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TMI Blog2023 (4) TMI 706X X X X Extracts X X X X X X X X Extracts X X X X ..... in, it would go against the very grain and texture of what the Hon ble Supreme Court has held in a catena of decisions. Thus, the following principles emerge: (i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction. (ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company. (iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that the accused were in charge of and responsible for the business of the company and by virtue of their position they are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and for setting aside order dated 6th July, 2017 by which Crl. Rev. No. 219/2017 filed by petitioner was dismissed by the Ld. Special Judge (PC Act), CBI-08, Central District, Tis Hazari Court, New Delhi. 2. The said complaint was filed under section 138 read with section 141 142 of the Negotiable Instruments Act, 1881 against the principal accused M/s Birla Cotsyn (India) Ltd. (A-l) an incorporated company with its registered office at Mumbai. Its Managing Director, Mr. P.V.R. Murthy, who is also a signatory to the cheque in question, has been arrayed as A-2 while the Directors of A-1, who are stated to be in charge and responsible for the conduct of day-to-day affairs of the accused company, have been arrayed as A-3 to A-8. The gravamen of the complaint was that the accused company had approached the complainant company (M/s. Cecil Webber Engineering Ltd.) for advancement of a business loan of Rs.5 crores as an Inter Corporate Deposit (ICD). The said loan was advanced on mutually agreed terms, and in discharge of its liability the accused company issued a cheque for Rs.5 crores with the assurance that the same would be honoured. The said cheque, on presentation, was dishono ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that A-3 was the Director of A-1 and was in charge of and responsible conduct of affairs of A-1 s business and on the basis that the letterhead by which the promissory note and the receipt was given, had the appellation Yash Birla Group on the top as also Form 32 showed that A-3 was Director of A-1. On this basis, the Ld. MM held that this was a matter to be decided in trial and the petitioner was at liberty to prove his defence during the same. iii) Thirdly, by virtue of the impugned order dismissing the revision petition, it was noted by the Ld. ASJ that the defence of the petitioner was that he was a non-executive Director of A-1 cannot be seen at the stage of framing of notice and the petitioner will get adequate opportunity to prove it at an appropriate stage. It was also noted that A-4 to A-8 who were initially arrayed as accused, were dropped by the complainant since the complainant was having difficulty in serving them. iv) Fourthly, this Court had directed the petitioner on 22nd May, 2019 to file an affidavit specifically deposing whether he was a Director or not on 11th July, 2012. Such an affidavit was indeed filed by the petitioner stating categorically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not a non-executive Director. Further, when legal notice was issued on 27th July, 2012, there was no reply from the petitioner and also when summons were issued on 9th November, 2012, the petitioner was a Director and resignation, if any, of the petitioner on 29th December, 2012 was post the summoning order. 7. Reliance has been placed on the decision of the Hon ble Supreme Court in Ashutosh Ashok Parasrampuriya v. Gharrkul Industries (P) Ltd., (2021) SCC OnLine SC 915 where while dealing with the contentions of the accused that they were non-executive Directors and not responsible for the conduct of the company, it was held that it was not open for the High Court to interfere under section 482 Cr.P.C. unless it comes across some unimpeachable, incontrovertible evidence which is beyond suspicion of doubt and which would clearly indicate that the Director could not have been concerned with the issuance of the cheque. 8. Ld. Senior Counsel for the petitioner rebutted reliance on this decision by stating that on facts, the cheques were issued when the accused were Directors of the company and were responsible for its business activities and were involved in the company. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had resigned from the company in any event on 29th December, 2012. What is evident from the contentions of the parties that there was no reason for the complainant to drop accused A-4 to A-8 from the proceedings merely on the submission that they were difficult to be served whereas continued with A-3, the petitioner, even though he was also in the same category as Director but amplified their contention by stating that the company was part of Yash Birla Group . It is also noted that the accused company is now in liquidation vide order dated 24th September, 2019 passed by the NCLT, Mumbai. 12. Receiving an ICD of Rs.5 crores was evidently not done under the signatures of the petitioner, nor was the petitioner a signatory to the said cheque which was furnished as part of the promissory guarantee of repayment. There is nothing on the records of the proceedings that there was any communication with the complainant which would have noted an active role of the petitioner in the specific transition that had taken place or the cheque which had been issued in lieu thereof. The dictum of the Hon ble Supreme Court in Sunita Palita (supra) is, therefore, apposite and applicable in thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder: 37. A combined reading of Sections 5 and 291 of Companies Act, 1956 with the definitions in clauses (24), (26), (30), (31) and (45) of Section 2 of that Act would show that the following persons are considered to be the persons who are responsible to the company for the conduct of the business of the company: (a) the Managing Director(s); (b) the whole-time Director(s); (c) the Manager; (d) the Secretary; (e) any person in accordance with whose directions or instructions the Board of Directors of the company is accustomed to act; (f) any person charged by the Board of Directors with the responsibility of complying with that provision: Provided that the person so charged has given his consent in this behalf to the Board; (g) where any company does not have any of the officers specified in Clauses (a) to (c), any Director or Directors who may be specified by the Board in this behalf or where no Director is so specified, all the Directors: Provided that where the Board exercises any power under Clause (f) or Clause (g), it shall, within thirty days of the exercise of such powers, file with the Registrar a return in the prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used 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. otherwise. (emphasis added) 17. In Jwala Devi Enterprises v. Fadi El Jaouni, (2018) SCC OnLine Del 10030 this Court has held that as per judicial pronouncements the following principles may be summarised as under: (i) It is only those persons who are in charge of or responsible for the conduct of the business of the company at the time of commission of the offence under Section 138 of the Negotiable Instruments Act, 1881 who can be subjected to criminal action with reference to Section 141; (ii). If the person committing an offence under Section 138 of the Negotiable Instruments Act, 1881 is a company, the person who was signatory to the cheque which is dishonoured is clearly responsible for the incriminating act and would be liable to be proceeded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible for the conduct, affairs and business of the company. There is no specific averment made that this was so at the time of the commission of the offence. Also, the signatory of the cheque was also the Managing Director of the Company would be deemed to be in-charge of and responsible for the conduct of the business of the company and therefore, it was not as if the complainant was remediless. Considering that Accused No.4 to 8 were dropped by the complainant, there was no reason for the complainant to have continued with proceedings against Accused No.3. 19. The reasons provided by the Ld. MM while dismissing the discharge application of Accused No.3 (the petitioner) was limited to adverting to the letter head of Yash Birla Group in order to continue proceedings against Accused No.3. Merely the mention of the name of Accused No.3 on the letter head as being the Head of the Group, does not ipso facto or ipso jure make him in-charge of and responsible for the affairs and business of the company at the time the offence was committed. 20. As per Annual Report filed by the petitioner, he was clearly a Non-Executive Director of the Company and therefore the monitoring of exec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... need not interfere in the day-to-day affairs of the company. Chairperson of large business conglomerates are in fact even further removed from the minutiae of everyday operations of the company and distant from the micro-management which is required to be done by the executive directors and officers of the company. Needless to say, this has to be assessed in context of the peculiar facts of each case. 24. In this regard reference may also be made to a decision of the High Court of Karnataka in Shamanur Shivashankarappa v. India Sugars Refineries Ltd., 2014 SCC OnLine Kar 8179 regarding liability of a Chairperson of a company in context of the Essential Commodities Act, where it was noted: 26. The term Chairman is not defined under the Companies Act, 1965. The Chairman is a necessary person in company meetings and is usually appointed by the articles of the Company. Generally, Chairman is the highest post in the Company, who represents the name and fame of the Company. Chairman's role is to attend the meetings and to act according to the byelaws of the Company and also exercise any defined or reserved rights or duties. Regulation 76(1) of table A to Schedule-I to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate in the day to day business, conduct and affairs of the Company, he is not liable for all the offences committed by the Company. (emphasis added) 25. Creeping up an escalating liability to Chairpersons of large conglomerates/companies for cheques issued in day-to-day affairs of the business of a company would unfairly and unnecessarily expand the provisions of vicarious liability under the provisions of the Negotiable Instruments Act. Particularly, since no prejudice is caused to the complainant in this case as the signatory of the cheque and admittedly the Managing Director of the accused company is already arrayed as A-2 and is continued to be part of proceedings. It does not need to be reiterated, as has been held by various decisions, including the ones noted above, that the High Courts have the power to quash proceedings under section 138 NI Act qua those accused who do not fall within the rubric of vicarious liability as now defined and refined by various decisions of the Hon ble Supreme Court. 26. In view of the above facts and circumstances and the discussion and analysis above, in the considered opinion of this Court, the said complaint and its proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X
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