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TMI Blog2016 (4) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... has declined to quash the order of the Magistrate issuing summons against the respondent No. 4 (original accused No. 2), but the said accused has not approached this Court. 3. The facts, briefly stated, are that M/s ABG Shipyard Ltd. is a company registered under the Companies Act, 1956. On being approached by the authorities of the company, a short term loan facility for a sum of Rs. 200 crores was granted by the appellant-bank to the company on 28.04.2012. As averred in the complaint, the company executed an indemnity in favour of the appellant-bank and agreed to repay the amount in three instalments; one on 15.12.2012, the second on 15.01.2013 and the last on 15.02.2013. The company issued three cheques, one dated 15.12.2012 for Rs. 66,67,00,000/-, and the two others dated 15.01.2013 and 15.02.2013 for Rs. 66,67,00,000/- and Rs. 66,66,00,000/- respectively towards the repayment of the liability. As per the dates mentioned in the cheques, they were presented before the bank but due to "insufficient funds" and "account blocked" the cheques were dishonoured. The appellant-bank issued requisite statutory notice for each cheque. As no response was given by the respondents, the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntend that the learned Magistrate had taken cognizance in a mechanical manner without perusing the averments made in the complaint petition and, therefore, the exercise of jurisdiction by the High Court in setting aside the order issuing summons cannot be faulted. She has commended us to the decisions in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and another (2005) 8 SCC 89 (hereinafter referred to as 'SMS Pharma I'), Gunmala Sales Pvt. Ltd. v. Anu Mehta and Ors. (2015) 1 SCC 103, National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal & Anr. (2010) 3 SCC 330, Tamil Nadu News Print & Papers Ltd. v. D. Karunakar & Ors. (2015) 8 SCALE 733, A.K. Singhania v. Gujarat State Fertilizer Company Ltd. & Anr. (2013) 16 SCC 630. 9. To appreciate the controversy in proper perspective, it is appropriate to refer to Sections 138 and 141 of the Act. Section 138 reads as follows:-:- "138. Dishonour of cheque for insufficiency, etc., of funds in the account.-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 knowledge, or that he had exercised all due diligence to prevent the commission of such offence: Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any Director, Manager, Secretary or other officer of the company, such Director, Manager, Secretary or other officer shall also be deemed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t." 15. The three-Judge Bench referred to Section 138 and 141 of the Act, Sections 203 and 204 of CrPC and observed that a complaint must contain material to enable the Magistrate to make up his mind for issuing process and if this were not the requirement, consequences would be far-reaching. If a Magistrate has to issue process in every case, the burden of work before the Magistrate as well as the harassment caused to the respondents to whom process has to be issued would be tremendous. It has been observed therein that Section 204 of the CrPC commences with the words "if in the opinion of the Magistrate taking cognizance of an offence there is sufficient ground for proceeding" and that apart, the words "sufficient ground for proceeding" again suggest that ground should be made out in the complaint for proceeding against the respondent. The three-Judge Bench has ruled that it is settled law that at the time of issuing of the process, the Magistrate is required to see only the allegations in the complaint and where the allegations in the complaint or the chargesheet do not constitute an offence against a person, the complaint is liable to be dismissed. 16. After so stating, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Manager, Secretary or other officer of a company in the commission of an offence. The Court proceeded to observe that the said provision operates when in a trial it is proved that the offence has been committed with the consent or connivance or is attributable to neglect on the part of any of the holders of the offices in a company. It has also been observed that provision has been made for directors, managers, secretaries and other officers of a company to cover them in cases of their proved involvement. It is because a person who is in charge of and responsible for conduct of business of a company would naturally know why a cheque in question was issued and why it got dishonoured and simultaneously it means no other person connected with a company is made liable under Section 141 of the Act. The liability arises, as the three-Judge Bench opined, on account of conduct, act or omission on the part of an officer and not merely on account of holding office or position in a company and, therefore, in order to bring a case within Section 141 of the Act, the complaint must disclose the necessary facts which makes a person liable. In the said case, the Court has referred to the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a two-Judge Bench. The two-Judge Bench, hearing S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and another (2007) 4 SCC 70 (hereinafter referred to as 'SMS Pharma II'), reproduced a passage from Sabitha Ramamurthy v. R.B.S. Channabasavaradhya (2006) 10 SCC 581 which reads as follows:- "7. A bare perusal of the complaint petitions demonstrates that the statutory requirements contained in Section 141 of the Negotiable Instruments Act had not been complied with. It may be true that it is not necessary for the complainant to specifically reproduce the wordings of the section but what is required is a clear statement of fact so as to enable the court to arrive at a prima facie opinion that the accused are vicariously liable. Section 141 raises a legal fiction. By reason of the said provision, a person although is not personally liable for commission of such an offence would be vicariously liable therefor. Such vicarious liability can be inferred so far as a company registered or incorporated under the Companies Act, 1956 is concerned 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainant did not disclose commission of offence against the accused persons. 24. Be it noted, the observations made in Saroj Kumar Poddar (supra) and clarification given in SMS Pharma II (supra) and Everest Advertising (P) Ltd. (supra) were taken note of in K.K. Ahuja v. V.K. Vora and Anr (2009) 10 SCC 48. In the said case, the Court explaining the position under Section 141 of the Act has stated thus:- "The position under Section 141 of the Act can be summarised thus: (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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the Company used to be decided, organized and administered by accused persons along with other Directors. 27. In Gunmala Sales Pvt. Ltd. (supra) the Court was concerned with Directors who issued the cheques. This authority, as we notice, has to be appositely understood. The two-Judge Bench referred to SMS Pharma I and other earlier decisions, and came to hold that:- "30. When a petition is filed for quashing the process, in a given case, on an overall reading of the complaint, the High Court may find that the basic averment is sufficient, that it makes out a case against the Director; that there is nothing to suggest that the substratum of the allegation against the Director is destroyed rendering the basic averment insufficient and that since offence is made out against him, his further role can be brought out in the trial. In another case, the High Court may quash the complaint despite the basic averment. It may come across some unimpeachable evidence or acceptable circumstances which may in its opinion lead to a conclusion that the Director could never have been in charge of and responsible for the conduct of the business of the company at the relevant time and therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to be remitted to the High Court for fresh hearing. However, we are inclined to confirm the order passed by the High Court quashing the process as against Shobha Mehta. Shobha Mehta is stated to be an old lady who is over 70 years of age. Considering this fact and on an overall reading of the complaint in the peculiar facts and circumstances of the case, we feel that making her stand the trial would be an abuse of process of court. It is however, necessary for the High Court to consider the cases of other Directors in light of the decisions considered by us and the conclusions drawn by us in this judgment." 29. We have referred to the aforesaid decision in extenso, as we are of the convinced opinion that the analysis made therein would squarely apply to the case at hand and it shall be clear when we reproduce certain passages from the complaint. 30. Prior to that, we may profitably refer to a two-Judge Bench decision in Tamil Nadu News Print & Papers Ltd. v. D. Karunakar and Others (2015) 8 SCALE 733. In the said case, the Court has referred to the decision rendered in S.M.S. Pharma I (supra) and, thereafter, taken note of the averments made in the complaint. Be it noted, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through Accused Nos. 2 and 3 approached the Complainant Bank at its Branch situated at Mumbai for a Short Term Loan facility for a sum of Rs. 200 Crore to meet the expenditure of Four ORV vessels being built at ABG Shipyard. After verifying the documents submitted the Complainant Bank vide its sanction letter dated 28th April 2012 sanctioned the said Facility for the purpose mentioned therein. The said terms and conditions mentioned in the sanction letter dated 28th April 2012 were duly accepted by the Accused No. 1 by signing the same. Accused No. 1 also agreed to pay interest at the negotiated rate by the Complainant bank. Hereto annexed the marked as Exhibit 'B' is a copy of the said sanction letter dated 28th April 2012. xxxxx xxxxx 10. I say that the accused Nos.1 to 7 were aware that the aforesaid cheque would be dishonoured for being "Account Blocked" and all the accused, in active connivance mischievously and intentionally issued the aforesaid cheques in favour of the complainant Bank." 33. The aforesaid averments, as we find, clearly meet the requisite test. It is apt to mention here that there are seven accused persons. Accused No.1 is the Company, accused Nos.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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