2018 (7) TMI 1602 - HC - Indian Laws

Dishonor of cheque due to insufficiency of funds - Section 138 of the Negotiable Instruments Act, 1881 - Concern on day to day activities of company - petitioners were the Directors of the company accused, denying that they had any concern or responsibility with the conduct of the day-today business of the company - Held that - Averments are deficient to the effect that there is not even a whisper of allegation that the petitioners 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 petitioners 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. The view taken by the revisional court, therefore, cannot be upheld - The complaint cases, in so far as these petitioners are concerned, do not pass the muster of the requisite basic averments - petitions are allowed - decided in favor of petitioners.

Issues Involved:
1. Whether the petitioners can be summoned as accused under Section 138 of the Negotiable Instruments Act, 1881.
2. Whether the complaints contain sufficient averments to hold the petitioners responsible for the conduct of the business of the company at the time the offence was committed.
3. Applicability of Section 141 of the Negotiable Instruments Act, 1881 to the petitioners.
4. Whether the revisional court's order dismissing the petitioners' revision petitions was justified.

Issue-wise Detailed Analysis:

1. Summoning of Petitioners as Accused:
The court examined whether the petitioners could be summoned as accused under Section 138 of the Negotiable Instruments Act, 1881. The petitioners argued that they were merely directors and were not involved in the day-to-day business of the company. The court noted that the Metropolitan Magistrate had issued process against the petitioners based on preliminary inquiry. However, the petitioners contended that the allegations did not establish their involvement in the company’s business operations.

2. Sufficiency of Averments in Complaints:
The court scrutinized the complaints to see if they contained sufficient averments to hold the petitioners responsible for the conduct of the business of the company at the time the offence was committed. The complaints were found to have almost identical averments, except for specifics about the cheques and background facts. The court emphasized that the crucial averments in the complaints were deficient as there was no specific allegation that the petitioners were in charge of or responsible for the company’s business at the time the offence was committed. The general averments about the petitioners’ responsibilities were deemed insufficient.

3. Applicability of Section 141 of the Negotiable Instruments Act, 1881:
The court referred to Section 141 of the Negotiable Instruments Act, 1881, which deals with offences by companies. It reiterated the principles laid down in various Supreme Court rulings, including SMS Pharmaceuticals Pvt. Ltd. vs. Neeta Bhalla, Gunmala Sales (P) Ltd. vs. Anu Mehta, and Standard Chartered Bank vs. State of Maharashtra. The court summarized the guiding principles, noting that only those in charge of or responsible for the conduct of the company’s business at the time of the offence can be subjected to criminal action. The court found that the complaints did not meet the criteria set out in Section 141, as the petitioners were not signatories to the cheques and there were no specific allegations of their involvement in the business at the relevant time.

4. Revisional Court's Order:
The court reviewed the order of the Sessions Court, which had dismissed the petitioners' revision petitions. The court concluded that the revisional court's view could not be upheld because the complaints lacked the requisite basic averments to hold the petitioners accountable under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881. Consequently, the court set aside the Sessions Court's order to the extent it dismissed the petitioners' revision petitions.

Conclusion:
The court allowed the petitions, set aside the impugned order of the Sessions Court, and dropped the proceedings against the petitioners in the four criminal complaint cases (CC Nos. 440/1/14 to 443/1/14). The petitions and the applications filed therewith were disposed of accordingly.

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