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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 ..... ging 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 was in charge of and was responsible to the company, for the conduct of the business of the company or make any specific allegation about consent, connivance or negligence. The very fact that the dishonoured cheque was signed by him on behalf of the company, would give rise to responsibility under sub-section (2) of Section 141. (iii) In the case of a Director, Secretary or Manager (as defined in Section 2(24) of the Companies Act) or a person referred to in clauses (e) and (f) of Section 5 of Companies Act, an averment in the complaint that he was in charge of, and was responsible to the company, for the conduct of the business of the company is necessary to bring the case under Section 141(1). No further averment would be necessary in the complaint, though some particulars will b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all decide the cases on merits. The criminal petitions are dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... id money to the respective Mills by way of RTGS and that the Mill owners assured that they would not insist for further payment for the next two months. The petitioner also wrote a letter on 21.6.2012 that the mortgage of Ac. 0-66 cents of land belonging to Vikram R. Naidu and Miss Diya R. Naidu would be created in favour of four parties and these letters would show, she was actively participating in the affairs of A1-company. R2 further pleaded that the petitioner had full knowledge with regard to the issuance of cheques in favour of complainants by A1-company and signed by A2, and she consented and therefore, she cannot be exonerated from the criminal cases. Whether she ceased to be a Director/Non-Executive Director is a disputed question of fact which cannot be determined in the quash petitions and hence, the petitions are liable to be dismissed. 4. The petitioner 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a). He would further argue that in all the complaints, the basic averments that the A3 was incharge of and responsible for the conduct of the business of A1's company were clearly mentioned and such basic averments were sufficient for the trial Court to take cognizance of the offence and issue summons and it is not the requirement of law that the complainant should invariably mention about the method and manner in which petitioner/A3 was involved in the conduct of the business or in issuance of the cheques and that part relates to the trial. He would thus argue that the trial Courts rightly took cognizance in all the criminal cases. b). Learned Counsel would further argue that whether the petitioner/A3 was only a Non-Executive Director between 7.12.2007 to 23.11.2012 or whether she officiated as a Director involving in the day-to-day business affairs of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted, 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 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, Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the company is not known but even otherwise, there was no averment in the complaint petitions as to how and in what manner the appellant was responsible for the conduct of the business of the company or otherwise responsible to it in regard to its functioning. (a) Thus it would appear that, in this decision the Division Bench remarked that apart from the basic averments there were no other averments as to in what manner the appellant was responsible for the conduct of the business of the company. (iii) However, in a subsequent decision reported in N. Rangachari v. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to be made. (vii) In National Small Industries Corporation Ltd. v. Harmeet Singh Paintal and another, (2010) 3 SCC 330, a Division Bench of apex Court held that for making a person liable under Section 141(2) of the N.I. Act, the mechanical repetition of a requirements of Section 141(1) of N.I. Act will be of no assistance but there should be necessary averments in the complaint as to how and in what manner the accused was guilty of consent and connivance or negligence and therefore responsible under Section 141(2) of the Act. (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cific averments too are required would depend upon the fact whether the complainant ascribes the accused guilty under Section 141(1) or 141(2) of N.I. Act. For the purpose of offence under Section 141, the persons connected to an accused company are broadly divided into two categories--(i) Managing Director/Joint Managing Director, authorized signatory of cheque and other Directors, Managers, Secretaries or officers who are in charge of and responsible to the company for the conduct of the business 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 141 of N.I. Act depend on the category of persons alleged i.e. 141(1) or 141(2). 11. Point No. 2:Having resolved point No. 1 as above, it has now to be seen in each individual complaint whether allegations are levelled against petitioner/A3 in terms of Section 141(1) or 141(2) of N.I. Act and whether such allegations 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 65/2013 (Crl. P No. 5119 of 2013) complaints are filed against A1-company; A2-Managing Director, A3-Director (and A4-Authorised signatory in CC No. 57/2013). It is averred that as per the order placed by accused the complainant supplied cotton bales and in discharge of the sale price, the accused issued cheques which were 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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