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TMI Blog2011 (2) TMI 1278X X X X Extracts X X X X X X X X Extracts X X X X ..... the Company, the appellant was not the Director; he had nothing to do with the affairs of the Company. appeals are, accordingly, allowed - CRIMINAL APPEAL NOS. 360-377 OF 2011 - - - Dated:- 8-2-2011 - AFTAB ALAM AND R.M. LODHA, JJ. JUDGMENT R.M. Lodha, J. - Leave granted. 2. These 18 appeals, by special leave, are directed against the common judgment and order dated 6-9-2007 passed by Calcutta High Court whereby 18 criminal revision applications filed by the appellant for quashing the proceedings initiated by the complainants in 18 complaint cases under section 138 read with section 141 of Negotiable Instruments Act, 1881 ( NI Act ) against him have been dismissed. 3. The brief facts are these. The complainants were interested in business relationship with Rifa Healthcare (India) Pvt. Ltd. ( the Company ) for the sale of bio-ceramic products. The complainants, for the orders they had placed, issued demand drafts in favour of the Company. It appears that the Company had not delivered the products ordered by the complainants and accordingly they asked the Company for return of their money. On April 30, 2004, the Company issued 18 cheques bearing Nos. ( i ) 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was that the appellant was appointed as Director of the Company on 27-8-2003. He resigned from the directorship on 2-3-2004 which was accepted by the Board of Directors on that day itself with immediate effect. The factum of his resignation is also recorded in Form No. 32 filed by the Company with the Registrar of Companies on March 4, 2004. The 18 cheques which were issued on behalf of the Company to the complainants were issued after his resignation. The dishonour of these cheques through the complainants bankers was also subsequent to his resignation. In other words, it was submitted by the counsel for the appellant before High Court that at the time when the cheques were issued or when the cheques were dishonoured, the appellant had no concern or connection with the Company. 7. The High Court, however, relying upon a decision of Single Judge of that Court in Fateh Chand Bhansali v. Hindustan Development Corporation Ltd. [2005] 1 CCr.LR (Cal.) 581, held that resignation by the petitioner as Director of the Company is a defence of the accused and the defence is a matter for consideration at the trial on the basis of evidence which cannot be decided by the Court in revisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1988) with effect from 1-4-1989. These provisions as amended from time to time read as under: "138. Dishonour of cheque for insufficiency, etc., of funds in the accounts. Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless ( a )The cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; ( b )The payee or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal position concerning the vicarious liability of a director in a company which is being prosecuted for the offence under section 138, NI Act has come up for consideration before this Court on more than one occasion. In the case of S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla [2005] 63 SCL 93 (SC) the following questions were referred to a 3-Judge Bench for determination : "( a )Whether for purposes of section 141 of the Negotiable Instruments Act, 1881, it is sufficient if the substance of the allegation read as a whole fulfil the requirements of the said section and it is not necessary to specifically state in the complaint that the person accused was in charge of, or responsible for, the conduct of the business of the company. ( b )Whether a director of a company would be deemed to be in charge of, and responsible to, the company for conduct of the business of the company and, therefore, deemed to be guilty of the offence unless he proves to the contrary. ( c )Even if it is held that specific averments are necessary, whether in the absence of such averments the signatory of the cheque and or the managing directors or joint managing director who admittedly would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a prosecution could be launched not only against the company on behalf of which the cheque issued has been dishonoured, but it could also be initiated against every person who at the time the offence was committed, was in charge of and was responsible for the conduct of the business of the company. In fact, section 141 deems such persons to be guilty of such offence, liable to be proceeded against and punished for the offence, leaving it to the person concerned, to prove that the offence was committed by the company without his knowledge or that he has exercised due diligence to prevent the commission of the offence. Sub-section (2) of section 141 also roped in Directors, Managers, Secretaries or other officers of the company, if it was proved that the offence was committed with their consent or connivance. ****** But as has already been noticed, the decision in S.M.S. Pharmaceuticals Ltd. [2005 (8) SCC 89] binding on us, has postulated that a Director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of his business in the context of section 141 of the Act. Bound as we are by that decision no further discussion on this aspect a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther officers of a company can be made liable only under sub-section (2) of section 141, by averring in the complaint their position and duties in the company and their role in regard to the issue and dishonour of the cheque, disclosing consent, connivance or negligence." 13. In K.K. Ahuja s case ( supra ) this Court observed that if a mere reproduction of the wording of section 141(1) in the complaint was sufficient to make a person liable to face prosecution, virtually every officer/employee of a company without exception could be impleaded as accused by merely making an averment that at the time when the offence was committed they were in charge of and were responsible to the company for the conduct and business of the company. 14. In a recent decision in the case of National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal [2010] 98 SCL 407 (SC) after survey of earlier decisions wherein legal position concerning section 138 and section 141 of the NI Act was considered, this Court culled out the following principles: "( i )The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rar of Companies about change among directors of the company. In this view of the matter, in our opinion, it must be held that a director - whose resignation has been accepted by the company and that has been duly notified to the Registrar of Companies - cannot be made accountable and fastened with liability for anything done by the company after the acceptance of his resignation. The words every person who, at the time the offence was committed , occurring in section 141(1) of the NI Act are not without significance and these words indicate that criminal liability of a director must be determined on the date the offence is alleged to have been committed. 16. On 2-3-2004, the appellant sent a letter of resignation to the Managing Director of the Company, the relevant part of that reads as follows: "Subject: Resignation to the Post of Director with reference to the above subject I hereby resign to the post of Director in your company ( sic ) immediate effect as I am pre-occupied with my other business activities and unable to concentrate, participate in the affairs of the company. Therefore it is kind request with you to accept my resignation and intimate the R.O.C. by fili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the appellant s resignation as Director from the Company with effect from 2-3-2004. While relying upon Fateh Chand Bhansali ( supra ) the Single Judge referred to a decision of this Court in State of Madhya Pradesh v. Awadh Kishore Gupta [2004] 1 SCC 691 which was referred in Fateh Chand Bhansali s case ( supra ). 20. In Awadh Kishore Gupta s case ( supra ) this Court while dealing with the scope of power under section 482 of the Code observed : "13. It is to be noted that the investigation was not complete and at that stage it was impermissible for the High Court to look into materials, the acceptability of which is essentially a matter for trial. While exercising jurisdiction under section 482 of the Code, it is not permissible for the Court to act as if it was a trial Judge......." 21. In our judgment, the above observations cannot be read to mean that in a criminal case where trial is yet to take place and the matter is at the stage of issuance of summons or taking cognizance, materials relied upon by the accused which are in the nature of public documents or the materials which are beyond suspicion or doubt, in no circumstance, can be looked into by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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