purchased the
materials from the complainant on a credit basis; to
discharge the liability, the accused No.2 has issued the
disputed cheque for Rs.40,58,210/-. The accused No. 2 and
3 have not made timely payment to the complainant; hence,
they are liable to pay additional compensation of
Rs.5,00,000/- along with the cheque amount and also
liable to pay litigation expenses of Rs.30,000/-. The
accused persons have not disputed the issuance of the
38 C.C. 27584 / 2019
cheque, and the signature appeared on the cheque, as per
Ex.D3 claim list the accused persons have to pay
Rs.1,25,76,141/- to the complainant; the accused persons
themselves admitted the liability. Under such
circumstances, the accused No.2 and 3 are held liable to
pay the cheque amount along with additional compensation
and litigation expenses. The order passed by the company
law tribunal is applicable only to the corporate debtors, i.e.,
the company, but not to the directors, accordingly I answer
point No.1 in the negative and point No.2 in the affirmative.
Point No.3 :
23. For the above said reasons and discussions, I
proceed to pass the following:
ORDER
Acting under section 255(1) of the Cr.P.C
the accused No.1 company by name M/s.
Fortuna Urban Scape Pvt. Ltd. is hereby
acquitted for the offense punishable under
section 138 of the Negotiable Instruments Act as
39 C.C. 27584 / 2019there is a order from the company law tribunal,
Bangalore that the resolution process initiated
against accused No.1 Company as per IBC
Code.
Acting under section 255(1) of the Cr.P.C
the accused No.4 is hereby acquitted for the
offense punishable under section 138 of the
Negotiable Instruments Act.
Acting under section 255(2) of the Cr.P.C
the accused No.2 and 3 is hereby convicted for
the offense punishable under section 138 of the
Negotiable Instruments Ac
The accused No. 2 and 3 shall pay a fine of
Rs.45,93,210/- (which includes cheque amount
of Rs.40,58,210/-, additional compensation
amount of Rs.5,00,000/- and litigation expenses
of Rs.30,000/- and fine amount of Rs.5,000/-
payable to the government) in default of
payment of fine accused No.2 and 3 shall
undergo simple imprisonment for one year for
the offense punishable under Section 138 of the
Negotiable Instrument Act.
The accused No.2 and 3 are jointly and
severally liable to pay the fine amount.
40 C.C. 27584 / 2019
As per Section 357 of Cr.P.C. out of total
fine amount, Rs.45,88,210/-(which includes
cheque amount and additional compensation
amount + litigation expenses) is to be paid to
the complainant as compensation and the
balance amount is to be remitted to the state
government.
Bail bond and surety bond of the accused
shall stand canceled.
Further, in exercise of power conferred
under section 424(1)(a) of Cr.P.C the accused
No.2 and 3 are permitted to pay/deposit the fine
amount of Rs.45,93,210/- within 30 days from
this order and execution of sentence passed
against him in view of the above permission
stands suspended for a period of 30 days from
today.
Supply free copy of the judgment to the
accused.
(Directly typed by me on my laptop, corrected by me and pronounced
the judgment in the open court on this 16th day of April 2025)(SHRISHAIL BHIMASHEN BAGADI)
XX A.C.J.M., Bengaluru.
41 C.C. 27584 / 2019
ANNEXURE
List of witnesses examined on behalf of complainant:
P.W.1 C. Narayanappa P.W.2 Maheshkumar B R
List of documents produced on behalf of complainant:
Ex.P.1 Cheque Ex.P. 1(a) Signature of the accused Ex.P.2 Bankers Return Memo Ex.P.3 Copy of the legal notice Ex.P.4 to 10 Postal Receipts Ex.P.11 to 17 Returned postal cover Ex.P.11(a) to 17(a) Notice inside the cover Ex.P.18 Online Ledger account Ex.P.18(a) Certificate u/s 65(B) of Indian Evidence Act Ex.P.19 Online Ledger account Ex.P.19(a) Certificate u/s 65(B) of Indian Evidence Act Ex.P.20 Tax Invoice Bills - 50 Ex.P.21 46 way bill Ex.P.22 Online GST Certificate Ex.P.22(a) Certificate u/s 65(B) of Indian Evidence Act 42 C.C. 27584 / 2019 Ex.P.23 Certified copy of joint memo Ex.P.24 Certified copy of Crl.R.P. 982/2019 Ex.P.25 cheque issued by the accused No.2 in favour of the Hydro Tools and Engineering Ex.P.26 Certified copy of Crl.R.P. 983/2019 Ex.P.27 Account opening form Ex.P.28 Specimen signature Ex.P.29 Copy of Resolution
List of witnesses examined on behalf of accused:
D.W.1 Shailesh
List of documents produced on behalf of accused:
Ex.D.1 The certified copy of the orders
passed by NCLT in C.P.(IB)
No.132/BB/2017
Ex.D.2 The certified copy of the orders
passed by NCLT in C.P.(IB)
No.132/BB/2017
Ex.D.3 List of Creditors
Ex.D.3(a) Certificate u/s 65(B) of Indian
Evidence Act.
43 C.C. 27584 / 2019
Ex.D.4 Form No.32
Ex.D.5 Company Master DataXX A.C.J.M.,
Bengaluru.
[ad_2]
Source link