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TMI Blog2024 (11) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Snehalatha Elangovan, [ 2022 (9) TMI 846 - SUPREME COURT] , after examining the issue as to who would be held vicariously liable for the offence of the company has held that Section 141 extends such criminal liability in case of a company to every person who at the time of the offence, was in charge of and was responsible for the conduct of the business of the company and such a person is vicariously liable to be held guilty for the offence under Section 138 and punished accordingly. The proviso to Section 141 of the NI Act states that the officer who is being accused of committing an offence under Section 138 of the NI Act as being responsible and in-charge of the company can escape the punishment if he/she proves that the offence was committed without his/her knowledge or that he/she was not responsibly for the affairs of the company. The Petitioner herein is a Director of the accused Company. In the Master Data, the Petitioner has not been shown as an independent Director or a Non-Executive Director or a Deputy Director, who can be said to be not responsible for the conduct of day-to-day affairs of the company. This Court is of the opinion that when there are only three Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, New Delhi, was issued by the Company to the Respondent No. 2/Complainant in discharge of its liability. It is stated that it was agreed that the said cheque would be realizable by giving 60 days notice upon failure on the part of the Company to disburse the agreed monthly interest or on failure to return the loan amount as and when demanded by the Complainant. It is stated that in November-December, 2016, there was failure on the part of the Company to return the interest amount and thereby the Complainant was entitled to recall the loan amount as per the loan agreement. 3. It is stated that notice was sent to the Company on 28.12.2016 seeking recall of the loan amount. It is stated that despite the notice, the Company did not return the amount. It is stated that since the amount was not paid as per the terms of the agreement, the cheque in question was presented, however, the same was returned unpaid with endorsement account blocked . It is specifically averred in the Complaint that the complainant visited the Petitioner and Respondent No. 4 who undertook to take remedial measures. It is stated that on the assurance of the Petitioner and the Respondent No. 4, the Respondent No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Petitioner is not a signatory to any of the Loan documents, Security documents of the transaction in question and the cheque which was dishonoured. 6. Per contra, learned Counsel for the Respondent No. 2 states that there are only three Directors in the accused Company and it cannot be said that only two Directors were responsible for the day-to-day affairs of the Company and the Petitioner was not aware of anything. He further states that the fact that the Petitioner herein was not responsible for the conduct of business of the accused Company can only be proved in Trial and the summoning Order cannot be quashed on these averments. 7. Heard the Counsels for the parties and perused the material on record. 8. It is well settled that while exercising its jurisdiction under Section 482 Cr.P.C, the High Court must be extremely cautious and slow in quashing a complaint at an initial stage. It is now well settled that the power of quashing should be exercised sparingly and that too in the rarest of rare cases and courts must not embark upon enquiry as to the reliability or genuineness or otherwise of the allegations made in the Complaint unless the allegations in the complaint are so p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ievance of the aggrieved party. (7) Where a criminal proceeding is manifestly attended with mala fides and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge. As noted above, the powers possessed by the High Court under Section 482 of the Code are very wide and the very plenitude of the power requires great caution in its exercise. Court must be careful to see that its decision in exercise of this power is based on sound principles. The inherent power should not be exercised to stifle a legitimate prosecution. The High Court being the highest court of a State should normally refrain from giving a prima facie decision in a case where the entire facts are incomplete and hazy, more so when the evidence has not been collected and produced before the court and the issues involved, whether factual or legal, are of magnitude and cannot be seen in their true perspective without sufficient material. Of course, no hard-and-fast rule can be laid down in regard to cases in which the High Court will exercise its extraordinary jurisdiction of quashing the proceeding at any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 996 SCC (Cri) 497] , Rashmi Kumar v. Mahesh Kumar Bhada [(1997) 2 SCC 397 : 1997 SCC (Cri) 415] , Satvinder Kaur v. State (Govt. of NCT of Delhi) [(1999) 8 SCC 728 : 1999 SCC (Cri) 1503 : AIR 1999 SC 3596] and Rajesh Bajaj v. State NCT of Delhi [(1999) 3 SCC 259 : 1999 SCC (Cri) 401].] 10. The Apex Court in S.P. Mani Mohan Dairy v. Snehalatha Elangovan, (2023) 10 SCC 685, after examining the issue as to who would be held vicariously liable for the offence of the company has held that Section 141 extends such criminal liability in case of a company to every person who at the time of the offence, was in charge of and was responsible for the conduct of the business of the company and such a person is vicariously liable to be held guilty for the offence under Section 138 and punished accordingly. The proviso to Section 141 of the NI Act states that the officer who is being accused of committing an offence under Section 138 of the NI Act as being responsible and in-charge of the company can escape the punishment if he/she proves that the offence was committed without his/her knowledge or that he/she was not responsibly for the affairs of the company. 11. In Commr. v. Velliappa Textiles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as under: 58. Our final conclusions may be summarised as under: 58.1. The primary responsibility of the complainant is to make specific averments in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no legal requirement for the complainant to show that the accused partner of the firm was aware about each and every transaction. On the other hand, the first proviso to sub-section (1) of Section 141 of the Act clearly lays down that if the accused is able to prove to the satisfaction of the Court that the offence was committed without his/her knowledge or he/she had exercised due diligence to prevent the commission of such offence, he/she will not be liable of punishment. 58.2. The complainant is supposed to know only generally as to who were in charge of the affairs of the company or firm, as the case may be. The other administrative matters would be within the special knowledge of the company or the firm and those who are in charge of it. In such circumstances, the complainant is expected to allege that the persons named in the complaint are in charge of the affairs of the company/firm. It is only the Directors of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uudl the accused Nu. 2 3 are jointly responsible for day to day affairs of the business of the accused no. 1 and responsible for all the financial transaction and payments for and on behalf of the company besides being personally involved in making representations to complainant for clearing the dues/debts of the accused NO. 1 company. ***** 5. As per the terms of the agreement, since the cheque bearing No.000621 drawn on HDFC Bank had become realizable, the complainant presented the same for encashment with his banker. Canara Bank, Sector-J, Rohini, New Delhi-85, however the same was return unpaid being blocked. Upon a personal visit to the accused No. 2 3, the accused undertook to take a remedial measure and convinced the complainant to represent the cheque again after sometime. (emphasis supplied) 17. As stated above, the Petitioner herein is a Director of the accused Company. In the Master Data, the Petitioner has not been shown as an independent Director or a Non-Executive Director or a Deputy Director, who can be said to be not responsible for the conduct of day-to-day affairs of the company. This Court is of the opinion that when there are only three Directors in the Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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