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TMI Blog2024 (5) TMI 457X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned Orders') passed by the learned Metropolitan Magistrate (NI Act) Digital Court, East District, Karkardooma Courts, Delhi (hereinafter referred to as the 'Trial Court'), summoning, inter alia, the petitioner herein in the Complaint Cases filed by the respondent no. 2 under Section 138 of the Negotiable Instruments Act, 1881 (in short, 'NI Act'). Factual Matrix: 2. The above Complaint Cases have been filed by the respondent no. 2 herein alleging that: 2.1 It is in the business of equipment leasing, leasing of immovable and movable properties of all kinds and description, and right, title and interest therein etc.; 2.2 Accused no. 1, that is, Garage Cowork Pvt. Ltd. is a Company incorporated under the Companies Act, 2013 (hereinafter referred to as 'Companies Act'). The other accused persons, including the petitioner herein, are its Directors and are in charge of day-to-day affairs of the accused no. 1 Company; 2.3 Respondent no. 2 herein is the owner of the property bearing no. 270, Phase-2, Udyog Nagar, Gurugram, Haryana (hereinafter referred to as the 'Subject Property'); 2.4 Respondent no. 2 herein leased out the entire subject property to the Accused no. 1 for a peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Garg, who is also arrayed as an accused in the Complaint Cases. She submits that the cheque has not been signed by the petitioner, but by Mr. Prashant Garg. 7. She further submits that the demand notice(s) was not delivered upon the petitioner. 8. She further submits that the respondent no. 2 has initiated other litigations as well against the accused no. 1 Company, including complaints to the Registrar of Companies, wherein it has not made any allegation against the petitioner herein. 9. Placing reliance on the judgments of the Supreme Court in Ashok Shewakramani & Ors. v. State of Andhra Pradesh & Anr., (2023) 8 SCC 473; A.C. Narayanan v. State of Maharashtra & Anr., (2014) 11 SCC 790; Siby Thomas v. M/s. Somany Ceramics Ltd., (2024) 1 SCC 348; National Small Industries Corporation Limited v. Harmeet Singh Paintal & Anr., (2010) 3 SCC 330; Gunmala Sales (P) Ltd. v. Anu Mehta & Ors., (2015) 1 SCC 103; and, Susela Padmavathy Amma v. M/s Bharti Airtel Limited 2024 SCC OnLine SC 311, she submits that merely because the petitioner at one point of time was the Director of the main accused Company, he cannot be made an accused and be summoned in a complaint filed under Section 138 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner to be an Executive Director and Promoter of the accused no. 1 Company. 16. Rule 2(k) of the Companies (Specification of definitions details) Rules, 2014 defines an 'Executive Director' to mean a whole-time director as defined in clause (94) of Section 2 of the Companies Act. 17. Section 2(94) of the Companies Act defines the 'Whole-time Director' to include a director in the whole-time employment of the company. 18. Section 2(51) defines the 'Key Managerial Personnel', in relation to a company, to inter alia mean the whole-time director. 19. Reading of the above provisions would show that an Executive Director is a 'Key Managerial Personnel', who, even in terms of Section 2(60) of the Companies Act, shall be an 'officer who is in default'. 20. Section 2(69) of the Companies Act, defines 'Promoter' to mean a person who, inter alia, has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise or in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act, provided such person is not acting merely in a professional capacity. 21. As noted hereinabove, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; Law presumes that the Managing Director is in charge of and is responsible to the company for the conduct of its business. It was held as under: "20. Section 291 of the Companies Act, 1956 provides that subject to the provisions of that Act, the Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do. A company though a legal entity can act only through its Board of Directors. The settled position is that a Managing Director is prima facie in charge of and responsible for the company's business and affairs and can be prosecuted for offences by the company. But insofar as other Directors are concerned, they can be prosecuted only if they were in charge of and responsible for the conduct of the company's business. 21. A combined reading of Sections 5 and 291 of the Companies Act, 1956 with the definitions in clauses (24), (26), (30), (31), (45) of Section 2 of that Act would show that the following persons are considered to be the pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 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 the Companies Act, an averment in the complaint that he was in charge of, and was responsibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Karnataka, while the property and the company being in Delhi, he was not in control of the affairs of the company, the same will be a matter of trial and cannot be adjudicated upon in these proceedings by this Court. 30. Similarly, the submission of the petitioner that the petitioner has since resigned, also cannot make the petitioner escape his liability under Section 138 read with Section 141 of the NI Act, at this Stage. In S.P. Mani & Mohan Diary (supra), the Supreme Court has held that different persons can be in-charge of the company when each of the series of acts of commission and omission essential to complete the commission of offence by the company were being committed. Therefore, "every person who was in charge of and was responsible to the company for the conduct of its business at the time any of the components necessary for the commission of the offence occurred may be "proceeded against", but may not be "punished" if he succeeds in proving that the offence was committed without his knowledge and despite his due diligence; the burden of proving that remaining on him.". I may quote from the judgment as under:- "34. The seminal issue raised and required to be settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly" as it occurs in sub-section (1) of Section 141 and the use of the phrase "provided that nothing contained in this sub-section shall render any person liable to punishment if he proves..." that occurs in the first proviso. Every person who was in charge of and was responsible to the company for the conduct of its business at the time any of the components necessary for the commission of the offence occurred may be "proceeded against", but may not be "punished" if he succeeds in proving that the offence was committed without his knowledge and despite his due diligence; the burden of proving that remaining on him. 37. Therefore, it also has to be held that the time of commission of the offence of dishonour of cheque cannot be on the stroke of a clock or during 15 days after the demand notice has to be construed as the time when each of the acts of commission and omission essential to constitute the offence was committed. The word "every" points to the possibility of plurality of responsible persons at the same point of time as also to the possibility of a series of persons being in charge when the sequence of events culminating into the commission of offence by the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause the complaint contains the basic averment which is sufficient to make out a case against the Director. 34.3. In the facts of a given case, on an overall reading of the complaint, the High Court may, despite the presence of the basic averment, quash the complaint because of the absence of more particulars about the role of the Director in the complaint. It may do so having come across some unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abuse of process of court. Despite the presence of basic averment, it may come to a conclusion that no case is made out against the Director. Take for instance a case of a Director suffering from a terminal illness who was bedridden at the relevant time or a Director who had resigned long before issuance of cheques. In such cases, if the High Court is convinced that prosecuting such a Director is merely an arm-twisting tactics, the High Court may quash the proceedings. It bears repetition to state that to establish such case unimpeacha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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