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TMI Blog2025 (2) TMI 1049X X X X Extracts X X X X X X X X Extracts X X X X ..... 138 of the Negotiable Instruments Act, 1881 ('NI Act') against the accused company - M/s West Haryana Highways (hereafter 'accused company') and its directors pursuant to the dishonour of the cheque issued by the accused company. The accused company is engaged in the business of construction/laning of roads. 3. It is alleged that the accused company approached the complainant for a grant of a term loan for the purpose of six/four laning of existing two lane road from Delhi-Haryana Border to Rohtak. It is alleged that on the request of the accused company, the complainant vide Sanction letter dated 25.04.2008 sanctioned a Senior Term Debt of Rs. 100 crores. Subsequently, it is averred that the accused company through its directors vide letter dated 30.10.2013, approached the complainant for restructuring of the existing debt of Rs. 88 crores. It is alleged that on the request of the accused company, the complainant agreed to restructure the existing debt of Rs. 88 crores on the terms and conditions as stipulated in the letter dated 31.12.2013. 4. It is alleged that the Interest During Construction ('IDC') dues were pending to the complainant. It is alleged that upon the request o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction alleged in the complaint. 8. He submitted that an incontrovertible document to the effect that the petitioners, at the time of issuance of the cheque, were not responsible for managing the day-to-day affairs of the company is the Annual Return of the accused company duly filed before the Registrar of Companies for the year 2014-2015 which demonstrates that the petitioners had not attended a single meeting during the said financial period in which the subject cheque was issued and/or dishonoured. 9. He submitted that in addition to the said documents, there are several emails exchanged between the petitioners and the active directors (before and after receiving of the legal demand notice) indicating the absence of knowledge of working and management of the accused company during the relevant period of issuance of cheque. He submitted that as per the provisions of Section 167(1)(b) of the Companies Act, the petitioners even ceased to be directors. He submitted that the Registrar of Companies were informed about the non-compliance of the provisions of the Companies Act by the accused company as none of the meetings for more than 12 months preceding July 2015 were either int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst as per the contours of the NI Act. Arguments advanced on behalf of the complainant qua the Petitioners in CRL.M.C. 4497/2019 14. The learned counsel for the complainant submitted that the present petition is liable to be dismissed since the grounds raised by the petitioners are triable in nature, and any interference at this stage is unwarranted. He submitted that the petitioners were responsible for the day-to-day affairs of the company, and they were also full time directors of the accused company. He submitted that the petitioners have annexed several internal communications like emails which substantiate that the petitioners were at the helm of the affairs of the accused company during the relevant time. He submitted that the defences raised by the petitioners are subject matter of trial and cannot be looked into at this stage. Arguments advanced on behalf of the complainant qua the Petitioner in CRL.M.C. 2520/2020 15. The learned counsel for the complainant submitted that the grounds raised by the petitioner are subject matter of trial and no interference, at this stage, is warranted. He submitted that the petitioner was responsible for the day-to-day affairs of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Situated thus, to non-suit the complainant, at the stage of the summoning order, when the factual controversy is yet to be canvassed and considered by the trial court will not in our opinion be judicious. Based upon a prima facie impression, an element of criminality cannot entirely be ruled out here subject to the determination by the trial Court. Therefore, when the proceedings are at a nascent stage, scuttling of the criminal process is not merited." (emphasis supplied) 17. In line with the dictum of the Hon'ble Apex Court in Rathish Babu Unnikrishnan v. State (NCT of Delhi) (supra), thus, while exercising the power under Section 482 of the CrPC to quash a complaint at the pre-trial stage, it is pertinent for this Court to examine whether the factual defence is of such impeachable nature that the entire allegations made in the complaint is disproved. 18. The petitioners are sought to be implicated in the present case by virtue of Section 138 read with Section 141 of the NI Act on account of being the directors of the accused company at the relevant time when the cheque was issued. Section 141 of the NI Act reads as under: "141. Offences by companies.-(1) If the person comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company. The key words which occur in the section are "every person". These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words: '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, etc.' 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 shall not fall within the ambit of the provision. It is only those persons who were in charge of and responsible for the conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. It follows from this that if a Director of a company who was not in charge of and was not responsible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unctioning of the company. This Court held that there is no universal rule that a director of a company is in charge of its everyday affairs. It was, therefore, necessary, to aver as to how the director of the company was in charge of day-to-day affairs of the company or responsible to the affairs of the company. This Court, however, clarified that the position of a managing director or a joint managing director in a company may be different. This Court further held that 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. To escape liability, they will have to prove that when the offence was committed, they had no knowledge of the offence or that they exercised all due diligence to prevent the commission of the offence." 23. It must be borne in mind that Section 141 of the NI Act is a penal provision that aims to create vicarious liability on the accused. For this reason, the provisions ought to be strictly construed. In the case of National Small Industries Corpn. Ltd.v.Harmeet Singh Paintal : (2010) 3 SCC 330, the Hon'ble Apex Court had emphasised the necessity to detail the ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and "was responsible to the company for the conduct of the business of the company" as appearing in Section 141 (1) of the NI Act observed as under: "22. In the light of sub-section (1) of Section 141, we have perused the averments made in the complaints subject-matter of these three appeals. The allegation in Para 1 of the complaints is that the appellants are managing the Company and are busy with day-to-day affairs of the Company. It is further averred that they are also in charge of the Company and are jointly and severally liable for the acts of Accused 1 Company. The requirement of sub-section (1) of Section 141 of the NI Act is something different and higher. Every person who is sought to be roped in by virtue of sub-section (1) of Section 141 of the NI Act must be a 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. Merely because somebody is managing the affairs of the Company, per se, he does not become in charge of the conduct of the business of the Company or the person responsible for the Company for the conduct of the business of the Company. For example, in a given c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners had annexed numerous internal communications such as emails, it only translates to mean that the petitioners were at the helm of the affairs of the accused company. In line with the dictum of the Hon'ble Apex Court in Ashok Shewakramani and Others v. State of Andhra Pradesh and Another (supra) and Section 141 (1) of the NI Act, to fasten liability, the petitioner ought to be in charge of and responsible for the conduct of the company at the time of commission of the offence. The Hon'ble Apex Court noted that merely because a person is managing the affairs of the company per se does not tantamount to mean that he was in charge of the conduct of the business of the company or responsible for the company for the conduct of the business of the accused company. It must be shown that the director was not only in charge of but also responsible to the company for the conduct of the business of the company. 28. It is undisputed that the petitioners were not a signatory to the subject cheque. The Annual Return of the accused company in the nature of Form No. MGT-7 has also been appended which materialises that the petitioners had failed to attend any Board Meeting/Committee Meeting dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the issuance of a cheque or dishonour thereof, such as Director (Personnel), Director (Human Resources Development), etc. into criminal proceedings under the NI Act, only because of their designation. 42....The materials on record clearly show that these appellants were independent, non-executive Directors of the company. As held by this Court in Pooja Ravinder Devidasani v. State of Maharashtra [Pooja Ravinder Devidasani v. State of Maharashtra, (2014) 16 SCC 1 : (2015) 3 SCC (Civ) 384 : (2015) 3 SCC (Cri) 378] a non-executive Director is not involved in the day-to-day affairs of the company or in the running of its business. Such Director is in no way responsible for the day-to-day running of the accused Company. Moreover, when a complaint is filed against a Director of the company, who is not the signatory of the dishonoured cheque, specific averments have to be made in the pleadings to substantiate the contention in the complaint, that such Director was in charge of and responsible for conduct of the business of the Company or the Company, unless such Director is the designated Managing Director or Joint Managing Director who would obviously be responsible for the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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