TaxTMI 
TaxTMI 
2023 (1) TMI 292
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.... a company incorporated under the Companies Act 1956, had purchased some goods and as payment security he had given one undated Account Payee Cheque No. 511915, for a sum of Rs. 27,54,000/ of Vijaya Bank, in the purchase order. The respondent Firm has issued two Tax Invoices, dated 01.04.2019, for a sum of Rs. 13,85,064/ and 09.04.2019 for a sum of Rs. 13,62,354/ (All total Rs. 27,47,418/) against the said purchase order. The petitioners have paid the said amount to the complainant's account, on 29.05.2019 and 03.06.2019, and the amounts were debited from his account and the concerned bank has issued one statement under their seal to that effect. But, suppressing the said facts the complainant has, with ulterior motive, served demand notice upon him, asking for payment of the check amount of Rs.27,54,000/, which was given as a security, and the petitioners have given reply to the said notices. But, inspite of payment of the cheque amount, the complainant has instituted the case under section 138 NI Act, with ulterior motive." 4. Being highly aggrieved, the petitioner approached this court for quashing the proceeding on the following grounds, that :- (i) The learned cour....
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.... Mr. Hussain further submits that there was no legally enforceable debt between the petitioners and the respondent, on the date of presentation of the cheque in question in the bank on 13.01.2020, for encashment and as on the date of issuance of legal notice on 27.01.2020, to the petitioners, since in view of Annexure-V, the petitioners have already paid a sum of Rs. 13,85,064/ by NEFT on 29.05.2019, and another sum of Rs. 13,62,354/ by NEFT on 03.06.2019, as such no ingredients of the offence under section 138 N.I. Act is made out against the petitioners. Further Mr. Hussain pointed out that the respondent has failed to spell out in what capacity the petitioner No.1 has been arraigned as party in the N.I. Act as he is neither director of the company nor he is responsible for the conduct of the business of the company in view of Annexure-I, the Memorandum of Association and Article of Association of the company, i.e. Durga Kishor Store Private Limited, and that the respondent has also failed to made the company as party in the proceeding and as such the proceeding is not maintainable, and it is nothing but an abuse of the process of the court and therefore, Mr. Hussain contended to....
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....within the stipulated time for which the respondent has approached the Court of learned CJM, Cachar, Silchar by filing a complaint- Annexure-VIII, under Section 138 of the N.I. Act. 10. A careful perusal of the said complaint reveals that Durga Krishna Store Pvt. Ltd., in whose name the cheque was issued has not been made a party in the said complaint. Rather, the petitioner No.1 Sri Sidhartha Munda and petitioner No.2, Shri Govind Mundra, have been made as accused No.1 and accused No.2 respectively, for being the Directors of the company. It also appears from the complaint, specially paragraph No.3, where in it is averred that the accused No.1 as Director of Durga Krishna Store Pvt. Ltd, has issued the cheque in question for Durga Krishna Store Pvt. Ltd. 11. But, it appears that the respondent has not enclosed any supporting documents to that effect to show that the petitioner No.1 is the Directors of the company. Whereas, the Annexure-I, the Memorandum of Association and Article of Association of the company, i.e. Durga Kishor Store Private Limited, enclosed with the petition, reveals that the petitioner No.1 is not the director of the company. He is arraigned as an accused....
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.... it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a director is indicted." In similar terms, the Court further held: "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 drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself.... " The judgment of the three Judge Bench has since been followed by a two Judge Bench of this Court in Charanjit Pal Jindal vs. L.N. Metalics2. There is merit in the second submission which has been urged on behalf of the appellant as well. The proviso to Section 138 contains the pre-conditions which must be fulfilled before an offence under the provision is made out. These conditions are; • presentation of the cheque to the bank within six months from the date on which it is drawn or within the period of its validity, whichever is earlier; • a demand being made in writing by the payee or....
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....ible 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." It has been further held that :- "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." 17. In the case of Sabitha Rammurthy and Another vs. R.B.S. Channabasavaradhya, reported in (2006) 10 SCC 581, it has been held that - Section 141 raises a legal fiction. By reason of the said provision, a person although is not personally liable for commission of such an offence would be vicariously liable t....
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....erson must be pleaded and proved and not inferred. xx xx xx (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. 20. Moreover, it appears from the Annexure -V, at page No. 43 of the petition that the petitioners have paid a sum of Rs. 13,85,064/ on 29.05.2019, by NEFT and 03.06.2019, paid a sum of Rs. 13,62,354/ by NEFT to the account of Steel Traders, the firm of the respondent. Having not been disputed by the respondent, the same goes a long way to show that on the date of issuance of the cheque in question i.e. Annexure-IV, on 13.01.2020, and on the date of issuance of the demand notice-Annexure- VI, on 27.01.2020, there was no legally enforceable debt and the cheque in question does not represent the correct amount of debt also. Mr. Hussain, the learned counsel for the petitioners have rightly pointed this out in his argument and the case law i.e. Dasarathbhai Trikambhai Patel (supra), also strengthen his submission. It is to be noted here that in the said case Hon'ble ....
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....Section 138 need to be fulfilled in addition to the ingredients in the substantive part of Section 138. Since in this case, the first respondent has not committed an offence under Section 138, the validity of the form of the notice need not be decided. 22. I have carefully considered the submission of Mr. Chakravarty, the learned counsel for the respondent and also carefully gone through the paragraph No.21 of the decision of Hon'ble Supreme Court in Ashutosh Asok Parasrampuriya (supra), referred by him. In fact, in the paragraph No.21 of the said decision, Hon'ble Supreme Court has discussed the law laid down by it in the case of S.M.S. Pharmaceuticals Ltd. (supra). But, in view of above discussion and finding, I am unable to record concurrence with the submission of Mr. Chakravarty because of the following reasons :- (a) in the present case, the Company has not been arraigned as a party, and no legal notice was issued to it, which is imperative on the part of the respondent/complainant, as held by Hon'ble Supreme Court in the case of Aneeta Hada (Supra), (b) the petitioners herein have made payment of the cheque amount and as such the dishonored cheque, does ....