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TMI Blog2022 (12) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 - One can also not lose sight of the fact that once such innocent persons are summoned, they have no choice but to seek bail and face the ordeal of trial. Many of such persons also approach the High Court under Section 482 Cr.P.C. to seek quashing of the summoning order and the complaint filed against them and this further increases the burden on the already overburdened Courts. Coming to the facts of the present case, a perusal of Form No. DIR-11, dated 19.09.2019, 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 he was incharge of and was responsible for the conduct of the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny, 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 was 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 persons were summoned to appear by the learned Trial Court. 3. Learned counsel for the petitioner submits that grave miscarriage of justice has been caused by summoning the present petitioner in the complaint case filed by respondent no. 2. It is the case of the petitioner that he was an Independent/Non-Executive Director in the accused company at the time of commission of offence, the fact which is authenticated by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the records, the petitioner was a director of the accused company and he 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 under: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 sought to be made criminally liable under Section 141 should be, at the time the offence was committed, in charge of and responsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the provision. It is only those persons who were in charge of and responsible for the conduct of business of the company at the time of commission of an offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mall 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 affairs of the company. *** 38. But 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 stating that he was in charge of the business of the company or by stating that he was in charge of the day-to-day management of the company or by stating that he was in charge of, and was responsib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 complaint, except the mere bald and cursory statement with regard to the appellant, the complainant has not specified her role in the day to day affairs of the Company. We have verified the averments as regard to the same and we agree with the contention of Mr. Akhil Sibal that except reproduction of the statutory requirements the complainant has not specified or elaborated the role of the appellant in the day to day affair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rict 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 liable to be convicted for an offence committed by the company if he/she was in charge of and was responsible to the company for the conduct of its business or if it is proved that the offence was committed with the consent or connivance of, or was attributable to any negligence on the part of the Director concerned (see State of Karnataka v. Pratap Chand [State of Karnataka v. Pratap Chand, (1981) 2 SCC 335 : 1981 SCC (Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 Commodities India Pvt Ltd 2020 SCC OnLine Del 11 wherein a Coordinate bench of this Court quashed proceedings against a director and held that: 31. As laid down by this Court in Bhardwaj Thuiruvenkata Venkatavraghavan (supra) and Kanarath Payattiyath Balraj (supra), the petitioner being an Independent and a Non-Executive Director, in the absence of any specific role attributed against the petitioner for his active partici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuted 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 summoning orders in view of the decision of the Apex Court in Adalat Prasad v. Rooplal Jindal, (2004) 7 SCC 338. One can also not lose sight of the fact that once such innocent persons are summoned, they have no choice but to seek bail and face the ordeal of trial. Many of such persons also approach the High Court under Section 482 Cr.P.C. to seek quashing of the summoning order and the complaint filed against them and this furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner could have been held vicariously liable only if it was shown that he 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.l Is a company registered under the provisions of the Companies Act 1956. Accused Nos. 2 to 14 are the Directors of the Company who were incharge of managing the day to day affairs of the Company. All the accused nos. 2 to 14 were at the helm of affairs of the Company at the time of Its dealing with the Complainant and/or at the time when the subject matter SI cheques were issued to the Complainant and at the time of dishonour of cheques. 3. That in or around August 2012, Accused No.l acting throu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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