AI Drafter 
TaxTMI 
TaxTMI 
2022 (12) TMI 963
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....rting crude oil through complainant company, on the respective dates: (i) Two agreements on 24.08.2012, (ii) Two agreements on 28.08.2012, (iii) One agreement on 03.09.2012, (iv) One agreement on 04.12.2012, and (v) One agreement on 08.01.2013. b. The total amount of all the consignments arising from the contracts was a sum of Rs.1,06,77,37,316.50/- (Rupees One hundred and Six Crore, Seventy Seven Lacs, Thirty Seven Thousand, Three hundred sixteen and Fifty Paise only). c. On 11.11.2016, 16 cheques were issued in favour of the drawer company against the aforesaid seven agreements. On 07.02.2017, the cheques were drawn on account of Central Bank of India, Morena, MP maintained by the drawer company, and the same were returned dishonored with remarks showing 'Funds Insufficient'. d. Thereafter, on 07.03.2017, statutory demand notice and another addendum notice dated 09.03.2017 was sent to the accused demanding payment of the said amount. However, upon not receiving any response from the side of the accused, a complaint was filed under Section 138/141 of Negotiable Instruments Act, 1881 ("NI Act") bearing complain....
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....ust be done after due application of mind. Reliance in this regard is placed on Mehmood UI Rehmand v. Khazir Mohammad Tunda (2016)1 SCC(Cri) 124. 5. Learned counsel for petitioner also states that respondent no. 2 did not even serve the present petitioner with the statutory legal notice, and hence it was within the knowledge of the complainant/respondent no. 2 that petitioner was neither incharge nor responsible for the day-to-day affairs of the accused company. 6. Controverting the contentions raised on behalf of the petitioner, learned counsel for respondent no. 2/complainant states that cheques in question were dishonoured in February 2017 whereas the petitioner had resigned from the accused company only in September 2017. It is further stated that the even as per the records, the petitioner was a director of the accused company and he is liable to face the trial. It is also averred that the petitioner's arguments cannot be considered at this stage and can be dealt with only during the trial. 7. Both the learned counsel for respondent no. 2 as well as learned APP for the State have stated that the amount in question is more than Rs.106 crores and trial is pending as of ....
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....ant part of Section 149 is reproduced as under: "149. Company to have Board of Directors. *** (12) Notwithstanding anything contained in this Act, (i) an independent director; (ii) a non-executive director not being promoter or key managerial personnel, shall be held liable, only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently..." 10. In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla (2005) 8 SCC 89, the Hon'ble Supreme Court of India discussed the meaning and purpose of Section 141 as well as the averments required to be made in the complaint under Section 138 r/w 141 of Negotiable Instruments Act, 1881 to fasten the vicarious liability on the persons associated with a company. The Apex Court held as under: "10. 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....
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....siness 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)...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 conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be in charge 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..." (emphasis supplied) 11. Reiterating the same view, the Apex Court in National Small Industries Corp. Ltd. v. Harmeet Singh Paintal (2010) 3 SCC 330 further held as under: "22. 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 o....
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....re in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with. (iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred. (v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with. (vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint. (vii) The person sought to be made liable should be in charge 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..." (emphasis supplied) 12. The Apex Court in Anita Malhotra v. Apparel Export Promotion Council (2012) 1 SCC 520, following the principles laid down in National Small Industries Corp. Ltd. (supra), held that: "22. This Court has repeatedly held that in case of a Director, complaint sh....
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....e liable for an offence under Section 141 of the NI Act. In National Small Industries Corpn. [National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330 : (2010) 1 SCC (Civ) 677 : (2010) 2 SCC (Cri) 1113] this Court observed: (SCC p. 336, paras 13-14) "13. Section 141 is a penal provision creating vicarious liability, and which, as per settled law, must be strictly construed. It is therefore, not sufficient to make a bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent 1 was in charge of or was responsible to the accused Company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability. 14. A company may have a number of Directors and to make any or all the Directors as accused in a complaint merely on the basis of a statement that they are in charge of and responsible for the conduct of the busin....
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.... pany and not on designation or status alone as held by this Court in S.M.S. Pharmaceuticals Ltd. (supra). The materials on record clearly show that these Appellants were independent, non-executive Directors of the company. As held by this Court in Pooja Ravinder Devidasani v. State of Maharashtra and Anr. (supra) a non-Executive Director is not involved in the day-to-day affairs of the company or in the running of its business. Such Director is in no way responsible for the day-to-day running of the Accused Company. Moreover, when a complaint is filed against a Director of the company, who is not the signatory of the dishonoured cheque, specific averments have to be made in the pleadings to substantiate the contention in the complaint, that such Director was in charge of and responsible for conduct of the business of the Company or the Company, unless such Director is the designated Managing Director or Joint Managing Director who would obviously be responsible for the company and/or its business and affairs. *** 46. As held by this Court in National Small Industries Corporation Ltd. v. Harmeet Singh Painta quoted with approval in the subsequent decision of this ....
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....r: 9. The prime objective of this Court is to remind all the Metropolitan Magistrates in Delhi to carefully scrutinize all the complaint cases being filed under Section 138 r/w 141 of the Negotiable Instruments Act, 1881 against the accused companies at the pre-summoning stage and make sure that notice be directed only to those directors or employees of the company who satisfy the principles laid down in the aforesaid judgments. Summons must be issued only after giving due consideration to the allegations and the materials placed on record by the complainant. Undeniably, as per the aforesaid legal pronouncements, Managing Director and the Joint Managing Director are deemed to be vicariously liable for the offence committed by the company because of the position they hold in the company. Problem arises in cases where all the persons holding office in the company are sought to be prosecuted by the complainant, irrespective of whether they played any specific role in the incriminating act. It is surprising to see that in plethora of cases, the complaint contains allegations even against those persons who might have been Directors at any point in time in the accused company, but had....
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....e offence by the accused Company and their exact role as to how and in what manner they were responsible for the commission of the alleged offence; e. Particulars of the legal notice and status of its service; f. Particulars of reply to the legal notice, if any. 11. The Registry is directed to send a copy of this order to all the Metropolitan Magistrates posted in various district courts of Delhi for necessary compliance. Registry is further directed to send a copy of this order to all the Bar Associations of various district courts of Delhi, so that they can apprise the members of the Bar about the aforesaid directions. 17. Coming to the facts of the present case, a perusal of Form No. DIR-11, dated 19.09.2019, of the accused company K.S. Oils Limited shows that the petitioner was an independent director at the time of commission of the offence. In view of Section 141 of Negotiable Instruments Act, 1881 and Section 149 of Companies Act, 2013 petitioner could have been held vicariously liable only if it was shown that he was incharge of and was responsible for the conduct of the business of the company at the time of commission of offence, and not otherwise.....