TaxTMI 
TaxTMI 
2024 (7) TMI 178
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....es punishable under Section 138 read with Section 142 of the Negotiable Instruments Act (in short NI Act) and Section 420 of Indian Penal Code (in short 'IPC'). It was asserted that the complainant is a partnership firm. The accused (Cian Healthcare Limited) is a Directorship firm (sic) having its plant office at village Sisona, Bhagwanpur, registered office at Milkat No.3339, Block No.1, Harpale Park, opposite Burger Paint, Phursungi, Pune 412308 and Corporate office at 1st and 2nd floor, Premdeep Building, above Latur Urban Coop Bank Ltd. Lullanagar Chowk, Near Zahir Khan's Restaurant Camp Kondhwa Road, Pune- 411040. Accused No.4 to 8 are the Managing Directors and Directors of the accused. The accused had business relations with the complainant. The complainant supplied medicines against valid bills/invoices. The accused were making the payment through online transactions. An amount of Rs.31,04,291/- was payable by the accused to the complainant on 22.07.2021. When the complainant demanded the money, one of the authorized signatories of accused Nos.1 to 3 on their behalf and in the discharge of their liability issued six postdated cheques drawn on IDBI Bank, Pune, Maharashtra in....
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....e of and responsible to the Company for its daily affairs and there is no infirmity in the order passed by the learned Trial Court. Hence, he prayed that the present petition be dismissed. 8. I have given considerable thought to the rival submissions at the bar and have gone through the records carefully. 9. The Hon'ble Supreme Court dealt with the liability of the Company and its Directors in Pawan Kumar Goel v. State of U.P., 2022 SCC OnLine SC 1598 and held that a person, who is in charge of and responsible to the Company for its affairs can be summoned and punished under Section 138 read with Section 141 of NI Act. It was observed: "22. A two-judge Bench of this Court in the case of K.K. Ahuja v. V.K. Vora (2005) 8 SCC 89 after analysing the provisions contained in Section 141 of the Act, observed as under:- "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....
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....or if the offence was a result of any negligence on his part. The liability of persons mentioned in sub-section (2) is not on account of any legal fiction but on account of the specific part played-consent and connivance or negligence. If a person is to be made liable under sub-section (2) of section 141, then it is necessary to aver consent and connivance, or negligence on his part." 23. The scope of Section 141 of the NI Act was again exhaustively considered by this Court in S.M.S Pharmaceuticals Ltd. v. Neeta Bhalla (2005) 8 SCC 89.: "10. ....What is required is that the persons who are sought to be made criminally liable under Section 141 should be at the time the offence was committed, in charge of and responsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the provision. It is only those persons who were in charge of and responsible for the conduct of the business of the company at the time of the 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....
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....urpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial." (emphasis supplied) 10. This position was reiterated in Rajesh Viren Shah v. Redington India Ltd., (2024) 4 SCC 305: 2024 SCC OnLine SC 143 wherein it was observed: "3. The position of law as to the liability that can be fastened upon a Director for non-realisation of a cheque is no longer res integra. Before adverting to the judicial position, we must also take note of the statutory provision - Section 141 of the NI Act, which states that every person who at the time of the offence was responsible for the affairs/conduct of the business of the company, shall be held liable and proceeded against under Section 138 of the NI Act, with exception thereto being that such an act if done without his knowledge or after him having taken all necessary precautions, would not be held liable. However, if it is proved that any act of a company is proved to have been done with the connivance or consent or may be attributable to (i) a Director; (ii) a Manager; (iii) a Secretary; or (iv) any other officer - they shall be ....
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.... 2005 SCC (Cri) 1975] was followed in Ashutosh Ashok Parasrampuriya v. Gharrkul Industries (P) Ltd. [Ashutosh Ashok Parasrampuriya v. Gharrkul Industries (P) Ltd., (2023) 14 SCC 770 : 2021 SCC OnLine SC 915]" 11. In the present case, the complainant had specifically stated in para No.2 of the complaint that accused No.4 to 8 are its Managing Directors and Directors of accused No.1 to 3 and are fully responsible for all assets, liabilities and daily business affairs of accused No.1 to 3. It was laid down in N. Rangachari v. BSNL, (2007) 5 SCC 108: (2007) 2 SCC (Cri) 460: 2007 SCC OnLine SC 536 that once it is established that a Director is in charge and responsible for the affairs of the Company, the burden shifts upon the accused to show that there was some restriction on his power. A person dealing with the Company is entitled to presume that he is the Director and in charge for the affairs of the Company and the burden shifts upon the person to prove any restriction. It was observed: "16. While Section 138 made a person criminally liable on dishonour of a cheque for insufficiency of funds or the circumstances referred to in the section and on the conditions mentioned ....
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.... stated in Palmer that [Ibid., p. 515.] : "Directors are, in the eye of the law, agents of the company for which they act, and the general principles of the law of principal and agent regulate in most respects the relationship of the company and its directors." 18. The above two passages were quoted with approval in R.K. Dalmia v. Delhi Admn. [AIR 1962 SC 1821 : (1963) 1 SCR 253] (SCR at p. 300). In Guide to the Companies Act by A. Ramaiya (16th Edn.) this position is summed up thus: "All the powers of management of the affairs of the company are vested in the Board of Directors. The Board thus becomes the working organ of the company. In their domain of power, there can be no interference, not even by shareholders. The Directors as a Board are exclusively empowered to manage and are exclusively responsible for that management." 19. Therefore, a person in the commercial world having a transaction with a company is entitled to presume that the Directors of the company are in charge of the affairs of the company. If any restrictions on their powers are placed by the memorandum or articles of the company, it is for the Directors to establish it at t....
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....romoters and Board of Directors and the nature and extent of its business and its memorandum or articles of association. Other than that, he may not be aware of the arrangements within the company in regard to its management, daily routine, etc. Therefore, when a cheque issued to him by the company is dishonoured, he is expected only to be aware generally of who are in charge of the affairs of the company. It is not reasonable to expect him to know whether the person who signed the cheque was instructed to do so or whether he has been deprived of his authority to do so when he actually signed the cheque. Those are matters peculiarly within the knowledge of the company and those in charge of it. So, all that a payee of a cheque that is dishonoured can be expected to allege is that the persons named in the complaint are in charge of its affairs. The Directors are prima facie in that position. 22. In fact, in an earlier decision in Monaben Ketanbhai Shah v. State of Gujarat [(2004) 7 SCC 15: 2004 SCC (Cri) 1857] two learned Judges of this Court noticed that: (SCC p. 17, para 4) "The laudable object of preventing bouncing of cheques and sustaining the credibility of c....
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....tion was reiterated in Paresh P. Rajda v. State of Maharashtra, (2008) 7 SCC 442 : (2008) 3 SCC (Cri) 118: 2008 SCC OnLine SC 932 wherein it was observed: "11. It will be clear from the afore-quoted judgments that the entire matter would boil down to an examination of the nature of averments made in the complaint though we observe a slight digression in the judgment in N. Rangachari case [(2007) 5 SCC 108 : (2007) 2 SCC (Cri) 460]. It is in this background, that the complaint needs to be examined. Paras 2 and 8 are reproduced below: "(2) I know all the accused. Accused 1 is a Company registered under the Companies Act, 1956. Accused 2 is the Chairman of Accused 1. Accused 3 is the Joint Managing Director of Accused 1 and Accused 4, 5 and 6 are the Directors of Accused 1. *** (8) Accused 2 is the Chairman of Accused 1 and is responsible for the day-to-day affairs of Accused 1 and therefore he is liable to repay the amount of dishonoured cheques. Accused 3 being Joint Managing Director and Accused 4, 5 and 6 being the Directors of Accused 1 are responsible officers of Accused 1 and therefore they are liable to repay the amounts of the dishonoured c....