TaxTMI 
TaxTMI 
2009 (7) TMI 758
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....ant's proprietary concern (M/s. Delhi Paints & Oil Traders) by the company represented by its Chairman. In the said complaints, the appellant had impleaded nine persons as accused, namely, the company (A-1), its Chairman (A-2), four Directors (A-3 to A-6) as also its Vice-President (Finance), General Manager and Deputy General Manager (A-7, A-8 and A-9 respectively). In the complaint, the complainant averred that "at the time of the commission of offence, accused 2 to 9 were in-charge of and responsible for the conduct of day-to-day business of accused No. 1" and that, therefore, they were deemed to be guilty of offence under section 138, read with section 141 of the Act and section 420 of the Indian Penal Code. The appellant also alleged that respondents 2 to 9 were directly and actively involved in the financial dealings of the company and that the accused had failed to make payment of the cheques which were dishonoured. In the pre-summoning evidence, the appellant reiterated that accused 2 to 9 were responsible for the conduct of day-to-day business of first accused company at the time of commission of offence. The learned Magistrate by order dated 3-10-2001 directed issue of su....
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....f 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 : ****** (2) Notwithstanding anything contained in sub-section (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 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." 6. A three-Judge Bench of this Court considered the scope of section 141 of the Act in S.M.S. Pharma I's ....
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....ened vicariously on a person connected with a company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of section 141 has to be spelled out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within section 141, he would issue the process. We have seen that merely being described as a director in a company is not sufficient to satisfy the requirement of section 141. Even a non-director can be liable under section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial." [Emphasis supplied] This Court then proceeded identified the nature of allegations requi....
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....ist strict compliance with the statutory requirements." [Emphasis supplied] 8. In Saroj Kumar Poddar v. State (NCT of Delhi) [2007] 73 SCL 308 (SC) while dealing with an appeal against the refusal to quash the order taking cognizance, by an Ex-Director who had resigned from the Board prior to the date of issuance of the cheque, this Court held that making some bald averment was not sufficient. In that case, the complaint contained the following averments :- "That Accused 1 is a public limited company incorporated and registered under the Companies Act, 1956, and Accused 2 to 8 are/were its Directors at the relevant time and the said Company is managed by the Board of Directors and they are responsible for and in charge of the conduct and business of the Company, Accused 1. However, cheques referred to in the complaint have been signed by Accused 3 and 8 for and on behalf of Accused 1 Company." In spite of the averment that accused were Directors at the relevant time and were responsible for and in charge of the conduct of the business of the company, this Court held that allegations in the complaint, even if taken to be correct in their entirety, did not disclose any offence by ....
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....nd how and in what manner he is liable. 10. Having regard to section 141, when a cheque issued by a company (incorporated under the Companies Act, 1956) is dishonoured, in addition to the company, the following persons are deemed to be guilty of the offence and shall be liable to be proceeded against and punished :- (i)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; (ii)any Director, Manager, Secretary or other officer of the company with whose consent and connivance, the offence under section 138 has been committed; and (iii)any Director, Manager, Secretary or other officer of the company whose negligence resulted in the offence under section 138 of the Act, being committed by the company. While liability of persons in the first category arises under sub-section (1) of section 141, the liability of persons mentioned in categories (ii) and (iii) arises under sub-section (2). The scheme of the Act, therefore is, that a person who is responsible to the company for the conduct of the business of the company and who is in charge of business of the company is vicariously liab....
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....pany" occurs not only in section 141(1) of the Act but in several enactments dealing with offences by companies, to mention a few - section 278B of the Income-tax Act, 1961, section 22C of Minimum Wages Act, 1948, section 86A of the Employees State Insurance Act, 1948, section 14A of Employees Provident Fund and Miscellaneous Provisions Act, 1952, section 29 of Payment of Bonus Act, 1965, section 40 of The Air (Prevention and Control of Pollution) Act, 1981 and section 47 of Water (Prevention and Control of Pollution) Act, 1974. But neither section 141(1) of the Act, nor the pari materia provisions in other enactments give any indication as to who are the persons responsible to the company, for the conduct of the business of the company. Therefore, we will have to fall back upon the provisions of Companies Act, 1956 which is the law relating to and regulating companies. Section 291 of the said Act provides that subject to the provisions of that Act, the Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do. A company though a legal entity can act only through its Board of Di....
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....d, thus, belongs to the group of persons making the policy followed by the company, but yet may not be in charge of the business of the company; that a person may be a Manager who is in charge of the business but may not be in overall charge of the business; and that a person may be an officer who may be in charge of only some part of the business. 16. Therefore, if a person does not meet the first requirement, that is being a person who is responsible to the company for the conduct of the business of the company, neither the question of his meeting the second requirement (being a person in charge of the business of the company), nor the question of such person being liable under sub-section (1) of section 141 does not arise. To put it differently, to be vicariously liable under sub-section (1) of section 141, a person should fulfil the 'legal requirement' of being a person in law (under the statute governing companies) responsible to the company for the conduct of the business of the company and also fulfil the 'factual requirement' of being a person in charge of the business of the company. 17. Therefore, the averment in a complaint that an accused is a director and that he is ....
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....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 bri....