TaxTMI 
TaxTMI 
2026 (9) TMI 464
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....at a complaint u/s 138 of the Negotiable Instruments Act, 1881 was filed where it was averred that accused No. 1 was a Company duly incorporated, Amit Mittal (accused No. 2) was its Chief Managing Director, Sh. Balendra Pratap Singh Chohan (accused No. 3) and Manoj Khetan (accused no. 4) were authorized signatories, Manoj Gupta (accused no. 5), Sandeep Garg (accused no.6) and Abhay Garg (accused no. 7) were Directors and accused No.8/Petitioner was a Joint Managing Director of accused No. 1 Company i.e. A2Z Waste Management (Ludhiana) Limited. It was further averred that the accused No. 1 Company was awarded with work of the Integrated Solid Waste Management project in Ludhiana City by the Ludhiana Municipal Corporation vide Award dated 30.06.2011 and the accused No. 1 Company entered into an agreement dated 25.05.2013 w.e.f. 16.05.2013 with the respondents to carry out activities of collection and transport of Municipal Solid Wastes and for the said purpose payments were to be made by accused No. 1 Company. However, it was alleged that accused No. 3 and 4 being the authorized signatories issued cheque No. 000200 dated 17.09.2013 for an amount of Rs. 4,05,00,000/-(Rs. four crore an....
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....650020110000389 of their firm maintained in Bank of India Ludhiana Branch, Guru Teg Bahadur Market, G.T. Road Punjab for the discharge of the liability of their firm, against the work done by the complainant's firm, for the collection and transportation etc. of solid waste in Ludhiana city, under the above agreement. Thus the complainant were the holder of the cheque in due course of business. 3. The impugned complaint was filed at Dasuya, District Hoshiarpur against all the accused persons. The Petitioner was arrayed as accused no.8. Thereafter, summoning order dated 16.01.2014 was passed against all the accused by the JMIC Dasuya. A copy of the order is attached as Annexure P-5 to the petition. 4. However, the complaint was returned by the JMIC Dasuya to the complainant to be filed at Ludhiana and another summoning order dated 12.05.2015 was issued, in which only 2 accused persons were summoned i.e. accused No. 3 namely Manoj Khaitan and accused No. 4 namely Balinder Singh Chouhan, the signatories of the cheque. Qua the remaining accused, including the petitioner, the complaint was dismissed. A copy of the order dated 12.05.2015 is attached as Annexure P-6 to the petiti....
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....Special Leave Petition (Crl.) No. 3713/2024 titled as 'Amit Mittal vs. Rajinder Earthmover Filling Station Private Limited', which came to be dismissed by the Hon'ble Supreme Court vide order dated 18.03.2024. A copy of the said order is attached as Annexure P-10 to the petition. 9. The instant petition has been preferred by the petitioner-Deepak Aggarwal seeking quashing of the complaint dated 05.10.2018 (Annexure P-4) and all the consequential proceedings arising therefrom including the summoning order dated 16.01.2024 (Annexure P-5) qua him on the grounds that he was never a Joint Managing Director/Director/employee/authorized signatory of cheque/authorized signatory in the A2Z Waste Management (Ludhiana) Limited i.e. the accused Company having Corporate Identification (CIN) No. U90002HR2011PLC043415. 10. The learned Senior counsel for the petitioner contends that the signatories on the cheque No.000200 dated 17.09.2013 for an amount of Rs. 4,05,00,000/- drawn on Bank of India Ludhiana Branch, which was dishonoured on 26.09.2013 are Manoj Khaitan and Balendra Pratap Singh Chohan accused No. 4 and accused No. 3 respectively. The cheque was issued on behalf of the accused Co....
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.... (Annexure P-4) and all the consequential proceedings arising therefrom including summoning order dated 16.01.2014 (Annexure P-5) be quashed qua the petitioner. 11. The learned counsel for the respondent-complainant, on the other hand, contends that against the complaint and summoning order, Amit Mittal who was described as the Chief Managing Director of the Company had filed a revision petition before the Revisional Court at Hoshiarpur. The complainant and the summoning order was set aside qua him vide order dated 16.07.2019. The complainant-respondent/Rajinder Earthmover Filling Station Private Limited approached this Court by way of a petition bearing No.CRR-2329-2019 challenging the order dated 16.07.2019. This Court vide order dated 05.03.2024 (Annexure P-9) allowed the revision petition (CRR-2329-2019) preferred by the respondent-complainant and set aside the order dated 16.07.2019 qua Amit Mittal thereby nominating him once again as an accused. An SLP i.e. Special Leave Petition (Crl.) No. 3713/2024 was preferred preferred against the said order which also stands dismissed by the Hon'ble Supreme Court vide order dated 18.03.2024. It has been argued in the said case that A....
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....guilty of that offence and shall be liable to be proceeded against and punished accordingly. 14. The Hon'ble Supreme Court and this Court has categorically held that the liability of a person arises from being incharge of and responsible for the conduct of the business of the Company at the relevant time and not on the basis of merely holding a designation or office in a Company. Therefore, a person not holding any office or designation in a Company may be liable if he satisfies the primary requirement of being in charge of and responsible for the conduct of the business of the Company at the relevant time. The liability depends on the role played in the affairs of the Company and not on Designation or status in the company. In 'S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla and anr' 2005(4) RCR (Criminal) 141, the Hon'ble Supreme Court held as under. The relevant extract of the same is as under:- "13. While analysing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company. The key words which occur in the Section are "every person". These are general words and take every person connected with a com....
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....it is proved that the offence has been committed with the consent or connivance or is attributable to neglect on the part of any of the holders of these offices in a company. In such a case, such persons are to be held liable. Provision has been made for Directors, Managers, Secretaries and other officers of a company to cover them in cases of their proved involvement. 15. 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. XXXX XXXX XXXX 20. To sum up, there is almost unanimous judicial opinion that necessary averments ought to be contained in a complaint before a persons 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 ....
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.... Managing Director or Joint Managing Director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as signatory of a cheque which is dishonoured is incriminating act and will be covered under sub-section (2) of Section 141. 15. The ratio of the aforementioned judgment has been followed by this Court in the case of Dharampal Singhal versus IDBI Bank Limited (bearing No.CRM-M-10340-2014 decided on 28.07.2026). 16. The Hon'ble Supreme Court in 'K.K. Ahuja versus V.K. Vohra & Anr. 2009(3) RCR (Criminal) 571, Sunita Palita & others versus M/s Panchami Stone Quarry 2022(4) RCR(Criminal) 118 and M/s Mansi Finance (Chennai) Ltd. versus M/ Lalitha and others 2026(3) RCR(Criminal) 146', has held that in the case of Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is incharge of and responsible for the conduct of the business of the Company because such officers are deemed to be incharge of and responsible for the conduct of the business of the Company. In the case of Director or an officer who has signed the cheque, he is per se li....
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....rs will be desirable. They can also be made liable under section 141(2) by making necessary averments relating to consent and connivance or negligence, in the complaint, to bring the matter under that sub-section. (iv) Other Officers of a company can not be made liable under sub-section (1) of section 141. Other officers of a company can be made liable only under sub-section (2) of Section 141, be averring in the complaint their position and duties in the company and their role in regard to the issue and dishonour of the cheque, disclosing consent, connivance or negligence. In Sunita Palita & others versus M/s Panchami Stone Quarry 2022(4) RCR(Criminal) 118, the Hon'ble Supreme Court has held as under:- 30. As held in K.K. Ahuja v. V.K. Vora (supra) when the accused is the Managing Director or a Joint Managing Director of a company, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company for the conduct of the business of the company. This is because the prefix "Managing" to the word "Director" makes it clear that the Director was in charge of and responsible to the company, for the conduct of th....
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....aint 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 the case which is alleged against him. This will enable him to meet the case at the trial. 19. In view of the above discussion, our answers to the questions posed in the reference are as under: (a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of busine....
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....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. *** 22. Therefore, this Court has distinguished the case of persons who are in charge of and responsible for the conduct of the business of the company at the time of the offence and the persons who are merely holding the post in a company and are not in charge of and responsible for the conduct of the business of the company. Further, in order to fasten the vicarious liability in accordance with Section 141, the averment as to the role of the Directors concerned should be specific. The description should be clear and there should be some unambiguous allegations as to how the Directors concerned were alleged to be in charge of and were responsible for the conduct and affairs of the company. *** 39. From the above discussion, the following principles emerge: (i) The ....
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....erely by association. The complaint must, therefore, disclose sufficient factual foundation qua each accused and the role attributable to each must be independently discernible. 30. The High Court has quashed the proceedings against all the respondents on the ground that the complaint does not disclose specific averments as to how and in what manner they were in-charge of and responsible for the conduct of the affairs of the Society and that the allegations are omnibus in nature. In doing so, reliance has been placed upon the decisions of this Court in S.P. Mani and Mohan Diary (supra) and Ashok Shewakramani (supra). The proposition of law laid down in the foregoing decisions admits of no dispute. Mere designation as an office bearer of a company or society is not sufficient to attract Section 141 of the NI Act. Equally, a complaint containing only a bald reproduction of the statutory language without factual foundation cannot be sustained. However, it is clear that the complaint itself is required to be read as a whole and not in isolated fragments. 17. The Hon'ble Supreme Court in 'Saroj Kumar Poddar versus State (NCT of Delhi) & Anr. 2007(1) RCR(Criminal) 741, Harshe....
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....before, had resigned from the Directorship of the Company. It may be true that as to exactly on what date the said resignation was accepted by the Company is not known, but, even otherwise, there is no averment in the complaint petitions as to how and in what manner the appellant was responsible for the conduct of the business of the Company or otherwise responsible to it in regard to its functioning. He had not issued any cheque. How he is responsible for dishonour of the cheque has not been stated. The allegations made in paragraph 3, thus, in our opinion do not satisfy the requirements of Section 141 of the Act. XXXX XXXX XXXX 12. For the reasons aforementioned, we have no other option but to hold that the allegations made in the complaint petitions even if are taken to be correct in their entirety do not disclose any offence as against the appellant herein. The proceedings against him, thus, should have been quashed by the High Court. The impugned judgment, therefore, cannot be sustained which is set aside accordingly. The appeal is allowed. In Harshendra Kumar D. versus Rebatilata Koley etc. 2011(1) RCR(Criminal) 887, the Hon'ble Supreme Court has he....
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....out appellant's resignation. It is not even the case of the complainants that the dishonoured cheques were issued by the appellant. These facts leave no manner of doubt that on the date the offence was committed by the Company, the appellant was not the Director; he had nothing to do with the affairs of the Company. In this view of the matter, if the criminal complaints are allowed to proceed against the appellant, it would result in gross injustice to the appellant and tantamount to an abuse of process of the court. 23. These appeals are, accordingly, allowed. The judgment of the Calcutta High Court dated September 6, 2007 and the summons issued by the Metropolitan Magistrate, Calcutta to the appellant are set aside. The complaints as against the appellant stand quashed. In Mrs. Anita Malohotra versus Apparel Export Promotion Council and another 2011(4) RCR(Civil) 930, the Hon'ble Supreme Court has held as under: 11. A reading of the above provisions make it clear that there is a statutory requirement under Section 159 of the Companies Act that every Company having a share capital shall have to file with the Registrar of Companies an annual return wh....
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....ly his mind in that behalf. It was not done. Although, therefore, it may be that as an authorised signatory he will be deemed to be person in-charge, in the facts and circumstances of the case, we are of the opinion that the said contention should not be permitted to be raised for the first time before us. A person who had resigned with the knowledge of the complainant in 1996 could not be a person in charge of the Company in 1998 when the cheque was dishonoured. He had no say in the matter of seeing that the cheque is honoured. He could not ask the Company to pay the amount. He as a Director or otherwise could not have been made responsible for payment of the cheque on behalf of the Company or otherwise. [See also Saroj Kumar Poddar v. State (NCT of Delhi), Everest Advertising (P) Ltd. v. State, Govt. of NCT of Delhi and Raghu Lakshminarayanan v. Fine Tubes." 13. In Harshendra Kumar D. v. Rebatilata Koley and Others, 2011(1) RCR (Criminal) 887 : 2011(1) Recent Apex Judgments (R.A.J.) 559 (2011)3 SCC 351, while considering the very same provisions coupled with the power of the High Court under Section 482 of the Code of Criminal Procedure, 1973 (in short 'the Code'....
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....the year 1998 and she cannot be held responsible for the dishonour of the cheques issued in the year 2004. 15. This Court has repeatedly held that in case of a Director, complaint should specifically spell out how and in what manner the Director was in charge of or was responsible to the accused Company for conduct of its business and mere bald statement that he or she was in charge of and was responsible to the company for conduct of its business is not sufficient. [Vide National Small Industries Corporation Limited v. Harmeet Singh Paintal and Another, 2010(2) RCR (Criminal) 122 : 2010(2) Recent Apex Judgments (R.A.J.) 22 : (2010)3 SCC 330]. In the case on hand, particularly, in para 4 of the complaint, except the mere bald and cursory statement with regard to the appellant, the complainant has not specified her role in the day to day affairs of the Company. We have verified the averments as regard to the same and we agree with the contention of Mr. Akhil Sibal that except reproduction of the statutory requirements the complainant has not specified or elaborated the role of the appellant in the day to day affairs of the Company. On this ground also, the appellant is enti....
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....tigation was not complete and at that stage it was impermissible for the High Court to look into materials, the acceptability of which is essentially a matter for trial. While exercising jurisdiction under section 482 of the Code, it is not permissible for the court to act as if it was a trial Judge." 25. In our judgment, the above observations cannot be read to mean that in a criminal case where trial is yet to take place and the matter is at the stage of issuance of summons or taking cognizance, materials relied upon by the accused which are in the nature of public documents or the materials which [pic] are beyond suspicion or doubt, in no circumstance, can be looked into by the High Court in exercise of its jurisdiction under Section 482 or for that matter in exercise of revisional jurisdiction under Section 397 of the Code. It is fairly settled now that while exercising inherent jurisdiction under Section 482 or revisional jurisdiction under Section 397 of the Code in a case where complaint is sought to be quashed, it is not proper for the High Court to consider the defence of the accused or embark upon an enquiry in respect of merits of the accusations. However, in an....
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....relevant time when the offence was committed, the Magistrate can issue process against such Director; b) If a petition is filed under section 482 of the Code for quashing of such a complaint by the Director, the High Court may, in the facts of a particular case, on an overall reading of the complaint, refuse to quash the complaint because the complaint contains the basic averment which is sufficient to make out a case against the Director. c) In the facts of a given case, on an overall reading of the complaint, the High Court may, despite the presence of the basic averment, quash the complaint because of the absence of more particulars about role of the Director in the complaint. It may do so having come across some unimpeachable, uncontrovertible 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 sufferin....
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....ver, not dealt with the factual matrix. Ex facie, we find that the complainant has not placed any materials on record indicating complicity of the present appellant(s) in the alleged crime. Particularly, when the appellant(s) had no role in the issuance of the instrument, which is evident from Form 32 (Exh.P.59) issued much prior to the date on which the cheque was drawn and presented for realisation. 9. The veracity of Form-32 has neither been disputed by the Respondent nor has the act of resignation simpliciter been questioned. As such, the basis on which liability is sought to be fastened upon the instant appellant(s) is rendered questionable. 10. The record reveals the resignations to have taken place on 9th December 2013 and 12th March 2014. Equally, we find the cheques regarding which the dispute has travelled up the courts to have been issued on 22nd March 2014. The latter is clearly, after the appellant(s) have severed their ties with the Respondent- Company and, therefore, can in no way be responsible for the conduct of business at the relevant time. Therefore, we have no hesitation in holding that they ought to be then entitled to be discharged from pros....
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....er Section 138 r/w 141 of the Negotiable Instruments Act, 1881 against the accused companies at the pre-summoning stage and make sure that notice be directed only to those directors or employees of the company who satisfy the principles laid down in the aforesaid judgments. Summons must be issued only after giving due consideration to the allegations and the materials placed on record by the complainant. Undeniably, as per the aforesaid legal pronouncements, Managing Director and the Joint Managing Director are deemed to be vicariously liable for the offence committed by the company because of the position they hold in the company. Problem arises in cases where all the persons holding office in the company are sought to be prosecuted by the complainant, irrespective of whether they played any specific role in the incriminating act. It is surprising to see that in plethora of cases, the complaint contains allegations even against those persons who might have been Directors at any point in time in the accused company, but had resigned from such company much prior to the period when the alleged offence was committed. Issuing summons to all persons named in the complaint mechanically, ....
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....tice and status of its service; f. Particulars of reply to the legal notice, if any. 11. The Registry is directed to send a copy of this order to all the Metropolitan Magistrates posted in various district courts of Delhi for necessary compliance. Registry is further directed to send a copy of this order to all the Bar Associations of various district courts of Delhi, so that they can apprise the members of the Bar about the aforesaid directions. 19. This Court in 'Anil Chanana versus M/s Gyani Ram Ruliya Ram 2019(1) RCR(Criminal) 388', while agreeing with the observations made and directions issued by the Delhi High Court in Sudeep Jain (supra), directed that in all cases where the accused was a Company, before summons were issued to the accused persons, the Trial/Magistrate would direct the complainant to produce a copy of Form 32 and the Annual Returns filed by the Company in order to determine the persons who were the Directors on the date of commission of the offence. The relevant extract of the said judgment is as under:- 28. At this stage, it would be appropriate to refer to the judgment of the Delhi High Court in Sudip Jain (supra). Delhi High Cou....
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....uld be a matter of Trial. The argument raised by the learned counsel for the respondent, however, cannot be accepted in view of the judgments in 'Saroj Kumar Poddar versus State (NCT of Delhi) & Anr. 2007(1) RCR(Criminal) 741, Harshendra Kumar D. versus Rebatilata Koley etc. 2011(1) RCR(Criminal) 887, Mrs. Anita Malohotra versus Apparel Export Promotion Council and another 2011(4) RCR(Civil) 930', Gunmala Sales Private Limited versus Anu Mehta and others 2015(1) RCR(Criminal) 54 and Rajesh Viren Shah versus Redington (India) Limited 2024(2) RCR(Criminal) 13', as per which the Director who has resigned from the company and has produced unimpeachable evidence of the same cannot be summoned to face Trial under the Negotiable Instruments Act, 1881. The case of the petitioner is on a better footing inasmuch as he was never ever a Joint Managing Director of the accused Company, so, the question of resigning does not arise. 21. In fact, had the directions issued in the judgments of Sudeep Jain versus Ece Industries Ltd. 2013(8) RCR(Criminal) 2483 and Anil Chanana versus M/s Gyani Ram Ruliya Ram 2019(1) RCR(Criminal) 388 been complied with by the concerned Magistrate inasmuch as if the ....
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....3(8) RCR(Criminal) 2483 and this Court in Anil Chanana versus M/s Gyani Ram Ruliya Ram 2019(1) RCR(Criminal) 388 and before parting with this judgment, this Court deems it necessary to issue certain directions with a view to streamlining the process of adjudication of complaints filed under Section 138 of the Negotiable Instruments Act, 1881, particularly in cases where the accused is a body corporate, namely, a private limited company or a public limited company. It has been noticed that a substantial number of complaints under Section 138 NI Act are filed without adequate verification of the corporate status of the accused entity, and without ascertaining the actual persons who were in charge of, and responsible to, the company for the conduct of its business at the time the offence is alleged to have been committed. This has, on several occasions, resulted in erroneous impleadment of persons who had already ceased to be directors, or who never held the position of a director/authorised signatory at the relevant point in time, thereby causing unnecessary harassment to such individuals and consequential delay in the trial. In order to obviate such difficulties and to ensure that o....