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2008 (5) TMI 613

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..... nd that the prosecution of the respondents being mala fide despite the fact that on technical grounds it may be lawful to set aside the order of the High Court, it, in our opinion, should not be done. Jurisdiction of this Court in terms of Article 136 of the Constitution of India need not be exercised only because it would be lawful to do so. Various factors including the conduct of the appellant will be relevant therefor. Having regard to the facts and circumstances of this case, it is not a fit case where we should allow the appellants to raise additional contentions which have not been raised before the courts below. Appeal dismissed. - CRL.A. 875 OF 2008 - - - Dated:- 13-5-2008 - S.B. Sinha, J. JUDGMENT 1. Leave granted. 2. What would be the effect of a post dated cheque vis-`-vis prosecution in terms of Section 141 of the Negotiable Instruments Act, 1881 (in short the Act) is the question involved in this appeal which arises out of a judgment and order dated 31st January, 2007 passed by the High Court of Delhi at New Delhi in Criminal Revision No. 777 of 2003 dismissing the Criminal Revision Application preferred from an order dated 5th July, 2003 passed by the le .....

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..... to be prosecuted and punished in accordance with law by this Hon'ble Court, as provided by section 141 of the N.I. Act, 1881. Further the offence has been committed by the accused No.1 with the consent and connivance of the accused Nos. 2 to 10." 4. No allegation was made in the complaint petition that the 1st respondent was a signatory to the cheque or he was authorized therefor. 5. An application was filed by the 1st respondent for his discharge. By reason of the order dated 5th July, 2003 the same was allowed by the learned Additional Sessions Judge, New Delhi, stating :- "....It is a well-known fact that the Constitution of the Board of Directors of a company keeps on changing and a fixed ration of the directors of the company keep on retiring by rotation every year and new directors are inducted. The complainant cannot make directors of the year 1995 or 1996 as the accused person for a cheque dishonoured in the year 1998. He can make accused only those directors who were the directors of the company in the year 1998. The Companies Act has made specific provisions for all companies registered with the Registrar of Companies to file a return about the directors in the compan .....

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..... petition one Peter N. Ballam was examined on behalf of the appellant. In relation to the 1st respondent he did not make any statement as is required in terms of Section 141 of the Act. He merely stated :- "8. I state that the above named accused no.1 is a Company and accused No. 2 to 8 are Directors/key executives of the accused No.1 Company and are responsible for the affairs of accused No.1 is/are guilty of offence u/s 138 of Negotiable Instruments Act 420 of IPC and is/are liable to be prosecuted and punished in accordance with law." He, thus, even was not aware of the post held by the First Respondent herein at the relevant time. The learned Sessions Judge in his order dated 5th July, 2003 has noticed that no contention had been raised that the 1st respondent in his capacity as an authorized signatory signed the cheque. Such a contention appears to have been raised before us for the first time. It has not been disputed that the 1st respondent resigned as a Director of the Company on or about 25th May, 1996. 9. The question which arises for consideration is as to whether an authorized signatory, in a situation of this nature, would be liable for prosecution. 10. The .....

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..... which may extend to twice the amount of the cheque, or with both..." 14. For constituting an offence in terms of the said provision, the following ingredients are to be satisfied:- a) A cheque must be drawn; b) It must be presented and returned unpaid inter alia with the remarks "insufficient funds"; c) A Notice for payment should be served on the accused; d) The accused has failed to make the payment of the said amount to the payee within 15 days from the date of receipt of notice. 15. First Respondent indisputably was a Director of the Company. The liability attached to him was not a personal liability. It was a constructive liability. The cheque was drawn on behalf of the Company. He might have been liable as a person incharge of the company within the meaning of Section 141 of the Act as has been held by this Court in S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla and another : (2005) 8 10 SCC 89 whereupon strong reliance has been placed by Mr. Patwalia. One of the questions which indisputably arose for consideration therein was as to whether a signatory of the cheque would come within the purview of Section 141 of the Act, as would appear from paragraph 1 thereof, which .....

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..... e 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 business of the company at 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 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 se .....

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..... ly within their knowledge and it is for them to establish at the trial such a restriction or to show that at the relevant time they were not in charge of the affairs of the Company. Reading the complaint as a whole, we are satisfied that it is a case where the contentions sought to be raised by the appellant can only be dealt with after the conclusion (sic commencement) of the trial." 17. We are, however, concerned with a different situation hereat. 18. Section 141 of the Act provides for a constructive liability. A legal fiction has been created thereby. The statute being a penal one, should receive strict construction. It requires strict compliance of the provision. Specific averments in the complaint petition so as to satisfy the requirements of Section 141 of the Act are imperative. Mere fact that at one point of time some role has been played by the accused may not by itself be sufficient to attract the constructive liability under Section 141 of the Act. (See K. Srikanth Singh vs. M/s. North East Securities Ltd. and another : JT 2007 (9) SC 449). 19. We may also notice that this Court in N.K. Wahi vs. Shekhar Singh and others : (2007) 9 SCC 481 has observed :- "8. To la .....

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..... lia, however, submitted that a situation may arise where change in the management is effected only to avoid such constructive liability. Firstly we are not concerned with such a hypothetical case. Secondly, as noticed by this Court in Rangachari's case (supra) that a person normally having business or commercial dealings with a company, would satisfy himself about its creditworthiness and reliability by looking at its promoters and Board of Directors and the nature and extent of its business and its memorandum or articles of association. 22. When post dated cheques are issued and the same are accepted, although it may be presumed that the money will be made available in the bank when the same is presented for encashment, but for that purpose, the harsh provision of constructive liability may not be available except when an appropriate case in that behalf is made out. 23. Section 140 of the Act cannot be said to have any application whatsoever. Reason to believe on the part of a drawer that the cheque would not be dishonoured cannot be a defence. But, then one must issue the cheque with full knowledge as to when the same would be presented. It appears to be a case where the ap .....

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