2018 (7) TMI 1568 - HC - Indian Laws

Prosecution of the parties - Section 141 Negotiable Instruments Act, 1881 - concern of the accused with the responsibility for the conduct of the day-to-day business of the company - Held that;- Averments are deficient to the effect that there is not even a whisper of allegation that the respondents are persons who were in charge of or responsible to the company accused for the conduct of its business at the time the offence was committed . The respondents are not stated to be signatories to the cheques in question. They cannot be roped in merely because they have been directors of the company accused. The general averments that they were responsible for all the business dealings and for the circumstances leading to the dishonour of the cheques or that they had given any assurance as to the cheques do not suffice. Petitions dismissed.

Summary

Issues Involved:
1. Legality of summoning directors of a company under Section 138 of the Negotiable Instruments Act, 1881.
2. Adequacy of allegations in the complaint to hold directors liable under Section 141 of the Negotiable Instruments Act, 1881.
3. Application of precedents set by the Supreme Court in similar cases.

Issue-wise Detailed Analysis:

1. Legality of Summoning Directors of a Company under Section 138 of the Negotiable Instruments Act, 1881:
The court examined whether the directors of the company could be summoned for offences under Section 138 of the Negotiable Instruments Act, 1881, which deals with the dishonor of cheques. The Metropolitan Magistrate initially issued process against the respondents based on preliminary inquiry. However, the respondents contended that they were not responsible for the day-to-day business of the company and hence should not be summoned.

2. Adequacy of Allegations in the Complaint to Hold Directors Liable under Section 141 of the Negotiable Instruments Act, 1881:
The court scrutinized the complaints to determine if they met the requirements under Section 141, which extends liability to persons in charge of the company at the time the offence was committed. The complaints lacked specific averments that the directors were in charge of or responsible for the conduct of the business of the company at the time the offence was committed. The court emphasized that merely being a director is insufficient to attract liability under Section 141.

3. Application of Precedents Set by the Supreme Court in Similar Cases:
The court relied on the precedent set by the Supreme Court in SMS Pharmaceuticals Pvt. Ltd. Vs. Neeta Bhalla, which mandates specific averments in the complaint that the accused were in charge of and responsible for the conduct of the business of the company at the relevant time. The court also referenced Gunmala Sales (P) Ltd. Vs. Anu Mehta and Standard Chartered Bank Vs. State of Maharashtra, which reiterated the necessity of specific allegations and the absence of deemed liability for directors who are not signatories to the cheques.

Key Findings:
- Section 138: The dishonor of a cheque alone does not constitute an offence; it must be followed by a notice of demand and non-payment within the statutory period.
- Section 141: Only those in charge of and responsible for the conduct of the business at the time of the offence can be held liable. Specific averments in the complaint are essential.
- Precedent Application: The court upheld the principles established by the Supreme Court, emphasizing the need for specific allegations regarding the role of directors.

Conclusion:
The court concluded that the complaints were deficient as they did not specifically aver that the respondents were in charge of or responsible for the conduct of the business of the company at the time the offence was committed. The general allegations were insufficient to hold the directors liable. Consequently, the court upheld the decision of the Sessions court to quash the summoning orders and dismissed the petitions, affirming that the respondents could not be prosecuted based on the provided complaints.