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2015 (12) TMI 779 - HC - Indian LawsCriminal Complaint under Sections 138 of Negotiable Instruments Act, 1881 - whether a person simply being a Director of a Company is liable to be prosecuted by virtue of the provisions of Section 141 NI Act or the person who at the time of offence was in charge of and was responsible to the company for the conduct of the business of the Company would be prosecuted? - Held that - The complainant has stated in so many words that the Company in question acting through the petitioners and other accused No. 2 and 3 placed orders for purchase of Urad for which invoices amounting to ₹ 53,54,449.67 were issued by the Complainant and as a part-payment of the said invoices, under the signature of Mr.Sushil Jindal and on directions and instructions of the petitioners and Mr. Anil Jindal, a cheque bearing No.361540 dated 23.11.2010 for a sum of ₹ 53,50,000/- drawn on State Bank of Bikaner and Jaipur, Khari Baoli Branch, Delhi, was issued which was dishonoured later. Whereupon, Mr.Sushil Jindal, Mr. Anil Jindal and the petitioners (accused No. 2 to 6) acting for and on behalf of Company (accused No.l) stated that there was financial crunch in the Company, however, assured that the cheque would be honoured at any cost and the balance principal amount alongwith interest shall also be paid very soon by them. Thus, specific allegations against the present petitioners, accused No. 4 to 6, have been made in the complaint. Therefore, in my opinion, the Metropolitan Magistrate was right in summoning the petitioners keeping in view the allegations made in the complaint. The petitioners can prove their innocence by taking recourse to proviso to sub-Section (1) of Section 141 NI Act. No merit in this petition. This petition amounts to gross abuse and misuse of process of law. The petitioners have succeeded in delaying the complaint before the Metropolitan Magistrate for more than four years.
Issues Involved:
1. Quashing of the order dated 26.07.2011 by the Metropolitan Magistrate. 2. Quashing of the complaint under Sections 138 and 141 of the Negotiable Instruments Act, 1881. 3. Determination of the liability of the petitioners as directors of the accused company. 4. Examination of the legal notice service and its implications. 5. Evaluation of the petitioners' involvement in the day-to-day affairs of the company. Detailed Analysis: 1. Quashing of the Order Dated 26.07.2011: The petitioners sought the quashing of the order dated 26.07.2011 passed by the Metropolitan Magistrate in Criminal Complaint No.2693/2011, where summons were issued against them under Sections 138 of the Negotiable Instruments Act, 1881. The petitioners argued that they were dormant/non-active directors and not involved in the day-to-day functioning of the company. They claimed that the complaint was false and frivolous, intending to unnecessarily persecute them. 2. Quashing of the Complaint under Sections 138 and 141 of the NI Act: The petitioners also sought the quashing of the complaint itself, arguing that they were not signatories to the cheque in question and were not served with the mandatory notice under Section 138 NI Act. They contended that criminal liability arises from being in charge of and responsible for the conduct of business at the relevant time, not merely from holding the post of a director. 3. Determination of the Liability of the Petitioners as Directors: The court examined whether the petitioners, as directors, could be held liable under Section 141 NI Act, which deals with offences by companies. The court referred to the Supreme Court's judgment in N.K. Wahi Vs. Shekhar Singh & Ors., which emphasized that to launch a prosecution against directors, there must be specific allegations as to their role in the transaction. The court also considered the case of Gunmala Sales Private Ltd. Vs. Anu Mehta, where the Supreme Court held that the presence of basic averments in the complaint is sufficient to issue process against directors. 4. Examination of the Legal Notice Service and Its Implications: The complaint mentioned that the legal notice dated 11.06.2011 was served upon the accused through Speed Post and Registered A.D. Cover, but the notices were returned with endorsements suggesting that the addressees were either not present or the house was closed. The court inferred that the accused deliberately got false endorsements to defeat the process of law and avoid criminal liability. Despite the service of notice, the accused did not make the payment within the statutory period of 15 days, indicating mala fide intentions. 5. Evaluation of the Petitioners' Involvement in the Day-to-Day Affairs of the Company: The court scrutinized the involvement of the petitioners in the company's day-to-day affairs. The complaint alleged that the petitioners, along with other accused, were responsible for the company's transactions and had assured the complainant that the dishonoured cheque would be honoured. The court referenced S.M.S Pharmaceuticals Ltd. Vs. Neeta Bhalla & Anr., which clarified that specific averments must be made in the complaint about the accused being in charge of and responsible for the conduct of the company's business at the relevant time. Conclusion: The court concluded that the complaint contained specific allegations against the petitioners, making them liable under Section 138 read with Section 141 NI Act. The Metropolitan Magistrate was justified in summoning the petitioners based on the allegations. The petitioners could prove their innocence during the trial by taking recourse to the proviso to sub-Section (1) of Section 141 NI Act. Consequently, the petition was dismissed with costs, and the Metropolitan Magistrate was directed to complete the trial within six months.
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