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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 ..... turn of their money. On April 30, 2004, the Company issued 18 cheques bearing Nos. (i) 000843 for Rs. 30,000; (ii) 00870 for Rs. 40,000; (iii) 000845 for Rs. 30,000; (iv) 000852 for Rs. 3,00,000; (v) 00842 for Rs. 60,000; (vi) 000862 for Rs. 40,000; (vii) 000834 for Rs. 60,000; (viii) 000572 for Rs. 40,000; (ix) 000827 for Rs. 30,350; (x) 000854 for Rs. 3,00,000; (xi) 000826 for Rs. 60,000; (xii) 000855 for Rs. 3,00,000; (xiii) 000857 for Rs. 3,00,000; (xiv) 000858 for Rs. 3,00,000; (xv) 000841 for Rs. 60,000; (xvi) 000871 for Rs. 40,000; (xvii) 000568 for Rs. 40,000 and (xviii) for Rs. 60,130 drawn on UTI Bank Ltd., Jayanagar, Bangalore in favour of the complainants. These 18 cheques were dishonoured by the Bank/s on presentation. 4. In the month of December, 2004, the complainants filed 18 complaints under section 138 read with section 141 of the NI Act. For the sake of brevity and convenience, we shall refer to the complaint No. 14512 of 2004. In the complaint, besides the Company, the appellant was arraigned as accused No. 3. It was alleged in the complaint that the Managing Director and the two Directors (including the appellant) were responsible for day-to-day affairs of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be decided by the Court in revisional jurisdiction. The High Court considered the matter thus: "The question of the learned Advocate for the petitioner is that the petitioner was not director of a company at the material point of time because there is Form 32 which shows the date when the petitioner was appointed a director and when there came to be a change of directorship of the company. According to Mr. Trivedi learned Advocate for the petitioner, a Hon'ble Judge of this Court in Saroj Kumar Jhunjhunwala v. State of West Bengal [2007] 1 CCr.LR (Cal.) 793 was pleased to hold that if before the issuance of cheques, the accused-petitioner had resigned from the directorship, then he cannot be held liable for the offence. This decision which favours the petitioner has been pitted against the decision in Fateh Chand Bhansali v. M/s. Hindustan Development Corporation Ltd. [2005] 1 C Cr. LR (Cal.) 581 wherein another Hon'ble Single Judge of this court with reference to a good number of decisions including the decision in State of M.P v. Awadh Kishore Gupta 2004 SCC (Cr.) 352 held that the High Court while considering the revisional application cannot look into the papers and docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c )The drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation.-For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability. 141. Offences by companies.-(1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the company for conduct of its business could be proceeded against." 10. The 3-Judge Bench of this Court answered the aforesaid questions thus: "(a )It is necessary to specifically aver in a complaint under section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of section 141 cannot be said to be satisfied. (b )The answer to the question posed in sub-para (b ) has to be in the negative. Merely being a director of a company is not sufficient to make the person liable under section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of section 141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases. (c )The answer to question (c) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 SCC 48 a 2- Judge Bench of this Court had an occasion to consider the earlier decisions of this Court including the decision in the case of S.M.S. Pharmaceuticals Ltd. (supra). It was held that mere fact that at some point of time an officer of a company had played some role in the financial affairs of the company, that will not be sufficient to attract the constructive liability under section 141 of the NI Act. The Court summarized the legal position as follows: "(i )If the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director or Joint Managing Director at the relevant time. This is because the prefix "Managing" to the word "Director" makes it clear that they were in charge of and are responsible to the company, for the conduct of the business of the company. (ii )In the case of a Director or an officer of the company who signed the cheque on behalf of the company, there is no need to make a specific averment that he was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s about the transaction. (ii)Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company. (iii)Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with. (iv)Vicarious liability on the part of a person must be pleaded and proved and not inferred. (v )If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with. (vi)If the accused is a Director or an officer of a company who signed the cheques on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on that day itself. The extract of resolution to that effect reads as follows : "Mr. Harshendra Kumar D S/o Rathnavarma Hegde residing at No. -55, Vittal Mallya Road, Bangalore. Due to his personal inconivenceses (sic) he requested to accept his resignation for the Director, and the Board accepted the resignation and it will be effected immediately on the date of resignation." 18. On 4-3-2004, the Company informed the Registrar of Companies in the prescribed form (Form No. 32) about the resignation of the appellant from the post of Director of the Company and, thus, change among directors. 19. The above documents placed on record by the appellant have not been disputed nor controverted by the complainants. As a matter of fact, it was not even the case of the complainants before the High Court that the change among Directors of the Company, on resignation of the appellant with effect from 2-3-2004, has not taken place. The argument on behalf of the complainants before the High Court was that it was not permissible for the High Court to look into the papers and documents relating to the appellant's resignation since these are the matters of defence of the accused person and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt jurisdiction under section 482 or revisional jurisdiction under section 397 of the Code in a case where complaint is sought to be quashed, it is not proper for the High Court to consider the defence of the accused or embark upon an enquiry in respect of merits of the accusations. However, in an appropriate case, if on the face of the documents - which are beyond suspicion or doubt - placed by accused, the accusations against him cannot stand, it would be travesty of justice if accused is relegated to trial and he is asked to prove his defence before the trial court. In such a matter, for promotion of justice or to prevent injustice or abuse of process, the High Court may look into the materials which have significant bearing on the matter at prima facie stage. 22. Criminal prosecution is a serious matter; it affects the liberty of a person. No greater damage can be done to the reputation of a person than dragging him in a criminal case. In our opinion, the High Court fell into grave error in not taking into consideration the uncontroverted documents relating to appellant's resignation from the post of Director of the Company. Had these documents been considered by the High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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