TaxTMI 
TaxTMI 
2017 (4) TMI 192
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....said of Act. 3 The free English translation of the complaint reads as under: "The complainant is engaged in the business of fabrication. The complainant is carrying on business in the name of 'Vaibhav Engineering Works'. It is a proprietary concern and the complainant is the proprietor. The complainant knows the accused persons very well. The accused No.1 is the company. The accused No.2 is the Chairman of the company. The accused No.3 is the Director of the company and the accused No.4 is the Chief Operating Officer of the company. The company assigned a work contract under the instructions of the accused Nos.2, 3 and 4. The complainant completed the work of the accused No.1 - company, more particularly, the T.C. Plant (Thiamine Chloride). Right from the commencement of the work till the completion, there was no complaint by the accused persons with regard to the work. The Vice President (Project) of the accused No.1 - company, under his signature, had issued a letter of contract and work order to complete the T.C. Plant of the company. The complainant with the help of forty one workers, plants and machineries, commenced the fabrication work of the T.C. Plant a....
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....llowing order was passed by this Court: "At the outset, Mr. Shah, the learned counsel appearing with Mr.Saksena, learned counsel for the applicant does not press this application so far as the applicant No.1 Mr. Pravin Amrutlal Kiri is concerned. This application is disposed of as not pressed so far as applicant No.1 is concerned. Let notice be issued to the respondents returnable on 3.12.2015. Mrs. Punani, the learned APP waives service of notice for and on behalf of the respondent No.1 State of Gujarat. Direct service on respondent No.2 is permitted. In the meantime, let there be an adinterim order in terms of para 11(c) so far as the applicants Nos. 2 and 3 are concerned." 5 Thus, it appears that this application seeking quashing of the proceedings of the criminal case was not pressed so far as Shri Pravin Amrutlal Kiri is concerned. He is the Chairman of the company, who had signed the cheque in question. It also appears that during the pendency of this application, the applicant No.3 arraigned as an accused in his capacity as the Chief Operating Officer of the company passed away. Therefore, I am now left with to consider the case of the applicant No.2, who happens....
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....nt quashed on the ground that no particulars are given in the complaint about his role, because ordinarily the basic averments would be sufficient to send him to trial and it could be argued that his further role could be brought out in the trial. 9 In support of his submissions, the learned counsel appearing for the complainant has placed strong reliance on two decisions of the Supreme Court: (1) In the case of Gunmala Sales Private Limited vs. Anu Mehta and others [2015 Cri. L.J. 285] (2) In the case of Standard Chartered Bank vs. State of Maharashtra and others [(2016) 6 SCC 62]. 10 Mr. A.L. Shah, the learned counsel appearing for the applicants, in rejoinder, submitted that the contention of the learned counsel appearing for the complainant can be accepted provided that there is even a bald averment. According to Mr. Shah, there is not even a bald averment to prima facie indicate the involvement of the applicant accused as regards the daytoday affairs and management of the company. According to Mr. Shah, the complainant owes a duty to make a averment that at the time of the commission of the offence, a particular Director was incharge of and responsible in the dayto....
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.... could be brought out in the trial. Quashing of a complaint is a serious matter. Complaint cannot be quashed for the asking. For quashing of a complaint it must be shown that no offence is made out at all against the Director." 13 In a very recent pronouncement of the Supreme Court in the case of Standard Chartered Bank (supra), His Lordship Dipak Mishra, J. has very succinctly explained and discussed the issue in question after an exhaustive review of all earlier decisions of the Supreme Court on the point. I may quote the relevant observations made in paras 9 to 34 as under: "9. To appreciate the controversy in proper perspective, it is appropriate to refer to Sections 138 and 141 of the Act. Section 138 reads as follows:" 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....
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....nothing contained in this subsection shall render any person liable to 9 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: 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 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 ....
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....cess and if this were not the requirement, consequences would be farreaching. If a Magistrate has to issue process in every case, the burden of work before the Magistrate as well as the harassment caused to the respondents to whom process has to be issued would be tremendous. It has been observed therein that Section 204 of the CrPC commences with the words "if in the opinion of the Magistrate taking cognizance of an offence there is sufficient ground for proceeding" and that apart, the words "sufficient ground for proceeding" again suggest that ground should be made out in the complaint for proceeding against the respondent. The threeJudge Bench has ruled that it is settled law that at the time of issuing of the process, the Magistrate is required to see only the allegations in the complaint and where the allegations in the complaint or the chargesheet do not constitute an offence against a person, the complaint is liable to be dismissed. 16 After so stating, the Court adverted to the complaint filed under Section 138 of the Act and opined that the complaint should make out a case for issue of process. As far as the officers responsible for conducting the affairs of the company....
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....the consent or connivance or is attributable to neglect on the part of any of the holders of the offices in a company. It has also been observed that provision has been made for directors, managers, secretaries and other officers of a company to cover them in cases of their proved involvement. It is because a person who is in charge of and responsible for conduct of business of a company would naturally know why a cheque in question was issued and why it got dishonoured and simultaneously it means no other person connected with a company is made liable under Section 141 of the Act. The liability arises, as the threeJudge Bench opined, on account of conduct, act or omission on the part of an officer and not merely on account of holding office or position in a company and, therefore, in order to bring a case within Section 141 of the Act, the complaint must disclose the necessary facts which makes a person liable. In the said case, the Court has referred to the decisions in Secunderabad Health Care Ltd. v. Secunderabad Hospitals (P) Ltd. [1999 (96) Comp Case 106], V. Sudheer Reddy v. State of A.P.[2000 (107) Comp Case 107], R. Kanan v. Kotak Mahindra Finance Ltd. [2003 (115) Comp Cas....
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..... Channabasavaradhya [2006 (10) SCC 581] which reads as follows:13 23 "7. A bare perusal of the complaint petitions demonstrates that the statutory requirements contained in Section 141 of the Negotiable Instruments Act had not been complied with. It may be true that it is not necessary for the complainant to specifically reproduce the wordings of the section but what is required is a clear statement of fact so as to enable the court to arrive at a prima facie opinion that the accused are vicariously liable. 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." 20 Thereafter the Court referred to the authority....
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.... Ltd. (supra) were taken note of in K.K. Ahuja v. V.K. Vora and Anr 2009 (10) SCC 48]. In the said case, the Court explaining the position under Section 141 of the Act has stated thus: "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 wa....
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....s authority, as we notice, has to be appositely understood. The twoJudge Bench referred to SMS Pharma I and other earlier decisions, and came to hold that:" 30. When a petition is filed for quashing the process, in a given case, on an overall reading of the complaint, the High Court may find that the basic averment is sufficient, that it makes out a case against the Director; that there is nothing to suggest that the substratum of the allegation against the Director is destroyed rendering the basic averment insufficient and that since offence is made out against him, his further role can be brought out in the trial. In another case, the High Court may quash the complaint despite the basic averment. It may come across some unimpeachable evidence or acceptable circumstances which may in its opinion lead to a conclusion that the Director could never have been in charge of and responsible for the conduct of the business of the company at the relevant time and therefore making him stand the trial would be an abuse of process of court as no offence is made out against him. 31 When in view of the basic averment process is issued the complaint must proceed against the Directors. But,....
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....over 70 years of age. Considering this fact and on an overall reading of the complaint in the peculiar facts and circumstances of the case, we feel that making her stand the trial would be an abuse of process of court. It is however, necessary for the High Court to consider the cases of other Directors in light of the decisions considered by us and the conclusions drawn by us in this judgment." 29 We have referred to the aforesaid decision in extenso, as we are of the convinced opinion that the analysis made therein would squarely apply to the case at hand and it shall be clear when we reproduce certain passages from the complaint. 30 Prior to that, we may profitably refer to a twoJudge Bench decision in Tamil Nadu News Print & Papers Ltd. v. D. Karunakar and Others 2015 (8) Scale 733]. In the said case, the Court has referred to the decision rendered in S.M.S. Pharma I (supra) and, thereafter, taken note of the averments made in the complaint. Be it noted, in the said case it had been averred in the complaint petition that the accused Nos. 2 to 9 were Directors and were in day to day management of the accused company and in that context the Court has opined as follows: ....
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....hipyard. After verifying the documents submitted the Complainant Bank vide its sanction letter dated 28th April 2012 sanctioned the said Facility for the purpose mentioned therein. The said terms and conditions mentioned in the sanction letter dated 28th April 2012 were duly accepted by the Accused No. 1 by signing the same. Accused No. 1 also agreed to pay interest at the negotiated rate by the Complainant bank. Hereto annexed the marked as Exhibit 'B' is a copy of the said sanction letter dated 28th April 2012. xxxxx xxxxx 10. I say that the accused Nos.1 to 7 were aware that the aforesaid cheque would be dishonoured for being "Account Blocked" and all the accused, in active connivance mischievously and intentionally issued the aforesaid cheques in favour of the complainant Bank." 33 The aforesaid averments, as we find, clearly meet the requisite test. It is apt to mention here that there are seven accused persons. Accused No.1 is the Company, accused Nos.2 and 3 are the Chairman and Managing Director respectively and accused Nos.6 and 7 were signatory to the cheques. As far as the accused Nos.4 and 5 were concerned, they were wholetime Directors and the assertion is ....
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....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 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." 16 From a plain reading of the aforesaid provision it is evident that every person who at the time the offence was committed is in charge of and responsible to the Company shall be deemed to be guilty of the offence under Section 138 of the Act. In the face of it, will it be necessary to specifically state in the complaint that the person accused was incharge of and responsible for the conduct of the business of the Company?....