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TMI Blog2015 (12) TMI 779X X X X Extracts X X X X X X X X Extracts X X X X ..... . Shashi Jindal (petitioner No.1 herein) is the Managing Director and In-charge of and responsible for the day-to-day affairs of the Company, Mr.Vaibhav Jindal and Mr. Saurabh Jindal, petitioners No.2 and 3 respectively, are the Directors and In-charge of and responsible for the day to day affairs of the Company. Accordingly, all the petitioners were handling the transactions and thus, dealt with the Complainant on behalf of the said Company. 3. It is further averred that the said Company while acting through the petitioners and other accused No. 2 and 3, named above, placed orders for purchase of Urad on the Complainant, which deal was brokered by one Mr. Hitesh. Accordingly, Urad was agreed to be supplied to the Company by the Complainant on the terms inter-alia that carriage of the goods would be the liability and responsibility of the petitioners @ 1.75% commission on the total price, which the accused agreed to pay in addition to the total price of Urad and other terms were agreed to be as per the rules of the Delhi Grain Merchant Association (Regd.). Accordingly, Complainant issued various Invoices, details of which are as under:- S. No. Invoice No. Date of Invoice Amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accused, the Complainant presented the said cheque to his Banker for encashment, however, the same was again returned dishonoured with the endorsement "Exceeds arrangement", information of the same was received by the Complainant by way of cheque return memo dated l9.05.2011. Accordingly, the Complainant again approached the accused and asked for the cheque amount of Rs. 53,50,000/- as well as the remaining principal amount of Rs. 4,449.67 as also the interest to which he is legally entitled to in accordance with the rules of the Delhi Grain Merchant Association (Regd.) as well as in terms of the acknowledgement/undertaking dated 29.11.2010 given by Mr. Anil Jindal for and on behalf of the Company. Upon which the accused became agitated without any rhyme or reason and warned him not to again come or approach them and stated that they will not make any payment to him. The Complainant was shocked to hear this, despite the receipt of goods by the accused; they had not paid a single penny to him which conduct on their part was uncalled for. When the Complainant reminded the accused of its right to approach the court of law, the accused again warned him of adverse consequences in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the statutory period of 15 days from the receipt of notice. This act of the accused reflects that the accused malafidely, knowingly, deliberately and intentionally issued the said cheque with the intention not to honour the same. 9. It is further averred that the petitioners and other accused had used and consumed the goods purchased by them from the Complainant to their satisfaction and never raised any sort of complaint or dispute qua the said goods. All the accused are members of one family and are residing together. The accused No.l Company is wholly and virtually owned, managed and controlled by accused No.2 to 6, who are and also were incharge of and responsible for the management, working and day-to-day affairs of the Company at the time of purchase of goods, issuance of cheque in question, dishonour of the said cheque, issuance and service of legal notice and continues to be so even as on date. 10. Thus, the accused including the petitioners have committed an offence punishable under Section 138 read with Section 141 NI Act by dishonouring the aforesaid cheque and not making the payment of the same within the statutory period of 15 days after receipt of the legal notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Company and have been made directors just to fulfil the statutory requirements for registration of Company which is also clear from the Memorandum of Association and Articles of the Company. 16. To support his submissions, learned counsel for the petitioners has relied upon the case of N.K. Wahi Vs. Shekhar Singh & Ors., (2007) 9 SCC 481, wherein the Supreme Court held as under:- "8. To launch a prosecution, therefore, against the alleged Directors there must be a specific allegation in the complaint as to the part played by them in the transaction. There should be clear and unambiguous allegation as to how the Directors are incharge and responsible for the conduct of the business of the company. The description should be clear. It is true that precise words from the provisions of the Act need not be reproduced and the court can always come to a conclusion in facts of each case. But still in the absence of any averment or specific evidence the net result would be that complaint would not be entertainable." 17. On the other hand, Mr. Bharat Gupta, learned counsel appearing on behalf of the Complainant submitted that the petitioner No.1, being the Managing Director of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be abuse of the process of the court. Despite the presence of basic averment, it may come to a conclusion that no case is made out against the Director. Take for instance a case of a Director suffering from a terminal illness who was bedridden at the relevant time or a Director who had resigned long before issuance of cheques. In such cases, if the High Court is convinced that prosecuting such a Director is merely an arm-twisting tactics, the High Court may quash the proceedings. It bears repetition to state that to establish such case unimpeachable, uncontrovertible evidence which is beyond suspicion or doubt or some totally acceptable circumstances will have to be brought to the notice of the High Court. Such cases may be few and far between but the possibility of such a case being there cannot be ruled out. In the absence of such evidence or circumstances, complaint cannot be quashed; d) No restriction can be placed on the High Court's powers Under Section 482 of the Code. The High Court always uses and must use this power sparingly and with great circumspection to prevent inter alia the abuse of the process of the Court. There are no fixed formulae to be followed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of summoning the petitioners. It shall, however, be open to the petitioners to lead evidence before the trial court to show that they are neither whole-time Directors of the Company in question nor involved in its day-to-day management." 21. Further relied upon the case of Ranjit Tiwari Vs. Narender Nayyar, 191 (2012) DLT 318, wherein this Court held as under:- "14. The law has been settled in the case of Anil Hada (supra), way back in 1999 by the Supreme Court holding that though the company itself is not prosecuted, the persons mentioned in section 141 (1) and (2) become liable if a finding is given that such company has in fact committed the offence. But the only course open to the office bearers of the company is that they can adduce rebuttal evidence to establish that the company did not issue the cheque towards any antecedent liability. The offender in Section 138of N.I. Act is the drawer of the cheque. He alone would have been the offender there under if the Act do not contain other provisions. It is because of Section 141of the Act that penal liability under Section 138 is cast on other persons connected with the company. xxxx xxxx xxxx 16. According to Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly." 26. This question is no longer res integra and has already been decided by the Full Bench of the Supreme Court in the case of S.M.S Pharmaceuticals Ltd. Vs. Neeta Bhalla & Anr. AIR 2005 SC 3512, wherein following questions were referred 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 fulfils 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 directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07)5 SCC 108, the Division Bench of the Supreme Court held that:- 13........... "A person in the commercial world having a transaction with a Company is entitled to presume that the Directors of the Company are in charge of affairs of the Company. If any restrictions on their powers are placed by the memorandum or Articles of the Company, it is for the Directors to establish it at the trial. It is in that context that Section 141 of the Negotiable Instruments Act provides that when the offender is a Company, every person, who at the time when the offence was committed was in charge of and was responsible to the company for the conduct of the business of the Company, shall also be deemed to be guilty of the offence along with the Company. It appears to us that an allegation in the complaint that the named accused are Directors of the Company itself would usher in the element of their acting for and on behalf of the company and of their being in charge of the Company........ 14. A person normally having business or commercial dealings with a Company, would satisfy himself about its creditworthiness and reliability by looking at its promoters and Board of Directors and the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the company are targeted to be held vicariously liable and covered within the ambit of Section 141 NI Act. The proviso to Section 141 NI Act specifies that a person not having the knowledge about the offence or a person exercising all due diligence to prevent the commission of the offence is excluded from the scope of Section 141 NI Act. Section 141 NI Act creates a legal fiction against the defaulting company, so as to cover within its ambit all persons who have consented, connived or anyway attributed to the commission of the offence. The offence is the result, whereas the transaction is the cause. The liability arises on account of conduct, act or omission on the part of the person and not merely on account of holding an office or position in a company. Therefore, in order to bring a case within Section 141 NI Act, the complaint must disclose the necessary "facts" which make the person liable. 31. At this stage, the Court is required to only examine the complaint as set out by the complainant, while exercising its discretion to quash a complaint. The allegations in the complaint are clear that the petitioners and the accused Nos. 1 and 2 were responsible for the day-to-day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 34. In the case of S.V.Mazumdar and Ors. Vs. Gujarat State Fertilizers Co. Ltd. and Anr. reported as 2005 V AD (S.C.) 494, the Supreme Court has held that once the allegations sufficient to summon the accused has been made, the accused can be summoned and thereafter proving the truth or falsity of the allegation will be a matter of evidence to be led before the trial court. 35. In the case of Rallis India Ltd. Vs, Poduru Vidya Bhusan & Ors., Criminal Appeal No. 924/2011 decided on 13.04.2011, the Division Bench of the Supreme Court observed that this Court ought not to interfere at the summoning stage in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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