2024 (2) TMI 191 - HC - Indian Laws

Dishonour of Cheque - Funds insufficient - Offences by companies - vicarious liability - roles and responsibilities of directors and non-directors of a company - HELD THAT - Apart from mentioning the petitioners in CRR 196 of 2016 as non-directors and in CRR 197 of 2016 as directors , the complainant has also described as to how the said accused persons by their oral representation depicted the property to be so lucrative that it led to the misunderstanding of the complainant about the potency of the property as well as the bone fide of the accused persons. The argument advanced on behalf of the petitioners in CRR 196 of 2016 and CRR 197 of 2016 cannot be accepted. Instead, a case has been made out sufficiently regarding their alleged involvement. Policy decisions being made by the petitioners for the accused company, their active involvement in executing those and accruing benefits therefrom, are apparent. Likewise, it is also apparent that at the relevant point of time, excepting the present petitioners, there were no other directors or nondirectors , in the said company and also that the concerned cheques were issued by them. Considering the attending facts and circumstances as discussed above and the object and purpose of the statute itself as delineated above, this Court hardly finds any impropriety in the orders passed by the Metropolitan Magistrate regarding taking cognizance of offence under section 138 and 141 of the Negotiable Instruments Act. Service of the notice / summons to the company - Held that - From the reading of provisions under Section 65 and under Section 305 of the Cr.P.C, it appears firstly that affixing duplicate of summons at a conspicuous place of the company would satisfy requirement of good service thereof to a company. It shows also that no coercive action has, however, been provided by the statute in case of absence of a representative of an accused company, even after due service of summons to it. In case he appears, according to section 305(3) of the CrPC, statutory requirements of things to be done, read, stated or explained in presence of the accused, would be construed to be required to be so done in presence of the said representative. It has further been provided that the requirement of law of examination of the accused company would be construed to be as the requirement of examination of the said representative. However, in his absence, the statute has provided that provisions under section 305(3) of the CrPC, would not apply. Company as a juridical person cannot be physical apprehended. - The natural consequence would be that an order of issuance of warrant of arrest may not be an executable order under law against the company, which is a juridical person. However, company as an accused person cannot be seized of the liability to face the trial and punished, if found guilty, in case the Court finds the summons to have been duly served upon it. An appropriate punishment as prescribed under the law would be applicable in its case. This Court finds it proper to interfere into the impugned order dated December 11, 2015, of the Magistrate, to the extent as necessary. So far as the issuance of warrant of arrest and order of attachment against the company namely M/s. AKJ Mineral Ltd, i.e, petitioner in CRR 278 of 2016 is concerned, the same is found to have been passed in disobedience and derogation of the statutory provisions and thus is violative of the same. For this reason the same cannot be maintained and should be set aside. For the Magistrate a decision pursuant to an enquiry regarding due service of summons to the accused company, would suffice, to let it proceed with the trial of the case - so far as the accused company is concerned. The impugned order dated December 11, 2015, is modified to that extent. The case is allowed in part.

Summary

Issues Involved:
1. Maintainability of the complaint case.
2. Legality and propriety of the complaint process.
3. Issuance of warrant of arrest and order of attachment against the company.

Summary:

Issue 1: Maintainability of the Complaint Case
The petitioners challenged the maintainability of the complaint case on the grounds that the requisite averments to invoke the penal provision under Section 141 of the Negotiable Instruments Act, 1881, were absent. The Court referred to several judgments, including SMS Pharmaceuticals Ltd. vs Neeta Bhalla & Anr., which emphasized that specific averments must be made in the complaint to implicate a director or non-director of a company. The Court concluded that the complaint contained sufficient details to establish the involvement of the accused persons and their roles in the company's affairs, thus satisfying the legal requirements under Section 141.

Issue 2: Legality and Propriety of the Complaint Process
The complaint alleged that the petitioners had allured the complainant to part with a significant amount of money for purchasing properties, issued cheques that were dishonored due to insufficient funds, and failed to repay the amount despite promises. The Court found that the Magistrate had followed due process in taking cognizance of the offence under Section 138/141 of the Negotiable Instruments Act and issuing summons. The Court held that the prosecution against the petitioners could be sustained, as the complaint made out a prima facie case of their involvement.

Issue 3: Issuance of Warrant of Arrest and Order of Attachment Against the Company
The petitioners argued that an order of attachment against a company was illegal. The Court noted that a company, being a juridical person, cannot be physically apprehended, and the law does not provide for the issuance of a warrant of arrest against a company. The Court referred to Section 305(4) of the Cr.P.C., which states that in the absence of a company representative, the provisions requiring the presence of the accused do not apply. The Court modified the Magistrate's order, setting aside the issuance of a warrant of arrest and order of attachment against the company, but allowed the trial to proceed based on due service of summons.

Conclusion:
The revision cases CRR 196 of 2016 and CRR 197 of 2016 were dismissed, while CRR 278 of 2016 was allowed in part. The Court directed that the trial before the Magistrate should proceed independently, without being influenced by the observations made in this judgment.