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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 ..... r the conduct of its business. In National Small Industries Corporation Limited [ 2010 (2) TMI 590 - SUPREME COURT] the Supreme Court reiterated that if the accused is a Managing Director or Joint Managing Director, then it is not necessary to make specific averments in the complaint and by virtue of their position, they are liable to be proceeded with. 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 [ 2022 (9) TMI 846 - SUPREME COURT] , 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; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent no. 2 keeping in view the outbreak of the Covid-19 pandemic; 2.6 The respondent no. 2 herein made numerous requests to the accused to pay the arrears of rent, however, to no avail; 2.7 Accused no. 1, through its directors, issued cheques in the months of September, October, and December 2020 for the due and payable monthly rent. The said cheques got dishonoured on their presentation with the remarks Funds Insufficient or Stop Payment . Whereafter, the respondent no. 2 herein, through its counsel, sent demand notices dated 26.10.2020, 25.11.2020, and 07.04.2021. The said notices were duly served upon the accused, however, the dues were not paid. 3. By the Impugned Orders, the learned Trial Court has been pleased to issue summons inter alia to the petitioner in the above Complaint Cases. 4. Aggrieved of the said Orders, the petitioner has filed the present petitions. Submissions of the Learned Counsel for the Petitioner: 5. The learned counsel for the petitioner submits that the petitioner was involved in the affairs of the accused no. 1 Company in the complaint cases, that is, Garage Cowork Pvt. Ltd., only as a resident Indian Director and that too, for a short period and onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Counsel for the Respondent no. 2: 12. On the other hand, the learned counsel for the respondent no. 2 submits that the petitioner was an Executive Director of the accused no. 1 Company. He was also the Promoter of the said Company. Placing reliance on the judgment of the Supreme Court in S.P. Mani Mohan Dairy v. Dr. Snehalatha Elangovan, (2023) 10 SCC 685; and of this Court in Sashi Kumar Nagaraji Ors. v. M/s Magnifico Minerals Pvt Ltd Ors., Neutral Citation No. 2023:DHC:4318, he submits that the position of an Executive Director is different, as he is a Key Managerial Person of the Company as defined in Section 2(51) of the Companies Act. He further submits that for an Executive Director, the law presumes that he is in-charge of and responsible for the day-to-day affairs of the Company. He submits that, in fact, even in Susela Padmavathy Amma (Supra), the Supreme Court has highlighted the above distinction. Analysis Findings: 13. I have considered the submissions made by the learned counsels for the parties. 14. At the outset, it is to be kept in mind that at the time of issuing process, the learned Trial Court is only concerned with the allegations made in the complaint and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 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, ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision (and who has given his consent in that behalf to the Board); and (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. It follows that other employees of the company, cannot be said to be persons who are responsible to the company, for the conduct of the business of the company. 22. Section 141 uses the words was in charge of, and was responsible to the company for the conduct of the business of the company . (emphasis supplied) It is evident that a person who can be made vicariously liable under sub-section (1) of Section 141 is a person who is responsible to the company for the conduct of the business of the company and in addition is also in charge of the business of the company. There may be many Directors and secretaries who are not in charge of the business of the company at all. The meaning of the words person in charge of the business of the company was considered by this Court in Girdhari Lal Gupta v. D.H. Mehta (1971) 3 SCC 189 followed in State of Karnataka v. Pratap Chand (1981) 2 SCC 335 and Kat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r officers of a company cannot be made liable under sub-section (1) of Section 141. Other officers of a company can be made liable only under sub-section (2) of Section 141, by averring in the complaint their position and duties in the company and their role in regard to the issue and dishonour of the cheque, disclosing consent, connivance or negligence. 24. In National Small Industries Corporation Limited (Supra), the Supreme Court reiterated that if the accused is a Managing Director or Joint Managing Director, then it is not necessary to make specific averments in the complaint and by virtue of their position, they are liable to be proceeded with. 25. The above position in law has been reiterated by the Supreme Court in Sunita Palita v. Panchami Stone Quarry, (2022) 10 SCC 152; S.P. Mani Mohan Dairy (Supra); and, in Susela Padmavathy Amma (Supra). 26. It is for the above reason that in Ashok Shewakramani (Supra) and in Susela Padmavathy Amma (Supra), the Supreme Court emphasized that in those cases, it was not dealing with the cases of a Managing Director or a Whole-Time Director. The role of a Joint Managing Director of a Company may be different from an ordinary Director. 27. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re punishable by law and, therefore, can consist of several parts, each part being committed at different time and place involving different persons. The provisions of Section 138 would require a series of acts of commission and omission to happen before the offence of, what may be loosely called dishonour of cheque can be constituted for the purpose of prosecution and punishment. It is held by the Supreme Court in K. Bhaskaran v. Sankaran Vaidhyan Balan, that : 14. The offence under Section 138 of the Act can be completed only with the concatenation of a number of acts. The following are the acts which are components of the said offence : (1) drawing of the cheque, (2) presentation of the cheque to the bank, (3) returning the cheque unpaid by the drawee bank, (4) giving notice in writing to the drawer of the cheque demanding payment of the cheque amount, (5) failure of the drawer to make payment within 15 days of the receipt of the notice. 35. 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. To take an example, in the case of a company, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he inference that the petitioner is not so liable. What was his role in the transaction, would require appreciation of evidence and the complaint cannot be quashed by this Court at this stage. 32. In S.M.S Pharmaceuticals (Supra), the Supreme Court, while taking note of the earlier judgment in MCD v. Ram Kishan Rohtagi Ors., (1983) 1 SCC 1, has observed that order of the Magistrate issuing process can only be set aside/quashed in a case where the allegation made in the complaint or the statements of the witnesses recorded in support of the same taken at their face value make out absolutely no case against the accused or the complaint does not disclose the essential ingredients. It was further reiterated the managing directors or the joint managing directors, by virtue of the office they hold are in-charge of and responsible for the conduct of the business of the company and can be made vicariously liable under Section 141 of the NI Act. 33. In Gunmala Sales (Supra), the Supreme Court has cautioned that the High Court must use the power under Section 482 of the Cr.P.C. for quashing of the complaint cases under Section 138 of the NI Act sparingly and with great circumspection and sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h great circumspection to prevent inter alia the abuse of the process of the court. There are no fixed formulae to be followed by the High Court in this regard and the exercise of this power depends upon the facts and circumstances of each case. The High Court at that stage does not conduct a mini trial or roving inquiry, but nothing prevents it from taking unimpeachable evidence or totally acceptable circumstances into account which may lead it to conclude that no trial is necessary qua a particular Director. 34. In S.P. Mani (Supra), the Supreme Court has held as under: 50. The principles discernible from the aforesaid decision of this Court in Ashutosh Ashok Parasrampuriya are that the High Court should not interfere under Section 482 of the Code at the instance of an accused unless it comes across some unimpeachable and incontrovertible evidence to indicate that the Director/partner of a firm could not have been concerned with the issuance of cheques. This Court clarified that in a given case despite the presence of basic averments, the High Court may conclude that no case is made out against the particular Director/partner provided the Director/partner is able to adduce some u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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