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2018 (12) TMI 1986
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....ashed as against the petitioners on two grounds which are as follows: a] The petitioners are only Investor Directors//Non-Executive Directors and even as per the Articles of Association of the 1st accused Company, such Investor Directors are not incharge of or responsible for the day-to-day management of the Company and they will not be liable for any default or failure of the Company; and b] The complaint does not contain sufficient allegations against these petitioners and it does not satisfy the requirements under Section 141 of the Negotiable Instruments Act, 1881. 4. In order to substantiate the above said submissions, the learned counsel for the petitioners relied upon the following judgments: I] National Small Industries Corporation Limited. Vs. Harmit Singh Paintal land Another reported in [2010 3 SCC P 330]. II] Pooja Ravinder Devidasani. Vs. State of Maharashtra and Another reported in [2014 16 SCC 1]. III] Ashok Mal Bafna. Vs. M/s. Upper India Steel Mfg. & Engg. Co. Ltd. reported in [2017 SCC OnLine SC 705]. 5. Per contra, Mr. Nithyaesh, learned counsel for the respondent would submit that the document sought to be....
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..... M.P. No. 21962 of 2015) dated 17.11.2014. 9. Anu Mehta. Vs. Gunmala Sales reported in [2016 1 Calcutta Law Journal 603]. 10. Anu Mehta. Vs. Gunmala Sales (Review Petition (Crl. No. 54 of 2015). 11. B. Devi. Vs. State of UP reported in [2015 SCC Online Allahabad 7104]. 7. This Court has carefully considered the submissions made on either side. This Court will first take up the issue as to whether necessary allegations have been made in the complaint against the petitioners by satisfying the requirements under Section 141 of the Negotiable Instruments Act. For this purpose, it is necessary to extract the relevant averment made in the complaint. "1.................... The second accused is Mr. Anil Pathak, Director of Hallmark Living Space Pvt. Ltd, having office at No. 43, Old No. 62/2, United Plaza, Usman Road, T. Nagar, Chennai-600017 TN. ...................The Sixth accused is Mr. Pulliattu Chandrasekharannair Sasikumar, Director of Hallmark Living Space Pvt. Ltd, having office at No. 43, Old No. 62/2, United Plaza, Usman Road, T. Nagar, Chennai 600017 TN. ........................ 6. On verifying the records of first accus....
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....ion that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. A liability under Section 141 of the Act is sought to be fastened vicariously on a person connected with a company, the principal accused being the company itself. It is a departure from the rule in criminal law against vicarious liability. A clear case should be spelled out in the complaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of Section 141 has to be spelled out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within Section 141, he would issue the process. We have seen that merely being described as a director in a company is not sufficient to satisfy the requirement of Section 141. Even a non-director can be liable under Section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is ....
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....141, the averment as to the role of the concerned Directors should be specific. The description should be clear and there should be some unambiguous allegations as to how the concerned Directors were alleged to be in- charge of and was responsible for the conduct and affairs of the company. 26. In a subsequent decision in N.K. Wahi vs. Shekhar Singh & Ors., (2007) 9 SCC 481 while following the precedents of SMS Pharmaceuticals's case (supra), Sabhita Ramamurthy's case (supra) and Saroj Kumar Poddar's case (supra), this Court reiterated that for launching a prosecution against the alleged Directors, there must be a specific allegation in the complaint as to the part played by them in the transaction. The relevant portion of the judgment is as under: "7. This provision clearly shows that so far as the companies are concerned if any offence is committed by it then every person who is a Director or employee of the company is not liable. Only such person would be held liable if at the time when offence is committed he was in charge and was responsible to the company for the conduct of the business of the company as well as the company. Merely being a Direct....
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..../s; (c) the Manager; (d) the Secretary; (e) any person in accordance with whose directions or instructions the Board of Directors of the company is accustomed to act; (f) any person charged by the Board of Directors with the responsibility of complying with that provision; Provided that the person so charged has given his consent in this behalf to the Board; (g) where any company does not have any of the officers specified in clauses (a) to (c), any director or directors who may be specified by the Board in this behalf or where no director is so specified, all the directors: Provided that where the Board exercises any power under clause (f) or clause (g), it shall, within thirty days of the exercise of such powers, file with the Registrar a return in the prescribed form. 38. But if the accused is not one of the persons who falls under the category of "persons who are responsible to the company for the conduct of the business of the company" then merely by stating that "he was in-charge of the business of the company" or by stating that "he was in- charge of the day-to-day management of the company" or by statin....
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.... there is no deemed liability of a Director in such cases. 10. The 2nd judgment that has been relied upon by the learned counsel for the petitioners is [2014 16 SCC 1]. The relevant portions of the judgment is extracted hereunder: "15. We have given our thoughtful consideration to the arguments advanced by the counsel on either side at length. The questions that arise for determination are (i) whether the appellant is liable for prosecution under Section 138 read with Section 141 of the N.I. Act for the alleged offence of dishonor of cheques committed by the default Company?; (ii) whether the High Court was right in dismissing the writ petitions filed by the appellant seeking quashing of the criminal proceedings initiated against her by the Respondent No. 2? 17. There is no dispute that the appellant, who was wife of the Managing Director, was appointed as a Director of the Company-M/S Elite International Pvt. Ltd. on 1st July, 2004 and had also executed a Letter of Guarantee on 19th January, 2005. The cheques in question were issued during April, 2008 to September, 2008. So far as the dishonor of Cheques is concerned, admittedly the cheques were not signed by ....
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....nto motion is not a matter of course. To settle the scores between the parties which are more in the nature of a civil dispute, the parties cannot be permitted to put the criminal law into motion and Courts cannot be a mere spectator to it. Before a Magistrate taking cognizance of an offence under Section 138/141 of the N.I. Act, making a person vicariously liable has to ensure strict compliance of the statutory requirements. The Superior Courts should maintain purity in the administration of Justice and should not allow abuse of the process of the Court. The High Court ought to have quashed the complaint against the appellant which is nothing but a pure abuse of process of law. 11. The 3rd judgment that has been relied upon by the learned counsel for the petitioners is [2017 SCC OnLine SC 705]. The relevant portions of the judgment is extracted hereunder: "9. Interpreting the provisions of Section 141 this Court in National Small Industries Corporation v. Harmeet Singh Paintal (2010) 3 SCC 330 observed that 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 ....
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.... the Negotiable Instruments Act, is alleged in the Complaint and nothing more is required. For this purpose, the learned counsel specifically relied upon the following relevant portions of the judgment which is extracted hereunder: "28. We are concerned in this case with Directors who are not signatories to the cheques. So far as Directors who are not signatories to the cheques or who are not Managing Directors or Joint Managing Directors are concerned, it is clear from the conclusions drawn in the above- mentioned cases 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. This is a basic requirement. There is no deemed liability of such Directors. 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 SMS Pharma-(1) observed that the question of requirement of averments in a complaint has to be considered on the basis of provisions contained in ....
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....is a question of fact depending on the peculiar facts in each case and that there is no universal rule that a Director of a company is in charge of its everyday affairs. What follows from this is that it cannot be concluded from SMS Pharma-(1) that the basic requirement stated therein is sufficient in all cases and whenever such an averment is there, the High Court must dismiss the petition filed praying for quashing the process. It must be remembered that the core of a criminal case are its facts and in factual matters there are no fixed formulae required to be followed by a court unless it is dealing with an entirely procedural matter. We do not want to discuss 'the doctrine of Indoor Management' on which submissions have been advanced. Suffice it to say, that just as the complainant is entitled to presume in view of provisions of the Companies Act that the Director was concerned with the issuance of the cheque, the Director is entitled to contend that he was not concerned with the issuance of cheque for a variety of reasons. It is for the High Court to consider these submissions. The High Court may in a given case on an overall reading of a complaint and having come across some ....
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....rtible evidence which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abuse of the process of the court. Despite the presence of basic averment, it may come to a conclusion that no case is made out against the Director. Take for instance a case of a Director suffering from a terminal illness who was bedridden at the relevant time or a Director who had resigned long before issuance of cheques. In such cases, if the High Court is convinced that prosecuting such a Director is merely an arm-twisting tactics, the High Court may quash the proceedings. It bears repetition to state that to establish such case unimpeachable, uncontrovertible evidence which is beyond suspicion or doubt or some totally acceptable circumstances will have to be brought to the notice of the High Court. Such cases may be few and far between but the possibility of such a case being there cannot be ruled out. In the absence of such evidence or circumstances, complaint cannot be quashed; 34.4. No restriction can be placed on the High Court's powe....