Madras High Court
Mrs. K. Umadevi vs V. Manikandan, Proprietor, Manisha ... on 11 February, 2006
Equivalent citations: III(2006)BC378, [2006]130COMPCAS311(MAD), 2006(1)CTC662
ORDER M. Jeyapaul, J.
1. The petitioner, who has been arraigned as third accused in a case under Section 138 of the Negotiable Instruments Act (hereinafter called the 'Act'), moves these criminal original petitions seeking quashment of the criminal proceedings culminated in C.C. Nos. 2209 to 2216 of 2005 on the file of the learned VII Metropolitan Magistrate, G.T., Chennai, on the sole ground that she ceased to be the Director of the first accused company long prior to the issuance of the cheques which are the subject matter of the proceedings under Section 138 of the Act.
2. The complainant, V.Manikandan, Proprietor, Manisha Traders, having alleged that the cheques issued by the first accused company for the existing liability were returned by the drawee bank with an endorsement 'payment stopped by drawer' when the said cheques were presented for payment. After giving due notice and having waited for the payment to be made by the first accused company, the respondent/complainant has laid the private complaint for an offence under Section 138 of the Act, specifically alleging that the petitioner herein, being a partner of the first accused-company, was also responsible for the conduct of the first accused at the time of commission of the offence under the aforesaid provision of law.
3. It is contended on the side of the petitioner that the petitioner had tendered her resignation as early as on 27.3.1998 itself as seen from the extract of Form-32 obtained from the Registrar of Companies and that therefore she is not liable to answer the criminal prosecution by the respondent/complainant.
4. Learned counsel for the respondent/complainant would submit that the petitioner/third accused was originally one of the Directors of the first accused company and the factual dispute as to whether she resigned from the company long prior to the issuance of the cheques and no longer participated in the conduct of the business of the company, will have to be adjudicated only in the trial.
5. In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Anr. 2005 (4) Crimes 34, the Hon'ble Supreme Court of India has observed that it is necessary to specifically aver in the complaint that the person accused was in charge of and responsible for the conduct of the business of the company. It has been further held that a Director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of Section 141 of the Act that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time has to be averred as a fact, it has been ruled.
6. On a perusal of the complaints filed by the complainant in the aforesaid cases, it is found that there is a specific averment that the petitioner/third accused being the Director of the first accused-company was in charge of and responsible for the conduct of the business of the company.
7. Of course, the petitioner has filed xerox copies of the extract of form-32 submitted to the Registrar of Companies by M/s.Amalgam Leather Private Limited, the first accused-company, which would prima facie show that the petitioner herein had resigned from the said company as on 27.3.1998 and the same was registered by the Registrar of Companies as on 8.12.1999. Based on the above document, learned counsel for the petitioner would submit that the petitioner, who is no longer responsible for the conduct of the business of the company, cannot be directed to face the ordeal of trial for offence under Section 138 of the Act.
8. Learned counsel for the respondent would submit that the respondent doubts the veracity of the xerox copy of the extract of Form-32 filed by the petitioner. He would further submit that the respondent sticks to the stand that the petitioner is still at the helms of affairs and is responsible for the conduct of the business of the first accused- company.
9. This Court in Deepak Gupta v. Raghavendra Steels Ltd., Chennai Represented by its Chief Accountant (2001) M.L.J. (Crl.) 1082 - Malai Subramanian, J.) held as follows:-
To establish that a particular person is a partner of a firm, mere production of 'Form A' is more than sufficient. This is also a public document. It requires no further proof. Therefore, on this sole ground, the petitioner need not be made to face the trial unnecessarily.
10. The very same view taken by this Court in Ashok Muthanna Managing Director Fidelity Industries Ltd. and 3 Ors. v. Wipro Finance Ltd., Represented by its Area Manager, Chennai-18 2001 (2) CTC 78 - M. Karpagavinayagam, J.) is as follows:-
In the present case, as noted above, the document Form No. 32 would reveal that the second petitioner was not the director who was in-charge of and responsible for the affairs of the company during the relevant period and as such, the proceedings as against the second petitioner are liable to be quashed and accordingly, quashed.
11. This Court in I. Dharmapaul v. D. Chandrasekaran 2001 Company Cases 518 - B. Akbar Basha Khadiri, J.) had taken a contrary view as follows:-
That it was not necessary to go into the question what was the part played by the petitioner regarding the management of the company, it was sufficient that there was an averment that he was at the helm of affairs of the company.
12. The very same contrary view taken by this Court in M.S. Rama Mohan Rao v. Mrs. S. Nagu Bai 2003 Company Cases 403 - A. Packiaraj, J. is as follows:-
Though the petitioner produced the concerned letter addressed to the complainant in the Court, showing the resignation of the petitioner from the company as director, the Court sitting in revisionary jurisdiction could not go into the preliminary issue, since these were matters that could be decided only by letting in evidence.
13. The Hon'ble Supreme Court of India in a recent case in S.V. Mazumdar and Ors. v. Gujarat State Fertilizers Co. Ltd. and Anr. 2005 (3) CTC 380 has now settled the position of law as follows, when the very same question whether the Director/accused should face the trial, in spite of his resignation from the Company:-
Whether a person is in charge of or is responsible to the company for the conduct of the business is to be adjudicated on the basis of materials to be placed by the parties.
14. In this case, the petitioner was originally a director of the first accused-company. Now she has filed a xerox copy of the extract of Form-32 to bring home the point that she had resigned from the first accused-company as early as on 27.3.1998 and the same was registered by the Registrar of Companies on 8.12.1999. Of course, the cheques have been issued later in point of time. When the complainant has specifically averred in the complaint that a particular accused was one of the Directors and was responsible for the conduct of the business of the accused-company and disputes the stand taken by the said accused-Director that he or she was no longer a Director and was not responsible for the conduct of the business of the Company, such a disputed fact will have to be adjudicated only during the course of trial as categorically laid down by the Hon'ble Supreme Court of India. There are instances where the extract of Form-32 produced by the accused-Director to show that he or she had resigned from the company which was registered by the Registrar of Companies turned out to be a false and fabricated one. Further we do not know whether the petitioner was re-inducted as a Director of the company after the alleged resignation from the first accused-company which was registered by the Registrar of Companies. The Revisional Court cannot conduct a roving enquiry relating to the disputed facts. Under the above circumstances, this Court is not inclined to quash the criminal proceedings as regards the petitioner herein. The petitioner has to face the trial and establish her contention that she had already resigned from the first accused-company and was no longer in charge of and responsible for the conduct of the business of the first accused-company.
15. In the result, Crl.O.P. Nos. 34352 to 34359 of 2005 stand dismissed. Consequently, connected criminal miscellaneous petitions also stand dismissed.