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TMI Blog2025 (3) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... that Section 141 of the NI Act is a penal provision that creates vicarious liability for the accused. The petitioners have been implicated on the premise that they were responsible for the day-to-day affairs of the company. It is also settled that every person, regardless of whether they are in charge of the company during each series of act necessary to constitute the offence under Section 138 read with Section 141 of the NI Act or not, could be proceeded against if they are in charge of the affairs of the company even during one of the omissions' that is necessary to constitute an offence under Section 138 read with Section 141 of the NI Act. The Court can exercise its jurisdiction only upon unimpeachable and uncontroverted evidence being placed on record, however, in the absence of such evidence, the fact whether the accused person is responsible for the affairs of the accused company becomes a factual dispute, which is to be seen during trial - In a situation where the accused moves the Court for quashing even before the trial has commenced, the Court's approach should be careful not to prematurely extinguish the case by disregarding the legal presumption supporting the compla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- drawn on HDFC Bank. The cheque bearing no. 000179 was issued in lieu of cheque no. 000119, after deduction of Rs. 5,31,000/- towards discharge of liability for the payment of outstanding dues by the accused company. The said cheque no. 000179, upon presentation, was dishonoured with remarks "Payment stopped by Drawer" vide return memo dated 27.09.2018. Upon the failure of the accused persons to make the payment despite the service of notice, the respondent filed the subject complaint. 4. The learned counsel for the petitioners submitted that the learned Trial Court has mechanically passed the summoning orders without appreciating that the petitioners were not involved in the day-to-day affairs of the accused company. 5. He submitted that the cheque in question was issued on 25.09.2018, whereas the petitioners namely - Mahindra Kumar Jain and Monica Jain had already resigned from the Directorship of the accused company, with effect from 01.08.2018 and 25.08.2018 respectively, and hence, the complaint case under Section 138 of the NI Act is not maintainable against them. Resignation Form No. DIR-12, in respect of both the petitioners has been relied upon, evidencing that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then the complainant has all the reasons to believe that what he has stated in the notice has been accepted by the noticee. In such circumstances what more is expected of the complainant to say in the complaint. 57. When in view of the basic averment process is issued the complaint must proceed against the Directors or partners as the case may be. But, if any Director or Partner wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he is really not concerned with the issuance of the cheque, he must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his contention. He must make out a case that making him stand the trial would be an abuse of process of Court. He cannot get the complaint quashed merely on the ground that apart from the basic averment no particulars are given in the complaint about his role, because ordinarily the basic averment would be sufficient to send him to trial and it could be argued that his further role could be brought out in the trial. Quashing of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commission of the offence, were in charge of and were responsible for the conduct of the business of the firm. But vicarious criminal liability can be inferred against the partners of a firm when it is specifically averred in the complaint about the status of the partners "qua" the firm. This would make them liable to face the prosecution but it does not lead to automatic conviction. Hence, they are not adversely prejudiced if they are eventually found to be not guilty, as a necessary consequence thereof would be acquittal. 58.4. If any Director wants the process to be quashed by filing a petition under Section 482 of the Code on the ground that only a bald averment is made in the complaint and that he/she is really not concerned with the issuance of the cheque, he/she must in order to persuade the High Court to quash the process either furnish some sterling incontrovertible material or acceptable circumstances to substantiate his/her contention. He/she must make out a case that making him/her stand the trial would be an abuse of process of Court." (emphasis supplied) 10. The learned counsel for the respondent submits that the offence, in the present case, is a continuing offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction. On the other hand, proviso to 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 knowledge or he had exercised due diligence to prevent the commission of such offence, he will not be liable of punishment.... But vicarious criminal liability can be inferred against the partners of a firm when it is specifically averred in the complaint about the status of the partners "qua" the firm. This would make them liable to face the prosecution but it does not lead to automatic conviction. Hence, they are not adversely prejudiced - if they are eventually found to be not guilty, as a necessary consequence thereof would be acquitted." (emphasis supplied) 12. With reference to the resignation, it is observed that the petitioners have not placed on record FORM 32, which is required to be filed with the Registrar of Companies to indicate the status of the company's directors. Furthermore, FORM NO. DIR-12, pertaining to the petitioner, Mahender Kumar Jain, was filed by the authorization of the Board of Directors on 20.08.2018, with effect from 01.08.2018. Mahender Kumar Jain contends t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, the Court's approach should be careful not to prematurely extinguish the case by disregarding the legal presumption supporting the complaint. 17. In Malwa Cotton and Spinning Mills Ltd. v. Visra Singh Sidhu & Ors. : (2008) 17 SCC 147, the Hon'ble Apex Court made certain observations in this regard, which reads as under: "6. As rightly contended by learned Counsel for the appellant factual disputes are involved. What was the effect of delayed presentation before the Registrar of Companies is essentially a matter of trial. Whether respondent No. 1 had intimated the company and whether there was any resolution accepting his resolution are matters in respect of which evidence has to be led. Therefore, the High Court was not justified in its view. 8. We find that the prayers before the courts below essentially were to drop the proceedings on the ground that the allegations would not constitute a foundation for action in terms of Section 141 of the Act. These questions have to be adjudicated at the trial. Whether a person is in charge of or is responsible to the company for conduct of business is to be adjudicated on the basis of materials to be placed by the parties. Subsection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder: 33. We may summarize our conclusions as follows: a) Once in a complaint filed Under Section 138 read with Section 141 of the NI Act the basic averment is made that the Director was in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed, the Magistrate can issue process against such Director; b) If a petition is filed Under Section 482 of the Code for quashing of such a complaint by the Director, the High Court may, in the facts of a particular case, on an overall reading of the complaint, refuse to quash the complaint because the complaint contains the basic averment which is sufficient to make out a case against the Director. c) 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 role of the Director in the complaint....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 pros ..... X X X X Extracts X X X X X X X X Extracts X X X X
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