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TMI Blog2017 (10) TMI 457X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the complaint there is no averment against the petitioner as required under Section 141 of the Negotiable Instruments Act, warranting implication of the petitioner for the offence alleged and thereby the further proceedings against her is an abuse of process of law. 3. Learned counsel appearing for the respondent/complainant has vehemently contended that the petitioner is the wife of the Managing Director of the company and as such she is involved in the day to day affairs of the company and that she being a Director is also liable for prosecution under the Act. 4. For the sake of convenience, the relevant paragraphs in the complaint are extracted hereunder. "1. The complainant states that the accused company had business dealings with the complainant in the past and during such business transactions with the complainant, the accused company owes to the complainant various amounts on various dates and towards the discharge of the same, the accused in the capacity of Authorized Signatories issued the following cheques in favour of the complainant: Sl. No. Cheque No. & Date Cheque amount Rs. Drawn on (Bank's name ) 1 292195/26.4.2009 12,50,000/- ICICI Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 provision of this Act, be punished with imprisonment for a term which may be extended 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 the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrayed as A-3 though she is in-charge and responsible for the day to day affairs of the company as contemplated under Section 141 of the Act. 7. In the judgment reported in (2005) 8 SCC 89 (S.M.S.Pharmaceuticals Ltd., vs. Neeta Bhalla), the Hon'ble Apex Court has held as follows:- (paragraphs 1, 2, 10, 11, 12, 13, 14, 15 and 18) "1. This matter arises from a reference made by a two Judge Bench of this Court for determination of the following questions by a larger Bench : " (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 fulfill the requirements of the said section and it is not necessary to specifically state in the complaint that the persons 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 signa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted, 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 knowledge, or that he had exercised all due diligence to prevent the commission of such offence. Provided [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 guilty of that offence and shall be liable to be proceeded against and punished accordingly." It will be seen from the above provisions that Section 138 casts criminal liability punishable with imprisonment or fine or with both on a person who issues a cheque towards discharge of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion or office in a company. Conversely, a person not holding any office or designation in a Company may be liable if he satisfies the main requirement of being in charge of and responsible for conduct of business of a Company at the relevant time. Liability depends on the role one plays in the affairs of a Company and not on designation or status. If being a Director or Manager or Secretary was enough to cast criminal liability, the Section would have said so. Instead of "every person" the section would have said "every Director, Manager or Secretary in a Company is liable".etc. The legislature is aware that it is a case of criminal liability which means serious consequences so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action. 11. A reference to sub-section (2) of Section 141 fortifies the above reasoning because sub-section (2) envisages direct involvement of any Director, Manager, Secretary or other officer of a company in commission of an offence. This section operates when in a trial it is proved that the offence has been committe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect is the judgment of the Madras High Court in R. Kannan v. Kotak Mahindra Finance Ltd. 2003 (115) CC (Mad) In Lok Housing and Constructions Ltd. v. Raghupati Leasing and Finance Ltd. and another [2003 (115) CC (Del) 957], the Delhi High Court noticed that there were clear averments about the fact that accused No.2 to 12 were officers in charge of and responsible to the company in the conduct of day-to-day business at the time of commission of offence. Therefore, the Court refused to quash the complaint. In Sunil Kumar Chhaparia v. Dakka Eshwaraiah and another [2002 (108) CC (AP) 687, the Andhra Pradesh High Court noted that there was a consensus of judicial opinion that: " a director of a company cannot be prosecuted for an offence under Section 138 of the Act in the absence of a specific allegation in the complaint that he was in charge of and responsible to the company in the conduct of its business at the relevant time or that the offence was committed with his consent or connivance." The Court has quoted several judgments of various High Courts in support of this proposition. We do not feel it necessary to recount them all. 15. Cases have arisen under other Acts wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 141 he would issue the process. We have seen that merely being described as a director in a company is not sufficient to satisfy the requirement of Section 141. Even a non director can be liable under Section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial. 8. In the later decision reported in 2014 (16) SCC 1 (Pooja Ravinder Devidasani Versus State Of Maharashtra), the Hon'ble Apex Court has held as follows:- (paragraphs 17 to 21) 17 There is no dispute that the appellant, who was wife of the Managing Director, was appointed as a Director of the Company-M/S Elite International Pvt. Ltd. on 1st July, 2004 and had also executed a Letter of Guarantee on 19th January, 2005. The cheques in question were issued during April, 2008 to September, 2008. So far as the dishonor of Cheques is concerned, admittedly the cheques were not signed by the appellant. There is also no dispute that the appellant was not the Managing Director but only a non-executive Director of the Company. Non-executive Director is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Company. 19 A Director of a Company is liable to be convicted for an offence committed by the Company if he/she was in charge of and was responsible to the Company for the conduct of its business or if it is proved that the offence was committed with the consent or connivance of, or was attributable to any negligence on the part of the Director concerned [See: State of Karnataka Vs. Pratap Chand & Ors. (1981) 2 SCC 335]. 20 In other words, the law laid down by this Court is that for making a Director of a Company liable for the offences committed by the Company under Section 141 of the N.I. Act, there must be specific averments against the Director showing as to how and in what manner the Director was responsible for the conduct of the business of the Company. 21 In Sabitha Ramamurthy & Anr. Vs. R.B.S. Channbasavaradhya (2006) 10 SCC 581, it was held by this Court 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 is vicariously liable. [pic]Section 141 raises a legal fiction. By reason of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X
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