TaxTMI 
TaxTMI 
TaxTMI 
2020 (9) TMI 594
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....he offences under Section 141 of NI Act as against the petitioner herein, the complainant should have specifically averred in the complaint that at the time of offence the petitioner was in charge of and responsible for the conduct and the business of the company. The petitioner is being merely Director of the company is not sufficient to make her liable to be prosecuted for the offences under Section 141 of NI Act. The respondent cannot presume every Director knows about the transaction while fastening criminal liability as against the Director of the company. The liability on the part of the Director cannot be inferred. The same need to be averred in the complaint so as to make the accused vicariously liable. He further submitted that the proviso categorically states that if a person who was in charge of the day to day management of the company or by stating that he / she was in charge of affairs of the company cannot be vicariously made liable under Section 141(1) of NI Act. In order to substantiate his contention, the learned counsel for the petitioner relied upon the following judgments of the Hon'ble Supreme Court of India: (i) National Small Industries Corporation Limited ....
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....se grounds cannot be considered under Section 482 Cr.P.C. before this Court. Therefore, he sought for dismissal of the quash petition. 4. Heard Mr.Nithyaesh Natraj, learned counsel for the petitioner and Mr.R.Prasanna Vineeth Durai, learned counsel for the respondent. 5. There are totally four accused on the complaint lodged by the respondent for the offence punishable under Sections 138 and 141 of NI Act, in which the petitioner is arrayed as third accused. The respondent lodged complaint as against the petitioner and others alleging that the accused persons have already availed term loan from the complainant during the month of April 2016 and June 2016 to the tune of Rs. 65 lakhs. The accused towards partial discharge of their liability issued eight cheques for a sum of Rs. 65 lakhs in favour of the respondent herein. On instruction, the respondent presented the cheques and the same were returned dishonoured for the reason "account closed". After causing statutory notice as contemplated under Sections 138 of NI Act, the respondent initiated proceedings for the offences punishable under Sections 138 and 141 of NI Act as against the accused persons. The first accused is the comp....
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.... questions which had been referred to it by a two-Judge Bench of this Court in SMS Pharmaceuticals vs. Neeta Bhalla and Anr. (2005) 8 SCC 89: "(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 fulfil the requirements of the said section and it is not necessary to specifically state in the complaint that the person 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 signatory of the cheque and or the managing directors or joint managing director who admittedly would be in charge of the company and responsible to the company for conduct of its business could be proceeded against." While considering the above questions, this Court held as under: 18. To sum up, there is almost unanimous judicial opinion that ....
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....ng director or joint managing director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141." Therefore, this Court has distinguished the case of persons who are in-charge of and responsible for the conduct of the business of the company at the time of the offence and the persons who are merely holding the post in a company and are not in-charge of and responsible for the conduct of the business of the company. Further, in order to fasten the vicarious liability in accordance with Section 141, the averment as to the role of the concerned Directors should be specific. The description should be clear and there should be some unambi....
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....is Court have become binding precedents. A combined reading of Sections 5 and 291 of Companies Act, 1956 with the definitions in clauses 24, 26, 30, 31 and 45 of Section 2 of that Act would show that the following persons are considered to be the persons who are responsible to the company for the conduct of the business of the company: (a) the Managing Director/s; (b) the whole-time Director/s; (c) the Manager; (d) the Secretary; (e) any person in accordance with whose directions or instructions the Board of Directors of the company is accustomed to act; (f) any person charged by the Board of Directors with the responsibility of complying with that provision; Provided that the person so charged has given his consent in this behalf to the Board; (g) where any company does not have any of the officers specified in clauses (a) to (c), any director or directors who may be specified by the Board in this behalf or where no director is so specified, all the directors: Provided that where the Board exercises any power under clause (f) or clause (g), it shall, within thirty days of the exercise of such powers, file with the Registrar a return in the prescribed form. 38....
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....the cheques on behalf of the company then also it is not necessary to make specific averment in complaint. (vii) The person sought to be made liable should be incharge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases. 8. He also relied upon the judgment in the case of Pooja Ravinder Devidasani Vs. State of Maharashtra and another reported in (2014) 16 SCC 1, wherein it is held as follows: We have given our thoughtful consideration to the arguments advanced by the counsel on either side at length. The questions that arise for determination are (i) whether the appellant is liable for prosecution under Section 138 read with Section 141 of the N.I. Act for the alleged offence of dishonor of cheques committed by the default Company?; (ii) whether the High Court was right in dismissing the writ petitions filed by the appellant seeking quashing of the criminal proceedings initiated against her by the Respondent No. 2? There is no dispute that the appellant, who was wife of the Managing Director, was appointed as a Director of the Company-M/S Elite Inte....
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....n the basis of a statement that they are in charge of and responsible for the conduct of the business of the company without anything more is not a sufficient or adequate fulfillment of the requirements under Section 141. Putting the criminal law into motion is not a matter of course. To settle the scores between the parties which are more in the nature of a civil dispute, the parties cannot be permitted to put the criminal law into motion and Courts cannot be a mere spectator to it. Before a Magistrate taking cognizance of an offence under Section 138/141 of the N.I. Act, making a person vicariously liable has to ensure strict compliance of the statutory requirements. The Superior Courts should maintain purity in the administration of Justice and should not allow abuse of the process of the Court. The High Court ought to have quashed the complaint against the appellant which is nothing but a pure abuse of process of law. 9. He also relied upon the judgment in the case of Ashok Mal Bafna Vs. M/s Upper India Steel Mfg & Engg Co. Ltd reported in 2017 SCC Online SC 705, wherein it is held as follows: Interpreting the provisions of Section 141 this Court in National Small Indust....