Delhi High Court
Shelly Narang vs The State (Govt. Of Nct Of Delhi) And Anr. on 29 October, 2024
Author: Subramonium Prasad
Bench: Subramonium Prasad
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 29th OCTOBER, 2024
IN THE MATTER OF:
+ CRL.M.C. 4575/2022 & CRL.M.As. 18566/2022, 21260/2023
SHELLY NARANG .....Petitioner
Through: Mr. Shiv Charan Garg, Mr. Imran
Khan, Ms. Jahanvi Garg, Advocates.
versus
THE STATE (GOVT. OF NCT OF DELHI) AND ANR.
.....Respondents
Through: Mr. Shoaib Haider, APP for the State.
Mr. Akul Mehandru and Mr. Vaibhav
Mehal, Advocates for R-2.
CORAM:
HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD
JUDGMENT
1. Petitioner has approached this Court challenging the Order dated
30.03.2019, passed by the learned Metropolitan Magistrate, Rohini Courts,
in Complaint Case No.10617/2017, issuing summons against the Petitioner
herein.
2. It is pertinent to mention that the present proceedings arise from
Complaint Case No.10617/2017, filed by the Respondent No.2 herein under
Section 138 NI Act against the Petitioner herein (Accused No.3 in the
Complaint) and Respondents No.3 (Accused No.1 in the Complaint) & 4
(Accused No.2 in the Complaint) herein. In the Complaint it is stated that
the Accused No.1, i.e. the Respondent No.3 herein/Company, is involved in
financial services. It is stated that the Petitioner herein and Respondent No.4
herein are the Directors of the Company. It is stated that after the demise of
Signature Not Verified
Digitally Signed
By:SHAZAAD ZAKIR
Signing Date:04.11.2024 CRL.M.C. 4575/2022 Page 1 of 15
17:03:36
Mr. Nimit Kumar, who was the signatory director to the cheque in question,
the Petitioner herein and the Respondent No.4 are jointly responsible for day
to day affairs of the business of the Company and are responsible for all the
financial transactions and payments for and on behalf of the company
besides being personally involved in making representations to the
Complainant for clearing the dues/debts of the Company. It is stated that the
Company, acting through its authorized representative had entered into an
agreement dated 20.04.2015, whereby the Complainant was induced into
disbursing loan of Rs.10,00,000/- to the Company at an interest of 3% per
month. It is stated that a cheque bearing No.000621, drawn on HDFC Bank,
3 NRI Complex, Mandakini, Alaknanada, New Delhi, was issued by the
Company to the Respondent No.2/Complainant in discharge of its liability.
It is stated that it was agreed that the said cheque would be realizable by
giving 60 days notice upon failure on the part of the Company to disburse
the agreed monthly interest or on failure to return the loan amount as and
when demanded by the Complainant. It is stated that in November-
December, 2016, there was failure on the part of the Company to return the
interest amount and thereby the Complainant was entitled to recall the loan
amount as per the loan agreement.
3. It is stated that notice was sent to the Company on 28.12.2016 seeking
recall of the loan amount. It is stated that despite the notice, the Company
did not return the amount. It is stated that since the amount was not paid as
per the terms of the agreement, the cheque in question was presented,
however, the same was returned unpaid with endorsement “account
blocked”. It is specifically averred in the Complaint that the complainant
visited the Petitioner and Respondent No.4 who undertook to take remedial
measures. It is stated that on the assurance of the Petitioner and the
Signature Not Verified
Digitally Signed
By:SHAZAAD ZAKIR
Signing Date:04.11.2024 CRL.M.C. 4575/2022 Page 2 of 15
17:03:36
Respondent No.4, the Respondent No.2 re-presented the cheque in question.
However, it was again returned unpaid with endorsement “account blocked”.
It is stated that the requisite notice under Section 138 of the NI Act was
issued on 27.06.2017 for payment of the loan amount. It is stated that the
notice under Section 138 NI Act was sent to the last known addresses of the
Petitioner and the Respondents No.3 & 4. However, the notices were
returned with remark “left” and “refused” respectively.
4. Thereafter, the Petitioner herein filed the complaint under Section 138
NI Act. Vide Order dated 30.03.2019, summons were issued to the
Petitioner herein by the learned Metropolitan Magistrate. It is this Order
which is under challenge in the present Petition.
5. The principal contention raised by the Petitioner is that she is the
housewife and has never dealt with the affairs of the Company and that the
cheque in question was not signed by her and she was not the authorised
signatory of the Company. It is stated that Mr. Nimit Sachdeva, the
Managing Director of the accused Company, passed away on 07.11.2016
and the Petitioner is not concerned with the Company. It is stated that she is
only a Director of the accused Company but has never dealt with the affairs
of the Company. The Petitioner also contends that she has also filed a
complaint stating that she never gave her digital signatures or any
documents for opening a bank account with the OBC Bank and the HDFC
Bank. She further states that she has never signed any documents or given
her consent to become the Director of the company. Petitioner places
reliance on Pooja Ravinder Devidasani v. State of Maharashtra, (2014) 16
SCC 1; Ashok Shewakramani v. State of A.P., (2023) 8 SCC 473, National
Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330;
S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89, etc. to
Signature Not Verified
Digitally Signed
By:SHAZAAD ZAKIR
Signing Date:04.11.2024 CRL.M.C. 4575/2022 Page 3 of 15
17:03:36
contend that there are no requisite averments in the complaint against the
Petitioner and that the Petitioner not being the signatory of the cheque in
question cannot be made liable for the offence under Section 138 of the NI
Act. It is further stated that specific averments have not been made against
the Petitioner in the complaint as to how is she responsible for the conduct
and business of the company and in the absence of any specific averments,
the Petitioner cannot be held vicariously liable. It is further stated that the
Petitioner is not a signatory to any of the Loan documents, Security
documents of the transaction in question and the cheque which was
dishonoured.
6. Per contra, learned Counsel for the Respondent No.2 states that there
are only three Directors in the accused Company and it cannot be said that
only two Directors were responsible for the day-to-day affairs of the
Company and the Petitioner was not aware of anything. He further states
that the fact that the Petitioner herein was not responsible for the conduct of
business of the accused Company can only be proved in Trial and the
summoning Order cannot be quashed on these averments.
7. Heard the Counsels for the parties and perused the material on record.
8. It is well settled that while exercising its jurisdiction under Section
482 Cr.P.C, the High Court must be extremely cautious and slow in
quashing a complaint at an initial stage. It is now well settled that the power
of quashing should be exercised sparingly and that too in the rarest of rare
cases and courts must not embark upon enquiry as to the reliability or
genuineness or otherwise of the allegations made in the Complaint unless
the allegations in the complaint are so patently absurd and inherently
improbable so that no prudent person can reach such a conclusion.
9. In Zandu Pharmaceutical Works Ltd. v. Mohd. Sharaful Haque,
Signature Not Verified
Digitally Signed
By:SHAZAAD ZAKIR
Signing Date:04.11.2024 CRL.M.C. 4575/2022 Page 4 of 15
17:03:36
(2005) 1 SCC 122, the Apex Court has held as under:
“11. The scope of exercise of power under Section 482
of the Code and the categories of cases where the High
Court may exercise its power under it relating to
cognizable offences to prevent abuse of process of any
court or otherwise to secure the ends of justice were set
out in some detail by this Court in State of Haryana v.
Bhajan Lal [1992 Supp (1) SCC 335 : 1992 SCC (Cri)
426] . A note of caution was, however, added that the
power should be exercised sparingly and that too in
rarest of rare cases. The illustrative categories
indicated by this Court are as follows : (SCC pp. 378-
79, para 102)“102. (1) Where the allegations made in the first
information report or the complaint, even if they
are taken at their face value and accepted in their
entirety do not prima facie constitute any offence
or make out a case against the accused.
(2) Where the allegations in the first information
report and other materials, if any, accompanying
the FIR do not disclose a cognizable offence,
justifying an investigation by police officers under
Section 156(1) of the Code except under an order
of a Magistrate within the purview of Section
155(2) of the Code.
(3) Where the uncontroverted allegations made in
the FIR or complaint and the evidence collected
in support of the same do not disclose the
commission of any offence and make out a case
against the accused.
(4) Where, the allegations in the FIR do not
constitute a cognizable offence but constitute only
a non-cognizable offence, no investigation is
permitted by a police officer without an order of a
Magistrate as contemplated under Section 155(2)Signature Not Verified
Digitally Signed
By:SHAZAAD ZAKIR
Signing Date:04.11.2024 CRL.M.C. 4575/2022 Page 5 of 15
17:03:36
of the Code.
(5) Where the allegations made in the FIR or
complaint are so absurd and inherently
improbable on the basis of which no prudent
person can ever reach a just conclusion that there
is sufficient ground for proceeding against the
accused.
(6) Where there is an express legal bar engrafted
in any of the provisions of the Code or the Act
concerned (under which a criminal proceeding is
instituted) to the institution and continuance of the
proceedings and/or where there is a specific
provision in the Code or the Act concerned,
providing efficacious redress for the grievance of
the aggrieved party.
(7) Where a criminal proceeding is manifestly
attended with mala fides and/or where the
proceeding is maliciously instituted with an
ulterior motive for wreaking vengeance on the
accused and with a view to spite him due to
private and personal grudge.”
As noted above, the powers possessed by the High
Court under Section 482 of the Code are very wide and
the very plenitude of the power requires great caution
in its exercise. Court must be careful to see that its
decision in exercise of this power is based on sound
principles. The inherent power should not be exercised
to stifle a legitimate prosecution. The High Court being
the highest court of a State should normally refrain
from giving a prima facie decision in a case where the
entire facts are incomplete and hazy, more so when the
evidence has not been collected and produced before
the court and the issues involved, whether factual or
legal, are of magnitude and cannot be seen in their
true perspective without sufficient material. Of course,
Signature Not Verified
Digitally Signed
By:SHAZAAD ZAKIR
Signing Date:04.11.2024 CRL.M.C. 4575/2022 Page 6 of 15
17:03:36
no hard-and-fast rule can be laid down in regard to
cases in which the High Court will exercise its
extraordinary jurisdiction of quashing the proceeding
at any stage. [See Janata Dal v. H.S. Chowdhary
[(1992) 4 SCC 305 : 1993 SCC (Cri) 36] and Raghubir
Saran (Dr.) v. State of Bihar [AIR 1964 SC 1 : (1964)
2 SCR 336 : (1964) 1 Cri LJ 1] .] It would not be
proper for the High Court to analyse the case of the
complainant in the light of all probabilities in order to
determine whether a conviction would be sustainable
and on such premises arrive at a conclusion that the
proceedings are to be quashed. It would be erroneous
to assess the material before it and conclude that the
complaint cannot be proceeded with. In a proceeding
instituted on complaint, exercise of the inherent powers
to quash the proceedings is called for only in a case
where the complaint does not disclose any offence or is
frivolous, vexatious or oppressive. If the allegations set
out in the complaint do not constitute the offence of
which cognizance has been taken by the Magistrate, it
is open to the High Court to quash the same in exercise
of the inherent powers under Section 482 of the Code.
It is not, however, necessary that there should be
meticulous analysis of the case before the trial to find
out whether the case would end in conviction or
acquittal. The complaint has to be read as a whole. If it
appears that on consideration of the allegations in the
light of the statement made on oath of the complainant
that the ingredients of the offence or offences are
disclosed and there is no material to show that the
complaint is mala fide, frivolous or vexatious, in that
event there would be no justification for interference by
the High Court. When an information is lodged at the
police station and an offence is registered, then the
mala fides of the informant would be of secondary
importance. It is the material collected during the
investigation and evidence led in court which decides
the fate of the accused person. The allegations of mala
fides against the informant are of no consequence and
cannot by themselves be the basis for quashing the
Signature Not Verified
Digitally Signed
By:SHAZAAD ZAKIR
Signing Date:04.11.2024 CRL.M.C. 4575/2022 Page 7 of 15
17:03:36
proceedings. [See Dhanalakshmi v. R. Prasanna
Kumar [1990 Supp SCC 686 : 1991 SCC (Cri) 142] ,
State of Bihar v. P.P. Sharma [1992 Supp (1) SCC 222
: 1992 SCC (Cri) 192 : AIR 1991 SC 1260] , Rupan
Deol Bajaj v. Kanwar Pal Singh Gill [(1995) 6 SCC
194 : 1995 SCC (Cri) 1059] , State of Kerala v. O.C.
Kuttan [(1999) 2 SCC 651 : 1999 SCC (Cri) 304 : AIR
1999 SC 1044] , State of U.P. v. O.P. Sharma [(1996)
7 SCC 705 : 1996 SCC (Cri) 497] , Rashmi Kumar v.
Mahesh Kumar Bhada [(1997) 2 SCC 397 : 1997 SCC
(Cri) 415] , Satvinder Kaur v. State (Govt. of NCT of
Delhi) [(1999) 8 SCC 728 : 1999 SCC (Cri) 1503 : AIR
1999 SC 3596] and Rajesh Bajaj v. State NCT of Delhi
[(1999) 3 SCC 259 : 1999 SCC (Cri) 401] .]
10. The Apex Court in S.P. Mani & Mohan Dairy v. Snehalatha
Elangovan, (2023) 10 SCC 685, after examining the issue as to who would
be held vicariously liable for the offence of the company has held that
Section 141 extends such criminal liability in case of a company to every
person who at the time of the offence, was in charge of and was responsible
for the conduct of the business of the company and such a person is
vicariously liable to be held guilty for the offence under Section 138 and
punished accordingly. The proviso to Section 141 of the NI Act states that
the officer who is being accused of committing an offence under Section
138 of the NI Act as being responsible and in-charge of the company can
escape the punishment if he/she proves that the offence was committed
without his/her knowledge or that he/she was not responsibly for the affairs
of the company.
10. In Commr. v. Velliappa Textiles Ltd., (2003) 11 SCC 405, the Apex
Court introduced the concept of ego and alter ego in relation to the employee
and the employer corporation and has held as under:
“56. In order to trigger corporate criminal liability for
Signature Not Verified
Digitally Signed
By:SHAZAAD ZAKIR
Signing Date:04.11.2024 CRL.M.C. 4575/2022 Page 8 of 15
17:03:36
the actions of the employee (who must generally be
liable himself), the actor-employee who physically
committed the offence must be the ego, the centre of the
corporate personality, the vital organ of the body
corporate, the alter ego of the employer corporation or
its directing mind. Since the company/corporation has
no mind of its own, its active and directing will must
consequently be sought in the person of somebody who
for some purposes may be called an agent, but who is
really the directing mind and will of the corporation,
the very ego and centre of the personality of the
corporation. To this extent there are no difficulties in
our law to fix criminal liability on a company. The
common law tradition of alter ego or identification
approach is applicable under our existing laws.”
11. In Sabitha Ramamurthy v. R.B.S. Channabasavaradhya, (2006) 10
SCC 581, the Apex Court has held as under:
“7. … Section 141 raises a legal fiction. By reason of
the said provision, a person although is not personally
liable for commission of such an offence would be
vicariously liable therefor. Such vicarious liability can
be inferred so far as a company registered or
incorporated under the Companies Act, 1956 is
concerned only if the requisite statements, which are
required to be averred in the complaint petition, are
made so as to make the accused therein vicariously
liable for the offence committed by the company.
Before a person can be made vicariously liable, strict
compliance with the statutory requirements would be
insisted.”
12. In K.K. Ahuja v. V.K. Vora, (2009) 10 SCC 48, the Apex Court
discussed the principles of vicarious liability of the officers of a company in
respect of dishonour of a cheque and has held as under:
Signature Not Verified
Digitally Signed
By:SHAZAAD ZAKIR
Signing Date:04.11.2024 CRL.M.C. 4575/2022 Page 9 of 15
17:03:36
“27. The position under Section 141 of the Act can be
summarised thus:
(i) If the accused is the Managing Director or a Joint
Managing Director, it is not necessary to make an
averment in the complaint that he is in charge of, and
is responsible to the company, for the conduct of the
business of the company. It is sufficient if an averment
is made that the accused was the Managing Director
or Joint Managing Director at the relevant time. This
is because the prefix “Managing” to the word
“Director” makes it clear that they were in-charge of
and are responsible to the company, for the conduct of
the business of the company.
(ii) In the case of a Director or an officer of the
company who signed the cheque on behalf of the
company, there is no need to make a specific averment
that he was in charge of and was responsible to the
company, for the conduct of the business of the
company or make any specific allegation about
consent, connivance or negligence. The very fact that
the dishonoured cheque was signed by him on behalf of
the company, would give rise to responsibility under
sub-section (2) of Section 141.
(iii) In the case of a Director, Secretary or Manager
[as defined in Section 2(24) of the Companies Act] or a
person referred to in clauses (e) and (f) of Section 5 of
the Companies Act, an averment in the complaint that
he was in charge of, and was responsible to the
company, for the conduct of the business of the
company is necessary to bring the case under Section
141(1) of the Act. No further averment would be
necessary in the complaint, though some particulars
will be desirable. They can also be made liable under
Section 141(2) by making necessary averments relating
to consent and connivance or negligence, in the
complaint, to bring the matter under that sub-section.
Signature Not Verified
Digitally Signed
By:SHAZAAD ZAKIR
Signing Date:04.11.2024 CRL.M.C. 4575/2022 Page 10 of 15
17:03:36
(iv) Other Officers of a company cannot be made liable
under sub-section (1) of Section 141. Other officers of
a company can be made liable only under sub-section
(2) of Section 141, by averring in the complaint their
position and duties in the company and their role in
regard to the issue and dishonour of the cheque,
disclosing consent, connivance or negligence.”
13. The Apex Court in S.P. Mani & Mohan Dairy v. Snehalatha
Elangovan, (2023) 10 SCC 685, has summarised the position as to who can
be held vicariously liable for the offence of the Company and has held as
under:
“50. The principles discernible from the aforesaid
decision of this Court in Ashutosh Ashok
Parasrampuriya [Ashutosh Ashok Parasrampuriya v.
Gharrkul Industries (P) Ltd., (2023) 14 SCC 770 :
2021 SCC OnLine SC 915] are that the High Court
should not interfere under Section 482 of the Code at
the instance of an accused unless it comes across
some unimpeachable and incontrovertible evidence to
indicate that the Director/partner of a firm could not
have been concerned with the issuance of cheques.
This Court clarified that in a given case despite the
presence of basic averments, the High Court may
conclude that no case is made out against the
particular Director/partner provided the
Director/partner is able to adduce some
unimpeachable and incontrovertible evidence beyond
suspicion and doubt.” (emphasis supplied)
14. As observed by the Apex Court in SP Mani (supra) that unless the
Director or the Partner is able to adduce some unimpeachable and
incontrovertible evidence beyond suspicion and doubt, the High Court
should not quash the proceedings under Section 482 Cr.P.C. The master data
of the accused company shows that the Petitioner is a Director in the
Signature Not Verified
Digitally Signed
By:SHAZAAD ZAKIR
Signing Date:04.11.2024 CRL.M.C. 4575/2022 Page 11 of 15
17:03:36
Company. There are only three Directors in the accused company and the
Petitioner, apart from stating that she has nothing to do with the affairs of
the company has not been able to adduce any unimpeachable and
incontrovertible evidence beyond suspicion and doubt to prove the same.
The second contention raised by the Petitioner is that there are no specific
averments against the Petitioner in the Complaint. In S.P. Mani (supra), the
Apex Court, after considering a number of judgments, has held as under:
“58. Our final conclusions may be summarised as
under:
58.1. The primary responsibility of the complainant is
to make specific averments in the complaint so as to
make the accused vicariously liable. For fastening the
criminal liability, there is no legal requirement for the
complainant to show that the accused partner of the
firm was aware about each and every transaction. On
the other hand, the first proviso to sub-section (1) of
Section 141 of the Act clearly lays down that if the
accused is able to prove to the satisfaction of the Court
that the offence was committed without his/her
knowledge or he/she had exercised due diligence to
prevent the commission of such offence, he/she will not
be liable of punishment.
58.2. The complainant is supposed to know only
generally as to who were in charge of the affairs of the
company or firm, as the case may be. The other
administrative matters would be within the special
knowledge of the company or the firm and those who
are in charge of it. In such circumstances, the
complainant is expected to allege that the persons
named in the complaint are in charge of the affairs of
the company/firm. It is only the Directors of the
company or the partners of the firm, as the case may
be, who have the special knowledge about the role they
had played in the company or the partners in a firm toSignature Not Verified
Digitally Signed
By:SHAZAAD ZAKIR
Signing Date:04.11.2024 CRL.M.C. 4575/2022 Page 12 of 15
17:03:36
show before the Court that at the relevant point of time
they were not in charge of the affairs of the company.
Advertence to Sections 138 and Section 141,
respectively, of the NI Act shows that on the other
elements of an offence under Section 138 being
satisfied, the burden is on the Board of Directors or the
officers in charge of the affairs of the
company/partners of a firm to show that they were not
liable to be convicted. The existence of any special
circumstance that makes them not liable is something
that is peculiarly within their knowledge and it is for
them to establish at the trial to show that at the
relevant time they were not in charge of the affairs of
the company or the firm.
58.3. Needless to say, the final judgment and order
would depend on the evidence adduced. Criminal
liability is attracted only on those, who at the time of
commission of the offence, were in charge of and were
responsible for the conduct of the business of the firm.
But vicarious criminal liability can be inferred against
the partners of a firm when it is specifically averred in
the complaint about the status of the partners “qua”
the firm. This would make them liable to face the
prosecution but it does not lead to automatic
conviction. Hence, they are not adversely prejudiced if
they are eventually found to be not guilty, as a
necessary consequence thereof would be acquittal.
58.4. If any Director wants the process to be quashed
by filing a petition under Section 482 of the Code on
the ground that only a bald averment is made in the
complaint and that he/she is really not concerned with
the issuance of the cheque, he/she must in order to
persuade the High Court to quash the process either
furnish some sterling incontrovertible material or
acceptable circumstances to substantiate his/her
contention. He/she must make out a case that making
him/her stand the trial would be an abuse of process of
Court.”
Signature Not Verified
Digitally Signed
By:SHAZAAD ZAKIR
Signing Date:04.11.2024 CRL.M.C. 4575/2022 Page 13 of 15
17:03:36
15. At this juncture, it is pertinent to extract the Relevant portion of the
Complaint and the same reads as under:
“2. That the accused no. 1 herein is a company
involved in financial services. That the accused no. 2 &
3 are the Director of accused no. 1 and after demise of
Mr. Nimit Kumar (signatory director to cheque), uudl
the accused Nu. 2 & 3 are jointly responsible for day to
day affairs of the business of the accused no. 1 and
responsible for all the financial transaction and
payments for and on behalf of the company besides
being personally involved in making representations to
complainant for clearing the dues/debts of the accused
NO.1 company.
*****
5. As per the terms of the agreement, since the cheque
bearing No.000621 drawn on HDFC Bank had become
realizable, the complainant presented the same for
encashment with his banker. Canara Bank, Sector-J,
Rohini, New Delhi-85, however the same was return
unpaid being blocked. Upon a personal visit to the
accused No.2 & 3, the accused undertook to take a
remedial measure and convinced the complainant to
represent the cheque again after sometime. ”
(emphasis supplied)
16. As stated above, the Petitioner herein is a Director of the accused
Company. In the Master Data, the Petitioner has not been shown as an
independent Director or a Non-Executive Director or a Deputy Director,
who can be said to be not responsible for the conduct of day-to-day affairs
of the company. This Court is of the opinion that when there are only three
Directors in the Company, it cannot be said that the Petitioner herein, who is
one of the three Directors of the company, is not responsible for the day-to-
day affairs of the company. The contentions raised by the Petitioner is a
Signature Not Verified
Digitally Signed
By:SHAZAAD ZAKIR
Signing Date:04.11.2024 CRL.M.C. 4575/2022 Page 14 of 15
17:03:36
matter of trial and at this juncture, this Court is not inclined to quash the
summoning Order in the absence of any unimpeachable and incontrovertible
evidence beyond suspicion and doubt that the Petitioner herein was not
responsible for the day-to-day affairs of the accused Company.
17. In view of the above, the Petition is dismissed along with the pending
application(s), if any.
SUBRAMONIUM PRASAD, J
OCTOBER 29, 2024
Rahul
Signature Not Verified
Digitally Signed
By:SHAZAAD ZAKIR
Signing Date:04.11.2024 CRL.M.C. 4575/2022 Page 15 of 15
17:03:36