9911796707
TMI Blog2020 (11) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant under Section 138 of NIA. The High Court allowed the petition filed under Section 482 Cr.P.C. and quashed the proceedings, but the order was ex-parte. In case the complainant chooses not to appear and contest the petition, despite being served, Court can proceed ex-parte and hear the Accused in a petition filed under Section 482 Cr.P.C. for quashing - Record indicates that Respondent has been duly served, and has due intimation of the listing of the petition, but has chosen not to contest the petition, despite ample opportunities to defend. In the circumstances the Respondent is proceeded ex-parte and the petition is heard on merits. There is force in the contention of counsel for the Petitioner that since the Petitioner had resigned on 15.06.2016 and was no longer responsible for the conduct of business of Accused No. 1 Company, on the date of the commission of the alleged offence, she cannot be arrayed as an Accused in the proceedings emanating out of the complaint referred to above. Form No. DIR-11 clearly evidences the resignation of the Petitioner on 15.06.2016 and the cheque in question is admittedly issued on 28.10.2016, which is post her resignation. It canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that in the entire complaint there is not even a whisper of the alleged transaction, pursuant to which the cheque was allegedly issued in favour of the complainant. All that is mentioned is towards the discharge of part of legal debts/liability cheque was issued. There are no specific allegations or averments against the Petitioner regarding her alleged role either in the transaction or in the conduct of business of the Company. It is settled that mere designation of an officer in a Company is not enough to make the officer vicariously liable. The absence of an averment as to the transaction / specific role of the Petitioner, in my opinion, is fatal to the case of the complainant. It is relevant to note at this stage that it is not the case of the complainant that even after resigning as a CEO of accused No. 1 the Petitioner continued to be associated with the Company or was occupying any such position which made her in-charge and responsible for the conduct of its business. Vicarious liability has been imputed to the Petitioner solely on account of her being the CEO of accused No. 1. It is also not the case of the complainant that the cheque in question was dishonoured or the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red a Criminal Revision bearing CR No.114/2019 on 28.02.2019, challenging the summoning order. On 25.03.2019 the Sessions Court issued notice to the Respondent and the Petitioner took repeated steps to effect service on the Respondent through his counsel before the Trial Court. However, none appeared on behalf of the Respondent. Vide order dated 04.12.2019 the Sessions Court dismissed the Revision petition and the Petitioner approached this Court. 4. It needs to be mentioned that vide order dated 08.06.2020 this Court after capturing the controversy involved issued notice to the Respondent, returnable on 06.07.2020. When the petition was listed on 06.07.2020 counsel for the Petitioner submitted that she had served the Respondent through the electronic mode and sought time to place on record an affidavit to that effect. Report of the Registry regarding service on the Respondent through other permissible modes was not on record and the Registry was directed to place the same on record. When the petition was listed on 16.07.2020, the Report of the Registry, placed on record, indicated that the Respondent had been served through e-mail. Counsel for the Petitioner also submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arte against the complainant, when the complainant chose to be unrepresented, despite being duly served. 8. Following these judgements, it is clear that in case the complainant chooses not to appear and contest the petition, despite being served, Court can proceed ex-parte and hear the Accused in a petition filed under Section 482 Cr.P.C. for quashing. 9. Record indicates that Respondent has been duly served, and has due intimation of the listing of the petition, but has chosen not to contest the petition, despite ample opportunities to defend. In the circumstances the Respondent is proceeded ex-parte and the petition is heard on merits. 10. Learned counsel for the Petitioner contends that the Petitioner had resigned from Accused No. 1 Company with effect from 15.06.2016, whereas the cheque in question was issued on 28.10.2016 and was dishonoured on presentation on 29.10.2016. The legal notice of demand was sent by the Respondent allegedly on 02.11.2016. In support of the resignation of the Petitioner, counsel has drawn the attention of the Court to Form No. DIR-11 issued under Proviso to Section 168(1) of the Companies Act, 2013 and Rule 18 of the Companies (Appointment and Qualif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the Courts have repeatedly affirmed that mere fact of being a Director is not enough and there must be specific allegations to make out a case against the Accused under Sections 138 and 141 of NIA. This according to the counsel has been so observed in the judgements in S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla Ors. (2005) 8 SCC 89 and Sudeep Jain vs. M/s. ECE Industries Ltd. 2013 SCC OnLine Del 1804. 14. Last but not the least learned counsel also argues that the complainant is a Company and a separate legal entity from its Directors. Ms. Sahiba points out to a Notification dated 08.08.2018 issued by the Office of Registrar of Companies published under Section 248(5) of the Companies Act, 2013 wherein a list of Companies has been published, which have been struck off from the Register of the Companies, as they stand dissolved. She draws the attention of the Court to seriatim 2033 where the name of the Respondent figures. The argument is that once the complainant Company has been dissolved, further prosecution cannot be continued as the complainant is no longer in existence. 15. I have heard the learned counsel for the Petitioner and examined her contentions. 16. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awer of the cheque, 69[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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. 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) has to be in the affirmative. The question notes that the managing director or joint managing director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141. 20. The same view was reiterated by the Supreme Court in National Small Industries Corp. Ltd. v. Harmeet Singh Paintal, 2010 (2) SCALE 372, wherein it was observed that : 24. if the accused is not one of the persons who falls under the category of persons who are responsible to the company for the conduct of the business of the company then merely by stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incharge 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. 22. In this context relevant it would be to quote a few passages from the judgement of this Court in Sudeep Jain (supra) as under:- 9. The prime objective of this Court is to remind all the Metropolitan Magistrates in Delhi to carefully scrutinize all the complaint cases being filed under Section 138 r/w 141 of the Negotiable Instruments Act, 1881 against the accused companies at the pre-summoning stage and make sure that notice be directed only to those directors or employees of the company who satisfy the principles laid down in the aforesaid judgments. Summons must be issued only after giving due consideration to the allegations and the materials placed on record by the complainant. Undeniably, as per the aforesaid legal pronouncements, Managing Director and the Joint Managing Director are deemed to be vicariously liable for the offence committed by the company because of the position they hold in the company. Problem arises in cases where all the persons holding office in the company are so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cheque/cheques c. Reasons due to which the cheque/cheques were dishonoured; d. Name and Designation of the persons sought to be vicariously liable for the commission of the offence by the accused Company and their exact role as to how and in what manner they were responsible for the commission of the alleged offence; e. Particulars of the legal notice and status of its service; f. Particulars of reply to the legal notice, if any. 23. Recently a Co-ordinate Bench of this Court in Alibaba Nabibasha (supra) following the judgements referred to above quashed the complaint pending before the Trial Court under Section 138 of the NIA including the summons and held as under:- 20. It is also settled law that mere repetition of the phraseology of Section 141 of NI Act that the accused is Incharge and responsible for the conduct of the day-to-day affairs of the Company may not be sufficient and facts stating as to how the accused was so responsible must be averred. It is the case of the respondent No.1 that the petitioner was involved in the discussion and represented the respondent No.2 before the agreement was executed on March 03, 2011 but that does not mean even after his resignation h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llegation is made in the complaint. xxx xxx xxx 32. It can, therefore, be safely concluded that the view, which is now accepted by the Supreme Court, is that more repetition of the phraseology contained in Section 141 of the NI Act, i.e. the accused is in charge of and responsible for the conduct of the day-to-day affairs of the company , may not be sufficient and something more is to be alleged to show as to how he was so responsible. xxx xxx xxx In this petition specific averment is made by the petitioner that he was neither a Director of the company nor at all incharge of the company nor involved in day-to-day running of the company at the time of commission of the alleged offence in February and March, 1999 when the cheques were dishonoured. What is stated is that the petitioner had resigned from the company on 4.2.1998 and copy of Form 32 was also submitted with the Registrar of Companies. Certified copy of Form 32 issued by the office of the Registrar of Companies is enclosed as per which, the petitioner resigned with effect from 4.2.1998. Cheques in question are dated 31.12.1998, which were issued much after the resignation of the petitioner as the Director and were dishonou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the year 1999 when the cheque was dishonoured as he had no say in the matter that the cheque is honoured and he could not have asked the Company to pay the amount. In my view even if resignation was not given by the petitioner under intimation to the complainant, that would not make any difference, once the Court relying upon certified copy of Form 32 accepts his plea that he was not a director of the Company, on the date the offence under Section 138 of Negotiable Instruments Act was committed. He having resigned from the directorship much prior to even presentation of the cheque for encashment, he cannot be vicariously liable for the offence committed by the Company, unless it is alleged and shown that even after resigning from directorship, he continued to control the affairs of the company and therefore continued to be person in charge of and responsible to the company for the conduct of its business. 27. Even in the recent judgment in the case of Ashoke Mal Bafna (supra,) the Hon ble Supreme Court has held as under: 9. To fasten vicarious liability under Section 141 of the Act on a person, the law is well settled by this Court in a catena of cases that the complainant shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies had substantial business transactions and in lieu of the business correspondence and financial transactions complainant company had sent payments to accused persons through RTGS and in discharge of part liability towards complainant co. you accused no. 3 being the Director of accused no. 1 and in connivance, consent and knowledge of accused no. 2, 4 and 5 issued the following cheques in favour of my client as under:- CHEQUE NO. DATED AMOUNT DRAWN ON 018110 18-10-13 ₹ 10000000/- IDBI BANK, BHUBNESHWAR, ORISSA-751022 018111 18-10-13 ₹ 10000000/- -------DO------- 014296 17-10-13 ₹ 1,40,00000/- -------DO------- ----------- ------------- ----------- -------------- 10. In the absence of necessary averments in the complaints in question regarding the nature of transaction between the parties, complaints in question cannot be maintained on such sketchy averments as highlighted above. Such view was taken in a similar case by Supreme Court in Omniplast Private Limited (Supra) while concluding as under:- That apart, as rightly pointed out by Mr. Divan, learned Senior Counsel, in the absence of necessary pleadings with particular details as regards the property based on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be proceeded against, only on account of his being an officer of the Company. Through several judicial pronouncements it has been enunciated that it must be clearly averred in the complaint made against any person that he/she, at the time the offence was committed, was in-charge of and responsible for the conduct of the business of the Company and thus liable. 26. It is also a settled law that it is not enough to state in the complaint that a particular person was a Director, Managing Director, CEO or Secretary etc. of the Company. As held by the Supreme Court in SMS Pharmaceuticals (supra) it may be that in a given case, a person may be a Director but may not know anything about the day to day functioning of the Company and there is no universal rule that a Director is in-charge of its everyday affairs. The Court observed that mere use of a particular designation of an Officer, without more, may not be enough, in a complaint, more particularly, when the requirement of Section 141 is that such a person should be in-charge of and responsible to the Company for conduct of its business. Liability is cast on person who may have something to do with the transactions complained of. Rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Directors of a company. Nothing is oral. What emerges from this is that the role of a director in a company is a question of fact depending on the peculiar facts in each case. There is no universal rule that a director of a company is in charge of its everyday affairs. We have discussed about the position of a director in a company in order to illustrate the point that there is no magic as such in a particular word, be it director, manager or secretary. It all depends upon the respective roles assigned to the officers in a company. A company may have managers or secretaries for different departments, which means, it may have more than one manager or secretary. These officers may also be authorised to issue cheques under their signatures with respect to affairs of their respective departments. Will it be possible to prosecute a secretary of Department B regarding a cheque issued by the secretary of Department A which is dishonoured? The secretary of Department B may not be knowing anything about issuance of the cheque in question. Therefore, mere use of a particular designation of an officer without more, may not be enough by way of an averment in a complaint. When the requirement i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable under the provision. The liability arises from being in charge of and responsible for the conduct of business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation 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 the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in V. Sudheer Reddy v. State of A.P. [(2000) 107 Comp Cas 107 (AP)] held that: (Comp Cas p. 110) The purpose of Section 141 of the Negotiable Instruments Act would appear to be that a person [who appears to be] merely a director of the company cannot be fastened with criminal liability for an offence under Section 138 of the Negotiable Instruments Act unless it is shown that he was involved in the day-to-day affairs of the company and was responsible to the company. Further, it was held that allegations in this behalf have to be made in a complaint before process can be issued against a person in a complaint. To the same effect is the judgment of the Madras High Court in R. Kannan v. Kotak Mahindra Finance Ltd. [(2003) 115 Comp Cas 321 (Mad)] In Lok Housing and Constructions Ltd. v. Raghupati Leasing and Finance Ltd. [(2003) 115 Comp Cas 957 (Del)] the Delhi High Court noticed that there were clear averments about the fact that Accused 2 to 12 were officers in charge of and responsible to the company in the conduct of the day-to-day business at the time of commission of the offence. Therefore, the Court refused to quash the complaint. In Sunil Kumar Chhaparia v. Dakka E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... object of preventing bouncing of cheques and sustaining the credibility of commercial transactions resulting in enactment of Sections 138 and 141 has to be borne in mind. These provisions create a statutory presumption of dishonesty, exposing a person to criminal liability if payment is not made within the statutory period even after issue of notice. It is also true that the power of quashing is required to be exercised very sparingly and where, read as a whole, factual foundation for the offence has been laid in the complaint, it should not be quashed. All the same, it is also to be remembered that it is the duty of the court to discharge the accused if taking everything stated in the complaint as correct and construing the allegations made therein liberally in favour of the complainant, the ingredients of the offence are altogether lacking. The present case falls in this category as would be evident from the facts noticed hereinafter. It was further observed: (SCC pp. 18-19, para 6) 6. The criminal liability has been fastened on those who, at the time of the commission of the offence, were in charge of and were responsible to the firm for the conduct of the business of the firm. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/liability cheque was issued. There are no specific allegations or averments against the Petitioner regarding her alleged role either in the transaction or in the conduct of business of the Company. It is settled that mere designation of an officer in a Company is not enough to make the officer vicariously liable. The absence of an averment as to the transaction / specific role of the Petitioner, in my opinion, is fatal to the case of the complainant. The most important factor that goes in favour of the Petitioner is that she had resigned from the Company w.e.f. 15.06.2016, which was before the cheque in question was even issued. Form No.DIR-11 placed on record substantiates the stand of the Petitioner. The authenticity of the Form is undisputed as the Respondent has failed to contest the matter, despite service, besides the fact that this is a public document. 30. It is relevant to note at this stage that it is not the case of the complainant that even after resigning as a CEO of accused No. 1 the Petitioner continued to be associated with the Company or was occupying any such position which made her in-charge and responsible for the conduct of its business. Vicarious liability h ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
