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TMI Blog2020 (12) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... of time and that the offence was committed by their consent or connivance. Receipt of the statutory notice - HELD THAT:- It is seen from the notice dated 15.10.2018, the petitioners called upon the respondent to refrain from presenting the alleged cheques for payment and return those cheques. On receipt of the same, the respondent did not send any rejoinder to the reply notice dated 26.12.2018. They also failed to deny the averments made in the notice dated 15.10.2018 in the complaint. It amounts to suppression of fact - In fact, in the complaint the respondent averred that the said cheques were fraudulently issued to cheat the respondent and instructed the respondent to present the same for collection. When the petitioners categorically called upon the respondent to refrain from presenting the cheques and also return the same, the petitioners would not have instructed the respondent to present those cheques for collection. That apart, those cheques admittedly are post-dated one. When there is a dispute in respect of quality of the garments, the petitioners stopped the payment of those cheques. All the impugned complaints filed as against the petitioners are liable to be qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipt of statutory notice issued under Section 138 of NI Act by the respondent, the petitioners have categorically replied by the reply notice dated 01.02.2019, along with the part and parcel of the notice dated 15.10.2018. While filing the complaint, the respondent completely suppressed the notice issued by the petitioners dated 15.10.2018, which was part and parcel of the reply notice of the petitioners. In the said notice, the petitioners categorically stated that in continuation of various correspondence between the respondent and the petitioners with respect to the defect material supplied by the respondent herein. The alleged cheques were not issued for any consideration and no dues are payable by the petitioners to the respondent herein. Therefore, they called upon the respondent to refrain from presenting the alleged cheques for payment and also to return the alleged cheques. This notice was completely suppressed by the respondent and lodged complaint. He further submitted that the respondent though alleged that certain amounts are due from the accused, the respondent did not even produce any single piece of document, much less a ledger statement to show that there are exis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 25,02,179/- is also ready for inspection by the accused. Towards repayment of the balance due, the accused have issued 6 Nos. of post-dated cheques for various amounts in total ₹ 63,52,433/-. All the cheques were presented for collection on instruction from the accused and the same were returned dishonoured with endorsement of payment stopped by drawer . Therefore, the respondent caused legal notice dated 22.12.2018. On receipt of the same, the accused issued reply notice dated 26.12.2018 with false averments. He further contended that insofar as the first accused company is concerned, represented by its all Directors. Admittedly, there is no Managing Director to represent on behalf of the first accused company. Since accused 2 to 4 are same family members and all are representing the first accused company. Therefore, all are liable to be punished under Sections 138 and 142 of NI Act. Therefore, all the accused are in charge of first accused company and all are responsible for the conduct of business of the first accused company. In fact, each cheque was signed by one of the accused and issued to the respondent herein. Therefore, there is no authorized signatory fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 415367 ₹ 7,06,253/- 15.09.2018 415411 ₹ 6,61,545/- 18.09.2018 415344 ₹ 30,00,000/- 28.09.2018 415412 ₹ 6,61,545/- 12.10.2018 415413 ₹ 6,61,545/- 20.10.2018 415414 ₹ 6,61,545/- Total ₹ 63,52,433/- All the cheques were presented for collection on instruction of the accused and all the cheques were returned dishonoured with endorsement of payment stopped by drawer . The respondent caused statutory notice as contemplated under Section 138 of NI Act and on receipt of same, the accused issued reply notice on 26.12.2018. Thereafter, the respondent initiated proceedings as against the accused for the offence punishable under Sections 138, 141 and 142 of NI Act. 9. The grounds raised by the petitioners are on four-fold. (a) There is no specific averments as against the petitioners 2 to 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words as well as the company appearing in the Section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a director is indicted. 59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh (supra) which is a three-Judge Bench decision. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioners to the respondent herein. The petitioners also noted defects in the materials of the respondent herein. 12. Further the payment terms were also revised by them and the alleged cheque was issued as security deposit. After made payment, the cheque which was given as security not returned to the petitioners. Therefore, the petitioners instructed their banker not to honour the cheque and issued stop payment. It is also evident from the notice dated 15.10.2018, the alleged impugned five cheques have been stopped by the petitioners due to quality defect and the respondent adjusted the payment of the defective garments against security cheque amount of ₹ 35 lakhs. Therefore, all the cheques impugned in all the complaints have not been issued for any legally enforceable debt by the petitioners. It is relevant to rely upon the judgment in the case of National Small Industries Corporation Limited Vs. Harmeet Singh Paintal and another reported in (2010) 3 SCC 330 , wherein it is held as follows: 19) In the case of second SMS Pharmaceuticals vs. Neeta Bhalla, (2007)4SCC70,this Court has categorically held that there may be a large number of Directors but so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the appellant was not the Managing Director but only a non-executive Director of the Company. Non-executive Director is no doubt a custodian of the governance of the Company but does not involve in the day-to-day affairs of the running of its business and only monitors the executive activity. To fasten vicarious liability under Section 141 of the Act on a person, at the material time that person shall have been at the helm of affairs of the Company, one who actively looks after the day-to-day activities of the Company and particularly responsible for the conduct of its business. Simply because a person is a Director of a Company, does not make him liable under the N.I. Act. Every person connected with the Company will not fall into the ambit of the provision. Time and again, it has been asserted by this Court that only those persons who were in charge of and responsible for the conduct of the business of the Company at the time of commission of an offence will be liable for criminal action. A Director, who was not in charge of and was not responsible for the conduct of the business of the Company at the relevant time, will not be liable for an offence under Section 141 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible. Simply because a person is a Director of defaulter Company, does not make him liable under the Act. Time and again, it has been asserted by this Court that only the person who was at the helm of affairs of the Company and in charge of and responsible for the conduct of the business at the time of commission of an offence will be liable for criminal action [See : Pooja Ravinder Devidasani v. State of Maharashtra Ors. AIR 2015 SC 675]. 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 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. The above judgments cited by the learned counsel for the petitioners are squarely applicable to the case on hand. The allegations made in the complaint does not satisfy the requirements of Section 141 of NI Act and the requirements reiterated by the Hon ble Supreme Court of India insofar as these petitioners are concerned. Under these circumstances, all the complaints are vitiated. 15. In view of the above discu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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