TaxTMI 
TaxTMI 
2024 (11) TMI 604
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....he accused undertook that in the event of the venture capital amount not being refunded on the same date as that of the repayment of the term loan from the bank, the same would attract interest at the same rate as that being charged by the bank for the term loan. 3. It is further the case of the respondent that the accused company had issued a cheque for a sum of Rs. 1,60,00,000/- being cheque no. 970600 dated 26.09.2016. The said cheque, upon presentation, was dishonoured with remarks "funds insufficient" vide Bankers memo dated 04.10.2016. The respondent had earlier written a letter dated 08.07.2016 to the accused company, to either pay the venture capital amount or keep sufficient amount so that the post dated cheque issued by the accused company would not be dishonoured. Thereafter, M/s Fresco Foods Pvt. Ltd, vide letter dated 22.09.2016 informed the respondent that the accused persons had settled the entire liability of the claim of the respondent for a sum of Rs. 1,60,00,000/- with the bank. It is the respondent's case that such contention is baseless, and the accused company owed a liability for a sum of Rs. 1,60,00,000/- to the respondent. Upon the failure of the accused....
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....rson 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, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this subsection shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence. Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this chapter. (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary....
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....he 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 the 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 the 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 sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action."....
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.... Apex Court had emphasised the necessity to detail the role of the director accused on account of the penal nature of Section 141 of the NI Act and held as under: "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. (emphasis supplied) 12. Accordingly, to impute liability on the petitioner under Section 138 read with Section 141 of the NI Act, it must be shown that the petitioner was responsible for the conduct of the accused company when the offence was committed. In the present case, liability is sought to be imputed to the petiti....
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....on 141(1) of the NI Act observed as under: "22. In the light of sub-section (1) of Section 141, we have perused the averments made in the complaints subject-matter of these three appeals. The allegation in Para 1 of the complaints is that the appellants are managing the Company and are busy with day-today 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 Accused 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 of the 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 i....