2024 (8) TMI 146 - SC - Indian Laws

Complaint under Section 200 of the Code of Criminal Procedure, 1973 - offence of violating the provisions in Section 29A of the National Housing Bank Act, 1987 - HELD THAT - A Bench of three Hon ble Judges of this Court had an occasion to interpret Section 141 of NI Act in the case of SMS PHARMACEUTICALS LTD. VERSUS NEETA BHALLA 2005 (9) TMI 304 - SUPREME COURT held that ' By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141.' Hence, in the absence of the averments as contemplated by sub-section (1) of Section 50 of the 1984 Act in the complaint, the Trial Court could not have taken cognizance of the offence against the third to seventh accused, who are allegedly the directors of the first accused company. However, the second accused being the Managing Director, would be in charge of the company and responsible to the company for its business. Therefore, there was no justification for quashing the complaint against the second accused. No reasons have been assigned to quash the complaint against the first accused. The impugned order is modified, and it is directed that complaint C.C. No. 4331 of 2010 filed in the Court of the Judicial Magistrate, Egmore at Chennai shall stand quashed as against the third to seventh accused shown therein - Appeal allowed in part.

Summary

Issues: Quashing of complaint under Section 200 of the Code of Criminal Procedure for violation of provisions in Section 29A of the National Housing Bank Act, 1987 based on non-compliance with requirements of Section 50 of the 1987 Act.

Analysis:
1. The appellant filed a complaint alleging an offence under Section 29A of the 1987 Act. The High Court quashed the complaint, citing non-compliance with Section 50 of the 1987 Act, similar to Section 141 of the NI Act.

2. The appellant's counsel argued that the complaint clearly showed a violation of Section 29A of the 1987 Act, implicating the accused. The accused's counsel supported the High Court's decision, citing lack of averments as required by Section 50 of the 1987 Act in the complaint.

3. Section 50 of the 1987 Act imposes liability on individuals in charge of the company's business for offences committed by the company. The complaint lacked assertions that the accused were responsible for the company's conduct, as mandated by Section 50.

4. Referring to a previous case interpreting Section 141 of the NI Act, it was held that specific averments of being in charge of the company's business are essential. Directors cannot be deemed liable solely based on their position; specific averments are necessary to establish liability.

5. The judgment modified the impugned order, quashing the complaint against the third to seventh accused due to lack of required averments. However, the complaint proceeded against the first and second accused, the latter being the Managing Director responsible for the company's business.

In conclusion, the judgment highlighted the importance of including specific averments in complaints to establish liability under statutory provisions like Section 50 of the 1987 Act. While liability extends to those in charge of the company's business, mere directorship is insufficient to establish guilt without proper averments. The decision balanced legal requirements with the need for clear allegations to uphold the rule of law.