2009 (7) TMI 758 - SC - Companies Law

Who can be said to be persons in-charge of, and was responsible to the company for the business of the company referred to in section 141 of the Negotiable Instruments Act, 1881? Held that - Appeal dismissed. No error/infirmity in the order quashing the summons as against the first respondent who was the Deputy General Manager of the company which issued the dishonoured cheque as Deputy General Manager is not a person who is responsible to the company for the conduct of the business of the company. He does not fall under any of the categories (a) to (g) listed in section 5 of the Companies Act. Therefore, the question whether he was in charge of the business of the company or not, is irrelevant. He cannot be made vicariously liable under section 141(1) of the Act.

Issues Involved:
1. Interpretation of "in-charge of, and responsible to the company for the business of the company" under Section 141 of the Negotiable Instruments Act, 1881.
2. Sufficiency of averments in the complaint to establish liability under Section 141.
3. Vicarious liability of company officers under Section 141(1) and (2).
4. Applicability of Section 482 Cr. P.C. for quashing proceedings.

Detailed Analysis:

1. Interpretation of "in-charge of, and responsible to the company for the business of the company" under Section 141 of the Negotiable Instruments Act, 1881:
The core issue was to determine who qualifies as being "in-charge of, and responsible to the company for the business of the company" under Section 141 of the Act. The judgment clarified that this phrase pertains to individuals who have overall control over the day-to-day business of the company. This includes Managing Directors and Joint Managing Directors by virtue of their positions. However, merely holding a designation such as Director, Manager, or Secretary does not automatically make one liable. The individual must be actively involved in the conduct of the business at the time the offence was committed.

2. Sufficiency of Averments in the Complaint to Establish Liability under Section 141:
The court emphasized that a complaint must contain specific averments that the accused was in charge of and responsible for the conduct of the business of the company at the relevant time. General statements or mere repetition of the statutory language of Section 141 are insufficient. The complaint should clearly spell out the role and involvement of the accused in the business operations of the company. This ensures that the accused is aware of the allegations and can prepare a defense.

3. Vicarious Liability of Company Officers under Section 141(1) and (2):
The judgment distinguished between the liabilities under sub-sections (1) and (2) of Section 141. Under sub-section (1), liability is vicariously imposed on individuals who are in charge of and responsible for the conduct of the business of the company. This includes Managing Directors and those who are explicitly stated to be in such positions in the complaint. Under sub-section (2), liability extends to Directors, Managers, Secretaries, or other officers if the offence was committed with their consent, connivance, or due to their negligence. Specific averments regarding their role and involvement are necessary to establish liability under sub-section (2).

4. Applicability of Section 482 Cr. P.C. for Quashing Proceedings:
The court upheld the High Court's decision to quash the proceedings against the Deputy General Manager under Section 482 Cr. P.C. The rationale was that the complaint did not contain specific averments about how the Deputy General Manager was in charge of or responsible for the conduct of the business of the company. The court reiterated that penal statutes, especially those imposing vicarious liability, must be construed strictly, and the requirements of Section 141 must be literally complied with.

Conclusion:
The Supreme Court dismissed the appeals, affirming that the Deputy General Manager could not be prosecuted under Section 141(1) or (2) of the Negotiable Instruments Act, 1881, due to the lack of specific averments in the complaint. The judgment reinforces the necessity for precise and clear allegations in complaints to establish vicarious liability for company officers under Section 141.

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