TaxTMI 
TaxTMI 
2007 (4) TMI 625
X X X X Extracts X X X X
X X X X Extracts X X X X
....y carried out various jobs and releases between the period July, 1997 and December, 1997. It raised bills to the extent of Rs. 2,59,21,053.37 for the work executed by it. On 14.11.1997, Accused No. 6 issued various postdated cheques allegedly towards part payment of the said dues which on presentation to the bank on 6.04.1998 admittedly were dishonoured. Notices were served on the Respondents Nos. 2 and 3 on 18.04.1998. Appellant Company (Company) filed two complaint petitions against the accused persons including Respondent Nos. 2 and 3 herein alleging: "4. That accused No. 1 to 5 are the Chairman, Vice Chairman, Director (Technical), Executive Director, and Senior General Manager (Finance) of the accused Company respectively and are Incharge and responsible to the accused company for the conduct of the business of the Company and are thus liable for making the payment. *** *** *** 9.That the complainant company presented these cheques on 26.3.1998 for encashment through their bankers Central Bank of India, Ram Tilak Nagar Branch, New Delhi, which have been returned back to the complainant company on 28.3.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....here is no specific averment as to how any of the accused 1 and 2 (respondents 2 and 3 herein) were actually involved in the conduct of the business of the company relating to the transaction in question or how and on what basis it can be said that it was with the active connivance of these two accused that the offence was committed by the company. In my opinion, the petitioners could not have been summoned on the basis of the allegations made by the complainant. The Metropolitan Magistrate has not committed any mistake in declining to summon the two accused. The petitions have no merit and, therefore, dismissed." Mr. Aloke Kumar Sengupta, learned Senior Counsel appearing on behalf of the Company, would submit that having regard to the allegations made in the complaint petition, the High Court committed a serious illegality in passing the impugned judgment. The learned counsel submitted that the learned Magistrate had no jurisdiction to recall its order whereby the accused persons were summoned. Mr. K.T.S. Tulsi, learned senior counsel appearing on behalf of Respondents Nos. 2 and 3, on the other hand, would submit that complaint petition contained mechanical reproduction of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....suance of summons the Magistrate should be satisfied that there is sufficient ground for proceeding with the complaint but that satisfaction is to be arrived at by the inquiry conducted by him as contemplated under Sections 200 and 202, and the only stage of dismissal of the complaint arises under Section 203 of the Code at which stage the accused has no role to play, therefore, the question of the accused on receipt of summons approaching the court and making an application for dismissal of the complaint under Section 203 of the Code on a reconsideration of the material available on record is impermissible because by then Section 203 is already over and the Magistrate has proceeded further to Section 204 stage. *** *** *** 16. Therefore, in our opinion the observation of this Court in the case of Mathew1 that for recalling an erroneous order of issuance of process, no specific provision of law is required, would run counter to the scheme of the Code which has not provided for review and prohibits interference at interlocutory stages. Therefore, we are of the opinion, that the view of this Court in Mathew case1 that no specific provision is required for recalling an erroneous or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....viduals; and (b) ''director'', in relation to a firm, means a partner in the firm.'' As the contentions of the parties are covered by a few decisions of this Court, we may at the outset notice the law operating in the field. The applicability and/or extent of Section 141 of the Act was referred to and considered by a 3-Judge Bench of this Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Anr. [(2005) 8 SCC 89 : 2005 (7) SCALE 397]. The questions so referred read as under : "(a) whether for purposes of Section 141 of the Negotiable Instruments Act, 1881, it is sufficient if the substance of the allegation read as a whole fulfill the requirements of the said section and it is not necessary to specifically state in the complaint that the persons accused was in charge of, or responsible for, the conduct of the business of the company. (b) whether a director of a company would be deemed to be in charge of, and responsible to, the company for conduct of the business of the company and, therefore, deemed to be guilty of the offence unless he proves to the contrary. (c) even if it is held that specific averments are necessary, whether in the absence of such averments the sign....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s noticed hereinbefore, the Managing Director and all other Directors were also made accused. The appellant did not issue any cheque. He, as noticed hereinbefore, had resigned from the Directorship of the Company. It may be true that as to exactly on what date the said resignation was accepted by the Company is not known, but, even otherwise, there is no averment in the complaint petitions as to how and in what manner the appellant was responsible for the conduct of the business of the Company or otherwise responsible to it in regard to its functioning. He had not issued any cheque. How he is responsible for dishonour of the cheque has not been stated. The allegations made in paragraph 3, thus, in our opinion do not satisfy the requirements of Section 141 of the Act." Yet again in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Anr. [2007 (3) SCALE 245], it was held: "In terms of Section 138 of the Act, a complaint petition alleging an offence thereto must demonstrate that the following ingredients exist that: (i) a cheque was issued; (ii) the same was presented; (iii) but, it was dishonoured; (iv) a not....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 141 of the Act but must also show as to how and in what manner the appellant was responsible for the conduct of the business of the company or otherwise responsible to it in regard to its functioning. A plain reading of the said judgment would show that no such general law was laid down therein. The observations were made in the context of the said case as it was dealing with a contention that although no direct averment was made as against the appellant of the said case fulfilling the requirements of Section 141 of the Act but there were other averments which would show that the appellant therein was liable therefor." [See also N.K. Wahi v. Shekhar Singh & Others 2007 (4) SCALE 188] The law operating in this behalf is, therefore, no longer res integra. What is, therefore, necessary is the application of law. Necessary ingredients of Section 141 have been stated in the complaint petition at more than one place. Whether the same satisfies the requirements of law or not is the question. A Chairman of a large Company may or may not be aware of the actual transaction. If in a given situation, cheques are issued in ordinary course of business. The Managing Director or a Deputy Managi....