TaxTMI 
TaxTMI 
TaxTMI 
2023 (12) TMI 948
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....ction 138 of the NI Act implicating 5 accused therein including the petitioner as accused no. 4. The respondent no. 2 pleaded that the accused no. 1 is a private limited company and is engaged in the business of trading and manufacturing of mobile handsets and the accused nos. 2, 3, 4 and 5 are the Directors/ Additional Directors of the accused no. 1 and are liable for the day to day affairs of the accused no. 1. The accused no. 1 is having business relationship with the respondent no. 2 being distributor for goods of the respondent no. 2/company as per Modern Trade Agreement dated 12.11.2015. The respondent no. 2 during the course of business had supplied goods as per various tax invoices bearing no. 1014217023, 1014217032, 1014217048, 1014217070 and 1014217094 at times to the accused. As per ledger account maintained by the respondent no. 2, Rs. 1,03,92,798/- is due and payable by the accused to the respondent no. 2. 2.1 The accused issued five cheques bearing no. 000017-000021 each dated 23.08.2017 drawn on HDFC Bank amounting Rs. 10,00,000/- (hereinafter referred to as "the cheques in question") towards partial payment of goods in favour of the respondent no 2. The respondent ....
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....he petitioner. The petitioner never was the Additional Director of the accused no. 1 company. The petitioner did not sign the cheques in question. There is no specific averment that the petitioner was in charge of and responsible for the conduct of the business of the accused no. 1. The petitioner was appointed as an employee of the accused no. 1 vide appointment order dated 28.09.2015. The accused nos. 2 and 3 were the original directors of the accused no. 1 company and were responsible for the conduct of the accused no. 1. The petitioner was promoted to the post of Additional Director only for the purpose of convenience and never managed the affairs of the accused no. 1 and never played any vital role in the company. The petitioner does not have any share in the accused no. 1 company like the other directors i.e. the accused nos. 2 and 3. The accused no. 2 holds 99.99% shares and the accused no. 3 holds 0.1 % of the shares in the accused no. 1. 4. The counsel for the petitioner advanced oral arguments and also submitted written submissions. He argued that the petitioner was the Executive Director of the accused no. 1 but was never involved or responsible for day-to-day functioni....
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.... other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless- (a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course 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 t....
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.... who at the time of commission of offence is in charge and responsible for the conduct of the business of the company is liable for the offence stated to be committed by the company. The criminal liability arises when the offence was committed and not on the basis of merely holding a designation or office in a company. Section 141 of the NI Act mandates that a person is criminally liable when at the time of commission of offence was in charge and responsible for the conduct of the business of the company and person connected with the company may not fall within the ambit of section 141 of the NI Act. 7.1 The Supreme Court in SMS Pharmaceuticals Ltd. V Neeta Bhalla & another, 2005 (8) SCC 89 held as under:- The normal rule in the cases involving criminal liability is against vicarious liability, that is, no one is to be held criminally liable for an act of another. This normal rule is, however, subject to exception on account of specific provision being made in statutes extending liability to others. Section 141 of the Act is an instance of specific provision which in case an offence under Section 138 is committed by a Company, extends criminal liability for dishonour of cheque ....
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....t 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 legislature is aware that it is a case of criminal liability which means serious consequences so far as the person ....
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....to prevent inter alia the abuse of the process of the Court. There are no fixed formulae to be followed by the High Court in this regard and the exercise of this power depends upon the facts and circumstances of each case. The High Court at that stage does not conduct a mini trial or roving inquiry, but nothing prevents it from taking unimpeachable evidence or totally acceptable circumstances into account which may lead it to conclude that no trial is necessary qua a particular Director. 42. The principles of law and the dictum as laid in Gunmala Sales Private Limited (supra), in our opinion, still holds the field and reflects the correct position of law." It was further observed as under:- 11. In the light of the afore-extracted recitals from the decision in Gunmala Sales Private Limited v. Anu, (2015) 1 SCC 103 quoted with agreement in S.P. Mani's case (supra) and in view of sub-section (1) of Section 141 of the N.I. Act it cannot be said that in a complaint filed under Section 138 read with Section 141 of the N.I. Act to constitute basic averment it is not required to aver that the accused concerned is a person who was in charge of and responsible for the conduct of the b....
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....laints is that the appellants are managing the company and are busy with day to day affairs of the company. It is further averred that they are also in charge of the company and are jointly and severally liable for the acts of the accused No. 1 company. The requirement of sub-section 1 of Section 141 of the NI Act is something different and higher. Every person who is sought to be roped in by virtue of sub-section 1 of Section 141 NI Act must be a 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. Merely because somebody is managing the affairs of the company, per se, he does not become in charge of the conduct of the business of the company or the person responsible for the company for the conduct of the business of the company. For example, in a given case, a manager of a company may be managing the business of the company. Only on the ground that he is managing the business of the company, he cannot be roped in based on sub-section 1 of Section 141 of the NI Act. The second allegation in the complaint is that the appellants are busy with the day-to-day affairs of the company. This i....
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....that the accused was in charge of and responsible for the conduct of the business of the company and A.K. Singhania V Gujarat State Fertilizer Company, (2013)16 SCC 630 wherein it was observed that in the case of offence by a company, to bring the Directors of the company within the ambit of section 138 of the NI Act, it shall be necessary to allege that the Directors were in charge and responsible for the conduct of the business of the company. The counsel for the petitioner also cited National Small Industries Corporation Ltd. V Harmeet Singh Paintal, (2010) 3 SCC 330. 8.1 It is accepted legal proposition in view of law laid down by the Supreme Court in above referred decision that it is the primary responsibility of the complainant to make specific averments in the complaint so as to make the accused vicariously liable. If the basic averment made in the complaint under section 138 of NI Act is that the Director was in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed, then the Magistrate can issue process against such Director. The complaint should specifically spell out how and in what manner the Direc....
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....prosecuted under the NI Act by a company arises if at the material time he was in charge of and also responsible to the company for the conduct of its business and that simply because a person is a director of a company, it does not necessarily mean that he was responsible for conduct of the business of the company. The counsel for the respondent no. 2 argued that the petitioner has failed to produce any document on the record such as DIR-12 and any other document/evidence in support of his contentions raised in the petition which are false and without any basis. 9.1 Section 141 of the NI Act provides for a constructive liability which is created by a legal fiction. Section 141 of the NI Act being a penal provision should receive strict construction and compliance. If the accused played insignificant role in the affairs of the company, it may not be sufficient to attract the constructive liability under section 141 of the NI Act. The petitioner is claiming that he was appointed as the Regional Sales Manager in the accused no. 1 with effect from 01.10.2015 vide offer letter dated 28.05.2015 at a monthly salary of Rs. 50,000/-. The accused nos. 2 and 3 are the first director of the ....