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TMI Blog2022 (11) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... tories to cheque, but not the other directors or persons, especially independent or non-executive directors, as held in catena of judgments. In fact, it has come to the knowledge of this Court that in reference to the same complaint case and summoning order, two other directors of the accused company namely Sanjay Aggarwal, arrayed as accused no. 5 in complaint, and Sourabh Garg, arrayed as accused no. 6 and 11 in complaint, had also filed petitions i.e., Crl. M.C. 5852/2019 and Crl. M.C. 5799/2019 before this Court seeking quashing of summoning order qua them. In these petitions, a Coordinate bench of this Court vide order dated 16.08.2022 has quashed the summoning order with regard to the petitioners therein, on the ground that they were not even the directors in the accused company at the relevant point of time and had resigned even before the agreements were entered into between the accused company and complainant - In absence of any specific averments or allegations carving out a specific role attributable to petitioner in relation to conduct of business of accused company, merely making bald statements that all the accused persons/directors were incharge and responsible fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s arising from the contracts was a sum of Rs.1,06,77,37,316.50/- (Rupees One hundred and Six Crore, Seventy Seven Lacs, Thirty Seven Thousand, Three hundred sixteen and Fifty Paise only). c. On 11.11.2016, 16 cheques were issued in favour of the drawer company against the aforesaid seven agreements. On 07.02.2017, the cheques were drawn on account of Central Bank of India, Morena, MP maintained by the drawer company, and the same were returned dishonored with remarks showing Funds Insufficient . d. Thereafter, on 07.03.2017, statutory demand notice and another addendum notice dated 09.03.2017 were sent to the accused demanding payment of the said amount. However, upon not receiving any response from the side of the accused, a complaint was filed under Section 138/141 of Negotiable Instruments Act, 1881 ( NI Act ) bearing complaint no. 16201/2017 before CMM at Patiala House Courts, New Delhi on 27.04.2017. The complaint was filed against the company and 12 persons, who were directors between 2012 and 2017 (including past, non-executive and nominee directors). e. Thereafter, by virtue of impugned order dated 28.11.2018, the petitioner as well as all other accused pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent no. 2 that petitioner was neither incharge nor responsible for the day-today affairs of the accused company. 6. Controverting the contentions raised on behalf of the petitioner, learned counsel for respondent no. 2/complainant states that cheques in question were dishonoured in February 2017 whereas the petitioner had resigned from the accused company only in September 2017. It is further stated that the even as per the records, the petitioner was a director of the accused company and she is liable to face the trial. It is also averred that the petitioner s arguments cannot be considered at this stage and can be dealt with only during the trial. 7. Both the learned counsel for respondent no. 2 as well as learned APP for the State have stated that the amount in question is more than Rs.106 crores and trial is pending as of now, in view of which, the relief prayed for in the present petition may not be granted. 8. Before considering the facts of the present case, it will be relevant to consider the law as laid down in statutes and through precedents. It will be appropriate to first refer to Section 141 of the Negotiable Instruments Act, 1881, which is reproduced as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently... 10. In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla (2005) 8 SCC 89 , the Hon ble Supreme Court of India discussed the meaning and purpose of Section 141 as well as the averments required to be made in the complaint under Section 138 r/w 141 of Negotiable Instruments Act, 1881 to fasten the vicarious liability on the persons associated with a company. The Apex Court held as under: 10. While analysing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company. The key words which occur in the section are every person . These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words: 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, etc. What is required is that the persons who are soug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... responsible to the company for conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be in charge 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... (emphasis supplied) 11. Reiterating the same view, the Apex Court in National Small Industries Corp. Ltd. v. Harmeet Singh Paintal (2010) 3 SCC 330 further held as under: 22. Therefore, this Court has distinguished the case of persons who are in charge of and responsible for the conduct of the business of the company at the time of the offence and the persons who are merely holding the post in a company and are not in charge of and responsible for the conduct of the business of the company. Further, in order to fasten the vicarious liability in accordance with Section 141, the averment as to the role of the Directors concerned should be specific. The description should be clear and there should be some unambiguous allegations as to how the Directors concerned were alleged to be in charge of and were responsible for the conduct and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded with. (vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint. (vii) The person sought to be made liable should be in charge 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... (emphasis supplied) 12. The Apex Court in Anita Malhotra v. Apparel Export Promotion Council (2012) 1 SCC 520, following the principles laid down in National Small Industries Corp. Ltd. (supra), held that: 22. This Court has repeatedly held that in case of a Director, complaint should specifically spell out how and in what manner the Director was in charge of or was responsible to the accused Company for conduct of its business and mere bald statement that he or she was in charge of and was responsible to the company for conduct of its business is not sufficient. [Vide National Small Industries Corporation Limited vs. Harmeet Singh Paintal and Another, (2010) 3 SCC 330 ]. In the case on hand, particularly, in para 4 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bald cursory statement in a complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the company without anything more as to the role of the Director. But the complaint should spell out as to how and in what manner Respondent 1 was in charge of or was responsible to the accused Company for the conduct of its business. This is in consonance with strict interpretation of penal statutes, especially, where such statutes create vicarious liability. 14. A company may have a number of Directors and to make any or all the Directors as accused in a complaint merely on the basis of a statement that they are in charge of and responsible for the conduct of the business of the company without anything more is not a sufficient or adequate fulfilment of the requirements under Section 141. 18. In Girdhari Lal Gupta v. D.H. Mehta [Girdhari Lal Gupta v. D.H. Mehta, (1971) 3 SCC 189 : 1971 SCC (Cri) 279 : AIR 1971 SC 2162] , this Court observed that a person in charge of a business means that the person should be in overall control of the day-to-day business of the Company. 19. A Director of a company is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsible for the day-to-day running of the Accused Company. Moreover, when a complaint is filed against a Director of the company, who is not the signatory of the dishonoured cheque, specific averments have to be made in the pleadings to substantiate the contention in the complaint, that such Director was in charge of and responsible for conduct of the business of the Company or the Company, unless such Director is the designated Managing Director or Joint Managing Director who would obviously be responsible for the company and/or its business and affairs. *** 46. As held by this Court in National Small Industries Corporation Ltd. v. Harmeet Singh Painta quoted with approval in the subsequent decision of this Court in Pooja Ravinder Devidasani v. State of Maharashtra and Anr. (supra) the impleadment of all Directors of an Accused Company on the basis of a statement that they are in charge of and responsible for the conduct of the business of the company, without anything more, does not fulfil the requirements of Section 141 of the NI Act... 15. Reliance was placed by learned counsel on behalf of the petitioner on the decision of Har Sarup Bhasin v. M/s Origo Commo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 sought to be prosecuted by the complainant, irrespective of whether they played any specific role in the incriminating act. It is surprising to see that in plethora of cases, the complaint contains allegations even against those persons who might have been Directors at any point in time in the accused company, but had resigned from such company much prior to the period when the alleged offence was committed. Issuing summons to all persons named in the complaint mechanically, without ascertaining whether they played any actual role in the transaction, not only pesters the innocent directors/employees named in the complaint, but also upsurges the load on the High Courts as the Magistrates once issuing the summoning orders against the accused, are precluded from reviewing their s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us district courts of Delhi, so that they can apprise the members of the Bar about the aforesaid directions. 17. Coming to the facts of the present case, a perusal of Form No. DIR-12, dated 16.01.2017, of the accused company K.S. Oils Limited shows that the petitioner was an independent director at the time of commission of the offence. In view of Section 141 of Negotiable Instruments Act, 1881 and Section 149 of Companies Act, 2013 petitioner could have been held vicariously liable only if it was shown that she was incharge of and was responsible for the conduct of the business of the company at the time of commission of offence, and not otherwise 18. As per settled legal propositions, it was to be specifically averred in the complaint as to how the petitioner, being an independent director, was incharge of day to day affairs of the company as well as the conduct of business. However, nothing of this sort can be inferred from the complaint filed before the learned Trial Court. The relevant para of the complaint casting allegations against all the directors of the accused company is as under: 2. That Accused No.1 Is a company registered under the provisions of the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any at relevant point of time, and thus, order summoning them may be quashed. 21. However, a perusal of complaint shows that a general allegation was made against all the directors without any specific role alleged of any of them, including the past directors i.e., petitioners in Crl. M.C. 5852/2019 and Crl. M.C. 5799/2019 against whom the cases have been quashed by this Court. Thus, the same general allegation exists against the present petitioner also, who was an independent director in the accused company. 22. In absence of any specific averments or allegations carving out a specific role attributable to petitioner in relation to conduct of business of accused company, merely making bald statements that all the accused persons/directors were incharge and responsible for the day to day affairs of the company, does not suffice to make the petitioner herein vicariously liable for dishonouring of the cheques not signed by her and there being material on record to show that she was an independent director in the company. 23. As held in S.M.S. Pharmaceuticals Ltd. (supra), and affirmed recently in Sunita Palita (supra) by the Apex Court, liability depends on the role one play ..... X X X X Extracts X X X X X X X X Extracts X X X X
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