TaxTMI 
TaxTMI 
2022 (6) TMI 198
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....nd 5th accused on behalf of the 1st accused approached the respondent for a loan of Rs.2/- crores. Acceding to the request, the respondent agreed to lend Rs.2/- crores on execution of certain loan agreement and in furtherance of the said loan agreement, cheques appear to have been exchanged between accused Nos.4 and 5 and the respondent. A cheque bearing No.124755 which was issued in favour of the respondent having been presented, is dishonoured on account of want of sufficient funds on 04-01-2020. The complainant on the cheque getting dishonoured, registered a private complaint invoking Section 200 of the Cr.P.C. arraying the petitioners as accused Nos.2 and 6 along with others. The Court having taken cognizance punishable under Section 138 of the Act, the petitioners/accused Nos.2 and 6 have knocked the doors of this Court in the subject petition. 3. Heard Smt. Kaveri Thimmaiah, learned counsel for the petitioners and Sri Manu Kulkarni, learned counsel for the respondent. 4. The learned counsel appearing for the petitioners would vehemently argue and contend that the petitioners are Non-executive Directors of the Company and being Non-executive Directors they are not involv....
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....rm/Proprietorship concern/Society/Trust and existing under the laws of India, and has the power and authority to carry on its business as it is now being carried on and to own and create security over is property and assets. (b) The borrower has all permissions required under law to borrow money from MBIND and has the power and authority to carry on its business. It has obtained all approval and sanction from its board of directors to directors to execute this agreement. The officers and employees and agents of the Borrower executing this Agreement and the documents to be executed in pursuance hereof, are duly and properly in office and fully and duly authorized to execute the same, and MBIND shall have no cause to make enquiry or satisfy itself independently in this regard;" (Emphasis added) The agreement narrates that it has obtained all approvals and sanction from its Board of Directors to execute this agreement. The signatories to the agreement are not the petitioners as the agreement is entered into between accused Nos.4 and 5 and the respondent. It is in furtherance of this agreement that cheques are issued in favour of the respondent. The cheque, which i....
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....s both the petitioners as participating in the meeting of the Company as Directors. 8. One fact that can be gathered from what is extracted hereinabove, is that the petitioners are nowhere described as Non-executive Independent Directors. In the light of the aforesaid documents, what is required to be noticed is the averments in the complaint with regard to the petitioners. The complaint insofar as it concerns the petitioners reads as follows: "5. The accused Nos. 2 and 6 are responsible for the day-to-day affairs of accused No.1` and are also in-charge of and responsible for the conduct of the business of accused No.1. The accused No.1 being a de jure entity is operated on the instructions of accused Nos.2 and 6. Accused Nos. 3 and 4 are the Joint Managing Directors of accused No.1. Accused Nos. 4 and 5 signed the cheque which was dishonoured. Accused No.2 to 6 are the brain and soul of the Company and are responsible for all the acts and omissions of the Company and are also responsible to the Company for the conduct of the business of the Company. Accused Nos. 2 to 6 were in-charge of and responsible for the conduct of Accused No.1 at the time when the offence for wh....
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....is that, they are brain and soul of the Company. On a coalesce of the afore-quoted extracts from the documents appended to the petition, the complaint and the sworn statement of the complainant what can be gathered is that the petitioners were aware of the day-to-day affairs of the Company. The petitioners are nowhere described, in any of the documents that they are the Non-executive Independent Directors. In every document they are shown with different designations - at one place as Chairman, in the next as Executive Director and in the other Chairman of the particular meeting of the Board. There is no whisper in any of the documents depicting the petitioners to be Non-executive Independent Directors. Therefore, if the haze has to be warded off, it is necessary for the petitioners to participate in the trial and demonstrate that they have no role to play in the day-to-day affairs of the Company and that they are not even aware of the borrowing. 10. It is no doubt settled principle of law that if the accused in a proceeding under Section 138 of the Act who are not signatories to the instrument are hauled into those proceedings and if they are Non-executive Independent Directo....
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...., it is clear from the conclusions drawn in the afore-stated judgment that it is necessary to aver in the complaint filed under Section 138 read with Section 141 of the NI Act that at the relevant time when the offence was committed, the Directors were in charge of and were responsible for the conduct of the business of the company. 26. This averment assumes importance because it is the basic and essential averment which persuades the Magistrate to issue process against the Director. That is why this Court in S.M.S. Pharmaceuticals Ltd. (supra) observed that the question of requirement of averments in a complaint has to be considered on the basis of provisions contained in Sections 138 and 141 of the NI Act read in the light of the powers of a Magistrate referred to in Sections 200 to 204 CrPC which recognise the Magistrate's discretion to take action in accordance with law. Thus, it is imperative that if this basic averment is missing, the Magistrate is legally justified in not issuing process. 27. In the case on hand, reading the complaint as a whole, it is clear that the allegations in the complaint are that at the time at which the cheques were issued by t....
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....him by the company is dishonoured, he is expected only to be aware generally of who are in charge of the affairs of the company. It is not reasonable to expect him to know whether the person who signed the cheque was instructed to do so or whether he has been deprived of his authority to do so when he actually signed the cheque. Those are matters peculiarly within the knowledge of the company and those in charge of it. So, all that a payee of a cheque that is dishonoured can be expected to allege is that the persons named in the complaint are in charge of its affairs. The Directors are prima facie in that position. 22. In fact, in an earlier decision in Monaben Ketanbhai Shah v. State of Gujarat [(2004) 7 SCC 15 : 2004 SCC (Cri) 1857] two learned Judges of this Court noticed that: (SCC p. 17, para 4) "The laudable object of preventing bouncing of cheques and sustaining the credibility of commercial transactions resulting in enactment of Sections 138 and 141 has to be borne in mind." 23. In the light of the ratio in S.M.S. Pharmaceuticals Ltd. [(2005) 8 SCC 89 : 2005 SCC (Cri) 1975] what is to be looked into is whether in the complaint, in addition to asserting tha....