TaxTMI 
TaxTMI 
2022 (11) TMI 855
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....hereinafter referred to as "High Court") in four Criminal Miscellaneous Writ Petitions filed by the Respondents seeking quashing of the summoning order dated 18.03.2013 passed by the Additional Chief Judicial Magistrate-II, Muzaffarnagar (hereinafter referred to as "Magistrate") and order dated 02.12.2013 passed by the Additional Sessions Judge, Muzaffarnagar (hereinafter referred to as "Sessions Court"). The High Court allowed the Writ Petition and quashed the entire proceedings including the summoning order dated 18.03.2013 as well as order dated 02.12.2013. 3. As the present appeals are filed by the same Appellant challenging the same impugned judgment, for the sake of brevity they are being disposed of by this common Judgment. Criminal Appeal arising out of Special Leave Petition (Crl.) No. 1697 of 2020 is taken up as a lead case and the parties arrayed thereunder are to be taken in the same manner for the other cases as well. Factual background: 4. The Appellant is engaged in the business of sales of machinery and spare parts under the name and style of 'M/s Pawan Hardware Store'. Respondent No. 2 herein is one of the Director of Ravi Organics Limited, a private limit....
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....sed by the Magistrate and also the order dated 02.12.2013 passed by the Sessions Court. The High Court vide impugned judgment and order dated 19.11.2019 allowed the Writ Petition and quashed the entire proceedings including the summoning order dated 18.3.2013 passed by the Magistrate placing reliance on the pronouncement of this Court in the case of Aneeta Hada Vs. Godfather Travels & Tours Pvt. Ltd. (2012) 5 SCC 661 and S.M.S Pharmaceuticals Ltd. Vs. Neeta Bhalla & Another. (2005) 8 SCC 89. 8.1 The operative portion of the impugned judgment reads as under: - "Considering the facts and circumstance of the present case, according to the complaint itself, the cheque was issued for Pawan Hardware Store, Sandeep talkies, near Court Road, Civil Lines, Muzaffar Nagar by the Director, Devendra Kumar Garg- petitioner. It is not averred in the complaint that Devendra Kumar Garg was in charge of and responsible for the conduct of the business of the company at the time of commission of the offence and hence he will not be liable for criminal action. It may be noted that the firm named as Ravi Organics Ltd., Nai Mandi, Muzaffar Nagar, who was the principal accused, has not b....
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.... the filing of the complaint. 10.3 Reliance to support the aforesaid contentions has been placed by the learned counsel for the appellant on the decisions of this Court in N.Harihara Krishnan Vs. J. Thomas (2018) 13 SCC 663, Bilakchand Gyanchand Co. Vs. A. Chinnaswami (1999) 5 SCC 693, and Rajneesh Aggarwal Vs. Amit. J. Bhalla (2001) 1 SCC 631. 11. In reply, learned counsel appearing on behalf of the Respondent No. 2 submitted that the summoning order is erroneous as the proceedings itself is not maintainable without the company having not been arrayed as an accused in the complaint. 11.1 It was also submitted that it is well settled by a catena of decisions that if a complaint under Section 138 of NI Act is filed in respect of dishonor of cheque issued from the account of the company, it is incumbent on the part of the complainant to make necessary averments in the complaint that at the time when the offence was committed, the person accused was in charge of and responsible for the conduct and business of the company. This averment is an essential requirement of Section 141 of NI Act. He further submitted that the infirmity in the complaint under Section 138 of NI Act for....
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....rse of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c) the drawer of such cheque fails to make the payment 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." 14. Section 141 of NI Act deals with offences by companies while extending the liability to every individual; who when the offence was committed was responsible for the conduct of the business which also extends towards key managerial positions like that of the Director. Section 141 of the NI 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 the offence was committed, was in charge of, and was responsible to the company for the....
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.... "16. Having regard to section 141, when a cheque issued by a company (incorporated under the Companies Act, 1956) is dishonoured, in addition to the company, the following persons are deemed to be guilty of the offence and shall be liable to be proceeded against and punished : (i) every person who at the time the offence was committed, was in charge of and was responsible to the company for the conduct of the business of the company; (ii) any Director, Manager, Secretary or other officer of the company with whose consent and connivance, the offence under section 138 has been committed; and (iii) any Director, Manager, Secretary or other officer of the company whose negligence resulted in the offence under section 138 of the Act, being committed by the company. While liability of persons in the first category arises under sub-section (1) of Section 141, the liability of persons mentioned in categories (ii) and (iii) arises under sub-section (2). The scheme of the Act, therefore is, that a person who is responsible to the company for the conduct of the business of the company and who is in charge of business of the company is vicariously liab....
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....the provision. It is only those persons who were in charge of and responsible for conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. It follows from this that if a director of a Company who was not in charge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable under the provision. The liability arises from being in charge of and responsible for conduct of business of the company at the relevant time when the offence was committed and not on the basis of merely holding a 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 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....
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....respondent no. 2, at the time when the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company. 19. This Court has been firm with the stand that if the complainant fails to make specific averments against the company in the complaint for the commission of an offence under Section 138 of NI Act, the same cannot be rectified by taking recourse to general principles of criminal jurisprudence. Needless to say, the provisions of Section 141 impose vicarious liability by deeming fiction which pre-supposes and requires the commission of the offence by the company or firm. Therefore, unless the company or firm has committed the offence as a principal accused, the persons mentioned in sub-Section (1) and (2) would not be liable to be convicted on the basis of the principles of vicarious liablity. 20. Reference in this connection may also be made to another judgment of the two-Judge Bench of this Court in Himanshu Vs. B. Shivamurthy and Another (Supra), the facts wherein have a stark similarity to the facts of the present case, considering the issue where the complaint was lodged only against the director without arraig....
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....has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a director is indicted. 59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself." 22. The observations made in the aforesaid judgment is also a complete answer to the arguments advanced by learned counsel for the appellant that in the absence of any prohibition under the NI Act, the amendment in the complaint is permissible and the impleadment of an additional accused subsequent to filing of the complaint, would not be barred. At this juncture, we may also refer to the following observations made in the case of N. Harihara Krishnan Vs. J. Thomas (Supra) :- "26. The scheme of the prosecution in punishing under Section 138 of the Act is different from the scheme of CrPC. Section ....
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.... failure to comply with any one of the steps contemplated under Section 138 would not provide "cause of action for prosecution". Therefore, in the context of a prosecution under Section 138, the concept of taking cognizance of the offence but not the offender is not appropriate. Unless the complaint contains all the necessary factual allegations constituting each of the ingredients of the offence under Section 138, the Court cannot take cognizance of the offence. Disclosure of the name of the person drawing the cheque is one of the factual allegations which a complaint is required to contain. Otherwise in the absence of any authority of law to investigate the offence under Section 138, there would be no person against whom a court can proceed. There cannot be a prosecution without an accused. The offence under Section 138 is person specific. Therefore, Parliament declared under Section 142 that the provisions dealing with taking cognizance contained in the CrPC should give way to the procedure prescribed under Section 142. Hence the opening of non obstante clause under Section 142. It must also be remembered that Section 142 does not either contemplate a report to the police or aut....
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....has to be treated to be restricted to its own facts as has been explained by us hereinabove." 25. As already stated above, a perusal of the complaint goes to show that even though respondent no. 2 has been arrayed as a respondent, but there are no averments that respondent no.2 at the time when the offence was committed was in charge of, and was responsible to the company for the conduct of its business. The averments made in the complaint are being reproduced hereunder :- "Complainant makes the following written submission:- 1. That the complainant has a firm which deals in all types of materials used int eh machineries of factories. 2. Defendant's firm M/s. Ravi Organics Limited is a chemical factory and the materials used in the machinery of defendant-firm are supplied by Complainant. Both the firms have old trade relations and they do business with each other. 3. Defendant gave an account payee cheque bearing no. 802276 of Union Bank of India, Muzaffarnagar of Rs.1,00,000/- (Rupees ten lakhs) on 20.11.2012 to Complainant against outstanding bill and asked him to produce the same in his bank for encashment after receiving his signal. ....
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....n 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." 27. A three-Judge Bench in the case of S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla (Supra), considering the aforesaid questions after analysing the provisions of Section 141 of the Act and specially the words "who, at the time the 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, etc." used in the said Section, observed as under :- "While analysing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company. The key words which occur in the Section are "every person". These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words : "who, at the ....
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....butable to neglect on the part of any of the holders of these offices in a company. In such a case, such persons are to be held liable. Provision has been made for Directors, Managers, Secretaries and other officers of a company to cover them in cases of their proved involvement. 12. The conclusion is inevitable that the liability arises on account of conduct , act or omission on the part of a person and not merely on account of holding an office or a position in a company. Therefore, in order to bring a case within Section 141 of the Act the complaint must disclose the necessary facts which make a person liable." 28. The three-Judge Bench also took note of the earlier pronouncements of this Court in the case of State of Haryana Vs. Brij Lal Mittal & Ors. (1998) 5 SCC 343, wherein it was held that vicarious liability of a person for being prosecuted for an offence committed under the Act by a company arises if at the material time he was in charge of and was also responsible to the company for the conduct of its business. Simply because a person is a director of a company, it does not necessarily mean that he fulfils both the above requirements so as to make him liable.....