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2017 (1) TMI 1790 - HC - Indian LawsDishonor of Cheque - vicarious liability of a Director - whether basic averments that at the time the offence was committed director was incharge of and was responsible for the conduct of the business of the company are suffice or specific averments showing as to how and in what manner the Director was responsible for the conduct of the business of the company must also be made in the complaint? - HELD THAT - The position under Section 141 of the Act can be summarized thus (i) If the accused is the Managing Director or a Joint Managing Director 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. It is sufficient if an averment is made that the accused was the Managing Director or Joint Managing Director at the relevant time. This is because the prefix Managing to the word Director makes it clear that they were in charge of and are responsible to the company for the conduct of the business of the company. (ii) In the case of a Director or an officer of the company who signed the cheque on behalf of the company there is no need to make a specific averment that he was in charge of and was responsible to the company for the conduct of the business of the company or make any specific allegation about consent connivance or negligence. The very fact that the dishonoured cheque was signed by him on behalf of the company would give rise to responsibility under sub-section (2) of Section 141. (iii) In the case of a Director Secretary or Manager (as defined in Section 2(24) of the Companies Act) or a person referred to in clauses (e) and (f) of Section 5 of Companies Act an averment in the complaint that he was in charge of and was responsible to the company for the conduct of the business of the company is necessary to bring the case under Section 141(1). No further averment would be necessary in the complaint though some particulars 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 cannot 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. Thus it can be concluded that the nature and sufficiency of complaint allegations in respect of an offence under Section 141 of N.I. Act depend on the category of persons alleged i.e. 141(1) or 141(2). If it is held basic averments are sufficient whether the complainants and their sworn affidavits did contain such basic averments and whether the petitioner/A3 could by unimpeachable material demonstrate that the basic averments pleaded were false to the core to deserve quashing of the proceedings? - HELD THAT - Since basic averments are made under Section 141(1) in terms of KK. AHUJA VERSUS VK. VORA 2009 (7) TMI 758 - SUPREME COURT the Magistrate has rightly taken cognizance against the accused including petitioner-A3. It is argued by the petitioner that she was only a non-executive Director between 7.12.2007 and 23.11.2012 and she was not in-charge of and responsible for the day-to-day business activities of A1-company and she did not know about the issuance and dishonour of cheque. The petitioner sought to produce a copy of Form-32 wherein she was allegedly shown as non-executive Director. Refuting the same the respondent too sought to produce copy of Form-32 which according to him would show the petitioner was a Director. He also sought to produce some letters allegedly written by the petitioner to some trading parties in the capacity of Chairman to show that she was actively engaged in the day-to-day business operations. It must be mentioned that neither party could produce unimpeachable and uncontrovertible evidence beyond doubt and this Court in a petition under Section 482 Cr.P.C. cannot make in depth enquiry on a question of fact which can be determined only after full-fledged trial. The parties are at liberty to establish their individual stand during trial and the trial Courts shall decide the cases on merits. The criminal petitions are dismissed.
Issues Involved
1. Whether basic averments are sufficient to take cognizance of an offence under Section 141 of the Negotiable Instruments Act (N.I. Act) against a Director. 2. Whether the petitioner/A3 could demonstrate that the basic averments pleaded were false to deserve quashing of the proceedings. Detailed Analysis Issue 1: Sufficiency of Basic Averments for Cognizance under Section 141 of N.I. Act The court examined whether it is sufficient to make basic averments in the complaint that the Director was in charge of and responsible for the conduct of the business of the company at the time the offence was committed, or if specific averments detailing how and in what manner the Director was responsible are necessary. Legal Principles and Precedents: - Vicarious Liability: Section 141 of the N.I. Act introduces vicarious liability, making certain individuals within a company liable for offences committed by the company. - Section 141(1) of N.I. Act: If a company commits an offence under Section 138, every person in charge of and responsible for the conduct of the business of the company at the time of the offence is deemed guilty. - Section 141(2) of N.I. Act: Specifies that if the offence is committed with the consent, connivance, or due to the neglect of any Director, Manager, Secretary, or other officer, they shall also be deemed guilty. Judicial Interpretation: - S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla (2005): It is necessary to specifically aver in a complaint that the person accused was in charge of and responsible for the conduct of the business of the company at the time the offence was committed. - Saroj Kumar Poddar v. State (NCT of Delhi) (2007): There should be averments in the complaint showing how and in what manner the Director was responsible for the conduct of the business of the company. - N. Rangachari v. Bharat Sanchar Nigam Limited (2007): Reiterated the necessity of basic averments in the complaint. - K.K. Ahuja v. V.K. Vora (2009): Distinguished between the requirements for Section 141(1) and Section 141(2), noting that basic averments are sufficient for Section 141(1) but specific averments are needed for Section 141(2). Conclusion: The court concluded that the sufficiency of complaint allegations depends on whether the accused falls under Section 141(1) or Section 141(2) of the N.I. Act. Basic averments are sufficient for Section 141(1), while specific averments are necessary for Section 141(2). Issue 2: Demonstration of False Averments by Petitioner/A3 The court analyzed whether the petitioner/A3 could provide unimpeachable material to demonstrate that the basic averments in the complaints were false. Case Analysis: - Complaints Against A3: In several complaints, it was averred that A3 was in charge of and responsible for the conduct of the business of the company. The petitioner argued that she was a non-executive Director and not involved in the day-to-day business. - Evidence Presented: The petitioner presented Form-32 to show her status as a non-executive Director, while the respondent presented letters allegedly written by the petitioner in the capacity of Chairman to show her active involvement. - Court's Stance: The court noted that neither party could produce unimpeachable evidence beyond doubt. Therefore, the factual disputes could not be resolved in a petition under Section 482 Cr.P.C. and required a full-fledged trial. Conclusion: The court dismissed the petitions where basic averments were sufficiently made under Section 141(1) but allowed the petitions where the complaints lacked the necessary averments under either Section 141(1) or 141(2). Final Judgment - Dismissed Petitions: Criminal Petition Nos. 3147, 3148, 3149, 3158, 3160, 3216, 3219, 3220, 3225, 3814, 3817, 3818, 3819, 3820, 3837, 3859, 4108, 4114, 4120, 4121, 5284, 5306, 5307, 5308, 8854, and 13809 of 2013 were dismissed, with the court dispensing with the petitioner/A3's presence except when specifically required. - Allowed Petitions: Criminal Petition Nos. 3816, 5118, and 5119 of 2013 were allowed, and consequently, CC Nos. 57, 66, and 65 of 2013 were dismissed against petitioner-A3. Miscellaneous Applications: All pending miscellaneous applications in the criminal petitions were closed.
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