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TMI Blog2024 (8) TMI 1267X X X X Extracts X X X X X X X X Extracts X X X X ..... th a caveat that a hyper-technical approach should not be adopted in quashing the complaints since the laudable object is to prevent dishonour of cheques and sustain the credibility of commercial transactions, for which avowed purpose Legislature has enacted Sections 138 and 141 of the NI Act. In SABITHA RAMAMURTHY ANR. VERSUS RBS. CHANNABASAVARADHYA [ 2006 (9) TMI 490 - SUPREME COURT ] the Supreme Court restated the requirements of Section 141 of the NI Act and held that the complainant must make a clear statement of fact to enable the Court to arrive at a prima facie opinion, even if the allegations are that the accused is vicariously liable. Section 141 of the NI Act raises a legal fiction where a person although not personally liable for commission of an offence, would be vicariously liable but before a person can be made vicariously liable, strict compliance with statutory requirements is to be insisted. Coming to the facts of the present case, perusal of Form No. DIR-12 of the accused company BTIL reflects that Petitioners No. 1 and 3 were Independent Non-Executive Directors while Petitioner No. 2 was Non-Executive Director at the time of commission of the alleged offence. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 141, as a caveat - The present complaint fails to pass muster and basis the same, no criminal liability can be fastened on the Petitioners. Since the contents and averments in the complaint are insufficient to attract the provisions under Section 141 (1) of NI Act, the impugned order dated 14.12.2017 passed by learned MM (NI Act), Patiala House Courts, New Delhi, in CC No. 16632/2017 is set-aside to the extent of issuing summons to the present Petitioners for alleged commission of the offence punishable under Section 138 of Negotiable Instruments Act, 1881. Petition allowed. - HON'BLE MS. JUSTICE JYOTI SINGH For the Petitioner Through: Mr. Siddharth Aggarwal, Senior Advocate with Mr. Aditya Wadhwa, Mr. Ayush Srivastava, Mr. Siddharth Sunil, Mr. Ashish Raghuvanshi and Mr. Shivansh Agarwal, Advocates For the Respondent Through: Mr. Mudit Jain, Advocate JUDGEMENT JYOTI SINGH, J. 1. These three petitions have been preferred on behalf of the Petitioners under Section 482 Cr. P.C. seeking quashing of summoning order dated 14.12.2017 and the complaint in Ct. Case No. 16632/2017 titled Good Marketing and Sales Pvt. Ltd. v. Brightstar Telecommunications India Ltd. Ors. qua the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of non-clearance of dues by iWorld under the Distributorship Agreements, BTIL filed petitions under Sections 9 and 11 of the Arbitration and Conciliation Act, 1996, which are stated to be pending and BTIL also initiated prosecution under Section 138 of Negotiable Instruments Act, 1881 ( NI Act ) against iWorld and its officers. (f) BTIL had cleared all its dues under the STC Agreement and despite this, complainant misused and presented the security cheque, which was dishonoured vide return memo dated 24.10.2017 for the reason Drawers signature not as per mandate and resulted in the instant prosecution. Petitioners No. 1 and 3 were Independent Non-Executive Directors while Petitioner No. 2 was Non-Executive Director having nothing to do with the day to day working of BTIL and yet legal notices dated 20.11.2017 were sent to them along with notices to BTIL and 6 other individuals under Section 138 read with Section 141 of NI Act, alleging that Petitioners were vicariously liable for the offence under Section 138 of NI Act. Petitioners responded to the legal notices on 08.12.2017 through their counsel denying the allegations and stating that the concerned cheque was a secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no concept of vicarious liability in criminal jurisprudence and 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 will not fall within the ambit of the provision. The liability arises from being in charge of and responsible for the conduct of business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. As held by the Supreme Court, if being a director or manager or secretary was enough to cast criminal liability, the legislature would have used the expression every director, manager or secretary in a company is liable instead of every person . Reliance was placed by learned Senior Counsel on the judgments of the Supreme Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Another, (2005) 8 SCC 89; Pooja Ravinder Devidasani v. State of Maharashtra and Another, (2014) 16 SCC 1; Sunita Palita and Others v. Panchami Stone Quarry, (2022) 10 SCC 152; S.P. Mani Mohan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 149 (12) to hold the Petitioners liable, as held by this Court in Kanarath Payattiyath Balrajh v. Raja Arora, 2017 SCC OnLine Del 7418 but a bare perusal of the complaint would show that only bald and vague allegation has been made in one line that the cheque in question was signed by accused Nos.2 and 3 with the knowledge and consent of accused Nos.4 to 10. There is neither any averment nor evidence on record to suggest even prima facie that Petitioners had knowledge regarding the concerned transactions or that there was any consent or connivance on their part. The impugned order shows that the learned MM has not applied its mind to the complaint and the averments therein and is in teeth of the judgment of this Court in Sudeep Jain (supra), wherein the Court observed that the prime objective of the High Court is to remind all the Metropolitan Magistrates in Delhi to carefully scrutinize all complaint cases being filed under Section 138 read with Section 141 of NI Act against the accused companies at the pre-summoning stage and make sure that notice is directed only to those Directors or employees of the company who satisfy the principles laid down in various judgments by the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company to M/s Brightstar Telecommunications India Ltd. in February, 2017. The mischief of the complainant in lodging a false and malicious prosecution is thus apparent. Admittedly. Petitioners are not the signatories to the cheque and both the signatories i.e. Mukesh Kapoor and Puneet Khanna had resigned from BTIL much prior to the alleged date of commission of the offence on 24.10.2017 in as much as Mukesh Kapoor resigned in October, 2015 while Puneet Khanna resigned on 28.02.2017. 8. Learned counsel for the Respondent, per contra, argued that Petitioners are vicariously liable for the offence under Section 138 read with Section 141 of NI Act since they were Directors of BTIL when the offence was committed. To absolve themselves from the liability, Petitioners shall have to prove that they were not involved in the day to day affairs of BTIL and that there was no connivance on their part in committing the offence and this onus cannot be shifted on the complainant. Petitioners were Directors of BTIL at the time of commission of the offence and it makes no difference that they were allegedly Independent Non-Executive Directors or Non-Executive Directors. It is trite that once ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the complainant that as a holder of the cheque, complainant has received the cheque in discharge of a liability and as held in Rangappa v. Sri Mohan, (2010) 11 SCC 441 by the Supreme Court, the presumption includes the existence of a legally enforceable debt or liability. 11. Petitioners have primarily predicated their case on their alleged status as Non-Executive Directors and are using this as a shield against their existing liability and criminal culpability. Heavy reliance is placed on Form No.DIR-12 claiming the document to be an unimpeachable evidence in their defence. There are, however, several documents on record of the Registrar of Companies ( RoC ) which reflect that Petitioners played an active role in executing day to day business of the company by being part of the Board meetings as well as meetings of the Audit Committees, Corporate Social Committees and Nomination Committees of BTIL. Form No. MGT-7 filed by BTIL in compliance of the mandate issued by Ministry of Corporate Affairs is an equally unimpeachable document as Form No. DIR-12 and reflects their role and participation in the day to day affairs of BTIL. All these aspects require evidence and thus the case mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts averred in the complaint as also to the evidence by way of affidavit, bank memo, cheque in question, demand notice and a host of other documents including the arguments of the parties. In Sunil Todi (supra), the Supreme Court observed that once the Magistrate adverts to all the aforesaid documents, his order cannot be invalid as betraying non-application of mind. The judgment in Sudeep Jain (supra) relied upon by the Petitioners was in the context of a Director and is distinguishable. 15. Heard learned Senior counsel for the Petitioners and learned counsel for the complainant. 16. Sections 138 and 141 of NI Act have been analysed and examined in several judgments from time to time and to avoid prolixity, I may only refer to a few. In S.P. Mani (supra), the Supreme Court observed as follows:- 25. Evidently, the gist of Section 138 is that the drawer of the cheque shall be deemed to have committed an offence when the cheque drawn by him is returned unpaid on the prescribed grounds. The conditions precedent and the conditions subsequent to constitute the offence are drawing of a cheque on the account maintained by the drawer with a banker, presentation of the cheque within the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, while the liability under sub-section (2) arises out of holding an office and consent, connivance or neglect. 29. While all the persons covered by sub-section (1) and sub-section (2) are liable to be proceeded against and also punished upon the proof of their being either in charge of and responsible to the company in the conduct of its business or of their holding of the office and having been guilty of consent, connivance or neglect in the matter of commission of the offence by the company, the person covered by sub-section (1) may, by virtue of the first proviso, escape only punishment if he proves that the offence was committed without his knowledge or despite his due diligence. 30. As for the requisite evidence, the burden upon the prosecution would be discharged under sub-section (1) when a person is proved to be in charge of and responsible to the company in the conduct of its business and would shift upon the accused to prove that he was ignorant or diligent, if that be his defence; whereas under sub-section (2) the prosecution would be required to allege and prove the consent, connivance or neglect and holding of the office by the accused. There is nothing to sugges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B and C, respectively, or any of them would advance the purpose of the provision and, if none can be prosecuted or punished, it would frustrate the purpose of the provisions of Section 138 as well as Section 141. 36. The key to this interpretation lies in the use of the phrase: every person shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany, regardless of his office or capacity, can, prima facie, be assumed to be in charge of and responsible to the company in the conduct of its business. And, where such person is prosecuted, then, if it be his defence that the offence was committed without his or her knowledge or that he or she has exercised all due diligence to prevent the commission of such offence, the burden to prove that would be on him or her and can only be discharged at the stage of evidence. 19. The issue of vicarious liability under Section 141 of NI Act was discussed in paragraphs 44 to 49 as follows:- 44. This Court in Commr. v. Velliappa Textiles Ltd., introduced the concept of ego and alter ego in relation to the employee and the employer corporation. The Court elucidated this principle in the following words: 56. In order to trigger corporate criminal liability for the actions of the employee (who must generally be liable himself), the actor-employee who physically committed the offence must be the ego, the centre of the corporate personality, the vital organ of the body corporate, the alter ego of the employer corporation or its directing mind. Since the company/corporation has no mind of its own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponsible 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 responsible to the company, for the conduct of the business of the company is necessary to bring the case under Section 141 (1) of the Act. No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable under Section 141 (2) by making necessary averments relating to consent and connivance or negligence, in the compla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 abused of process of court. Despite the presence of basic averment, it may come to a conclusion that no case is made out against the particular Director for which there could be various reasons. (emphasis supplied) 20. It would be useful and relevant at this stage to allude to some of the earlier judgments on the issue. In S.M.S. Pharmaceuticals Ltd. (supra) while dealing with the manner in which the averments must be specifically made against the Accused in a complaint under Section 138 read with Section 141 NI Act, the Supreme Court observed as under:- 8. The officers responsible for conducting the affairs of companies are generally referred to as directors, managers, secretaries, managing directors, etc. What is required to be considered is: Is it sufficient to simply state in a complaint that a particular person was a director of the company at the time the offence was committed and nothing more is required to be sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the cheque in question. Therefore, mere use of a particular designation of an officer without more, may not be enough by way of an averment in a complaint. When the requirement in Section 141, which extends the liability to officers of a company, is that such a person should be in charge of and responsible to the company for conduct of business of the company, how can a person be subjected to liability of criminal prosecution without it being averred in the complaint that he satisfies those requirements. Not every person connected with a company is made liable under Section 141. Liability is cast on persons who may have something to do with the transaction complained of. A person who is in charge of and responsible for conduct of business of a company would naturally know why the cheque in question was issued and why it got dishonoured. 9. The position of a managing director or a joint managing director in a company may be different. These persons, as the designation of their office suggests, are in charge of a company and are responsible for the conduct of the business of the company. In order to escape liability such persons may have to bring their case within the proviso t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious consequences so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action. 11. A reference to sub-section (2) of Section 141 fortifies the above reasoning because sub-section (2) envisages direct involvement of any director, manager, secretary or other officer of a company in the commission of an offence. This section operates when in a trial it is proved that the offence has been committed with the consent or connivance or is attributable to neglect on the part of any of the holders of these offices in a company. In such a case, such persons are to be held liable. Provision has been made for directors, managers, secretaries and other officers of a company to cover them in cases of their proved involvement. 12. The conclusion is inevitable that the liability arises on account of conduct, act or omission on the part of a person and not merely on account of holding an office or a position in a company. Therefore, in order to bring a case within Section 141 of the Act the complaint must disclose the necessary facts which make a person liable. 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icial opinion that: (Comp Cas p. 691) [A] director of a company cannot be prosecuted for an offence under Section 138 of the Act in the absence of a specific allegation in the complaint that he was in charge of and responsible to the company in the conduct of its business at the relevant time or that the offence was committed with his consent or connivance. The Court has quoted several judgments of various High Courts in support of this proposition. We do not feel it necessary to recount them all. 15. Cases have arisen under other Acts where similar provisions are contained creating vicarious liability for officers of a company in cases where primary liability is that of a company. State of Karnataka v. Pratap Chand [(1981) 2 SCC 335 : 1981 SCC (Cri) 453] was a case under the Drugs and Cosmetics Act, 1940. Section 34 contains a similar provision making every person in charge of and responsible to the company for the conduct of its business liable for offence committed by a company. It was held that a person liable for criminal action under that provision should be a person in overall control of the day-to-day affairs of the company or a firm. This was a case of a partner in a firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any allegation that the offence was made with the consent and connivance or that it was attributable to any neglect on the part of the accused. It was held that no case was made out against the accused who was a partner and the complaint was quashed. The latest in the line is the judgment of this Court in Monaben Ketanbhai Shah v. State of Gujarat [(2004) 7 SCC 15 : 2004 SCC (Cri) 1857] . It was observed as under: (SCC p. 17, para 4) 4. It is not necessary to reproduce the language of Section 141 verbatim in the complaint since the complaint is required to be read as a whole. If the substance of the allegations made in the complaint fulfil the requirements of Section 141, the complaint has to proceed and is required to be tried with. It is also true that in construing a complaint a hypertechnical approach should not be adopted so as to quash the same. The laudable object of preventing bouncing of cheques and sustaining the credibility of commercial transactions resulting in enactment of Sections 138 and 141 has to be borne in mind. These provisions create a statutory presumption of dishonesty, exposing a person to criminal liability if payment is not made within the statutory perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within Section 141, he would issue the process. We have seen that merely being described as a director in a company is not sufficient to satisfy the requirement of Section 141. Even a non-director can be liable under Section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial. 19. In view of the above discussion, our answers to the questions posed in the reference are as under: (a) It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied. (b) The answer to the question po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the following principles :- (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 accused therein vicariously liable for offence committed by company along with averments in the petition containing that accused were in-charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with. (iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred. (v) If accused is Managing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hra Pradesh and Another, (2023) 8 SCC 473 and I quote:- 18. Thus, in the light of the dictum laid down in Ashok Shewakramani case [Ashok Shewakramani v. State of A.P., (2023) 8 SCC 473 : (2023) 4 SCC (Civ) 116 : (2023) 3 SCC (Cri) 568 : 2023 INSC 692], it is evident that a vicarious liability would be attracted only when the ingredients of Section 141 (1) of the NI Act, are satisfied. It would also reveal that merely because somebody is managing the affairs of the company, per se, he would not become in charge of the conduct of the business of the company or the person responsible to the company for the conduct of the business of the company. A bare perusal of Section 141 (1) of the NI Act, would reveal that only that 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 alone shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished. 19. In such circumstances, para 24 in Ashok Shewakramani case [Ashok Shewakramani v. State of A.P., (2023) 8 SCC 473 : (2023) 4 SCC (Civ) 116 : (2023) 3 SCC (Cri) 568 : 2023 INSC 692] is als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch then attracts proceedings under Section 138 of the NI Act against him. xxx xxx xxx 22. This Court is conscious of the settled position of law that the High Court while entertaining a petition of this nature shall not consider the defence of the accused or conduct a roving inquiry in respect to the merits of the accusation/s but if the documents filed by the accused/petitioner are beyond suspicion or doubt and upon consideration, demolish the very foundation of the the accusation/s levelled against the accused then in such a matter it is incumbent for the Court to look into the said document/s which are germane even at the initial stage and grant relief to the person concerned under Section 482 CrPC in order to prevent injustice or abuse of process of law. In my opinion the present petition would fall within the aforesaid parameters. 23. I must state that the learned counsel for the petitioner is justified in relying upon the judgment of a Coordinate bench of this Court in the case of J.N. Bhatia (supra), wherein it was held as under: 16. However, difficulty arises when the complainant states that the concerned accused was Director and also makes averment that he was in charge of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... py of Form 32 obtained from the Registrar of Companies is filed indicating that the resignation was also intimated on 26.2.1998, which can be acted upon in view of judgment of this Court in Sarla Kumar Dr. (Mrs.) v. Srei International Finance Ltd. (supra). The summoning order qua the petitioner is liable to be quashed. It is accordingly quashed and the complaint qua him is dismissed. xxx xxx xxx 76. Summoning orders are issued in all these cases. Sh. Mukhesh Punjwani, who is accused No. 4, has filed these petitions raising similar plea that he had tendered his resignation on 1.3.2002, which was accepted on 10.3.2002 and thereafter, Form 32 was filed with the Registrar of Companies. Cheques were allegedly issued on 20.3.2002, namely, after his resignation and were dishonoured much thereafter when he was not the director. It is further contended that apart from bald allegation that he was in charge of the affairs of the company, nothing is stated as to how he was in charge of and/or responsible for the conduct of the day-to-day business of the accused No. 1 company. The averments qua the petitioner herein contained in all these complaints are as under: The accused Nos. 2 to 4 are the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor of a defaulter Company, does not make him liable under the Act. Time and again, it has been asserted by this Court that only the person who was at the helm of affairs of the Company and in charge of and responsible for the conduct of the business at the time of commission of an offence will be liable for criminal action. (See Pooja Ravinder Devidasani v. State of Maharashtra ). 10. In other words, the law laid down by this Court is that for making a Director of a Company liable for the offences committed by the Company under Section 141 of the Act, there must be specific averments against the Director showing as to how and in what manner the Director was responsible for the conduct of the business of the Company. xxx xxx xxx 12. Before summoning an accused under Section 138 of the Act, the Magistrate is expected to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof and then to proceed further with proper application of mind to the legal principles on the issue. Impliedly, it is necessary for the courts to ensure strict compliance with the statutory requirements as well as settled principles of law before making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udable object is to prevent dishonour of cheques and sustain the credibility of commercial transactions, for which avowed purpose Legislature has enacted Sections 138 and 141 of the NI Act. 29. In Sabitha Ramamurthy and Another v. R.B.S. Channabasavaradhya, (2006) 10 SCC 581, the Supreme Court restated the requirements of Section 141 of the NI Act and held that the complainant must make a clear statement of fact to enable the Court to arrive at a prima facie opinion, even if the allegations are that the accused is vicariously liable. Section 141 of the NI Act raises a legal fiction where a person although not personally liable for commission of an offence, would be vicariously liable but before a person can be made vicariously liable, strict compliance with statutory requirements is to be insisted. In Krishna Lal Chawla and Others v. State of Uttar Pradesh and Another, (2021) 5 SCC 435 , the Supreme Court held that the power conferred on the Magistrate under Section 202 Cr.P.C. to postpone the issue of process pursuant to a private complaint also provides an important avenue for filtering out frivolous complaints and this power must be fully exercised. On receipt of a private compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all acts and deeds done by them are binding on Accused No. 1. 5. That towards the discharge of part of the legal debts/liability, the Accused No. 1 issued a cheque, duly signed by the Accused No. 2 3 as Authorised Signatory of Accused No. 1 from the account maintained by the Accused No.l with its banker and with the knowledge and consent of Accused No 4 to 10. The Accused No. 2 to 10 made an assurance to the Complainant's official that the cheque shall be honoured on the presentation for the recovery of the debts/liability. 31. It is settled that Section 141 is a penal provision creating vicarious liability and must be strictly construed and therefore, bald cursory statements in the complaint in the absence of a specific role being ascribed to a Director and without spelling out how and in what manner the accused were in charge of or responsible to the accused company for the conduct of its business, vicarious liability cannot be fastened. It is also settled that it is not enough to state in the complaint that a particular person was a Director, Managing Director, CEO, etc. As held by the Supreme Court in S.M.S. Pharmaceuticals (supra), it may be that in a given case, a person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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. (emphasis in original) 32. Reliance by the complainant on the judgment in Basant Kumar Goswami (supra) is misplaced. In a catena of judgments, Supreme Court has laid down that it is on the complainant to aver specifically how a Director was involved in the day to day affairs of a company at the time of commission of the alleged offence under Section 138 of NI Act. In the complaint, as noted above, complainant has only made a bald a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder to illustrate the point that there is no magic as such in a particular word, be it director, manager or secretary. It all depends upon the respective roles assigned to the officers in a company. A company may have managers or secretaries for different departments, which means, it may have more than one manager or secretary. These officers may also be authorised to issue cheques under their signatures with respect to affairs of their respective departments. Will it be possible to prosecute a secretary of Department B regarding a cheque issued by the secretary of Department A which is dishonoured? The secretary of Department B may not be knowing anything about issuance of the cheque in question. Therefore, mere use of a particular designation of an officer without more, may not be enough by way of an averment in a complaint. When the requirement in Section 141, which extends the liability to officers of a company, is that such a person should be in charge of and responsible to the company for conduct of business of the company, how can a person be subjected to liability of criminal prosecution without it being averred in the complaint that he satisfies those requirements. Not ev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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