Subhash Chandra Agarwal v. Planet Media Services Ltd & Ors.

1. This common judgment shall decide the present petitions which are filed under section 482 of the Code of Criminal Procedure, 1973 (hereinafter referred to as “the Code”) for quashing the summoning orders dated 01.04.2017 and 23.02.2017 (hereinafter referred to as the “impugned orders”) passed in criminal complaints titled as Planetcast Media Services Ltd V Beret Media Services bearing CC no. 5229/2017 and CC No. 3047/2019 by the court of Shri Lovleen, Metropolitan Magistrate, Patiala House Courts, New Delhi (hereinafter referred to as the “trial Court”).

2. The respondent no. 1/complainant (hereinafter referred to as “the respondent no. 1”) has filed two complaints under section 138 of the Negotiable Instrument Act, 1881 (hereinafter referred to as the “NI Act”) titled as Planetcast Media Services Ltd V Beret Media Services & Others bearing CC no. 5229/2017 subject matter of CRL.M.C 1745/2019 and CC No. 3047/2017 subject matter of CRL. M.C 1155/2019 respectively on the allegations that the respondent no. 1 is engaged in the business of providing Playout, Satellite bandwidth & Teleport (Up linking) services under the license of the Ministry of Information & Broadcasting (MIB), Government of CRL.M.C.1155/2019 & 1745/2019 Page 3 India. The respondent no. 2, namely, Beret Media Pvt. Ltd./accused no. 1 (hereinafter referred to as the “respondent no. 2”) is stated to be a company registered under the Companies Act, 1956. The petitioner/accused no. 2, respondent no. 3/accused no. 3 and respondent no. 4/accused no. 4 are stated to be directors of the respondents no. 2, and are in charge and responsible for the conduct, management and day-to-day affairs of the respondents no. 2. The respondents no.2 and 3 are jointly, severely liable for acts of the respondent no. 2. The accused no. 5 i.e. Bhola Baba Developers Ltd is stated to be company registered under the Companies Act, 1956 and is running a TV channel “India Crime”. The accused no. 6, namely, Virender Kumar Agarwal (hereinafter referred to as the “accused no. 6”), accused no. 7, namely, Hari Shankar Agarwal (hereinafter referred to as the “accused no. 7”), accused no. 8, namely, Jitendra Agarwal (hereinafter referred to as the “accused NO. 8”) are the directors of the accused no. 5. The accused no. 6 to 8 are responsible for day-to-day affairs of the accused no. 5. 2.[1] The accused no. 5 through accused no. 6 to 8 approached the respondent no. 1 for availing the Uplinking and Bandwith services CRL.M.C.1155/2019 & 1745/2019 Page 4 for their TV Channel “India Crime” by using respondent no. 1 Teleport and Satellite resources alongwith Teleport/Hub. The accused no. 5 through the accused no. 6 to 8 as per mutually agreed understanding had entered into Uplinking Service Agreement and Space Segment Service Contract dated 17.01.2013 with the respondent no. 1. The accused no. 5 also gave a written confirmation dated 28.10.2015 to the respondent no. 1 wherein it is stated that all the payments towards the invoices raised after 28.10.2018 for Uplinking and Bandwith charges to accused no. 5 shall be done by the respondent no. 2. The respondent no. 2 also gave a written confirmation dated 30.10.2015 to the respondent no. 1 by stating that all the payments towards the invoices raised after 28.10.2015 for Uplinking and Bandwith charges to Bhola Baba Real Estate Developers Pvt. Ltd. i.e. the accused no. 5 shall be borne by the respondent no. 2, after all clearances and given frequency of channel from the date, the respondent no. 2 shall be liable to give payment to Essel Shayam (now known as the respondent no. 1) for Uplinking charges. The respondent no. 1 has fulfilled all its obligations and started providing Uplinking and Bandwith services for the T.V. CRL.M.C.1155/2019 & 1745/2019 Page 5 channel, namely, “India Crime” w.e.f. 23.11.2015 and accordingly, the accused no. 1 to 8 have availed the facilities and services provided by the respondent no. 1 under the agreements. 2.[2] The respondent no. 1 in lieu of services rendered by it, issued various invoices from time to time to the accused no. 5 on account of the respondent no. 2. In terms of the invoices raised by the respondent no. 1, still a principal balance of Rs.53,81,557/- is outstanding and payable by the petitioner, the respondents no. 2 to 4 and accused no. 5 to 8 as on 31.01.2017 and they are also liable to pay interest amounting to Rs.9,75,946/- in terms of the agreement. The respondent no. 2 in terms of the letter/written communication dated 30.10.2015, admitted its liability and accordingly, in discharge of its liability, the respondent no. 2 through petitioner, respondents no. 3 and 4, issued cheque bearing no. 190325 dated 03.02.2017 amounting to Rs.39,58,988/- subject matter of complaint bearing CC no. 5229/2017 and Crl.M.C.1745/2019 and cheques bearing NO. 214270 dated 30.09.2016, 214281 dated 20.10.2016 and 214280 dated 30.10.2016 each amounting to Rs.6,00,000/-, drawn on Axis Bank, Meerut, Uttar Pradesh-250001 subject matter of complaint CRL.M.C.1155/2019 & 1745/2019 Page 6 bearing CC No. 3047/2017 and CRL. M.C 1155/2019, respectively. However, when the said cheques were presented for encashment, returned back from the Bankers of the respondents no. 1 with remarks „fund insufficient‟ vide return memo dated 06.02.2017 and 27.12.2016 respectively issued by the Canara Bank, Branch-Janpath i.e. the Banker of the respondent no. 1. The respondent no. 2 through the petitioner and the respondents no. 3 and 4, did not make the payment of the cheque amount despite the notice dated 15.02.2017. Hence, the present complaints.

3. The trial Court vide impugned orders dated 23.02.2017 passed in complaint no. 3047/2017 and 01.04.2017 passed in complaint NO. 5229/2017 took the cognizance for the offence punishable under section 138 of the NI Act against the petitioner and the respondents no. 2 to 4. The accused no. 5 to 8 were not summoned by the Trial Court. The impugned orders reads as under:- CC No. 3047/2017 and 5229/2017 23.02.2017 and 01.04.2017 Fresh complaint received by way of assignment. It be checked and registered. Present: AR of the complainant with Ld. Counsel Evidence by way of affidavit tendered. Documents CRL.M.C.1155/2019 & 1745/2019 Page 7 exhibited. Vide separate statement, pre-summoning evidence stands closed. Arguments on summoning of accused heard. Perused. The complaint appears to be well within the limitation period of law. From the perusal of complaint, affidavit tendered and documents filed, there are sufficient material on record to proceed against the accused under Section 138-of N.I. Act. Accordingly, issue summons to accused no. 1, 2, 3 & 4 only on filing of PF/RC returnable for 13.10.2017. Complainant is directed to send copy of complaint along with 'necessary documents to the accused. Steps be taken within 04 weeks from today, in case of non availability/refusal/premises found locked, summons be served by way of affixation with photograph. As per the guidelines laid down in the case titled as 'Damodar S. Prabhu Vs. Sayed Baba Lal H', AIR 2010 (SC) 1907, Ahlmad is directed to make a mention on the summons (add separate sheet. If required) that the accused can make an application for compounding of the offence at the first or second hearing of the case and if such an application is made, compounding may be allowed by the court without imposing any cost on the accused.

4. The petitioner being aggrieved by the impugned orders dated 23.02.2017 and 01.04.2017, filed the present petitions to challenge the impugned orders by pleading that the petitioner was appointed as director in the respondent no. 2 w.e.f. 10.01.2016 only to lend prestige to the respondent no. 2 due to his standing in the society. The petitioner never took part nor was in charge and responsible for the CRL.M.C.1155/2019 & 1745/2019 Page 8 day-to-day affairs and conduct of the respondent no. 2. The petitioner challenged the impugned orders dated 23.02.2017 and 01.04.2017 on the ground that the impugned orders are abuse of process of law. There is no proximate of direct or indirect involvement of the petitioner in the affairs of the respondent no. 2 as he was only a Non-Executive Director as such, he never involved in its day-to-day activities. The impugned orders would cause unnecessary hassles, prejudice, embarrassment and loss of reputation to the petitioner. The petitioner did not have any role to play in the entire transaction. The Trial Court has failed to appreciate that the entire transaction took place between the respondent no. 1 and the accused no. 5 i.e. M/s Bhola Baba Real Estate Developers Pvt. Ltd. The petitioner has not given any undertaking or confirmation to admit the alleged liability. The alleged undertaking/confirmation was given prior to the petitioner being inducted as the director in the respondent no. 2 and as such, the petitioner was not having any knowledge regarding the said undertaking and confirmation. There is no specific averment made against the petitioner in the complaints. The petitioner is not the signatory of the cheques in question. The CRL.M.C.1155/2019 & 1745/2019 Page 9 petitioner was only the Non-Executive Director of the respondent no.2. The petitioner also raised other grounds as mentioned in the petitions. It is prayed that the impugned orders dated 23.02.2017 and 01.04.2017 be quashed qua the petitioner.

5. The counsel for the petitioner advanced oral arguments and also submitted written submissions on the basis of pleas and grounds as taken in the present petitions. The counsel for the petitioner in the brief note in support of the argument, primarily stated that the petitioner was a non executive director of the company and was never involved in its day to day activities and the confirmation/undertaking was prior to the induction of the petitioner in the respondent no. 2. The counsel for the petitioner relied upon the judgments of supreme court in Sunita Palita And Others V Panchami Stone Quarry, Special Leave Petition (Criminal) No. 10396/2019 decided on 01.08.2022 and SMS Pharmaceuticals Ltd. V Neeta Bhalla & Anr., 2005 (8) SCC 89 passed by the Supreme Court.

6. The counsel for the respondent no. 1 in the oral arguments as well as in the written arguments, submitted that the petitioner primarily pleaded and argued that he is a Non-Executive Director of CRL.M.C.1155/2019 & 1745/2019 Page 10 the respondent no. 2 as such, there is no proximate and direct involvement of the petitioner being Non-Executive Director of the respondent no. 2. The counsel for the respondent no. 1 further argued that as per the Form DIR-12 pertaining to the petitioner, the petitioner has been shown in the category of the Promoter and Non- Executive Director and was appointed as director on 10.01.2016. The petitioner as such, was the director when the cheques in question were issued and still he is continuing to be as one of the directors. The status of the respondents no. 3 and 4 in the respondent no. 2 is identical as that of the petitioner and as such, it cannot be pleaded that the petitioner is not full time director of the respondent no. 2. The counsel for the respondent no. 1 also referred sections 2(69) and 149(6) of the Companies Act, 2013. The counsel for the respondent no. 1 argued that the case law relied upon by the petitioner is not relevant for the purpose of decision in the present petition. The counsel for the respondent no. 1 relied on the cases titled as Malwa Cotton and Spinning Mills Ltd V Virsa Singh Sindhu and Ors (2008)17 SCC 147 Paras 8-11 and Krishna Murari Lal V IFCI Factors Ltd. 2012(10) AD (Del). CRL.M.C.1155/2019 & 1745/2019 Page 11

7. The section 138 and section 141 of the NI Act read as under:- 138 Dishonour of cheque for insufficiency, etc., of funds in the account. —Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for 19 [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless— (a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, 20 [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and CRL.M.C.1155/2019 & 1745/2019 Page 12

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation.— For the purposes of this section, “debt or other liability” means a legally enforceable debt or other liability. 141 Offences by companies. — (1) If the person committing an offence under section 138 is a company, every person who, at the time the offence 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 offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence: 22 [Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.] (2) Notwithstanding anything contained in subsection (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or CRL.M.C.1155/2019 & 1745/2019 Page 13 connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.— For the purposes of this section,— (a) “company” means any body corporate and includes a firm or other association of individuals; and (b) “director”, in relation to a firm, means a partner in the firm.]

8. A company is stated to be a juristic person and all the acts done on behalf of a company are done by the others. The officers of a company who are responsible for acts done on behalf of the company are personally liable for those acts including the criminal action. Every person who at the time of commission of offence is in charge and responsible for the conduct of the business of the company is liable for the offence stated to be committed by the company. However, the criminal liability arises when the offence was committed and not on the basis of merely holding a designation or office in a company. As per section 141 of the NI Act, a person is stated to be criminally liable when at the time of commission of offence was in charge and responsible for the conduct of the business CRL.M.C.1155/2019 & 1745/2019 Page 14 of the company. Every person connected with the company may not fall within the ambit of section 141 of the NI Act. 8.[1] The Supreme Court on various occasions, considered the liability of directors of a company in complaints filed under section 138 of NI Act. The Supreme Court in SMS Pharmaceuticals Ltd. V Neeta Bhalla & Anr., 2005(8)SCC 89 held as under:-

4. a company being a juristic person, all its deeds and functions are the result of acts of others. Therefore, officers of a company who are responsible for acts done in the name of the company are sought to be made personally liable for acts which result in criminal action being taken against the company. It makes every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of business of the company, as well as the company, liable for the offence. The liability arises from being in charge of and responsible for the conduct of business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. Conversely, a person not holding any office or designation in a company may be liable if he satisfies the main requirement of being in charge of and responsible for the conduct of business of a company at the relevant time. Liability depends on the role one plays in the affairs of a company and not on designation or status. 8.[2] The Supreme Court in judgment titled as SBI V Gaurav Varshney (2016) 14 SCC 430 held as under:- CRL.M.C.1155/2019 & 1745/2019 Page 15

10. While analysing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company. The key words which occur in the section are “every person”. These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words: “Who, at the time the offence 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 offence, etc.” What is required is that the persons who are sought to be made criminally liable under Section 141 should be, at the time the offence was committed, in charge of and responsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the provision. It is only those persons who were in charge of and responsible for the conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. It follows from this that if a director of a company 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 under the provision. The liability arises from being in charge of and responsible for the conduct of business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. Conversely, a person not holding any office or designation in a company may be liable if he satisfies the main requirement of being in charge of and responsible for the conduct of business of a company at the relevant time. Liability depends on the role one plays in the affairs of a company and not on designation or status. If being a director or CRL.M.C.1155/2019 & 1745/2019 Page 16 manager or secretary was enough to cast criminal liability, the section would have said so. Instead of “every person” the section would have said “every director, manager or secretary in a company is liable”…, etc. The legislature is aware that it is a case of criminal liability which means serious consequences so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action.

12. The conclusion is inevitable that the liability arises on account of conduct, act or omission on the part of a person and not merely on account of holding an office or a position in a company. Therefore, in order to bring a case within Section 141 of the Act the complaint must disclose the necessary facts which make a person liable.

9. As per the averment made in the complaint under section 138 of the NI Act, the accused no. 5(which is not summoned) gave a written confirmation dated 28.10.2015 to the respondent no. 1 and thereafter, the respondent no. 2 also gave a written confirmation to the effect that all the payments towards the invoices raised after 28.10.2015 for Uplinking and Bandwith charges to the accused no. 5 shall be borne by the respondent no. 2. The petitioner was appointed as director in the respondent no. 2 after written confirmation given by the accused no. 5 on 28.10.2015 and respondent no 2 on 30.10.2015. The perusal of complaint under section 138 of the NI Act also CRL.M.C.1155/2019 & 1745/2019 Page 17 reflects that the cheques in question were issued in favour of the respondent no. 2 after the petitioner was appointed as one of the directors of the respondent no. 2 i.e. after 10.01.2016. 9.[1] It is reflecting from the Form DIR-12 pertaining to the status of the petitioner in respondent no. 2 that the petitioner was admitted/appointed as director on 10.01.2016 as Non-Executive Director and was falling in the category of Promoter.

10. The section 2(69) of the Companies Act, 2013 defines the Promoters and it reads as under:- “promoter” means a person- (a) who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or (b) who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or

(c) in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act. It reflects that Promoter also includes a person who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise. CRL.M.C.1155/2019 & 1745/2019 Page 18