TaxTMI 
TaxTMI 
TaxTMI 
2017 (2) TMI 1287
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the accused no.2 to 4, i.e., Vivek Kumar (non-petitioner), Vimla Devi (petitioner no.1), Munni Devi (petitioner no.2) are carrying on business in partnership under the firm name and style M/s. Vinod Kumar and Company (accused no.1) having its registered office at Farrukhabad. On the request of the accused persons opposite party no.2 appointed accused no.2 to 4 as wholesale dealer in their partnership firm M/s. Vinod Kumar and company for the sale of fertilizers under the brand name of SHAKTIMAN for the Tehsil Kannauj District Farrukhabad. Accused no.2 to 4 through their firm M/s Vinod Kumar and Company requested the opposite party no.2 to supply the stock of fertilizers measuring about 1819.450 metric tons amounting to Rs. 90,10,374/- and after adjusting all the payments and other expenses an amount of Rs. 5,35,621.67 became overdue upon the firm. Accused no.2 to 4 through their firm accused no.1 issued a cheque no.929974 from Account No.2009 in Bank of India, Farrukhabad Branch for an amount of Rs. 535621.16. Cheque was duly presented by the complainant opposite party no.2 on 12.8.2005 with its banker State Bank of India, Jawahar Bhawan Branch, Lucknow which was dishonoured by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Court dated 04.01.2017. 7. Learned counsel for the petitioners submits that the petition is filed only on behalf of Vimla Devi and Munni Devi. Learned counsel has mainly pressed his arguments on Section 141 of Negotiable Instruments Act. It is submitted that so far as petitioners are concerned there is an assertion in para 2 of the complaint only which reads as under. "(2) That the accused nos.2 to 4 are carrying on business in partnership under the firm name and style of M/s.Vinod Kumar and Company (accused no.1), which is having its registered Officer at Lohia Shopping Complex, near City Hospital, Awas Vikas, District Farrukhabad." 8. It is further submitted that the petitioners are the sleeping partners, they have not signed the cheque. It is further submitted that even in the para no.4 of the complaint no assertion has been made regarding petitioners that they are the active partners of the firm. It is submitted that the cheque in question was signed by Vivek Kumar in the capacity of the partner for Vinod Kumar and company. It is further submitted that even C/C Account No.2009 was in the name of M/s. Vinod Kumar and company. Smt. Vimla Devi and Smt. Munni Devi were not auth....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... all the partners have joint liability. It is a question of fact as to whether who is a partner or not ? Who is a sleeping partner ? These all are question of fact which could not be looked into in a petition under Section 482 CrPC. Learned counsel has placed reliance upon Rallis India Limited vs. Poduru Vidya Bhushan and Others, (2011) 13 SCC 88. 12. It is further submitted that the case law of SMS Pharma (supra) has no bearing upon the petitioner's case. 13. Learned counsel has placed reliance upon Bacha F. Guzdar, Bombay vs. Commissioner of Income Tax, Bombay, (1995) 1 SCR 876. Learned counsel relied upon para 9 and submits that there is distinction between the company and partnership firm. Reliance has also been placed upon HMT Watches Limited vs. M.A. Abida and Another, Criminal Appeal No.471 of 2015 (Arising out of SLP (Crl) No.5295 of 2014) wherein it was held that factual intricacies could not be seen in a petition under Section 482 CrPC. Learned counsel has further placed reliance upon Sarguja Transport Service vs. State Transport Appellate Tribunal M.P. Gwalior and Others (1987) 1 SCC 5 wherein placing reliance upon para 9 of the report it is submitted that this pet....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rant cases instituted otherwise than on a police report, hence, the trial is to proceed as per procedure prescribed by law for summary cases. Accordingly Section 245 CrPC will not be attracted and the learned Magistrate has rightly dismissed the application under Section 245 CrPC. 17. Admittedly, a petition no.1603/07 was filed by Vinod Kumar, Vivek Kumar, Smt. Vimla Devi and Smt. Munni Devi for a prayer of quashing the enitre proceedings of case no. 866/05 under Section 138 Negotiable Instruments Act, pending before Special Judicial Magistrate (Pollution) Lucknow along with a prayer to quash the order dated 10.5.2007 wherein it was ordered that the accused is not present, hence, process be issued for attendance. When both the petitions came up for hearing on 04.01.2017, the learned counsel for the petitioner withdrew the petition no.1603/07 wherein the learned counsel for the opposite party did not raise any objection. It is noteworthy that the petition no. 234/08 was pending at that time. Learned counsel for the opposite party no.2 has placed reliance upon Sarguja Transport Service vs. State Transport Appellate Tribunal, M.P., Gwalior and Others (supra) wherein in para 9 it was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....petition is maintainable. 19. Learned counsel for the petitioner has mainly challenged the impugned order of summoning of the petitioners on the basis of Section 141 Negotiable Instruments Act. Section 141 Negotiable Instruments Act reads as under :- "141. Offences by companies.- (1) If the person committing an offence under Section 138 is a company, every person who, at the time of 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 : [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 of State Government of a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment 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. 21. Learned counsel for the petitioners has placed reliance upon a Three Judges' Bench judgment of the Hon'ble Apex Court in SMS Pharmaceuticals Limited Vs. Neeta Bhalla, (2005) 8 SCC 89 which was referred by the Hon'ble Apex Court in Darga Ram vs. State of Rajasthan, (2015) 2 SCC 775. It was held in SMS Pharmaceuticals in para 5 that :- "5. Section 203 of the Code empowers a Magistrate to dismiss a complaint without even issuing a process. It uses the words "after considering" and "the Magistrate is of opinion that there is no sufficient ground for proceeding". These words suggest that the Magistrate has to apply his mind to a complaint at the initial stage itself and see whether a case is made out against the accused persons before issuing process to them on the basis of the complaint. For applying his mind and forming an opinion as to whether there is sufficient ground for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tponement of the issue of the process "in a case where the accused is residing at a place beyond the area in which he exercises his jurisdiction" and thereafter to either inquire into the case by himself or direct an investigation to be made by a police officer or by such other person as he thinks fit. In the face of it, what needs our determination is as to whether in a case where the accused is residing at a place beyond the area in which the Magistrate exercises his jurisdiction, inquiry is mandatory or not. 12. The words "and shall, in a case where the accused is residing at a place beyond the area in which he exercises his jurisdiction" were inserted by Section 19 of the Code of Criminal Procedure (Amendment) Act (Central Act 25 of 2005) w.e.f. 23.6.2006. The aforesaid amendment, in the opinion of the legislature, was essential as false complaints are filed against persons residing at far off places in order to harass them. The note for the amendment reads as follows: "False complaints are filed against persons residing at far off places simply to harass them. In order to see that innocent persons are not harassed by unscrupulous persons, this clause seeks to amend sub-sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by asking the person against whom the violation of law is alleged, to appear before the court. The satisfaction on the ground for proceeding would mean that the facts alleged in the complaint would constitute an offence, and when considered along with the statements recorded, would prima facie, make the accused answerable before the court. No doubt, no formal order or a speaking order is required to be passed at that stage. The Code of Criminal Procedure requires speaking order to be passed under Section 203 CrPC when the complaint is dismissed and that too the reasons need to be stated only briefly. In other words, the Magistrate is not to act as a post office in taking cognizance of each and every complaint filed before him and issue process as a matter of course. There must be sufficient indication in the order passed by the Magistrate that he is satisfied that the allegations in the complaint constitute an offence and when considered along with the statements recorded and the result of inquiry or report of investigation under Section 202 CrPC, if any, the accused is answerable before the criminal court, there is ground for proceeding against the accused under Section 204 CrPC,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te the merits of the materials or evidence of the complainant, because the Magistrate must not undertake the exercise to find out at this stage whether the materials will lead to conviction or not. (Para 8) At the stage of framing of charge an individual accused may seek discharge if he or she can show that the materials are absolutely insufficient for framing of the charge against that particular accused. But such exercise is required only at a later stage and not at the stage of taking cognizance and summoning the accused on the basis of prima facie case. Even at the stage of framing of charge, the sufficiency of materials for the purpose of conviction is not the requirement and a prayer for discharge can be allowed only if the court finds that the materials are wholly insufficient for the purpose of trial. Even when there are materials raising strong suspicion against an accused, the court will be justified in rejecting a prayer for discharge and in granting an opportunity to the prosecution to bring on record the entire evidence in accordance with law so that case of both the sides may be considered appropriately on conclusion of trial. (Para 9) 27. In the background of thes....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 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. 11. A reference to sub-section (2) of Section 141 fortifies the above reasoning because sub-section (2) envisages direct involvement of any director, manager, secretary or other officer of a company in the commission of an offence. This section operates when in a trial it is proved that the offenc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me effect is the judgment of the Madras High Court in R. Kannan v. Kotak Mahindra Finance Ltd. (2003) 115 Comp Cas 321 (Mad). In Lok Housing and Constructions Ltd. v. Raghupati Leasing and Finance Ltd., (2003) 115 Comp Cas 957 (Del) the Delhi High Court noticed that there were clear averments about the fact that accused 2 to 12 were officers incharge of and responsible to the company in the conduct of the day to day business at the time of commission of the offence. Therefore, the Court refused to quash the complaint. In Sunil Kumar Chhaparia vs. Dakka Eshwaraiah (2002) 108 Comp Cas 687 (AP) the Andhra Pradesh High Court noted that there was a consensus of judicial opinion that : (Comp Cas p. 691) "[A] director of a company cannot be prosecuted for an offence under Section 138 of the Act in the absence of a specific allegation in the complaint that he was incharge of and responsible to the company in the conduct of its business at the relevant time or that the offence was committed with his consent or connivance." 29. It was held by the Hon'ble Apex Court in SMS Pharmaceuticals Limited (supra) in para 18 and 19 that :- "18. To sum up, there is almost unanimous judicial opi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in such cases. 30. Explanation attached to Section 141 (2) includes a firm or other association of individuals within the meaning of "company". It is further provided that "Director" in relation to a firm means a partner in the firm. 31. In para 7 of Sabitha Ramamurthy v. R.B.S. Channabasavaradhya (supra) it was held that :- "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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as wife of the Managing Director, was appointed as a Director of the Company - M/S Elite International Pvt. Ltd. On Ist July, 2004 and had also executed a Letter of Guarantee on 19the January, 2005. The cheques in question were issued during April, 2008 to September, 2008. So far as the dishonor of Cheques is concerned, admittedly the cheques were not signed by the appellant. There is also no dispute that the appellant was not the Managing Director but only a non-executive Director of the Company. Non-executive Director is no doubt a custodian of the governance of the Company but does not involve in the day to day affairs of the running of its business and only monitors the executive activity. To fasten vicarious liability under Section 141 of the Act on a person, at the material time that person shall have been at the helm of affairs of the company, one who actively looks after the day to day activities of the Company and particularly responsible for the conduct of its business. Simply because a person is a Director of a Company does not make him liable under the N.I. Act. Every person connected with the company will not fall into the ambit of the provision. Time and again, it has....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be incharge of and responsible for the conduct of the business of the company at the relevant time. Necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A clear case should be spelled out in the complaint against the person sought to be made liable. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. Merely being described as a Director in a company is not to satisfy the requirement of Section 141 of Negotiable Instruments Act. Since no compliance of Section 141 of Negotiable Instruments Act has been made by the opposite party no.2, hence, the complaint itself is not maintainable under the law. 38. Learned counsel for the opposite party has placed reliance upon HMT Watches Ltd. vs. M.A. Abida and Another, Criminal Appeal No. 472/2015, decided on 19.3.2015 and submit that the factual intricacies could not be seen in a petition under Section 482 CrPC. It is true that factual intricacies cannot be seen in a petition under Section 482 CrPC but if the complaint itself is not maintainable for want of a mandatory provision that can very well be seen under Section 482....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Code for quashing of the FIR should be exercised, there are circumstances where the court may be justified in exercising such jurisdiction. These are, where the FIR does not prima facie constitute any offence, does not disclose a cognizable offence justifying investigation by the police; where the allegations 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; where there is an expressed legal bar engrafted in any of the provisions of the Code; and where a criminal proceeding is manifestly attended with mala fide 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. Despite stating these grounds, the Court unambiguously uttered a note of caution to the effect that the power of quashing a criminal proceeding should be exercised very sparingly and with circumspection and that too, in the rarest of rare cases; the Court also warned that the court would not be justified in embarking upon an enquiry as to the reliability or genuin....