2000 (9) TMI 971 - SC - Companies Law

Petition filed by the appellant under section 482 to quash the criminal proceedings emanating from the complaint filed u/s 138 of the Negotiable Instruments Act 1881 dismissed by High Court Held that - Appeal allowed. The allegations made in the complaint do not either in express words or with reference to the allegations contained therein make out a case that at the time of commission of the offence the appellant was in charge of and was responsible to the company for the conduct of its business. In that view of the matter the High Court has misdirected itself and committed an error in coming to the conclusion that the requirements of section 141 are prima facie satisfied in so far as the appellant is concerned.

Summary

Issues:
Challenge to validity of High Court order quashing criminal proceedings under section 138 of Negotiable Instruments Act based on section 141 liability of company director.

Analysis:
The appellant challenged the High Court order dismissing the petition to quash criminal proceedings under section 138 of the Negotiable Instruments Act. The High Court found that the appellant, as the director of the accused company, was in charge of and responsible for the business, based on the complaint and witness statement. The appellant argued that the allegations did not make a case against him, as he did not sign the cheques and was being prosecuted under section 141 as a former director. The respondent contended that the appellant was responsible for the company's business at the time of the offense.

To understand the case, the facts were briefly narrated. The accused company issued cheques in March 1998, which were dishonored in May 1998. The respondent sent a notice to the appellant and others to pay the amounts, to which the appellant replied stating he was not in charge at the time. Despite this, a complaint was filed in July 1998, alleging a conspiracy to deceive and cheat the complainant, leading to dishonored cheques.

The complaint alleged that all accused persons, including the appellant, were part of a conspiracy to deceive and cheat the complainant, leading to dishonored cheques. However, the complaint did not explicitly state that the appellant was in charge or responsible for the company's business at the time of the offense. Section 141 of the Act holds individuals liable if they were in charge and responsible for the company's conduct at the time of the offense. The substance of the allegations must fulfill the requirements of this provision.

The court found that the complaint did not establish that the appellant was in charge or responsible for the company's business at the time of the offense. Therefore, the High Court erred in concluding that section 141 requirements were prima facie satisfied. The appeal was allowed, the High Court's order was set aside, and the proceedings against the appellant were quashed.