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TMI Blog2017 (1) TMI 1790X X X X Extracts X X X X X X X X Extracts X X X X ..... Managing Director and Director respectively and they are having day-to-day control and supervision over the affair of A1-company and during the course of their business transaction, they issued cheques to the complainants, drawn on ICICI Bank Limited, Coimbatore and on presentation by the complainants in different banks at Guntur, the cheques were dishonoured on the ground that payment was stopped by the drawer. After completion of legal formalities, the complainants filed criminal cases under Section 138 of N.I. Act against the aforesaid accused. 2. The accused No. 3 filed the instant batch of criminal petitions seeking to quash the proceedings on the pleas that the petitioner was innocent and unnecessarily implicated without there being any incriminating material to connect her with the alleged offence; learned Magistrate took cognizance of the offences in a highly mechanical fashion though there is absolutely no semblance of material to show that the petitioner was responsible for issuance of the cheques or she was in-charge and having control and supervision over the day-to-day affairs of A1 company and on the other hand, Form-32 submitted by A1-company would show that the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner filed reply to the counter and additional counter filed by respondent No. 2 and denied the contentions. 5. Heard arguments of Sri T. Nagarjuna Reddy, learned Counsel for the petitioner and Sri G.L.V. Ramana Murthy, learned Counsel for respondent No. 2/complainant. 6 a). Severely castigating the cognizance taken by trial Courts against the petitioner/A3 in the batch of criminal cases, learned Counsel for petitioner Sri T. Nagarjuna Reddy, would firstly argue that the ingredients of the offence under Section 141 of N.I. Act are not fulfilled in the instant case since the petitioner/A3 was only a Non-Executive Director of A1's company between 7.12.2007 to 23.11.2012 and ceased to be as such thereafter and during the relevant period, she was not incharge of and responsible for the conduct of the business of the company and even admittedly, she was not the signatory of any one of the cheques and the trial Courts without considering these aspects, mechanically took cognizance and issued summons and as such, the cognizance was vitiated by law. b. Secondly, he would argue, in order to attract an offence under Section 141 of N.I. Act against a Director of the company, who was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he A1-company during the relevant period of offence is a pure question of fact, which can be decided only after full-fledged trial. He thus prayed to dismiss the petitions. 8. The above divergent arguments raise two points, one legal and other factual, for determination of this batch of petitions: (i) To take cognizance of an offence under Section 141 of N.I. Act against a Director, whether basic averments that, at the time the offence was committed, he was incharge of and was responsible for the conduct of the business of the company are suffice or specific averments showing as to how and in what manner the Director was responsible for the conduct of the business of the company, must also be made in the complaint? (ii) If it is held, basic averments are sufficient, whether the complainants and their sworn affidavits did contain such basic averments and whether the petitioner/A3 could by unimpeachable material demonstrate that the basic averments pleaded were false to the core to deserve quashing of the proceedings? 9. Point No. 1: It is well settled principle that a person is liable for punishment for the offence committed by him and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.--For the purpose of this section,-- (a) "company" means anybody corporate and includes a firm or other association of individuals; and (b) "director", in relation to a firm, means a partner in the firm." 10. With regard to Section 141(1) of N.I. Act, the point of controversy is, whether the basic averments that the Director or some other person was incharge of and was responsible for the conduct of the business of the company is suffice or specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bharat Sanchar Nigam Limited 2007 5 SCC 108, another Division Bench declined to follow Saroj Kumar Poddar's case (supra), in view of binding ratio in S.M.S. Pharmaceuticals Limited case (2005) 8 SCC 89 (supra), which was rendered by three Judges. It was held thus: "Para 23: In the light of the ratio in S.M.S. Pharmaceuticals Ltd., (2005) 8 SCC 89, what is to be looked into is whether in the complaint, in addition to asserting that the appellant and another are the Directors of the company, it is further alleged that they are in charge of and responsible to the company for the conduct of the business of the company. We find that such an allegation is clearly made in the complaint which we have quoted above. Learned Senior Counsel for the appellant argued that in Saroj Kumar Poddar's case (supra), this Court had found the complaint unsustainable only for the reason that there was no specific averment that at the time of issuance of the cheque that was dishonoured, the persons named in the complaint were in charge of the affairs of the company. With great respect, we see no warrant for assuming such a position in the context of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (viii) In Pooja Ravinder Devidasani v. State of Maharashtra and another, (2014) 16 SCC 1, a Division Bench of apex Court observed that for making a Director of a company liable for the offences committed by company under Section 141 of 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. (ix) In Gunmala Sales Pvt. Ltd. v. Anu Mehta and others, (2015) 1 SCC 103, a Division Bench of apex Court having discussed several decisions and observing that S.M.S. Pharma (Case-I)'s case (supra), which was a three Judges Bench decision and holds the field, summarized its conclusions thus: (a) Once the complaint filed under Section 138 read with Section 141 of N.I. Act, the basic averment is made that the Director was incharge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed, the Magistrate can issue process against such Director. (b) If petition is filed to quash the complaint by the Director, the High Court may, in the facts of a particular case, on an overall reading of the complaint, refuse to q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of the company and (ii) those Directors, Managers, Secretaries and other officers of the company who were not in charge and responsible to the company for the conduct of the business of the company. The first category of persons fall under Section 141(1) and second category of persons fall under Section 141(2). The nature of the complaint allegations i.e., basic averments or specific averments depend upon the category of persons imputed. My view gets fortified from the decision in K.K. Ahuja's case (supra). The apex Court classified the accused under Section 141(1) and 141(2) for the purpose of deciding the sufficiency of the complaint averments for an offence under Section 141 of N.I. Act. It held thus: "Para 27 The position under Section 141 of the Act can be summarized 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 Manag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons are sufficient to take cognizance or not. 12. In CC No. 411/2012 (Crl. P No. 3147 of 2013); CC No. 442/2012 (Crl. P No. 3148 of 2013); CC No. 590/2012 (Crl. P No. 3149 of 2013); CC No. 591/2012 (Crl. P No. 3158 of 2013); CC No. 592/2012 (Crl. P No. 3160 of 2013); CC No. 455/2012 (Crl. P No. 3216 of 2013); CC No. 594/2012 (Crl. P No. 3219 of 2013); CC No. 593/2012 (Crl. P No. 3220 of 2013); CC No. 309/2012 (Crl. P No. 3225 of 2013); CC No. 19 of 2013 (Crl. P No. 3814 of 2013); CC No. 58/2013 (Crl. P No. 3817 of 2013); CC No. 60/2013 (Crl. P No. 3318 of 2013); CC No. 67/2013 (Crl. P No. 3819 of 2013); CC No. 310/2012 (Crl. P No. 3820 of 2013); CC No. 66/2013 (Crl. P No. 3837 of 2013); CC No. 418/2012 (Crl. P No. 3859 of 2013); CC No. 476/2012 (Crl. P No. 4108 of 2013); CC No. 181/2013 (Crl. P No. 4114 of 2013); CC No. 477/2012 (Crl. P No. 4120 of 2013); CC No. 475/2012 (Crl. P No. 4121 of 2013); CC No. 45/2013 (Crl. P No. 5284 of 2013); CC No. 36/2013 (Crl. P No. 5306 of 2013); CC No. 185/2013 (Crl. P No. 5307 of 2013); CC No. 16/2013 (Crl. P No. 5308 of 2013); CC No. 368/2013 (Crl. P No. 8854 of 2013); CC No. 335/2013 (Crl. P No. 13809 of 2013) complaints are filed against A1-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere bounced on presentation. It is averred that even after statutory notice the accused who are financially well-off and educated did not repay the amount. Hence the complaint. On a close scrutiny of averments and sworn affidavit of the complainant, it must be stated that the averments are not meeting the requirements of either Section 141(1) or Section 141(2) of N.I. Act. Except mentioning the petitioner as Director of A1-company, there is no further clear averment in the complaint or sworn statement to the effect that she was at the time of commission of the offence in-charge of and responsible for the conduct of the business of the company. Therefore, the requirement under Section 141(1) of N.I. Act was not fulfilled as no basic averment is made. Further, there was no specific averment as to consent or connivance or negligence on the part of petitioner-A3 in terms of Section 141(2) of N.I. Act. Hence, cognizance is vitiated since none of the requirements under Section 141(1) or 141(2) is fulfilled. Hence, Crl. P Nos. 3816, 5118 and 5119 of 2013 are bound to be allowed. 14a. In the result, Criminal Petition Nos. 3147, 3148, 3149, 3158, 3160, 3216, 3219, 3220, 3225, 3814, 3817, 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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