TaxTMI 
TaxTMI 
2014 (7) TMI 1350
X X X X Extracts X X X X
X X X X Extracts X X X X
....ersy involved, can be briefly stated as under: "The applicant Nos. 1 and 2 in Criminal Application No. 767/2012 and applicant Nos. 1 to 4 in Criminal Application No. 73/2013 are the original accused in the criminal complaint as stated above. It is the case of the respondent No. 1/complainant that it is a Private Limited Company established under the provisions of the Companies Act and deals in the business of production and selling spices under the name and style as "M/s. Gharkul Industries Pvt. Ltd." while applicant No. 1 Ameya Paper Mills Pvt. Ltd. deals in the business of paper production and all other applicants are its Directors. The respondent No. 1 and applicants being well acquainted with each other and applicants being in need of financial assistance for their business approached respondent No. 1 with a request to provide them financial assistance. The respondent No. 1 considering the relations and need of the applicants provided financial assistance and on negotiations and mutual agreement executed Memorandum of Understanding with the applicants, which was signed by applicant No. 2 (in Criminal Application No. 73/2013) with consent of all the applicants in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....12 in favour of respondent No. 1 towards part payment of the above said amount valued for Rs. 10,00,000/- drawn on State Bank of India, Finance Branch at Nagpur, which was deposited by respondent No. 1 in UCO Bank, Amravati for encashment. However, same was dishonoured due to "funds insufficient". The intimation of dishonour of cheque was received by respondent No. 1 on 4/6/2012. After dishonour of cheque, notice was issued to the applicants demanding the said amount of cheque, which was refused to be accepted by the applicants in spite of intimation given by the Postal Authorities and thus, the notice was returned with remark "not claimed". 4. In the background of above facts, respondent No. 1 filed complaint against the applicants under Section 138 of the Negotiable Instruments Act as according to the respondent No. 1, the applicants are equally responsible for the offence committed by them by issuing cheque to discharge their legal liability towards respondent No. 1. 5. The learned trial Court issued summons in the name of all the applicants for the offence punishable under Section 138 of the Negotiable Instruments Act against which the applicants have preferred the presen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mand and when the applicants are not under legal liability to pay any amount, there is no question of applicants committing any offence mentioned in the complaint. It is thus concluded by contending that as there are no averments made in the complaint that on the relevant date of issuance of cheque, the applicants were Managing Directors and that they were responsible for day to day conduct of business of the Company, filing of complaint by respondent No. 1 is nothing, but gross abuse of process of law and Court and thus, complaint cannot be allowed to progress further and as such, have prayed that both the criminal applications may be allowed by quashing Criminal Complaint No. 2500/2012. In support of their contentions, the learned Counsel for the applicants has relied upon the judgment of the Apex Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and another {(2005) 8 SCC 89} : [2005(5) ALL MR 1118 (S.C.)]. 8. The respondent No. 1 has resisted both these criminal applications contending that the applicants have made misleading and mischievous statements that in view of Memorandum of Understanding, permanent investment is made by respondent No. 1 with applicant No. 1 Company....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess 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." The questions so posed, as above, were replied as under: "(a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied. (b) The answer to the question posed in sub-para (b) has to be in the negative. Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is further found averred in the complaint that all the Directors of the applicant Company are responsible for its business and all the applicants are involved in the business of the Company and are responsible for all the affairs of the Company. After contending about the fact of issuance of cheque dated 2/6/2012 by the applicants to respondent No. 1 and dishonour of cheque for want of sufficient funds, it is further averred that on receipt of intimation regarding dishonour of cheque on 4/6/2012, respondent No. 1 issued legal notice to the applicants on applicant No. 1 Company's address as well as on their residential address by registered post acknowledgment due on 26/6/2012 demanding amount of Rs. 10 lakhs within fifteen days, which is alleged to have been refused by the applicants as per endorsement made by the Postal Department. 13. In the light of the above averments in the complaint and documents filed on record, it is revealed that the legal notice was issued by respondent No. 1 to all the applicants on their address and in spite of intimation given to the applicants by the Postal Department as they were not claiming the notice, the notice was returned to respondent ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssued has been dishonoured, but it could also be initiated against every person who at the time the offence was committed, was in charge of and was responsible for the conduct of the business of the company. In fact, Section 141 deems such persons to be guilty of such offence, liable to be proceeded against and punished for the offence, leaving it to the person concerned, to prove that the offence was committed by the company without his knowledge or that he has exercised due diligence to prevent the commission of the offence. A company, though a legal entity, cannot act by itself, but can only act through its Directors. Normally, the Board of Directors act for and on behalf of the company. This is clear from Section 291 of the Companies Act. Therefore, a person in the commercial world having a transaction with a company is entitled to presume that the Directors of the company are in charge of the affairs of the company. If any restrictions on their powers are placed by the memorandum or articles of the company, it is for the Directors to establish it at the trial. It is in that context that Section 141 of the NI Act provides that when the offender is a company, ever....